Sinha made entries on MCX, IBMA books

Mail trail unearthed by forensic auditor shows former NSEL chief had a free hand, but NSEL denies knowledge of board

Emails tracked by the forensic auditors of the National Spot Exchange Ltd (NSEL) showed accounting entries were made on the books of Financial Technologies' group companies such as the Multi Commodity Exchange (MCX) and Indian Bullion Markets Association (IBMA), an exchange subsidiary, to fit the requirements of the exchange. These were by Anjani Sinha, the then chief executive of NSEL, and executed by other senior staff of the exchange.  

While the trail suggested these were authorised by the board/promoters that had control of MCX and NSEL, the audit found several internal documents that showed the NSEL board continued to have significant control over Sinha and NSEL. NSEL promoter Jignesh Shah, Joseph Massey and Shreekant Javalgekar were common directors on the boards of the MCX and NSEL. However, in an email, the NSEL said, "Whatever transactions Sinha instructed, he did not inform the NSEL directors or the then MCX directors/promoters."

These documents have come to the fore in the audit by Chokshi & Chokshi, appointed by the commodity derivatives market regulator, Forward Markets Commission, to probe the e-series contracts. In an email dated May 5, 2011, Sinha instructed how various entries needed to be made on the books of companies such as the NSEL, IBMA, MCX and the client for Rs 1.5 crore. The subject said, "Adjustment of Rs 1.5 crore." These transactions ultimately resulted in an income of Rs 5 lakh for the NSEL. "All these are settled by the MCX to the NSEL, the NSEL to Sohanlal and Sohanlal to the IBMA. We get the residual of Rs 5 lakh from Sohanlal through a debit note subsequently on account of warehousing. Please examine the implications of the tax deducted at source and service tax on all these entries," Sinha said in his mail. In response, Shashidhar Kotian, chief financial officer, NSEL, on May 13 sent an email saying, "Mukesh P Shah requires balance confirmation from Sohanlal as on 31.3.2011 on IBMA books." Sinha’s control did not extend beyond the NSEL and IBMA. . "There is no evidence to establish the powers of management vested with the NSEL board were delegated to the then managing director and chief executive, as contended in the management response," the auditor said.

"The bye-laws and rules of the exchange empowered the NSEL board to put in place a monitoring mechanism through various committees. But, only audit, remuneration and membership panels were in place. This indicates non-compliance."