Will the EOW's 'strategy' pay off?

The majority of investors feel the 9,000-page charge sheet in the National Spot Exchange Ltd case is not seeing the wood for the trees

Companies approaching the market for Initial Public Offerings file documents that run into hundreds of pages. Though the purpose of these is disclosure, key and relevant information lies buried in mountains of trivialities dumped by the company. While some may do so inadvertently, some use this style of disclosure to conceal rather than reveal.

This could also be true of charge sheets running into thousands of pages. The Economic Offences Wing (EOW) of the Mumbai police has filed a 9,000-odd page charge sheet in the National Spot Exchange Ltd (NSEL) case. A vast majority of investors are left feeling it is not seeing the wood for the trees. During the course of its investigations, the EOW collected 24 terabytes of data from eight laptops, 45 hard disks, seven pen drives, a desk top and an unspecified number of compact discs and DVDs.

It has frozen 317 bank accounts, accounting for Rs 95 crore. Stocks worth Rs 210 crore have been seized. The EOW has also identified 166 properties belonging to 18 borrowers for securing and attachment; 84 of these belong to Ludhiana-based ARK Imports, run by Kailash Aggarwal and his family. The police found ARK a bogus company; its raw wool warehouse was also bogus. Both were floated to divert money from NSEL. Other allegedly bogus companies include LOIL Continental, LOIL Health Foods, Namdhari Food International, Yathuri Associates, Tavishi Enterprises and Aastha Minmet.

Yet, the charge sheet doesn't name any of the people associated with these bogus entities as accused. The five arrested, including former NSEL chief Anjani Sinha and staffers Jai Bahukandi and Amit Mukherjee, have been named accused and their personal properties, which include apartments in Mumbai and four-wheelers, attached. While Bahukandi's attached properties were worth a mere Rs 34 lakh, Mukherjee's were worth about Rs 5 crore and Sinha's properties were valued at Rs 4.5 crore, chicken feed against the Rs 5,600-crore default.

The EOW charge sheet leaves out former Forbes billionaire Jignesh Shah and other directors of NSEL, who the Forward Markets Commission has said are the brains behind the scam. Before the media, police officials have repeatedly stressed this was a matter of "strategy". Senior police official Himangshu Roy was quoted saying so soon after the 9,000-page charge sheet was filed.

Interestingly, the charge sheet does not state strategy as the reason for not arresting the other accused. "The role played by 1) NSEL, 2) its directors, 3) its key management persons, 4) its 25 borrowers who are subsequently declared as defaulters of NSEL and with whom the investor's money is held up, 5) brokers through whom the investors deposited their money with the accused company NSEL and the role played by others in the case is under examination. The collection of evidence against all these persons is under process and it is time-consuming. This is a case of criminal conspiracy committed by all the aforesaid persons/companies who/which are situated not only across Mumbai, but across 16 states. The case is registered on September 30, 2013, and due to the aforesaid reasons, the investigation is not yet complete. After confirmation of the role played by these persons, appropriate action will be taken against them," read Form 5A filed before a special judge.

Choose the best answer: a) strategy; b) lack of evidence; c) kid-gloved treatment; d) none of the above.