)
The Economic Offences Wing (EOW) of the city police on Tuesday arrested three senior directors of brokerage firms in connection with a Rs 5,600-crore payment crisis at National Spot Exchange Ltd (NSEL), promoted by Financial Technologies India Ltd (FTIL). Those arrested were Amit Rathi, managing director of Anand Rathi Financial Services Ltd; C P Krishnan of Geojit Comtrade Ltd; and Chintan Modi of India Infoline Ltd (IIFL).
The three have been charged with mis-selling NSEL products, cheating, forgery and criminal conspiracy, among other charges.
In a statement, Anand Rathi Commodities said, “Anand Rathi Commodities Ltd and its directors and officials have fully cooperated with the agencies in the course of the investigations. We have submitted the requisite information/documents from time to time and clearly established Anand Rathi Commodities did not make any illegal profits/enrichment. We are disappointed at the turn of events and do not believe the arrest is appropriate under the circumstances. Our counsels approached the Bombay High Court to prevent any arrest late Tuesday afternoon. The court granted an order directing no arrest of officials till March 4, 2015, if not already arrested. On submission of the order, we were informed the arrest had already taken place.”
|
IN THE DOCK Dues* of brokerage firms whose senior officials have been arrested |
|
ANAND RATHI Rs 143 crore INDIA INFOLINE Rs 72.8 crore GEOJIT COMTRADE Rs 69.9 crore |
IIFL said, “We would like to clarify India Infoline Commodities and its officials have been cooperating fully with the police in their investigation into the NSEL case for the past 18 months and have provided the documents, records and clarifications required by the police. While our utmost cooperation continues in the investigation, we are taking all necessary legal remedies to protect the interest of the organisation, our clients and the employees. We would like to clarify India Infoline Commodities acted only as a broker to facilitate the execution of orders by clients on the NSEL platform…we did not have any proprietary position or funding positions towards NSEL contracts.”
Geojit declined to comment on the issue.
Briefing the media, additional commissioner of police (EOW), Rajvardhan Sinha, said Rathi, Krishnan and Chintan had been sent to police custody. They will be presented before the Maharashtra Protection of Investors’ Deposits court on Wednesday.
Sinha said during their interrogation, the replies of those arrested were evasive, adding they weren’t cooperating in the probe.
An official said the police had probed 139 NSEL brokers. With Tuesday’s arrests, the number of those arrested in the NSEL case so far stands at 24. This is the first time brokerage officials have been arrested in the case. In August 2013, NSEL had declared a default, after 24 of its borrowers failed to honour commitments laid down in a payment schedule. The exchange had suspended trading on July 31, 2013, following a government order.
As of August 2013, Anand Rathi had overall receivables of Rs 143 crore in NSEL and 16 per cent exposure to NSEL volumes (Rs 19,130 crore). IIFL’s exposure to volumes stood at Rs 9,183 crore, while that of Geojit was Rs 5,526 crore, according to data provided by the EOW. Police said these brokerage firms had given false assurances to NSEL investors, made mis-leading statements to them so that they put money in NSEL paired contracts, and assured fixed returns. Also, they had told investors the exchange was regulated by the Forward Markets Commission and their investments were safe due to the exchange’s adequate settlement and guarantee fund. All the three brokerage firms were clearing and forwarding agents in the exchange and had confirmed warehouse stocks to NSEL auditors. EOW also said brokers had raked up NSEL volumes by short-selling. While the police suspect propriety trading by NSEL, instances of circular trading were also witnessed. A few fictitious transactions between these brokerage houses and NSEL investors had led to suspicion.
Police said the three entities had also modified unique client codes at their ends, not at the exchange’s. It was also found the brokers had traded in client accounts without their permission.
Meanwhile, EOW has issued a letter to FTIL, saying it should inform the EOW before liquidating any of its assets. According to the EOW, NSEL had made a payment of Rs 85 crore to FTIL as software-related dues.
