NSEL crisis: Role played by FMC, other agencies

The Forward Markets Commission, which was not regulating National Spot Exchange Ltd (NSEL) at the time the bourse suspended trading, has had the biggest role in taking steps in the NSEL case.

FMC Chairman Ramesh Abhishek first passed an order declaring Financial Technologies India Ltd (FTIL, whose associate company is NSEL), chief Jignesh shah, and two others not fit and proper to run Multi Commodity Exchange (MCX, another group firm), a regulated entity - on the ground that all of them were also associated with NSEL, a defaulter firm. This order was used as a base by all other regulators to ensure exits of FTIL, Jignesh shah and others from different exchanges that FTIL promoted.
 

FMC also ensured investors of e-series contracts traded on NSEL got their dues, as those were settled ones, where investors had paid money and commodities were delivered. In one of the meetings over supervising NSEL settlements, Abhishek asked NSEL to file civil suits against all NSEL borrowers, despite the Mumbai Police attaching their properties. The move helped NSEL get injunctions and decrees in borrowers' properties worth over Rs 4,388 crore.

A final blow came when Abhishek recommended to the government that NSEL be merged with parent FTIL. Had he not done so, the government would not have been able to proceed with a draft to merge the entities, because no evidence warranting such a merger were apparently found during the inspections carried out by the Registrar of Companies. The merger proposal, however, met with severe criticism from the corporate world, as NSEL was a limited liability company.

While the economic offences wing of the Mumbai Police has made several arrests and attached properties, there are limitations, given that the powers to dispose of attached properties are not with the wing. It filed interim chargesheets against all accused. The Enforcement Directorate has also attached properties of some of the NSEL borrowers. While charging borrowers with money laundering, it also filed a chargesheet against Jignesh Shah and others for allowing money laundering by NSEL borrowers.