NSEL sacks MD, six others after payment default

FMC turns the heat on Jignesh Shah

The board of National Spot Exchange Ltd (NSEL) removed seven top officials, including CEO & MD Anjani Sinha and CFO Shashidhar Kotian, for failing to repay investors on the first day of payout. The exchange was able to raise only Rs 92.73 crore — just about 53 per cent of the Rs 174. 72 crore committed.

P R Ramesh, who has been appointed the officer on special duty to exercise all powers of a CEO, will directly report to the board. He has an experience of over 20 years in legal practice and regulations dealing with exchanges and market participants. Sinha, Kotian, four vice-presidents and one manager will be special officers assisting in the recovery process.

The move, however, failed to satisfy the Forward Markets Commission (FMC), which criticised members of the NSEL board, which includes MCX Non-Executive Chairman Jignesh Shah, MCX-SX CEO & MD Joseph Massey and MCX CEO & MD Shreekant Javalgekar. The regulator said NSEL directors would not be allowed to hold any directorship or shareholding in any of the recognised futures commodity exchange, if they failed the test of ‘fit-and-proper’ criterion.

In a strongly-worded letter, FMC said there had been a “complete failure of the system at NSEL and that, in turn, reflects the complicity and/or incompetence of the board members to govern an exchange”. It cited several instances where the board had failed to comply with directives of the regulator and cited several flip-flops on Jignesh Shah’s part. “These instances are brought to your notice so that the board members do not try to evade their collective responsibility of the governance and supervision of the NSEL management,” the letter said. (STATUS CHECK)

Earlier in the day, the regulator had told the exchange that in view of the Rs 81.99-crore deficit, money should be proportionately distributed among members, including the Indian Bullion Markets Association (IBMA).

“However, in the case of IBMA members, the amount should be disbursed only to the genuine ones that have cleared trades,” FMC said.

The Financial Technologies-promoted exchange, in the settlement plan announced last week, had committed itself to paying Rs 174.72 crore on Tuesday.

For IBMA members, the commodities derivatives market regulator also said the amount due on account of proprietary transactions of IBMA and related and connected entities of NSEL, its group and management should be withheld.

FMC clarified the amount payable towards “utilised margin refundable”, VAT receivable by members and exchange fund utilisation might not be distributed on Tuesday and should be kept in the escrow account till further instructions.

The regulator directed NSEL to give a detailed list of party-wise pay-out list, along with payment details.While NSEL has yet to declare itself as a defaulter, NSEL Investors’ Forum has already done so. “We are looking for legal opinion. We may file a suit against the exchange (NSEL) and its promoters, including Jignesh Shah, next week,” said Sharad Kumar Saraf, chairman of the forum.

“Only a government agency can recover money from NSEL. So, the consumer affairs ministry, FMC, the finance ministry and all other top agencies should come together to investigate the NSEL fiasco. Their priority should be to restore faith in the entire trading system, which has spilled over from commodity to equities and also other financial asset classes,” said Anand Rathi Financial Services Founder & Chairman Anand Rathi.

“The government agency should track the money invested by borrowers in long-term projects and recover it. Also, commodities lying in the exchange’s warehouses should be auctioned to recover the money. If that is insufficient, the borrowers’ property should be attached to pay investors’ dues,” said Motilal Oswal Financial Services CMD Motilal Oswal.