NSEL investors move SC against Jignesh Shah bail order

Investors have also filed a new police complaint against FTIL and are pressing for a merger of NSEL with FTIL, to ensure money for repayment

The investors of National Spot Exchange (NSEL) have moved a special leave petition (SLP) in the Supreme Court, challenging a Bombay High Court (HC) order granting bail to promoter Jignesh Shah. The SLP, filed with the apex court last week, is in the process of being listed for a hearing.

It has been filed by Pankaj Saraf, the investor whose complaint led to the filing of a case last year against Shah, the directors and defaulters at NSEL. This is one of three significant moves the victims of the NSEL payment crisis have made in the past few days, in their struggle to get back their money. In separate moves, investors have also filed a complaint for charges against Financial Technologies (FTIL), the promoter entity, and are also pushing for the merger of NSEL and FTIL.

“Shah is a powerful person and in a position to influence the investigation process. We have pleaded that the court should deny him bail till at least the time the investigations by various agencies are complete. The case is of an economic offence, which is not a rush-of-the-blood crime. It is well planned and has a corruption angle, too. Therefore, we have prayed to the court for urgent relief, that will help 13,000 families,” said a member of the NSEL Investors Forum. Delhi-based law firm Karanjiwala & Co is advising the investors in the matter.

Eight months after the Rs 5,600-crore NSEL payment crisis broke, Shah was arrested by the Economic Offences Wing of the Mumbai Police, in May. He was sent to judicial custody. The Bombay HC had granted bail to Shah in August on health grounds. The order also contained certain severe observations against the people who lost money in NSEL. The judge had suggested that the victims be considered ‘bogus traders’ rather than ‘investors’. This raised the question of whether the application of the Maharashtra Protection of Investors of Depositors (in Financial Establishments) Act, also termed the MPID Act, in the matter was proper.

The promoters of NK Proteins, who have been charged and are under detention under the MPID Act, have, on the basis of this order, petitioned the HC to quash the chargesheet against them. The investors have been taking a series of efforts to hasten the wheels of justice, which they feel are slowly grinding to a halt as the crisis begins to fade from the public memory. In a fresh complaint to the commissioner of police, the NSEL Investors Action Group (this is a breakaway group from the NSEL Investors Forum) has sought to press charges against FTIL under the MPID Act. “ ..For reasons unknown to us, the promoter of NSEL, i.e Financial Technologies, has neither been named as an accused nor their properties have been attached under MPID Act, though they have a 99.99999% holding of NSEL,” the complaint went.

The complaint noted FTIL was a direct beneficiary of NSEL’s profits. The parent earned software charges of Rs 33 crore from NSEL in 2013 and including this, NSEL accounted for 81 per cent of the consolidated profit of FTIL, the complaint alleged. It also referred to the findings of the Forward Markets Commission and the Securities and Exchange Board of India, which ruled FTIL was not “fit and proper” to run exchanges.

FTIL has maintained in its defence before various fora that the NSEL payment crisis was triggered by employee fraud (by the management) and Shah and others were also victims of it. The investors are also pushing for a meeting with Union minister Nirmala Sitharaman, to press their case for the merger of FTIL with NSEL. They believe the merger with the parent, which has significant reserves, would hasten the repayment process. “The meeting has been confirmed. The date needs to be worked out,” a person involved in the efforts said. News reports have said the department of economic affairs of the finance ministry is in favour of such a move, though the corporate affairs ministry had expressed reservations.