Why Anjani Sinha's affidavit is a joke

NSEL's former MD & CEO has proved to be too clever by half

By his own admission (as told to a business magazine a couple of years ago), Anjani Sinha used to read “a lot of thrillers and novels with a lot of suspense” during his growing-up years. They must have left a deep imprint on his mind, as the former National Spot Exchange (NSEL) managing director & CEO has scripted a plot that can easily beat the twists and turns of the thrillers he was so fond of. His surprising confession last week that he was solely responsible for the NSEL however, has led to a lot of questions and few answers. For example, why is Sinha in such a hurry to give character certificates to his bosses, which include NSEL’s board members, while accusing a couple of his juniors of accepting bribes? 

 

The soft-spoken Sinha’s 13-page confessional affidavit is actually a bad joke, considering what he had said at the inauguration of the country’s first electronic spot exchange in 2008. NSEL, Sinha had said, proposes to be your helping hand in all respect and make trading a risk-free and seamless business. What the MD has ended up doing is exactly the opposite. He also lied through his teeth, evident from the fact that even when the NSEL scam became public knowledge, Sinha kept on claiming from all available public forums that there was no reason for panic as investors’ rights were fully secured. 

 

In that sense, he has a lot of explaining to do to the investigative agencies.  The affidavit talks about everything that could go wrong in an exchange – dodgy borrowers, false stock statements and suppression of information on defaults. The NSEL management cooked the books, cut deals with one dodgy borrower to plug the gap caused by another, rolled over positions that shot up every month, allowed diversion of money availed through fictitious sale transactions to buy real estate and other properties, etc. And he attributed all this t "judgement error". A scam of such magnitude happening over at least two years can be anything but a judgement error. That is being too clever by half. 

But the most curious is his repeated assertions that none of the board members were responsible for any matter pertaining to NSEL. Unwittingly, he may have ended up creating more problems for the NSEL board members as nobody believes the assertions of a man so discredited. At least the Forward Markets Commission would certainly take these assertions with a bagful of salt.  For more than a month back, FMC had written to all the board members so that they “do not try to evade their collective responsibility of the governance and supervision of NSEL”. 

 

FMC had also accused the NSEL board of double-speak on August 20. Consider this: During the presentation before the consumer affairs secretary July 10, 2013, Jignesh Shah, NSEL director, had said that the exchange offers highest level of safety for the participants as the model has over 100 per cent stock as collateral, 10-20 per cent as margin money and backed by 100 per cent of post-dated cheques from participants. But in a subsequent meeting on August 13 with the FMC, Shah himself cast serious doubts on the availability of commodities at the accredited warehouses of the exchange. This, the FMC rightly said, “reflects the complicity and/or incompetence of the board members to govern an exchange.

 

There are other glaring inconsistencies as well. Under the rules, NSEL has to complete trades within 10-11 days, but it was giving contracts for 25-34 days, allowing speculation in trade and ensuring abnormal returns to traders. It’s inconceivable that the board didn’t know anything about this. Also, though Sinha has sought to give former NSEL Chairman Shankarlal Guru a clean chit, the fact is the promoter of NSEL’s largest client, NK Proteins, which owed Rs 970 crore, is related to Guru. It’s possible that Guru was not liable for the business conduct of his relative, but a chairman of an exchange should have made sure that he is above suspicion. 

 

Sinha may have tried to put a lid on the NSEL scam by his confession. Ironically, he has opened a can of worms in the process.