The NSEL board meet that didn't happen

Some directors of National Spot Exchange Ltd (NSEL) have told investigative agencies board meeting records such as notices, agenda and minutes used by regulators such as the Forward Markets Commission (FMC) and the Registrar of Companies to decide on the board's involvement in the Rs 5,600-crore payment crisis aren't reliable and are likely to have been fudged by former NSEL chief executive Anjani Sinha.

"None of the independent directors attended. No notice was issued. The November 2009 meeting did not happen. But it has been 'minutesised' by Sinha as if it actually happened. I don't know why he did it. Only Sinha can answer this," a senior group executive told Business Standard.

Sinha has been in custody for the past two months.

The latest twist in the saga, which may emerge a key defence in the court cases against the regulatory orders, is similar to Ranbaxy Laboratories' tussle with the US Food and Drug Administration---a meeting of the board of directors, purported to be held in a foreign location referred to by a whistleblower, did not appear in company records.

The November 16, 2009, NSEL board meeting is crucial because it figures in the FMC's recent "fit and proper" order. This was the board meeting in which the long-dated (T+25, T+36 days forward) contracts, launched by NSEL on September 19, 2009, were ratified, according to NSEL records. These long-dated contracts enabled the "paired trades" at the centre of the NSEL crisis.

A senior FMC official said, "I don't think such an argument was put before us. We are going by official records." In its order dated December 17, the FMC said, "The commission, vide its letter dated September 16, 2013, called for the agenda notes and the minutes of the meetings of the board of directors of NSEL. Perusal of the minutes of the meetings of board of directors of NSEL, received by the commission on September 17, 2013, reveal such trades which provided for delivery and settlement beyond 11 days were first allowed in September 2009, which was ratified by the board of directors of NSEL on November 16, 2009. The board minutes dated December19, 2009, ratified trading of T+25 contracts. Subsequently, a number of such contracts were introduced on NSEL."

In a report, the Registrar of Companies said the long-dated contracts were illegal, adding the board had ratified these. "This action was ratified by the board on November 16, 2009, though it was not legally authorised to do so," the registrar had said. It added the permission to trade long-dated contracts "was never discussed" in any of the director's reports, though it "was required to do so".

The executive quoted earlier said there were several issues with some other board meeting records, too, and these had already been communicated to the police. "Other board meeting minutes talk about approval of members being ratified. But the names or details of the members are not given," he added.