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National Spot Exchange Ltd (NSEL) officials misled investors by claiming it could use stocks under the management of National Bulk Handling Corporation (NBHC) to build positions on the exchange.
This was revealed in a statement made by Jai Bahukhandi, former assistant vice-president (market operations), NSEL, before one of the several committees set up to probe the Rs 5,600-crore payment crisis at the exchange.
“I entered into an agreement with the client for multiple locations that were collaterally managed by NBHC. I could not take control of the stocks, as the goods were pledged with the banks,” Bahukhandi said. He is one of the several officials dismissed by the exchange following the debacle.
Explaining the modus operandi, which revealed a pre-planned conspiracy which Bahukhandi’s superiors were fully aware of, he said, “The trade was executed and the client offered these stocks through an offer letter, the CID (commodity inward document) was generated in the eWDMS (electronic warehouse and delivery management system) at the head office of NSEL, though I did not have control on the stock.” The statement added, “Simultaneously, quality certification and storage receipts were generated and marked for commodity pay-in, though the commodities were already under pledge.” Therefore, NSEL was creating new positions on the stock already pledged with banks through NBHC.
In an email statement NBHC said, “Though the NSEL officer concerned had clarified they had not informed NBHC about their understanding with their clients and the same stock was not made available to NSEL by their clients, the statement clearly shows the stocks were effectively under the control of NBHC and it wasn’t made available by the clients to NSEL, as told by the NSEL official.” “We hereby once again clarify whatever stocks are held by NBHC as the collateral manager of the banks would always remain in our effective control till we receive a release order from the bank,” NBHC, a sister concern of NSEL, said.
Bahukhandi knew NBHC operations and procedures well, as before joining NSEL, he had worked with the former as deputy general manager (collateral management).
He said his superiors were in full knowledge of what was going on. On the contracts started with PD Agroprocessors, Namdhari Groups and Shree Radhey as counterparties, Bahukhandi said, “When we started the contract with the party, the goods offered to us at the collaterally managed warehouse and the warehouse receipts were under pledge with the bank. This was informed verbally to Anjani Sinha, managing director and chief executive of NSEL, in presence of Amit Mukherjee and it was verbally approved to launch the contract and accept the goods.”
Karnal-based PD Agro had dues of Rs 617 crore and Sirsa-based Namdhari’s dues stood at Rs 63 crore against paddy stocks, while Saharanpur’s Shree Radhey owed Rs 35 crore against black pepper and red chilly. Bahukhandi’s submissions are contrary to Sinha’s recent affidavit that suggested he, along with other officials, was bribed by borrowers to skip deviate from the exchange’s rules. Recently, Mukherjee had told Business Standard he was just merely involved in marketing and was being framed by his own company.
“At the time of launching the contract, I had visited their office in Karnal, Haryana, along with Amit Mukherjee and Manish Chander Pandey (another NSEL official). We met Ranjeev Agarwal, director, finance, of PD Agro, and others. They assured us they would get the stocks released by making a loan repayment to banks and subsequently, offer/handover stock to NSEL in the next 10-15 days. However, the lien was not released and we could not have control over the stocks.”
Bahukhandi said this position continued for about two years. “No warehouse register was maintained and, therefore, there was no control over the movement of goods. We did not inform NBHC about the contracts. Also, we did not inform banks about the sale of goods. We were not given any access to the godowns. This practice started in September 2011 and continued till date.”
He said all senior officials were in the loop, adding he had also sent an email regarding the shortage of stocks.
