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Rediff News  All News  » Business » NSEL investors' forum wants strong action by govt

NSEL investors' forum wants strong action by govt

November 11, 2014 10:48 IST

NSELThe government needs to take serious action in the case of the National Spot Exchange Ltd scam to protect the confidence of the investing public and send out a strong message that “frauds cannot be tolerated”, according to Sharad Kumar Saraf, chairman of NSEL Investors Forum, a body of investors of the defunct spot exchange, which is facing a default of Rs 5,600 crore (Rs 56 billion).

Saraf said nearly 93 per cent of the 58,000 shareholders of Financial Technologies Ltd, promoters of NSEL, held just 6.82 per cent of the equity.

A majority of the equity was held by 133 investors connected with the promoter, Jignesh Shah and his associates, he claimed.

Saraf was responding to comments made by Venkat Chary, non-executive chairman of FTIL, in an interview to Business Standard on Friday.

In the interview to Business Standard last week, Chary had stated that the government’s proposal to merge was unwarranted and that FTIL shareholders did not benefit from higher dividends from NSEL.

In his statement, Saraf, however, countered this by saying the balance sheet of FTIL for FY 13 showed that “nearly 82 per cent of FTIL’s consolidated profit could be attributed to NSEL.

The fact that NSEL accounts

are still not finalised shows poor governance and indication of a fraud. FTIL was well aware about the NSEL fraud and there are reasons to believe that NSEL was created only to perpetrate the fraud.”

Saraf said the proposal of merger of NSEL and FTIL was not made in haste, as stated by Chary, but after consideration of several forensic audit reports, departmental reports, charge sheets by the Economic Offences Wing, etc. Amalgamation of a company involved in fraud with parent will set an example and will prevent other corporates from using this route to carry out a fraud.

“It is very surprising that the government is silent on the PWC report,” Saraf said.

The statement said “exchange by definition was a counter-guarantee institute.

The investors were not aware about the quality and conditions of the defaulters. It is not the job of investors to claim the refund from defaulters.

The fact that NSEL has failed to make any significant recovery from the defaulters shows that they do not have the muscle or lack the will to recover or possibly there is a hidden nexus between defaulters and NSEL management.

The by-laws of NSEL and all other Exchanges always provide Exchange as a counter party to trade.

The investors did not know anything about defaulters, since the payment was made to NSEL and details of defaulters were not disclosed”.

BS Reporter in Mumbai