Mumbai police arrests two former statutory auditors in NSEL scam

Six years after the payment default took place on the National Spot Exchange (NSEL), the Economic Offences Wing (EOW) of the Mumbai Police on Friday arrested two former partners of SV Ghatalia & Associates (SVGA).
SVGA was the statutory auditor of NSEL between FY10 and FY12, and is a network firm of global accounting major EY.

The EOW produced both the partners before the Sessions court, which sent the duo to police custody till the next hearing, scheduled for Monday. Attempts to reach EOW officials did not yield any result.
“We are surprised and dismayed at the sudden course of action taken by the EOW and will vigorously defend the reputation of our partners and our firm. The action by the department is for a six-year-old matter. During this period, we have always extended our full cooperation to the authorities and participated in over 50 meetings with the department,” said an official statement from SVGA.
The NSEL crisis had erupted in 2013 over a payment default of Rs 5,600 crore, involving 24 trading of its members and 13,000 clients. Following the crisis, the government ordered closure of the exchange.
Since then, government agencies, including EOW, the Enforcement Directorate and Serious Fraud Investigation Office have arrested a number of defaulting members, officials of NSEL and its promoter 63 Moons Technologies (formerly Financial Technologies) and released them on bail.
“We reiterate that our audit of NSEL’s financial statements for the years ended March 31, 2010, 2011, 2012 were in accordance with the auditing standards generally accepted in India. We were succeeded by another auditor for the financial year 2012-13. NSEL defaulted in its settlements in August 2013,” the SVGA statement said. It added that the firm has made several written and oral submissions during the last six years about settlement of NSEL’s contracts that were outstanding as of March 31, 2012, its last year of audit.
“We are confident of the quality of our audits and hopeful that our submissions and cooperation will be taken into account by the relevant authorities,” it added.
“We are shocked by the sudden and unwarranted arrest of two professionals associated with EY, as it was the statutory auditor of NSEL, and not that of the exchange platform. EY had nothing to do with verification of these stocks,” said a statement from 63 Moons.

Supreme Court sets aside merger of 63 Moon Technologies with NSEL

The Supreme Court of India on Tuesday set aside the central government’s decision to merge National Spot Exchange Ltd (NSEL) with Financial Technologies India Limited (FTIL), now known as 63 Moon Technologies Limited, as it was against the Section 396 of Companies Act. Section 396 of the Companies Act deals with the compulsory amalgamation of companies ordered by the central government, in public interest.
A two-judge bench of Justice Rohinton Fali Nariman and Justice Vineet Saran set aside a Bombay High Court judgment which had upheld the central government’s order on amalgamating the two companies. The central government had in 2016 decided to issue a final order for the merger of NSEL with FTIL under Section 396 of the Companies Act, 1956. The government had then said that the merger was being done in public interest.

Following the judgment by the top court, while the company’s Chairman Emeritus and Mentor said that truth had finally prevailed, the company’s chairman Venkat Chary said that justice had finally prevailed.
“The company has been articulating in the past that the merger will serve no purpose for the stakeholders of either NSEL or FTIL, but to benefit only a few people with vested interest. As such our stand has been fully vindicated,” said FTIL’s managing director S Rajendran in a statement.
FTIL, or 63 Moon Technologies as it is now known, is the 99.99 per cent shareholder of NSEL. Of the 99.99 per cent, nearly 45 per cent is held by Jignesh Shah and his family, while the other 43 per cent is held by the public. The remaining 5 per cent is held by institutional investors. On July 31, 2013, NSEL, the subsidiary of FTIL, had defaulted on payments of nearly Rs 5,600 crore to nearly 13,000 investors following which trading on the spot exchange was suspended. NSEL was incorporated in the year 2005 as an electronic trading platform for trading of commodities.

Former director Joseph Massey summoned by police in Rs 5,600-cr NSEL scam

Mumbai Police on Saturday summoned former director of the National Spot Exchange Limited (NSEL) Joseph Massey in connection with the Rs 5600-crore scam at the now-defunct commodities spot exchange.
On Friday, Massey had moved court seeking anticipatory bail and his plea is to be heard next Tuesday.

Massey filed the court a day after police arrested former chief financial officer of the NSEL, Shashidhar Kotian for his involvement in the falsification of minutes of the board of NSEL and manipulation of accounts.
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Kotian who was later remanded to police custody by a court.
Police sources said that a few more arrests in coming days are not ruled out.
NSEL called the move by the EOW a 'witch-hunt'.
"We are shocked and surprised that five years since the probe into the NSEL case began, Joseph Massey, a former Non-Executive Director of NSEL, and some former employees are being targeted in a clear case of witch-hunting by the EOW of the Mumbai Police (EOW-Mumbai). This is especially when all the agencies, Central Bureau of Investigation (CBI), Enforcement Directorate (ED) and EOW-Mumbai Police, have already filed their charge-sheets on NSEL and 63 moons. It is also to be noted that Massey is made a witness in its charge-sheet by CBI," read a statement from NSEL.
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The statement further read that the money trail for the scam had been traced to the 17 defaulters "and the entire liability for recovery rests with these defaulters".
"Despite these glaring facts, traders and traders’ forums, which are actually fronts for the brokers, have been completely misguiding the probe agencies since last five years and this entire action is being directed by brokers," a NSEL spokesperson said