NSEL case

NSEL case or NSEL scam relates to a payment default at the National Spot Exchange that occurred in 2013. The case is under investigation with the spotlight on the involvement of brokers, defaulters, investors and key decision makers. NSEL was promoted by Financial Technologies India Ltd. The payment default took place when the then commodities market regulator, the Forward Markets Commission (FMC) directed NSEL to stop launching any fresh contracts leading to an abrupt closure of the Exchange in July 2013.

Background

Three spot exchanges NSEL, NSPOT and National APMC were exempted by the government under Section 27 of FCRA to conduct forward trading in one day contracts. This was done to boost volumes so that their economic viability improved. While Financial Technologies (India) promoted NSEL was granted general exemption on June 5, 2007, NSPOT and National APMC received exemptions under the same provisions on July 23, 2008 and August 11, 2010 respectively. On the flawed recommendations of the FMC, the Ministry of Consumer Affairs ordered NSEL to settle all existing contracts and not launch any fresh contracts, which led to the crisis.Pair contract is the brainchild of intermediaries in order to lure the trading clients for enhancing their brokerage revenue. NSEL warned these members about selling contracts as pair contracts to their trading clients and cautioned them not to offer any assured returns. NSEL had issued circulars to its members, refraining from offering any such contracts by offering assured returns.

Investigations led by Enforcement Directorate (ED) & Economic Offences Wing (EOW) revealed the role of brokers & defaulters in the NSEL case. The brokers mis-sold NSEL products to their clients by assuring them fixed returns. The defaulters hypothecated stocks and produced fake warehouse receipts and siphoned the entire default money.

Initially, it was believed that there were 13,000 trading clients affected by the NSEL crisis. The genuineness & entitlement of these 13,000 trading clients is questionable as NSEL & other authorities repeatedly asked its members, brokers to furnish Know Your Customer (KYC) details of all 13,000 trading clients, but it has not been furnished. In fact, they vehemently opposed it. Even the high power committee of Mumbai High Court also suggested that brokers should furnish this data to NSEL in order to protect interest of genuine claimants. Considering this aspect, SFIO which is also investigating the case, has recently asked brokers & trading clients to provide various information in a specific format which also includes KYC related information.

Anjani Sinha, the sacked CEO and the MD of the company, owned up the entire responsibility of the crisis in his first affidavit. However, Anjani Sinha after arrest retracted his earlier affidavit. Subsequently, after his release, Sinha admitted to the contents of his first affidavit in his statement to the Enforcement Directorate.

History

Pursuant to the then Prime Minister’s vision to create a single market across the country for both manufactured and agricultural produce, NSEL (National Spot Exchange Limited) was conceptualized in the year 2004. According to the Economic Surveys of the government done in 2003-2006, 3 consecutive years of survey also recommended setting up a national-level, integrated market for agricultural products, as did the planning commission, which was aware of the benefits of the spot markets. This was followed by the Rangarajan Committee, which too sought a national spot market.

Following the invitation from Ministry of Consumer Affairs (MCA), the Multi Commodities Exchange Ltd. (MCX) which was earlier a sister company of NSEL, submitted a project report for establishing a nation-wide spot market for commodities. NSEL was set up as a company incorporated under the Companies Act, 1956 on 18th May 2005 with its registered office in the State of Maharashtra. NSEL was incorporated by MCX and nominees of FTIL.

Subsequently in view of regulatory concerns between regulated commodities exchanges holding equity shareholding in spot exchanges, the shareholding of MCX and nominees were transferred and consolidated later in 2005 with FTIL. On 5th June 2007, NSEL was approved as a Spot Exchange by Department of Consumer Affairs (DCA). National Spot Exchange Limited (NSEL), commenced live trading on October 15, 2008, and was the first commodity spot exchange of the country.

Within a few years, as many as six state governments issued licences under the model Agricultural Produce Market Committees (APMC) Act to NSEL, because their own APMCs mostly short-changed the poor farmers. NSEL turned out to be a boon for such farmers because they could now sell their produce at competitive rates and make better profits. NSEL also led to transparent spot price discovery leading to the growth of electronic spot markets. The Exchange was also promoted by National Agricultural Cooperative Marketing Federation of India. (NAFED) In August 2011, FMC was appointed as the ‘designated agency’ to fill the regulatory vacuum in the commodities market. A series of bizarre actions by the FMC spooked the market and as a result NSEL had to suspend the trading of all contracts on July 31, 2013

EOW Mumbai police action

The EOW (Economic Offences Wing) of Mumbai police is presently investigating the NSEL case and the Mumbai police has conducted various raids. On 9 October 2013, Amit Mukherjee, the Assistant Vice-President (Business Development) of NSEL, was arrested by the EOW of the Mumbai police marking the first arrest in the payment crisis. Subsequently, a day later on 10 October 2013, the EOW of Mumbai Police arrested Jai Bahukhandi, the former Assistant Vice-President of NSEL. Former CEO and MD, Mr. Anjani Sinha, was the third arrest in the case; he was arrested a week later on 17 October 2013. The EOW has since invoked the MPID (Maharashtra Protection of Investors Deposit) Act, under which it can attach properties and assets of the accused, for the interest of the investors. Mr. Nilesh Patel of NK Proteins Ltd., the biggest borrower from the NSEL, was arrested on 22 October 2013 who got out on bail subsequently. Mr. Surinder Gupta of PD Agroprocessors who owns Dunar brand rice has been arrested by EOW on 5 March 2014. Mr. Gupta tried various delaying tactics with EOW, NSEL and investors. In October 2013, EOW registered a case under the MPID Act in the NSEL scam. In the process, EOW attached defaulters' properties worth close to Rs. 4,500 crore across the country, and the MPID court initiated procedures to liquidate them so as to recover dues of depositors.

The EOW also arrested Rajesh Mehta of Swastik Overseas Ahmedabad who was one of the borrowers on 1 April 2014.

On 6 January 2014, the EOW of Mumbai's crime branch submitted its first chargesheet in connection with NSEL payment crisis. The chargesheet mentions the names of the following five accused:

• Amit Mukherjee (Former VP, Business Development at NSEL)
• Jay Bahukhandi (former AVP at NSEL)
• Anjani Sinha (Former Chief Executive of NSEL)
• Nilesh Patel (MD of NK Proteins)
• Arunkumar Sharma (Promoter & Director of Lotus Refineries)

The EOW arrested defaulter borrowers Nilesh Patel (NK Proteins), Arun Sharma (Lotus Refineries), Surinder Gupta (PD Agro) and Indrajit Namdhari (Namdhari Foods). On 11 August 2014, the EOW recently arrested the following officials from six defaulting companies on NSEL.

• Kailash Aggarwal (Ark Imports)
• Narayanam Nageswara Rao (NCS Sugar)
• B V H Prasad (Juggernaut Projects)
• Varun Gupta (Vimladevi Agrotech)
• Chandra Mohan Singhal (Vimladevi Agrotech)
• Ghantakameshwar Rao (Spin-cot Textiles)
• Prashant Boorugu (Metcore Steel & Alloys)

Rajvardhan Sinha, ACP, EOW of Mumbai Police said in an interview that the defaulters were not forthcoming with information pertaining to certain money flows, etc. The investigating official felt that custodial interrogation would help in tracing the fund flow. "The maximum money has been invested in immovable properties, some money has been used for payment of previous debt and some has just disappeared in a sense that it has been spent. Rs. 5,600 crore is gone. But most of the amount has been turned into assets," Rajvardhan added.

Arrests by EOW Mumbai and Enforcement Directorate

The Economic Offences Wing of Mumbai Police arrested Jignesh Shah and Shreekant Javalgekar on May 7, 2014 on charges of non-cooperation Reports however suggested that Shah was fully cooperative with EOW and had gone to EOW office 21 times against being summoned 7 times. Not only that, in order to facilitate the probe, NSEL had also deployed server in EOW office.

Jignesh Shah was released on bail on August 22, 2014 by the Hon. Bombay High Court. The court observed that “…the names of 25 different companies who are the defaulters have been mentioned in the FIR itself. Thus, though projected scam of Rs. 5,600 Cr, the ill-gotten amount has not gone to the applicant (Jignesh Shah), or for that matter, to NSEL.

The Enforcement Directorate arrested Jignesh Shah on 12 July 2016 for assisting NSEL defaulters in money laundering. A special PMLA court granted bail to Shah terming the arrest by ED was ‘illegal’. After hearing both sides, Hon. Judge P.R. Bhavake, Special PMLA Court, Mumbai, ruled: “The learned counsel for the ED failed to satisfy me that this arrest is for a separate crime… I do not find any force in the contention that the ED wanted to file a supplementary complaint against the applicant (Shah) in respect of the investigation made against him as Chairman of FTIL. The ED has come with specific averments that the applicant is not arrested in special PMLA case no 04/2015 but in other Enforcement Case Information Report (ECIR). The ED has failed to satisfy the Court how the applicant’s arrest is legal in different ECIR…..”

NSEL and borrowers' hidden nexus

While the NSEL management all along kept distancing itself from various defaulting borrowers, it was learnt that NSEL management was hand-in-glove with them. NSEL management made a last-ditch attempt to secure funds for the very defaulters who precipitated the Rs 5,600-crore fraud. Amit Mukherjee, AVP Business Development at NSEL negotiated a loan proposal on behalf of National Spot Exchange (NSEL) with Online Finance And Investment Pvt Ltd – a Chandigarh-based company. Strangely, but NSEL tried to help the defaulting borrowers raise money almost to the tune of Rs 4900 crores by acting as a guarantor in the last week of the scam.

Allegation on investigative agencies

The NSEL investors association has alleged slow investigation by Mumbai police, purposely going slow on FTIL group,Auditors of NSEL,defaulting borrowers and brokers who sold the ponzi scheme. It is being alleged that the data of crashed email server of FTIL-NSEL was not purposely being recovered by Mumbai police. The investors' association NIAG (NSEL Investors' Action Group)has written multiple letters to Enforcement Directorate and CBI alleging lax and compromised investigation. It is alleged that EOW wing of Mumbai police is not acting on inputs and no action has been taken on key FTIL directors like Devang Neralla, Paras Ajmera, manjay Shah etc. who all played pivotal role in the fraud.

Suspected foul play in detecting NSEL-FTIL email data/severs

There are serious allegations on Mumbai Police EOW of tampering with NSEL-FTIL email servers maintained by Pratap Polkam of FTIL. While earlier it was confirmed by Rajvardhan Sinha of Mumbai EOW that the mail server of NSEL/FTIL has crashed and has been sent to Bangalore for investigation, in a surprising about turn now the Mumbai police denies any such happening. Ketan Shah the man leading NSEL investors' association NIAG has leveled charges on the investigating agencies of misleading the court.

CBI Action

India's premier investigation agency The Central Bureau of Investigation raided various NSEL and borrowers' office and booked an FIR under prevention of corruption act for the funds that MMTC and PEC -two public sector units were made to invest in NSEL. However investors have complained that CBI has taken no action against politicians/bureaucrats involved in this scam and FTIL group.

The CBI conducted searches at 15 locations to unravel the conspiracy to get Project & Equipment Corporation (PEC), a PSU, to trade on NSEL. The fraud by a group of people resulted in an alleged loss of Rs. 120.75 crore to PEC, said the CBI in a press release on 13 March 2014. The CBI agency conducted simultaneous searches at 11 locations, including offices of brokers, PEC officials and traders in New Delhi and Karnal. The CBI also registered a case against certain officials of PEC on allegations that the accused were party to a criminal conspiracy to cheat PEC.

Kirit Somaiya – former BJP MP and President of Investors' Grievances Forum – had filed a Public Interest Litigation (PIL) in the Bombay High Court on 30 August 2013 seeking a CBI probe into the alleged refusal by NSEL to pay dues to 17,000 small investors. The respondents named in the PIL include Union Ministry of Consumer Affairs, Food & Public Distribution, Ministry of Finance, Forward Markets Commission (FMC), Central Board of Direct Taxes (CBDT), NSEL, and its promoter.

However, the Bombay High Court on 2 April 2014 allowed withdrawal of a PIL seeking a CBI probe into the alleged scam after the CBI informed that its Banking Securities & Fraud Cell had filed a case against NSEL and its promoters. A bench headed by Justice PV Hardas then allowed the Petitioner Ketan Tirodkar to withdraw the PIL as his request for a CBI probe had been considered. Shah, the bourse and the Sebi officials were charged for alleged criminal conspiracy and violations under the Prevention of Corruption Act. Rao, Dangeti and More worked under J N Gupta, who was responsible for the market regulation department. While Gupta has quit and floated a proxy advisory firm, Rao has been promoted as executive director. More, a visually challenged officer, was often seen in the rooms of the Bombay High Court during the high-profile legal battle between Sebi and MCX-SX in 2010. The agency said Shah and MCX-SX “in connivance with Sebi officials, deliberately suppressed” certain buy-back agreements the promoters had entered into with a public sector bank.

Role of the Ministry of Consumer Affairs, FMC & the UPA Government

In a show cause notice dated April 27, 2012, the Ministry of Consumer Affairs asked NSEL certain clarifications regarding the trades. NSEL promptly replied to this notice but for a year and half after the show cause notice, no action was taken by the Ministry. Instead, merely on the recommendation of the FMC, it ordered sudden and abrupt closure of NSEL on July 12, 2013. Shockingly enough, the same FMC did a U-turn, and on July 19, 2013 wrote to Department of Consumer Affairs (DCA) stating that the exemption notification was silent on whether the exemption was applicable to all or specific provisions of the FCR Act. As per the orders of the DCA, NSEL suspended trading on July 31, 2013. This sudden and abrupt closure of the Exchange market led to the payment default of Rs 5600 crore.

In fact, NSPOT did not even reply to the show cause notice sent to it by the DCA. Still, no action was taken against it. On the other hand, unlike at NSEL which was directed on 12 July 2013 to close the running contracts on their maturity, and not to launch any fresh contracts, NSPOT was allowed a gradual closure over the next year and half. Had similar long-term arrangement been provided to NSEL, the payments crisis would not have occurred.

Forensic audits by Grant Thornton, Choksi and Choksi and PWC

At the behest of the Forward Markets Commission (FMC), the NSEL asked Grant Thornton to conduct a forensic audit of the books of NSEL. The report, though not complete and with insufficient cooperation from NSEL, brought out various glaring irregularities. On the basis of the Grant Thornton report, the FMC served a show cause notice to the promoters of NSEL about their 'fit and proper' status to run exchanges.

There are still wide differences between the books of the NSEL, and those of the most borrowers. The Grant Thornton report also pointed out how Mr. Anjani Sinha wrote an internal email to stop using IBMA for rigging MCX prices, and to use SNP Designs P Ltd (his wife Shalini Sinha's company) to conduct proprietary speculative trades on the exchange.

As an inference, it was clear that the whole group NSEL/IBMA/MCX and FTIL were working in tandem and cooking books. Subsequent to a court petition by some investors of NSEL, FMC has been directed by the Mumbai High Court to conduct a forensic audit of Eseries bullion contracts of NSEL.

After petitions from certain NSEL pair trade investors, the Bombay high court directed the FMC to appoint a forensic audit of Eseries products of NSEL. An audit firm by the name of Choksi and Choksi was given this assignment and their audit report has damning revelations against the promoters and FT group. It was found that FTIL in 2011-12 had conducted a ProSys (Process and System) audit of NSEL and glaring risks/irregularities were found. Surprisingly these irregularities were never plugged and this report never finalized.

The FMC also asked PWC to conduct an audit of MCX where after the audit a lot of related party trades and other deviations were found which raised serious questions about the integrity and functioning of the FTIL group.It was learnt that MCX paid Rs 2.25 crores as dubious donations to Mukesh P Shah (Jignesh Shah's uncle and NSEL auditor) and Rs 17.76 crore either as donations or as professional charges to entities to which Sunil Daga Khairnar – former director of NBHC and NSEL.

NSEL also appointed SGS to carry out quantity and quality inspection of the commodities lying in various warehouses. The audit indicated that significant stock shortage was found in 9 warehouses relating to 7 defaulters. In respect of 29 warehouses relating to 11 defaulters, the SGS audit team was not allowed inside the premises.

The role of the Promoters

The EOW Wing of Mumbai police filed an FIR against all the directors of the NSEL and Financial Technologies India Ltd. The Grant Thornton forensic audit report also indicted the board of directors/promoters including Mr. Jignesh Shah who were present in all the crucial meetings, including the ones where fraudulent pair trade contracts were introduced, and money was allowed to be sanctioned to NK Protein Ltd. It is worthy to note that the owner of NK protein Ltd is also the son-in-law of the then Chairman Shankarlal Guru. It has also come to light in forensic audit that FT the promoter company had conducted a system/process audit of NSEL in 2011-2012 but the report was never finalized even after finding high risk irregularities.

The FMC in their show cause notice, and the Registrar of Companies (ROC) in their interim report, have held the promoters including Mr. Jignesh Shah, squarely responsible for the fraud. Jignesh Shah also came on TV on 5 August 2013, and promised a financial settlement. Interestingly, he said, "What will investors do with commodities, that's why we have decided to go for financial settlement" – which made people believe that he knew there were no underlying commodities in the NSEL warehouses, contrary to what was shown on the NSEL website. Mr. Jignesh Shah also promised a committee of three to look into the scam. The committee was to include the retired police commissioner Sivanandan, but it was merely a whitewash and was never formed. Various forensic audits by Grant Thornton, PWC, Chokshi and Choksi confirmed the involvement of the board of NSEL in the scam and dubious role of Financial Technologies Group Anjani Sinha's custodial statement squarely puts the blame on Jignesh Shah who he claimed was the mastermind of this whole NSEL fraud and the motive was to sustain profitability and market cap of FTIL which was dwindling as a result of loss making foreign exchanges that it floated.

It seems most exchanges being run and promoted by FT group have been mired in mismanagement, fraud and deceit. The fact that the parent company Financial Technologies India Ltd (FTIL)which owns 99.998% of NSEL had conducted an audit of NSEL systems/processes and did nothing even after knowing about NSEL shortcomings confirms the fact that the board of NSEL and FTIL knew much more about the scam then what is being made out.Soon after the news of the scam broke, FTIL claimed that the server that housed sensitive data related to the company has crashed. This seems more like a planned move on the part of the promoters.

The FMC also held FTIL, Jignesh Shah, Shreekant Javalgekar and Joseph Massey to be complicit in NSEL fraud and not 'fit and proper' to run any exchange in India.

The latest revelations from EOW investigation and the police charge-sheet on the promoter confirm that a company associated with him pulled out its money just before the exchange went bust. He also has been charged with insider trading on NSEL and also MCX exchanges.

An email between NSEL and NCS Sugar which was first sent to FTIL outbox (FT outbox)and then relayed by FTIL clearly shows FTIL's knowledge of launching of bogus T+2 - T+25 contracts on behalf of NCS sugar to 'liquidate old outstanding dues'.It was explicitly clear that these contracts were mere bogus contracts and the monies generated from investors will have to be given back to NSEL. This clearly underlines FTIL's complicity in the fraud.

The role of Brokers/Arrests

SEBI issued show-cause notices to the top five brokers namely Anand Rathi Commodities, India Infoline Commodities (IIFL), Geofin Comtrade, Motilal Oswal Commodities, and Phillip Commodities, on charges of mis-selling NSEL contracts by promising assured returns without ensuring delivery.

Since the brokers have also been accused of indulging in massive manipulation of client KYCs, large-scale modification of client codes for doing multiple deals and infusion of unaccounted money through their NBFCs, SEBI has asked them as to why they should not be declared not “fit and proper” since they were found to have violated securities regulations. In the notice, SEBI, has conveyed to these errant brokers that ‘it is alleged that your continuance as a market intermediary in the securities market is detrimental to the interest of this market…’

In the first show-cause notice, the allegations include several irregularities/violations such as false assurances to investors, wrong and misleading statements, arbitrage products sold with assured returns and as risk-free products, funding of clients and client code modification for those trading on NSEL.

“For grant of certificate of registration, the application has to be a fit and proper person in terms of regulation of the Stock Brokers Regulations, read with Schedule II of the SEBI (Intermediaries) Regulations, 2008. Further, the conditions stipulate that the stock broker shall at all times abide by the rules, regulation, byelaws of the stock exchange and code of conduct as specified in Schedule II of the stock exchange regulations...it is alleged that your continuance as a market intermediary in the securities market is detrimental to the interest of this market," the SCN states. “Therefore, it is alleged that you are no longer a ‘fit and proper' person for holding the certificate of registration in the securities market." In the second show-cause notice, media reports said, SEBI sent notices to five broker firms, as it was not satisfied with the explanation offered by them on allegations of mis-selling. The SEBI officers have formed an opinion that the brokers should not be granted licences for commodity business.

The Economic Offences Wing (EOW) of Mumbai Police also found evidence of large scale irregularities on the part of these brokers in the NSEL case. A forensic audit by the EOW also revealed hawala transactions, benami trades and client code modifications by these brokers.

The NSEL Investors' Action Group (NIAG) – a forum of NSEL investors requested the EOW to take strict action against these brokers who “falsely sold NSEL as an 'arbitrage product.' Several key brokers including Motilal Oswal undertook Power of Attorney to buy/sell/receive/deliver NSEL commodities on behalf of the investors and also opened DMAT (dematerialized) accounts to handle warehouse receipts of commodities in electronic form. “These brokers have also been accused of criminal breach of trust for parting with investors' monies without securing warehouse receipts as promised," the NSEL investors said in a letter to the Commissioner of Mumbai Police.

The Hon. Bombay High Court in its judgment dated August 22, 2014 also observed that "…brokers do have their own legal team and a full knowledge of how the market operates. The legalities of the transactions were quite expected to be known to the brokers … the brokers being quite experienced, and the investors being informed persons, it is apparent that the issue of illegality of the transactions raised by them is not out of their concern to adhere to legalities, but in order to project the applicant (Mr Jignesh Shah) as the main offender, rather than the defaulting parties.

On 3 March 2015 , the EOW, Mumbai, arrested 3 top brokers in NSEL scam.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.

The Securities and Exchange Board of India has formed a probe team to investigate the role of brokers in NSEL scam.

Role of auditors

Mr. Mukesh who is a maternal uncle of the founder of Financial Technologies has been internal as well as external auditor of NSEL from time to time. Mumbai police while opposing his anticipatory bail confirmed that he was doing insider-trading in FTIL shares and by virtue of possession of FTIL shares alone he should have been disqualified as an auditor. Besides,Mumbai police has confirmed that most companies of 'Rawal Group' where La Fin Financial Services P. Ltd. (promoter of FTIL) had a stake were registered at NSEL at the address of Mukesh Shah and Mukesh Shah was the auditor of all these companies which traded on NSEL to the tune of 1352 Crores and moved out in May–June 2013 without losing a penny showing their knowledge of the scam.

Anjani Sinha's custodial statement

In a custodial statement to the EOW authorities, Anjani Sinha the former CEO and MD of NSEL put the blame squarely on Jignesh Shah and charged him as the mastermind of the whole conspiracy. Anjani claimed that the whole idea of creating 'financing pair trades' (Vyaj Badla) on NSEL was of Jignesh Shah of FTIL as the other overseas exchanges of FTIL were not making money and he desperately needed to show profits to maintain his market cap and credibility and NSEL brought more than 50% to the consolidated profits of FTIL. Jignesh also fraudulently misused the name of NAFED a semi government organization by just giving them 100 shares (without representation) and claimed them as a co-promoter to induce investors. Anjani in his statement also claimed that his boss Jignesh Shah forcibly took away the passports belonging to him and his wife and made them sign forcibly confessional statements which were actually drafted by FTIL legal team. Anjani also claimed that the FTIL group changed the hard-disk of NSEL email servers between 15–25 September 2013 to hide the traces of Jignesh Shah's involvement in the fraud.

In his statement Anjani confirmed that Jignesh Shah, Manjay Shah (Jignesh Shah's brother), Shreekant Javalgekar, Mukesh P. Shah (Jignesh's uncle and auditor of NSEL)were fully aware of the NSEL scam and he was merely made a scapegoat.

NSEL–FTIL merger

On 21 October 2014 the Ministry of Corporate affairs announced a draft order for merger of NSEL which is the subsidiary company with its holding company, viz., FTIL. The govt by announcing this merger has exercised its power under sec. 396 of the Companies Act,1956. All stakeholders have been given 60 days to report to MCA and the order may get finalized after this. As of now FTIL has challenged this merger in Mumbai HC and the last date of merger allowed by Mumbai HC is 31 October 2015. In October, the court had set December 31 as the deadline. The Bombay High Court has extended the deadline till February 15 for the Union Ministry of Corporate Affairs (MCA) to pass the final order for the merger of the National Spot Exchange Ltd (NSEL) with the Financial Technologies India Ltd (FTIL). Hearing an application filed by the government, the Bench comprising Justices SC Dharmadhikari and BP Colabawala said time until 15 February 2016 is being granted, but with the condition that there will be no further extension. On 12 February 2016 the ministry of corporate Affairs India passed the final order of merger between FTIL and NSEL. The order was sigend by Shri Pritam Singh Additional Secratry to Ministry of Corporate Affairs. This order has been challenged by FTIL in Mumbai High Court and it is stayed till the arguments will be heard on merit.

MCA's move to take over FTIL board

On 28 February 2015,The ministry of corporate affairs convinced about FTIL's fraudulent activities, moved a CLB application to take over the board of FTIL and replace it with govt. nominated directors. This move is being contested by the FTIL board. On 30 June 2015 the Company Law Board (CLB) barred FTIL from selling its assets. FTIL got a stay from Chennai High Court on this CLB order. On 19 April Supreme Court of India reversed this stay and froze all assets of FTIL barring day to day expenses

Financial Intelligence Unit (FIU)'s Observation

FIU (under Finance Ministry) held that NSEL came under the purview of Forward Contracts (Regulation) Act (FCRA) and therefore guilty of failing in several of these obligations under the law. The black money watchdog has slapped a penalty of Rs 1.66 crore for several counts of violating the provisions of Prevention of Money Laundering Act (PMLA) on NSEL. The watch dog further held that failures is deliberate and willful and hence, invite penalties. NSEL is fined Rs.1 lac for each failure and the collective fine was Rs.1.66 crore.

Action by Enforcement Directorate (ED)

The ED has attached properties worth around 800 crores in NSEL scam. On 13 July 2016 the ED arrested the founder of Financial Technologies under PMLA (Prevention of Money Laundering act)

SFIO Probe on FTIL and NSEL

The Government of India ordered SFIO (Serious Fraud Investigation Office) probe on FTIL and its 18 associates pertaining to irregularities on NSEL. The Serious Fraud Investigation Office (SFIO), which is a multi-disciplinary organisation that probes serious financial frauds, has been asked to submit its investigation report in six months time.

Court quashes allegations made against MCX

A Metropolitan Court quashed allegations of a 900 Cr scam at MCX. This is the latest update in response to an earlier FIR filed by Mumbai Police raising questions of insider trading at MCX. The court in its findings cited an audit report conducted by PWC, ruling that it was based on hearsay and dismissed the protest petition. It however accepted the C-summary report filed by the investigating officer.

Sucheta Dalal's knowledge of NSEL scam

It was discovered that even 15 months before the NSEL scam went public, India's leading financial journalist Sucheta Dalal knew all major aspects of the fraud. An email dated 8 May 2012 from Sucheta to Jignesh Shah, Anjani Shah etc came in public domain which revealed that Sucheta knew about illegality and lack of safety of NSEL product. A complaint has been filed with Mumbai police by NSEL Investors' Action Group to investigate Sucheta Dalal's role. Sucheta knew about illegality of contracts, role of IBMA and the fact that the warehouses were in so called borrowers' own premises.