Madras HC tells Sebi to take action against alleged scam in NSEL

The Madurai Bench of the Madras High Court has directed the ministry of finance, ministry of corporate affairs, and the Securities and Exchange Board of India (Sebi) to consider a complaint against the delinquent brokers of National Spot Exchange Ltd (NSEL) in connection with the Rs 56 billion payment crisis scam where the government is taking action.

In an order issued on Tuesday, Justice CT Selvam and Justice AM Basheer Ahamed said, “We consider it appropriate to place on record our concern given the magnitude of the wrong-doing detected to the tune of Rs 56 billion and consider it appropriate to direct the respondents to consider the representation of the petitioner, dated 21.02.2018, and pass appropriate orders, within a period of six weeks (from the date of receipt of the order).”

The order was on a petition filed by L Palpandi against the ministry of finance, the ministry of corporate affairs and the Sebi, seeking direction to them to take necessary action against the delinquent brokers mentioned in a report of Grant Thornton dated September 21, 2013.

Sebi has issued show cause notice to five big brokers and Mumbai Police’s economic offence wing. It is also investigating their cases.

Senior counsel P Wilson, who appeared for the petitioner, submitted that the misuse of the NSEL to carry out financial dealings of commodity transactions during the period 2009-2013 came to notice. 

An audit by Grant Thornton directed by the then Forward Markets Commission, which is currently merged with the Sebi, found wrong doing to the extent of Rs 56 billion.
 

Twenty four named defaulters and several unnamed persons/brokers were found to have benefited from this, Wilson alleged.

While Sebi had initiated action against the brokers on October 28, 2015, nothing much had been done to bring them to book, alleged the petitioner. He also submitted a representation with Sebi and the ministries in February this year, which did not get a response so far.

The Central government’s senior panel counsel P Paul Pandi, representing the ministries, sought time to file its counter soon. The court said that the ministries and Sebi are open to filing any counter or status report by the next hearing, which is expected to be on August 13.