NSEL scam: Squaring with a favoured few

Audit record shows some chosen investors got paid from settlement fund soon after trade was suspended; facts on sums moved out differ from what was said then

The mystery of National Spot Exchange’s (NSEL’s) shrinking settlement fund could finally be unraveling. Documents unearthed by forensic auditors Chokshi & Chokshi show it paid a sum of Rs 148 crore from the Settlement Guarantee Fund (SGF) five days after suspension of trading.

Some NSEL investors have moved the high court at Mumbai on this. They contend this payout, on August 5, 2013, was made to select investors in an arbitrary manner. They’ve sought this amount be ploughed back, to ensure equitable distribution among all investors hit by the Rs 5,600-crore crisis.

The payout happened after the Forward Markets Commission (FMC) had given directions to promoter Jignesh Shah and the board of directors to set the bourse in order, after it suspended settlements on July 31.

An NSEL official said in an email response, “These were margins on cancelled trades’ pay in money, for trades between July 29 and 31, which were legitimately returned,”.  However, the documents tell a different story.

Did Jignesh’s friends dig deep into SGF?

• NSEL suspended all settlements on July 31
• But ledger shows pay-out of Rs 180 crore on August 5
• Investors argue this was made out of SGF, arbitrarily
• Investors seek list of investors to whom payouts made

Annexures to the forensic report show a sharp fall in bank balance and investments in  the SGF account after July 15.  On July 15, the bank balance and SGF account tallied at Rs 802 crore. By July 31, the bank balances shrink to Rs 202 crore, against the ledger balance of Rs 692 crore. This reflects the redemption pressure faced by the exchange following rumours in the market, and that it was dipping deep into the SGF to honour commitments.

But, the crucial period is between July 31 and August 6. There is no payout between August 1 and 4. On August 5, NSEL ledgers showed a payout of Rs 180 crore and a pay-in of Rs 32 crore. Where did the difference of Rs 148 crore come from, when the exchange had suspended all trades? The answer is in the bank balance against the SGF account. The SGF balance shrinks to Rs 57.09 crore on August 7 from Rs 202 crore on July 31.

NSEL’s then managing director and chief executive officer, Anjani Sinha, had given a completely different set of numbers when asked during this period about the SGF by investors and the FMC.  The FMC, in its ‘fit and proper’ order against Jignesh Shah, Joseph Massey and Shreekant Javalgekar on December 17, said: “…on 1st August, Sinha informed that NSEL had SGF of  about Rs 850 crore, whereas in a written reply to the mail dated 1st August, NSEL submitted it had SGF of Rs 738.55 crore. However, during  interaction with the board of NSEL, buyers and sellers on 4th August, it was  informed by the then MD and CEO, in the presence of the board members, that SGF had only Rs 62 crore.”