NSEL investor petitions: Sebi probing FTIL, promoters

High court asks it to try and complete the investigation, on complaints of breach of multiple rules in 12 weeks

The Securities and Exchange Board of India (Sebi) has told the high court at Mumbai that it is investigating complaints against Financial Technologies (FTIL) and connected entities and promoters, including founder Jignesh Shah.

The complaints by investors of scam-hit National Spot Exchange (NSEL), promoted by FTIL, have alleged violations of the Sebi Act and breach of various Sebi regulations, such as those on insider trading, fraudulent and unfair trade practices, and disclosure failure under the takeover code, among others.

The petitioners had sought to direct Sebi to hear and decide the complaints, within a time-bound schedule. The order from a bench of judges B P Colabawalla and V M Kanade went, “Since this is the only relief claimed by the petitioners, the petition can be disposed of by directing Sebi to look into the complaints and, if necessary, to investigate the same, and the said process to be completed within a time-bound schedule and if possible, within a period of 12 weeks...” The order records Seni's counsel saying they'd taken cognizance of the complaints and were probing these.

The complainants are Delhi-based Smita Bhartia and Mumbai-based Meenal Maheshwari. They’d lost Rs 1.3 crore in the Rs 5,600-crore payment crisis that hit NSEL in July 2013. They'd held responsible Jignesh Shah, companies floated by him such as La-Fin Finance Services and key management personnel of the group, including Paras Ajmera, Dewang Neralla, Joseph Massey and Manjay Shah.

They alleged Shah was aware of the state of affairs at NSEL and that some of these entities connected to him had sold shares of FTIL and the Multi Commodity Exchange, also promoted by it, ahead of the payment crisis between January and July 2013.

The duo had also complained about disclosure violations by a firm called Sigma Financial Services, associated with La-Fin, and irregularities in the sale of FT group arm Bourse Africa.

Business Standard had reported the Sigma case and Bourse Africa sale in December 2014.

While disposing the petition, the bench clarified that “we have not expressed any opinion on merits and only direct Sebi to decide the case on merits and in accordance with law.” The regulator may consider the request made by the petitioners for a copy of the Kalyaniwala and Mistry report (a forensic audit of the entities in question), the bench said.

In response to an e-mail for comments, an FTIL spokesperson said, “FTIL has not been made a party and has not come across, on the high court website, of any such order. We reserve our right, being the aggrieved party, and will take necessary legal recourse. On your query regarding the K&M report...FTIL was neither given a chance to reply/suggestions nor the final report was shared with us.”