Mumbai police arrests two former statutory auditors in NSEL scam

Sessions court sends them to police custody, to hear the case on Monday

Six years after the payment default took place on the National Spot Exchange (NSEL), the Economic Offences Wing (EOW) of the Mumbai Police on Friday arrested two former partners of SV Ghatalia & Associates (SVGA).

SVGA was the statutory auditor of NSEL between FY10 and FY12, and is a network firm of global accounting major EY.

The EOW produced both the partners before the Sessions court, which sent the duo to police custody till the next hearing, scheduled for Monday. Attempts to reach EOW officials did not yield any result. 

“We are surprised and dismayed at the sudden course of action taken by the EOW and will vigorously defend the reputation of our partners and our firm. The action by the department is for a six-year-old matter. During this period, we have always extended our full cooperation to the authorities and participated in over 50 meetings with the department,” said an official statement from SVGA.

The NSEL crisis had erupted in 2013 over a payment default of Rs 5,600 crore, involving 24 trading of its members and 13,000 clients. Following the crisis, the government ordered closure of the exchange. 

Since then, government agencies, including EOW, the Enforcement Directorate and Serious Fraud Investigation Office have arrested a number of defaulting members, officials of NSEL and its promoter 63 Moons Technologies (formerly Financial Technologies) and released them on bail.

“We reiterate that our audit of NSEL’s financial statements for the years ended March 31, 2010, 2011, 2012 were in accordance with the auditing standards generally accepted in India. We were succeeded by another auditor for the financial year 2012-13. NSEL defaulted in its settlements in August 2013,” the SVGA statement said. It added that the firm has made several written and oral submissions during the last six years about settlement of NSEL’s contracts that were outstanding as of March 31, 2012, its last year of audit. 

“We are confident of the quality of our audits and hopeful that our submissions and cooperation will be taken into account by the relevant authorities,” it added.

“We are shocked by the sudden and unwarranted arrest of two professionals associated with EY, as it was the statutory auditor of NSEL, and not that of the exchange platform. EY had nothing to do with verification of these stocks,” said a statement from 63 Moons.