By Maulik Vyas, ET Bureau | 29 Oct, 2013, 05.32AM IST3 comments |Post a Comment
I
MUMBAI:
Investors in the so-called e-series gold and silver contracts on
troubled spot bourse NSEL will have to wait longer for a financial
settlement after a directive by Bombay High Court for a forensic audit
of the business. In a separate development, public sector behemoth MMTC
filed a suit against NSEL in the HC for recovery of Rs 220 crore after
trading of paired contracts in which the PSU invested was halted by the
bourse on July 31.
A division bench of Justices SJ
Vazifdar and KR Sriram on Monday directed commodity market regulator
FMC, which has been authorised to oversee NSEL, to appoint an
independent agency for conducting a forensic audit of the e-series
business within four weeks of it appointment. The FMC told the court it
would need two weeks to appoint an auditor for the task, the cost of
which will be borne by NSEL.
The court direction
followed statements of Kevic Setalwad, additional solicitor general of
Maharashtra, who argued on behalf of the commodity market regulator and
government that to protect investors from further
damage they were
willing to conduct a forensic audit of E-series contracts. "It is clear
now that by notification, FMC has power to supervise and regulate the
E-series contracts," said the court.
MMTC's suit could
increase pressure on central agencies like Enforcement Directorate,
probing the scam, to take action against those allegedly involved in the
Rs 5,600-crore crisis, said sources. The PSU invested in controversial
paired contracts traded on NSEL, which allowed investors to lock in a
spread by simultaneously buying and selling commodities with two dozen
counterparties who raised thousands of crores against supposed agri and
metal commodities. The contracts offered by the bourse were halted by
the government as they violated spot exchange norms, which allowed only
oneday forward contracts and prohibited short selling.
"FMC
will have to issue orders to NSEL not to conduct rematerilisation or
financial settlement of Eseries contracts till the forensic audit report
is received," said the court while directing NSEL to pay for the
forensic audit.
The
HC is hearing petitions filed by a few NSEL investors who have sought a
stay on financial settlement of the e-series. They allege that the gold
and silver backing the contracts may not have been purchased with
investors' money and that eseries needed to be regulated by a government
agency. Apart from the legal battle, the Economic Offences Wing has
filed an FIR against NSEL directors, promoter Financial Technologies and
two dozen borrowers following an investor complaint alleging cheating
and forgery.
The EOW has arrested NSEL former MD &
CEO Anjani Sinha and the MD of NK Proteins. It has interrogated Jignesh
Shah, founder of FT, twice this month in connection with the scam and
is likely to summon him for a further round of questioning shortly, said
senior police sources.
NSEL
and its promoter Financial Technologies find themselves in the eye of a
storm after the bourse was directed to cease trading of controversial
paired contracts in July. The trading of these contracts was stopped on
July 31 and shortly after the exchange also said it was ceasing trading
of e-series.