Mumbai police freeze NSEL bank accounts; no payout to investors again

Mumbai: The economic offences wing (EOW) of the Mumbai police today froze bank accounts of crisis-ridden NSEL, which said the action prevents the exchange from making a scheduled payment of Rs 174.72 crore to investors.

“The EOW Mumbai police have in accordance with legal procedures, frozen the bank accounts of NSEL, including the settlement bank accounts. In view of the same, NSEL is unable to make any payouts today,” the National Spot Exchange Ltd (NSEL) said in a statement.

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The Forward Markets Commission, the commodity market regulator that’s overseeing the exchange’s settlement process, has been informed about the freezing of bank accounts, NSEL said. NSEL had in August submitted a plan to the FMC to settle about Rs 5,600 crore of dues to investors over a seven-month period ending in March.

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“NSEL is taking legal advice to defreeze the settlement bank accounts and investors and members will be notified in due course,” the statement added.

Yesterday, the Mumbai police registered an FIR against NSEL promoter Jignesh Shah and others in connection with the payment crisis at the crippled exchange and raided their offices, residences and warehouses across the country.

NSEL was engulfed in a payment crisis to 13,000 investors, represented by 148 members, after it halted trading in August following government directives. According to its settlement plan, NSEL would pay Rs 3,494.4 crore this year in instalments of Rs 174.72 crore every Tuesday.

The exchange has defaulted on payouts for the past six weeks and has settled about Rs 150 crore so far.

Police sources said they did not freeze the escrow account as it was opened for the specific purpose of making payouts to investors and brokers. The troubled exchange owes Rs 5,600 crore to a number of brokers and 13,000 investors. The escrow account was opened by NSEL after it was ordered by the government to ensure payouts on priority to investors after the exchange halted trading two months ago.

The police officer evaded a direct reply when asked if the frozen bank accounts included those of Shah, Chairman and Managing Director of FT, and Joseph Massey, Managing Director and CEO of MCX Stock Exchange, which is promoted by FT, both named accused in the FIR. “These were the bank accounts of the accused involved,” he said.

The Ministry of Corporate Affairs has ordered inspection of accounts of NSEL and its promoter entity FT. A senior ministry official said it is checking if these entities violated any rules under the Companies Act.

NSEL has been facing problems in settling Rs 5,600 crore dues of 148 members/brokers, representing 13,000

investor-clients, after it suspended trade on July 31. The EOW has charged NSEL promoters, directors and

defaulters with cheating, forgery, breach of trust and criminal conspiracy, among others.

Police teams, which started raids at as many as 184 locations yesterday morning, completed searches at 54 sites and claimed to have collected crucial evidence. “The raids at remaining locations are under way. It is a very tedious task and would take a few days to complete the searches,” Sinha said.

Eight warehouses were sealed, Sinha said, adding, “Some commodities were found in a few of the warehouses.” Places raided include the house and office of Nimish K Patel, Chairman of NK Proteins - a key debtor of NSEL - in Ahmedabad, another officer said.

PTI