Borrowers, brokerage houses are on the police radar

Jignesh Shah, former director of the scam-ridden National Spot Exchange Limited (NSEL), was arrested by the Mumbai police on Wednesday in connection with the nearly Rs.5,600-crore payment crisis.

The Economic Offences Wing (EOW) of the Mumbai police also arrested the Chief Financial Officer of Financial Technologies India Ltd. (FTIL), Srikant Javlekar. FTIL owns NSEL.

On September 30, an investor had filed an FIR against the directors and key functionaries of NSEL for cheating, forgery, criminal breach of trust and conspiracy. The FIR alleged that the accused hatched a criminal conspiracy to defraud the investors and misrepresented that they were investors and induced them to trade on the platform of NSEL by creating forged documents such as bogus warehouse receipts, thereby, defrauding the clients.

Criminal conspiracy

According to the police, Mr. Shah masterminded the entire scam and engaged in a criminal conspiracy with the co-accused to turn NSEL into a non-banking institution. So far, 11 persons have been arrested in the case.

Mr. Shah, FTIL head and NSEL director, as well as member of its audit committee, approved all the borrowers from NSEL. The accused conspired to turn NSEL into a non-banking institution, the police claimed.

Rajvardhan Sinha, Additional Commissioner of Police, EOW, told the press: “Mr. Shah represented to the government regarding the scheme of NSEL, which was nothing but a platform for running a non-banking financial company. Mr. Shah had linked the volumes of transaction of NSEL platform to the percentage of income of FTIL and by this FTIL made substantial gains and improved its brand value in the market which helped in launching of other exchanges by FTIL.”

Custodial interrogation

While the case was registered in September, the police took over nine months to arrest Mr. Shah.

Explaining the delay, Mr. Rajvardhan said, “He was interrogated on numerous occasions. However, he was evasive and was not cooperative. Hence, the need of custodial interrogation was felt.”

The police also said that Rs.5,100 crore had been ‘securitised’ as the seizures had been made under the Maharashtra Protection of Interest of Depositors (MPID) Act. This money will be disbursed to the investors on a pro rata basis.

Charge-sheet

In January, a charge-sheet had been filed against the NSEL CEO, Anjani Sinha, two vice-presidents — Amit Mukherjee and Jay Bahukhundi — and two borrowers of the beleaguered exchange — Nilesh Patel, managing director of NK Proteins and Arun Sharma, film financier and chairman of Lotus Refineries.

Police said borrowers and brokerage houses were on their radar and more arrests might take place.

“Many brokerage houses issued fake warehouse receipts. They had also accessed the accounts of their clients without their consent to perform transactions. These houses are under scrutiny,” Mr. Sinha added.

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