 "HC asks Jignesh Shah, others to file reports by Oct 10")
In its first hearing of the public interest litigation (PIL) filed by the Investor Grievances Forum (IGF), the Bombay High Court on Friday asked respondents to submit their reports before the next hearing scheduled on October 10.
The respondents include : Ministry of Consumer Affairs, Ministry of Finance, MMTC, PEC, National Spot Exchange (NSEL), NSEL director Jignesh Shah, Securities and Exchange Board of India (SEBI), Forward Markets Commission (FMC), Economic Offence Wing (EOW) of Mumbai Police etc.
The defense counsel sought time to file reports on behalf of defendants and the court granted it. With this the fear of rejection of the case evaporated.
“Prima facie it looks like the money involved in NSEL disaster was over Rs 8,000 crore of which a lot of ponzy schemes were run both on behalf of NSEL and their individual members,” said Somaiya.
NSEL declared a total pay-in obligations from its 24 members of Rs 5,600 crore.
“A lot of the money involved in this imbroglio belongs to non-resident Indians (NRIs). In fact, members who invested money of their NRI clients partly deposited in the exchange account. At the same time, they also ran their own ponzy schemes involving lots of small clients to invest. A large portion of the money is black-unaccounted,” Somaiya said.
The PIL names two public sector trading entities MMTC Ltd and PEC Ltd incurred accumulative loss of Rs 350 crore due to illegal speculative transactions.
“The two public sector companies obtained permission from their respective boards to invest Rs 350 crore in commodity exchanges – MCX and NCDEX. But, MMTC and PEC diverted this amount towards NSEL resulting into a complete loss. Four weeks passed by since the issue of NSEL defaults erupted, there has been no complaints from these government owned companies. This is a big surprise,” said Somaiya.
Investors Grievances Forum also complained to the Enforcement Directorate (ED) about the NSEL payment default. But, there was no action from ED.
“ED told us that we won’t act on complained by private agencies. No government agencies have complained so far. Hence, there will be no action in absence of complaint by the government agency,” said Somaiya.
While the SEBI, according to the Forum, termed the NSEL issue outside its jurisdiction and thus, the fiasco encourages the equity market regulator to take corrective measures not to spill over to stock markets, the FMC awaited additional power to regulate spot exchanges.
The FMC, according to the Forum, said that the exemption for one day forward contract was granted by the Ministry of Consumer Affairs (MCA). Hence, the MCA will take an action, Somaiya informed quoting an FMC official.
“So far, the only action is that NSEL has filed a complaint against investors under Section 138 of the Negotiable Instruments Act for bouncing of cheques. There are aleardy 16 lakhs cases pending under this Act. With the current speed, this case will come for hearing only after 20 years. Hence, the exchange is just buying time, nothing else,” Somaiya added.
The respondents include : Ministry of Consumer Affairs, Ministry of Finance, MMTC, PEC, National Spot Exchange (NSEL), NSEL director Jignesh Shah, Securities and Exchange Board of India (SEBI), Forward Markets Commission (FMC), Economic Offence Wing (EOW) of Mumbai Police etc.
The defense counsel sought time to file reports on behalf of defendants and the court granted it. With this the fear of rejection of the case evaporated.
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Feeling relieved Kirit Somaiya, President of Investors’ Grievances Forum and the complainant, said that there is no fear of the case being rejected by the court.
“Prima facie it looks like the money involved in NSEL disaster was over Rs 8,000 crore of which a lot of ponzy schemes were run both on behalf of NSEL and their individual members,” said Somaiya.
NSEL declared a total pay-in obligations from its 24 members of Rs 5,600 crore.
“A lot of the money involved in this imbroglio belongs to non-resident Indians (NRIs). In fact, members who invested money of their NRI clients partly deposited in the exchange account. At the same time, they also ran their own ponzy schemes involving lots of small clients to invest. A large portion of the money is black-unaccounted,” Somaiya said.
The PIL names two public sector trading entities MMTC Ltd and PEC Ltd incurred accumulative loss of Rs 350 crore due to illegal speculative transactions.
“The two public sector companies obtained permission from their respective boards to invest Rs 350 crore in commodity exchanges – MCX and NCDEX. But, MMTC and PEC diverted this amount towards NSEL resulting into a complete loss. Four weeks passed by since the issue of NSEL defaults erupted, there has been no complaints from these government owned companies. This is a big surprise,” said Somaiya.
Investors Grievances Forum also complained to the Enforcement Directorate (ED) about the NSEL payment default. But, there was no action from ED.
“ED told us that we won’t act on complained by private agencies. No government agencies have complained so far. Hence, there will be no action in absence of complaint by the government agency,” said Somaiya.
While the SEBI, according to the Forum, termed the NSEL issue outside its jurisdiction and thus, the fiasco encourages the equity market regulator to take corrective measures not to spill over to stock markets, the FMC awaited additional power to regulate spot exchanges.
The FMC, according to the Forum, said that the exemption for one day forward contract was granted by the Ministry of Consumer Affairs (MCA). Hence, the MCA will take an action, Somaiya informed quoting an FMC official.
“So far, the only action is that NSEL has filed a complaint against investors under Section 138 of the Negotiable Instruments Act for bouncing of cheques. There are aleardy 16 lakhs cases pending under this Act. With the current speed, this case will come for hearing only after 20 years. Hence, the exchange is just buying time, nothing else,” Somaiya added.