 "Report on NSEL finds fault with management")
The ministry of corporate affairs has finalised its report on National Spot Exchange Limited (NSEL) and is learnt to have found the management violated some provisions of company law.
The report includes findings about the board of Financial Technologies (India) Limited (FTIL), the promoter, which might also be held responsible for some of the lapses, officials said.
According to officials, the report has been sent to the law ministry and is likely to be forwarded to other administrative ministries and departments, including the finance ministry, and regulators such as Securities and Exchange Board of India.
FTIL, the parent company of NSEL, holds 99.99 per cent stake in the ailing spot exchange, where the Rs 5,600-crore payment crisis broke out last year. Since then, NSEL and FTIL have been under the scanner of multiple agencies.
Sources said the ministry’s final report upheld several findings of an interim report by the registrar of companies (RoC) in November 2013.
The November report had found serious lapses at the board level of both entities. It had said the permission to trade long-dated contracts “was never discussed” in any of the directors’ reports, though it “was required to do so”.
The long-dated contracts paired with the short-dated ones were at the nucleus of the payment crisis.
The report includes findings about the board of Financial Technologies (India) Limited (FTIL), the promoter, which might also be held responsible for some of the lapses, officials said.
According to officials, the report has been sent to the law ministry and is likely to be forwarded to other administrative ministries and departments, including the finance ministry, and regulators such as Securities and Exchange Board of India.
FTIL, the parent company of NSEL, holds 99.99 per cent stake in the ailing spot exchange, where the Rs 5,600-crore payment crisis broke out last year. Since then, NSEL and FTIL have been under the scanner of multiple agencies.
Sources said the ministry’s final report upheld several findings of an interim report by the registrar of companies (RoC) in November 2013.
The November report had found serious lapses at the board level of both entities. It had said the permission to trade long-dated contracts “was never discussed” in any of the directors’ reports, though it “was required to do so”.
The long-dated contracts paired with the short-dated ones were at the nucleus of the payment crisis.
The report has found violations of the Companies Act, including misrepresentation of facts. The report confirmed several findings of a forensic report by Grant Thornton, such as lack of warehouse management, inadequate monitoring of collaterals, poor risk management and allowing defaulting members to continue trading. The report slammed the board for “corporate governance failure.” The report also found several irregularities in the audit process of NSEL.
“Many directors, including Jignesh Shah, Joseph Massey and Sreekant Javalgekar are holding common directorship in all Financial Technologies (FT) group companies. They cannot take shelter for ignorance about the state of affairs of the company,” the ROC had said in its report to the ministry of corporate affairs (MCA).
FTIL Promoter Jignesh Shah, former chief of MCX SX Joseph Massey and former MCX CEO Shreekant Javelgekar were on the board of NSEL when the scam broke. Shankarlal Guru was the chairman of the bourse. While the board members and promoters have claimed ignorance and have held former NSEL CEO accountable for the lapses, Sinha has in turn alleged that all his actions were with full knowledge of the board. ends