NSEL denies FMC's slow-recovery charge

FMC had earlier noted that NSEL has posed a major impediment in the recovery process and consequently contributed to negligible progress

Scam-hit National Spot Exchange Limited (NSEL) has denied the "slow recovery" allegation of the commodity derivatives market regulator, Forward Markets Commission (FMC).

"NSEL believes if FMC uses its authority and takes measures against its defaulting members, it will enhance recovery efforts," it said on Thursday.

While winding up the monitoring-cum-auction committee (MAC) at NSEL on September 4, the FMC had said, "On the basis of the feedback from the members/investors’ bodies represented on the MAC, the commission has noted that the depletion of human resources, lack of financial resources and weak organisational structure at NSEL has posed a major impediment in the recovery process and consequently contributed to the negligible progress in the recovery of dues."

NSEL said it had continued its steadfast approach towards the recovery process. "It is learnt the investigating agencies were examining the role of brokers. The brokers being part of MAC resulted in a conflict of interest," said Saji Cherian, managing director and chief executive, in response to an FMC letter of September 4.

NSEL said, "Immediately after the crisis, the exchange and its promoter group enforced measures to lessen effects and bring to book the defaulters responsible for the defaults."

NSEL filed five arbitration petitions in the Bombay High Court, 27 applications in the Maharashtra Protection of Interest of Depositors (MPID) court and 30 complaints with a magistrate court with regards to bouncing of cheques. The bourse has also filed 20 complaints with the Economic Offences Wing of the Mumbai Police. As no first information reports (FIRs) have been filed in these complaints, the exchange has filed ten applications under Section 156(3) of the MPID Act with the magistrate for filing FIRs.

NSEL has also issued third party notices to 15 defaulters further to the representative suit filed by Modern India. These coordinated efforts have resulted in a historic order passed by the Bombay High Court last week where a committee comprising three distinguished persons was formed to overlook the process of assets sale and recovery from defaulters. FMC also agreed to the constitution of the committee by the court.

The senior management and recovery team of NSEL has assisted and coordinated with FMC, MAC and various investigative agencies during the probe.

The exchange till date distributed Rs 540 crore to clients, which includes an amount of Rs 179.25-crore bridge loan received from its parent Financial Technologies (India). As a result, so far about Rs 296.43 crore have been credited to the 33,000 e-series clients, which constitute 98.6 per cent of the total value of metals.

According to NSEL, it has adequate staff and expert human resources to assist in the recovery. The exchange has been apprising the FMC of the recovery efforts undertaken by it through a detailed weekly report.