The National Spot Exchange (NSEL) affair got murkier on Monday as regulator FMC cast doubts on its management and charged that the crisis-ridden spot exchange is not complying with its directions and providing wrong information in the case involving Rs 5,600 crore dues to investors.
While warning NSEL of stern action if violations are repeated, the Forward Markets Commission (FMC) ordered the exchange to reconcile the amount receivables and payable to various members of the bourse. Earlier in the day, Consumer Affairs Secretary Pankaj Agarwal said the government is mulling an audit of NSEL's physical stock in warehouses as it fears defaults in payment by buyers.
FMC said that despite several directives NSEL had given different information on different occasions, even just one day prior to the first scheduled pay-out date August 20. "This casts serious doubt on the reliability of the figures submitted by the NSEL and also raises doubt on the seriousness of the Management and Board of the NSEL regarding settlement of the outstanding obligations," FMC said in a letter to NSEL.
Investors hit by the payments crisis at the NSEL are keenly awaiting the first payout by the exchange on Tuesday before deciding on taking any legal action. NSEL Investors Forum (NIF) President SK Saraf said, "All investors are concerned about the ability of NSEL to pay up as the payout schedule is vague. We will wait until Tuesday to take a final decision."
His statement came close on the heels of Indian Council of Investors filing a PIL in the Bombay High Court on Friday against NSEL, which was thrown into a tizzy after the government last month-end forced it to suspend trading of contracts from 31 July, causing a payment crisis to the tune of Rs 5,600 crore.
The forum will plan for a proper strategy to ensure full payment of the legitimate dues of its members. The NIF plans to take up the matter at all levels, including official, political and legal, Saraf said.
However, NSEL is confident of settling the Rs 5,600-crore dues earlier than the 30-week schedule it had declared last week. "The time schedule declared by us is based on the minimum amount committed by buyers. But many of them have said they will pay earlier than the time committed," Anjani Sinha, managing director and chief executive of NSEL, told Business Standard.
The Forward Markets Commission (FMC) has already sought the help of the finance ministry and other investigating agencies.
With the payment crisis engulfing NSEL, the PMO is planning to set up a special team headed by Economic Affairs Secretary Arvind Mayaram to look into the issue. Sources said the Finance Ministry will also use its investigative agencies to look into allegations of possible money-laundering and warehouse-receipt fraud.
However, According to a Times of India report, the NSEL fiasco is actually turning out to be a multi-agency failure with even the finance ministry and the Reserve Bank of India (RBI), apart from the ministry of consumer affairs, failing to act against alleged irregularities. In fact, the ToI report notes that even Sebi's role has come under the scanner given that the depositories — NSDL and CDSL — are regulated by it and were participating in e-series contracts related to gold and silver, which were suspended after the NSEL fiasco turned into a full-blown crisis.
The crisis at NSEL will be discussed in Parliament this week. "A member has given a notice for moving a Calling Attention Motion on the issue in Parliament. The notice has been accepted and discussion will be held this week," a PTI source said.
An Economic Times article analyses how the NSEL problem is different from the Saradha scam. It notes that though the spot exchange's payments crisis has some difficult elements, it is likely to have a much happier ending because the payments could ultimately materialise, unlike the case of Saradha.
However, there were similarities in how the products were sold.
"The NSEL products at the centre of the problem were marketed to high net worth individuals (HNIs) by brokers who offered 11-15 percent annualised returns. And the clinching pitch, which many brokers apparently used to sell the product to clients, was that such returns were risk-free, or close to it." The report, says in both cases, the customers were offered a deal that was simply too good to be true.
With inputs from PTI