Curious case of repeated arrest and release of Jignesh Shah (or how Rs 5,600 cr lost without trace?)

It is clear that there is a pattern in the way all the investigative agencies went about handling the Rs 5,600 crore NSEL scam case

Shantanu Guha Ray November 01, 2016 18:09:08 IST
Curious case of repeated arrest and release of Jignesh Shah (or how Rs 5,600 cr lost without trace?)

Jignesh Shah, once considered the poster boy of Asian commodities, has virtually fallen off India’s corporate radar with his hop-in-hop-out jail terms in the Rs 5,600 crore NSEL scam, which, many claim, is virtually going nowhere.

On Wednesday, 19 October 2016, Shah was out of a jail in Kalyan on the southern fringes of Mumbai after the Central Bureau of Investigation (CBI) failed to convince a lower court why Shah was arrested. This was the third time he walked in and out of a jail term.

A lawyer even reminded Shah that he has already spent 156 days in jail ever since the Rs 5,600 crore plus NSEL payment crisis unfolded in 2013.

That is, almost, half a year, and the case almost three years old.

Curious case of repeated arrest and release of Jignesh Shah or how Rs 5600 cr lost without trace

Jignesh Shah. Reuters file photo

Probe agencies - the Central Bureau of Investigation (CBI), Enforcement Directorate (ED) and Economic Offences Wing (EOW) of the Mumbai Police - took Shah repeatedly into custody eventually ending up confessing in courts that they found no money trail to Shah’s lockers. And every time the judge asked the agencies reasons for his arrest, none had answers as to why Shah had to spend time among hardened criminals and undertrials at a prison in Kalyan on the outskirts of Mumbai.

Even Shah’s lawyers are trying hard to know why.

Eyewitnesses in the court said Shah did not remark when informed about his total jail term, his face peaceful against the tumult of his mind ever since the Central Bureau of Investigation (CBI) arrested him on 20 September 2016, in connection with a case unrelated to the NSEL payment crisis.

The arrest was linked to the renewal of licence to MCX-SX by market regulator Securities Exchange Board of India in 2010 that the CBI claimed Shah obtained illegally, bypassing stipulated guidelines.

The homes of four Sebi officials, Vishakha More, Rajesh Kumar Dangeti, SV Muralidhar Rao and JN Gupta, were also raided on 20 September 2016, as the CBI suspected that they may have received bribes from Shah in relation to the licence renewal.

What appeared strange is that Shah was being blamed for illegal wealth discovered in a Sebi official’s house in 2016, given that the alleged case of corruption occurred in 2010.

Interestingly, none of those four Sebi officials raided were arrested.

But a charge was also made out under Section 420 of the IPC in relation to a 2008 buyback agreement between two promoters of MCX-SX, namely MCX that held a 51 percent stake and Financial Technologies Ltd, now known as 63 Moons Technologies Ltd., which held 49 percent stake. This agreement was part of a stake sale undertaken by the promoters to comply with new Sebi guidelines restricting the maximum stake an individual company could hold in an exchange to 5 percent.

And there lies the biggest catch of this bizarre case.

Shah’s lawyer Amit Desai argued in the court that Sebi had actually opposed renewal of licence to MCX-SX and the matter went to the Bombay High Court which ruled in favour of MCX-SX, saying the buyback arrangement was absolutely legal. Secondly, if the licence was obtained on the basis of bribes offered to the aforesaid Sebi officials, then how come the then chairman CB Bhave was not mentioned in the FIR filed by CBI?

This licensing case, by all accounts, is purely incidental to the Rs 5,600 crore NSEL payment default that has been haunting Shah since 2013.

The CBI had no answer when the judge asked the public prosecutor Kavitha Patil why was Shah arrested. Worse, Desai reminded the court that the Bombay High Court had heard this matter in 2012 and held that this wasn't sufficient ground for cancelling the exchange’s licence.

The Bombay High Court order had ruled, "The buyback agreements cannot be held to be illegal as found in the impugned order of the Whole Time Member of SEBI on the ground that they constitute forward contracts."

When Sebi challenged this judgment in the Supreme Court their plea was dismissed as the Supreme Court maintained the Mumbai High Court order. Despite such a crucial validation from the highest judicial authority, many legal experts are now wondering whether or not the CBI was overruling the Supreme Court.

Patil’s argument that Shah had not been forthcoming about the sources of funds used to set up MCX-SX did not work with the judge because Sebi had already conducted due diligence in 2008 before granting MCX-SX "fit and proper" status.

Hence, what purpose are these arrests serving?

With the latest arrest, it is clear that there is a pattern in the way all the investigative agencies went about handling the case. Shah was taken in for non-cooperation all three times and released all the three times after the judges found several faults in his arrest, including the fact that he had been cooperating very well with the investigating agencies.

Eminent Supreme Court advocate KTS Tulsi says he is aghast: “In each arrest and the subsequent bail, I find no logic. It is not possible for the police to continue to arrest the person for, on the same threats, on the same allegations, time and again, on the mere pretext that he is not-cooperating. You can't arrest a person for not-cooperating. Cooperating means that I must turn into a witness against myself.”

Majid Memon, another top lawyer, said the arrests were totally out of place. “Different wings cannot treat a citizen like a vegetable, tossing him from one place to another. And every time, the investigating agencies are drawing a blank. So why are they arresting Shah?”

“There should be no selective arrest. There should not be vindictive approach in the matter of investigation. Arrest is always the last resort. The Supreme Court has expressed its anguish, that the liberty of citizen cannot be curtailed by way of some vindictive approach or to humiliate him or to cause loss of reputation or something of that kind,” said Memon said in an interview.

It’s intriguing that the CBI custody came close to the heels of the ED’s arrest. However, when he was granted bail by the PMLA Court on 6 August 2016, Shah was vindicated for the second time as the ED had found no evidence of the money trail.

In fact, the PMLA Court stated: “The ED has failed to satisfy the Court how Shah’s arrest is legal in a different case. There is no vicarious liability unless statue specifically provides.”

Even in 2014, when Shah was granted bail after being taken into custody by the EOW-Mumbai, the Bombay High Court, while granting bail stated: “Though projected a 'scam of Rs 5600 crores', the ill-gotten amount has not gone to the applicant (Shah), or for that matter, to NSEL.”

Lost in the rubble of arrests is the case of missing Rs 5,600 crores. Someone needs to focus on it, and bring the cash back to those who lost it.

Worse, with three failed arrests, its now increasingly becoming clear Shah is merely the target, not answer to the loss.

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