NSEL defaults for 17th time; pays Rs 9 cr against Rs 174.72 cr

Crisis-ridden bourse National Spot Exchange Ltd (NSEL) on Tuesday paid about Rs 9 crore against the scheduled payment amount of Rs 174.72 crore, defaulting for the 17th straight time. With Tuesday's pay-out, NSEL has so far settled about Rs 253 crore against about Rs 5,600 crore dues to 13,000 investors. NSEL, which is engulfed in a payment crisis, had previously defaulted for 16 times. On its seventh pay-out date and thirteenth pay-out date, the spot commodity bourse was unable to make any payment. "The total amount being disbursed today is around Rs 9 crore," an NSEL spokesperson said. Topworth Steels and Power has made a payment of about Rs 9 crore to the exchange, while 23 of other investors have defaulted, he added. The bourse has sought commodity market regulator Forward Markets Comission's (FMC) approval for disbursement of Rs 11 crore in the escrow account received from defaulting member Mohan India last week. NSEL had availed a bridge loan of Rs 177.23 crore from its promoter Financial Technologies (FTIL) to make payments on priority basis to small investors. NSEL, promoted by Jignesh Shah-led FTIL, is facing the problem of settling dues to 148 members after it suspended trade on July 31 following a government order. NSEL's decision to suspend trading followed a Consumer Affairs Ministry directive asking the bourse not to launch any new contracts till further order as it found violations of government norms in trading at NSEL. The bourse had earlier said it plans to settle all the dues in 30 weeks time, by paying Rs 174.72 crore for first 20 weeks followed by Rs 86.02 crore in next 10 weeks.

NSEL crisis: Over 30 brokers under regulatory scanner

 
As the NSEL crisis deepens, role of at least 32 brokerage firms has come under the scanner for allegedly charging high transaction charges and providing portfolio management and margin funding services to their clients in violation of regulations.

These brokers were apparently working as Carrying and Forward (C&F) agents as well for National Spot Exchange Ltd (NSEL) without checking the veracity of commodities lying in the warehouses, and kept investors in the dark about non-availability of commodities on which their clients were taking positions.

Margin funding is when brokers arrange to finance investors' purchases and charge money for such loans.

According to sources, various regulators including Sebi and FMC are looking into the role of these brokers, who were registered in both stocks and commodities markets.

Among the 32 brokers, 14 are from Gujarat, seven from Rajasthan and others are from states like Maharashtra, Delhi, Andhra Pradesh and Punjab.

These brokers, with a large outstanding on NSEL, were charging Rs 25 per lakh of transaction from their clients.

The regulators have received complaints that margin funding happened with the broking firms and their associates financing 80-90 per cent of exposure on NSEL, while balance was paid by high networth clients (HNIs), sources said.

The brokers were apparently charging Rs 100 per lakh as brokerage and additional commission for providing margin funding.

These stock brokers have come under regulatory scanner for inducing HNIs and other investors to trade on the spot market commodity exchange with promise of high returns.

They allegedly mis-sold the commodities forward contracts on NSEL to to their investors as lucrative investment products garnering fully secure returns of up to 18 per cent under portfolio management services.

The spot commodity bourse, promoted by Jignesh Shah-led Financial Technologies (FTIL), has been facing problems in settling Rs 5,600 crore dues of 148 member brokers, representing 13,000 investor clients, after it suspended trading on July 31 after government directions.

NSEL has so far settled about Rs 244 crore against about Rs 5,600 crore dues to 13,000 investors.

Earlier this week, police had attached properties of Shah, also a Director of NSEL and three others.

Besides Shah, properties of Joseph Massey, also a Director at the now defunct spot Exchange, and two others were attached by Mumbai Police's Economic Offences Wing (EOW) which is investigating the scam that came to light in late July.

'NSEL, board violated rules; failed to act against defaulters'

 
The corporate affairs ministry has found that the beleaguered National Spot Exchange (NSEL) and its Board not only violated multiple regulations but did not take action against repeated defaults which resulted in Rs  5,600- crore scam at the bourse.

According to PTI, the Registrar of Companies (RoC), Mumbai, has concluded that NSEL breached as many as 15 provisions of the Companies Act, including those related to corporate governance, sources said. The spot commodity exchange never declared any member as defaulter despite repeated instances of defaults, which is also one of the main reasons for the present crisis, sources added. Many of the defaulters were also allowed to trade and increase their exposure.

NSEL, part of Jignesh Shah-led Financial Technologies Group (FTIL), is grappling with the crisis after it suspended trade on July 31 on government direction. It has already seen major fallouts with rejig of Boards at the exchange as well as at some other Group companies.

Besides finding corporate governance failures, including lack of transparency, integrity and compliance, sources said that the bourse did not have as many as nine committees. These panels are required under regulations.

Among others, the exchange did not set up vigilance, dispute resolution, trading, clearing and arbitration panels. There have meetings and it has been found that the Board did not discuss the exchange's compliance with various rules such as those related to admission of new members, sources said.

Flagging various concerns, the inspection found that the exchange did not have a mechanism for verification of physical stock at the warehouses. As per the findings, many NSEL directors, including Shah and Joseph Massey, were holding common directorship in Group companies of FTIL and they cannot claim to be not aware about happenings at the exchange.

The inspection of books was ordered under Section 209 A of the Companies Act.

Non-executive chairman ShankarlaI Guru and two non- executive directors Ramanathan Devarajan and B D Pawar have also quit from NSEL Board.

NSEL scam: NK Proteins MD Nilesh Patel held

 
Managing Director of NK Proteins Ltd, one of the biggest defaulters of the beleaguered National Spot Exchange Ltd (NSEL), was on Tuesday arrested in connection with the bourse's Rs 5,600 crore scam, taking the total number of arrests in the case to four.

"NK Proteins' MD Nilesh Patel was on Tuesday arrested in connection with NSEL case," Additional Police Commissioner (EOW) Rajvardhan Sinha said.

NK Proteins was the first company that had borrowed Rs 350 crore from the NSEL, said another police officer adding that "now the company owes the spot exchange about Rs 850 crore to Rs 900 crore that includes the principal amount of Rs 350 crore, interest as well as other payable amount."

"Patel knew that its company would not be in a position to pay back money but still he borrowed Rs 350 crore from the spot exchange, knowing the fact that NSEL cannot lend money.

Hence, Patel, in connivance with the NSEL officials misused the investors' amount," the official added.

The company has also used the amount to expand its edible oil business and also entered into a joint venture with Adani group, the officer alleged, adding "hence the books of accounts of the joint venture have also come under scanner and investigators would surely examine the books."

NK Group and the Adani Group's agro trading arm, Adani Wilmar Ltd, had formed a 50:50 joint venture called AWN Agro Pvt Ltd, which became the largest castor oil exporting entity in India.

The EOW officials earlier arrested three accused in the case. Anjani Sinha, former head of the beleaguered bourse, was held on October 17, Amit Mukherjee, an ex-assistant vice-president of NSEL was nabbed on October 9 and the next day Jay Bahukhundi, another ex-assistant vice-president and in-charge of KYC department, was apprehended.

An FIR was registered in the case on September 30 by the EOW against the directors, including Jignesh Shah and Joseph Massey, promoters and defaulters.

All of them have been charged with cheating, forgery, breach of trust and criminal conspiracy and other offences under the Indian Penal Code. On October 1, CBI too registered a preliminary inquiry into the case.

NSEL has been facing problems in settling Rs 5,600 crore dues of 148 members/brokers, representing 13,000 investor-clients after it suspended trade on July 31 on government's direction.

NSEL defaults for 10th time, pays Rs 30 lakh against Rs 174.72 cr

Crisis-hit bourse National Spot Exchange Ltd (NSEL) defaulted for the tenth straight time on Tuesday as it could pay only Rs 30 lakh to investors against a scheduled amount of Rs 174.72 crore.

NSEL, which is engulfed in a Rs 5,600-crore payment crisis, had previously defaulted nine times. On its seventh pay-out date, the bourse was unable to make any payment as its accounts were frozen by economic offences wing (EoW) of the Mumbai police.

With Tuesday's pay-out, NSEL settled about Rs 180 crore against Rs 5,600 crore dues to 13,000 investors.

"The total amount being disbursed today in a proportionate manner is Rs 30 lakh," an NSEL spokesperson said.

According NSEL data, MSR Food Processing made a payment of Rs 5 lakh and Metkore Alloys & Industries made payment of Rs 25 lakh to the exchange.

NSEL had availed a bridge loan of Rs 177.23 crore from its promoter Financial Technologies (FTIL) to make payments on priority basis to small investors.

NSEL, promoted by Jignesh Shah-led FTIL, is facing the problem of settling Rs 5,600 crore dues to 148 members after it suspended trade on July 31 on the government direction.

The bourse plans to settle the entire dues in 30 weeks time, by paying Rs 174.72 crore for first twenty weeks followed by Rs 86.02 crore in next ten weeks.