Commodity market regulator FMC has said it has found NMCE's founder and Vice-Chairman Kailash Gupta guilty of defrauding the exchange and "grossly abusing" his position to favour his family-run companies.
The regulator has also asked National Multi-Commodity Exchange to immediately file criminal case against Gupta, who is currently its Vice-Chairman and has previously served as its CEO and Managing Director.
The Forward Markets Commission also asked the NMCE to initiate process to recover Rs. 36 crore (Rs. 360 million) and any other illegal payment from him.
In its 96-page order, FMC said that based on the detailed probe initiated by it, "the charges framed against Kailash Gupta, the then Managing Director and Executive Vice-Chairman and presently the vice-chairman of NMCE is established".
The regulator found that Gupta breached his fiduciary responsibility to the exchange and "systematically defrauded it, misused and misappropriated its property and committed series of crimes under various laws...for benefiting himself, his family and his family owned/controlled firms".
Gupta was heading Ahmedabad-based NMCE as Managing Director and CEO since its inception in 2003 till May 2010.
Thereafter, he served as Executive Vice-Chairman till February 26, 2011 and is currently Vice-Chairman of the country's fourth-largest commodity exchange.
The charges relate to the time when Gupta held the positions of MD and Executive Vice-Chairman.
This is probably the first case of an alleged fraud in a commodity exchange in India by its own founder and promoter.
A couple of years ago, founder driven scam came to light in IT firm Satyam Computers.
In the order dated July 23, FMC pointed out that Gupta has violated laws such as Forward Contract Regulation Act, Indian Penal Code and Foreign Exchange Management Act.
Besides Gupta, the regulator said his family-run entities that have been benefited are Arrow Total Solution Pvt Ltd, Arrow Total Solutions LLC, Neptune Overseas Ltd and Kushal Enterprises.
FMC held that "they (Gupta and associate firms) are all severally and jointly liable not only to return the embezzled, misappropriated and misused funds of the NMCE but also liable to be prosecuted for the offences committed".
In the light of these findings, FMC ordered NMCE to file criminal cases against Gupta and take legal action to recover wrongful and illegal payment totalling to over Rs. 36 crore (Rs. 360 million) made to firms controlled by him and his close relatives.