Hardening its stance on the payment-crisis hit National Spot Exchange Ltd. (NSEL), commodity market regulator Forward Markets Commission (FMC), on Wednesday, directed NSEL’s board to auction the commodities lying as collateral in the warehouses to recover dues from members who have defaulted payment to creditors.
The NSEL board has been told to ask defaulters to handover their books, documents, papers, assets, cheque books and other documents. These must be vested with the exchange for the benefit of creditors, the FMC said.
“The exchange should proceed to liquidate all realisable assets of the defaulter-members to meet their pay in obligations,” the FMC said in a letter to the NSEL board. “The proceeds of the commodities auctioned and realisation of assets of the defaulters in the shortest possible time should be deposited in the escrow account, and should be paid to selling-members with the approval of the commission,” the letter said.
The NSEL board has been asked to keep FMC informed of any deficiency being found by the Collateral Management Agency appointed by NSEL with regard to quality, quantity and value of stock lying at the accredited warehouses. “Based on the findings of the Collateral Management Agency, take suitable punitive action,” FMC said in its directive to NSEL. The FMC’s latest letter comes a day after NSEL failed to collect Rs.174 crore from defaulting members as promised in the settlement plan for pay-outs. NSEL could collect only Rs.92 crore, which has been distributed to various parties.
With NSEL failing to meet its commitment and many of the cheques collected from parties getting dishonoured, FMC has sought an explanation from the NSEL board as to why the positions of defaulting members have not been closed out in auction, why they have not been declared defaulters, and why default proceedings have not been initiated against them .