The investors approached the police after the exchange had defaulted on the fifth consecutive pay-out to its members and investors.
Around 58 investors and 17 brokers / members of the National Spot Exchange Ltd. (NSEL) have filed a criminal complaint with the Economic Offence Wing (EOW), Mumbai Police, against NSEL, Jignesh Shah, the board of directors of NSEL,executives of NSEL, including Amit Mukherjee and Jai Bhaukhundi, auditor Mukesh Shah and 24 defaulters and their clients.
The investors approached the police after the exchange had defaulted on the fifth consecutive pay-out to its members and investors. The pay-out involves around Rs. 5,500 crore.
The complaint makes a case that ``Mr. Shah is the brain, trust and alter ego of NSEL, and primarily responsible for the affairs and the fiasco at NSEL.’’ He abused his position to create a false impression in the minds of investors regarding the legitimacy of the operations at NSEL, said NSEL Investor Forum in a release here on Wednesday.
Noted senior advocate Amit Desai along with law firm AZB & Partners are advising the complainants .
In their complaint, they alleged that 99 per cent of delivery business was fraud, evidenced by the complete absence of underlying goods and issuance of fake warehouse receipts. The complaint alleged that NSEL built its business model around trading in “non existent” goods and giving investors an impression that goods were in warehouses, when none existed and produced several documents supporting the active marketing done by Mr. Shah.
The complaint also alleged that there existed cosy relationships between the defaulters, promoters and management wherein goods were stored in the premises of defaulters, which did not have storage capacity for stated quantities, in each case, through non-arms’ length relationships, and in all such cases, NSEL certified such warehouses as “Exchange Accredited”.
The complaint alleged a massive conspiracy by the accused and violations of the Indian Penal Code involving criminal breach of trust, forgery, criminal misappropriation of assets, cheating (sections 406, 407, 409, 417, 420, 424, 465, 467, 468, 471 r/w 120B of the IPC).
“The offences are of the utmost seriousness inviting over 7 years of rigorous imprisonment if proven. Investors are hopeful the complaint makes a strong case out for every enforcement authority (CBI, SFIO) to take effective action including by ED under the provisions of the Prevention of Money Laundering Act (PMLA),” said the Forum.
Fearing that NSEL and Mr. Shah might destroy evidence and alter records, they called for immediate steps to preserve records.