Commodity traders have protested against the threat of the economic offences wing (EOW) of the city police to attach properties of brokers of the National Spot Exchange (NSEL). Members of the commodity trading fraternity see the Rs 5,600-crore payment default as entirely a corporate fraud.
“The fraud was done at NSEL. Involvement of brokers is necessary for executing any trade on exchange platforms and brokers have traded on behalf of clients. Hence, attaching the properties of brokers is surprising," said Motilal Oswal, chairman of Motilal Oswal Financial Services Ltd, a leading brokerage.
A senior EOW official on Wednesday had said brokers’ assets could be frozen if the need arose. EOW had summoned broking firms, including Anand Rathi Commodities and Best Deal Commodities. The agency interrogated Anand Rathi’s director, Jugal Mantri, and Arpit Mehta, a part of NSEL’s business development team. It has also summoned Motilal Oswal, Nirmal Bang Commodities and Geojit Comtrade, among others.
Oswal told Business Standard the brokers are ready to extend all required support to investigating agencies. “But, our request is to give a fair hearing to brokers before arriving at a conclusion,” he said.
In a chargesheet filed by EOW in court against three arrested ex-NSEL officials and two leading borrowers, Anjani Sinha, the ex-managing director of NSEL, was termed the mastermind, sole decision maker in the exchange, not Jignesh Shah, the exchange’s promoter. The chargesheet says Sinha was “sole approving authority” for all limits granted to borrowers, and he subsequently siphoned off money. The police claim Sinha organised the Rs 5,600-crore scheme now in question, doing so with the help of colleagues in charge of some key functions such as business development and warehousing. Police said it was Sinha who “shaped the idea of long-term loan facility” to the borrowers, under the guise of adequate underlying stocks of commodities.
“So, it is proved by EOW that the fraud was done at NSEL. We have met EOW officials with our standpoint. EOW was keen to know if margins and commissions were collected lawfully at the time of executing orders or not. If one or two brokers have assured returns to investors and done anything unlawfully, the brokers’ fraternity will not support them. They should be brought to book and punished,” said Ashok Mittal, chief executive officer, Emkay Commotrade.
Earlier, the police said no evidence had been found to establish that NSEL investors’ money had been routed to Financial Technologies or its group companies. Now, the chargesheet states Sinha made “personal gains from borrowers/accused for granting them finance facilities”. The police further accuse Sinha of misleading and misinforming the general public, giving wrong information to the commodities trade regulator and other agencies.
“Investors don’t care where the money comes from. They are concerned with recovery of their investment. Let brokers go and collect money from anywhere," said Ketan Shah, a member of the NSEL Investors Action Group.