On a court order, the police here have registered a case against National Spot Exchange (NSEL), director Jignesh Shah and other top executives on various charges under the Indian Penal Code and the Information Technology Act. The First Information Report (FIR) was registered at the Barakhamba Road police station on Friday, on a complaint by Delhi-based broker Kunal Khaneja. The FIR adds a fresh twist to the legal proceedings in the Rs 5,600 crore NSEL payment crisis, being investigated by various agencies and with cases pending in advanced stages at different courts.
The move came after the chief metropolitan magistrate at the Patiala House courts directed an investigation into the matter after going through the petition by Khaneja’s company, Integrated Commodity Trades, and its 89 clients. The FIR narrates the sequence of events from the enrolment of trading memberships and investors for NSEL, despite allegedly being aware of proceedings by the government and regulatory bodies. "The accused persons colluded to siphon funds of the complainant company and its clients to the tune of Rs 29.50 crore in Delhi,” the FIR alleged. Plus, use of forged warehouse receipts and false documents and electronic records to fool the complainants about existence of stocks of the commodities on they took exposure in NSEL.
“We have come to know of the FIR only through media reports. We have not seen the document and can comment only after studying it,” an NSEL spokesperson said in response to a Business Standard query. Adding: “These are nothing but diversionary tactics, knowing fully well that the privity of contract is between the clients and the broker. Yet, they are targeting the promoters/directors of Financial technologies (NSEL's then parent) and NSEL. This is also being done to create sensationalism and prejudice the courts where various matters are sub judice. It is also to be noted that Jignesh Shah was a non-executive firector and was in no way involved in day-to-day operations of the exchange.”
The spokesperson also suggested the FIR was a response of brokers facing heat due to various investigations against them. “Many of their malpractices such as mis-selling and inducement are coming to light by way of complaints against them by their own clients. The complaints are of a very serious nature, including large scale misuse of client code modification facility, abusing the trust of their clients by way of appropriating loan documents to the extent of forgery and indulging in large scale name lending and PAN lending for carrying out benami transactions in their clients’ name,” the NSEL spokesperson said.