ARK Imports Under Investigation

On the grounds of looting 13k trading clients Mr.Kailash Aggarwal a business man from Ludhiana was arrested. There are 22 defaulters responsible for money laundering act in NSEL crisis. Mr.Aggarwal the accused is the Dir.of ARK Imports known for being one of the defaulter company in the NSEL crisis. Being a part of Rs.5600 crore crisis Mr. Aggarwal and his son Mr.Anubhav Aggarwal was under the lens of investigative agencies and government. ARK Imports is one among the key accused who is responsible for duping 13,000 trading clients by and never returning dues.

Kailash Agarwal was arrested by ED on Friday from Ludhiana and produced before ED court. He is been sent in custody till 29^thSeptember. Kailash Agarwal had allegedly duped Rs. 719.21crore through money laundering on NSEL platform. Agarwal with his son Anubhav Agarwal raised money through NSEL platform, stating that they have stored commodity of same amount worth in his warehouse. Kailash Agarwal and Anubhav Agarwal looted trading clients on the ploy of trading in commodities like wool, paddy, wheat, mustard oil and had projected that they are in physical custody of these goods at their various warehouses based in Ludhiana, Samrala and Nawanshahr.

They put the looted money into real estate and transferred majority of Rs.719.21crore abroad. Economic Offences Wing (EOW), ED and Central Bureau of Investigation (CBI) have booked Kailash Agarwal and Anubhav Agarwal under various sections of money laundering and fraud. EOW has attached around 82 properties of Kailash Agarwal worth Rs.102crore. Anubhav Agarwal is known to be absconding and currently married to a Russian and living in Dubai. 

NSEL Reecovery Group

National Spot Exchange Limited was a platform for trading commodities and it came into news in the year 2013. It was due to the payment crisis happened on July 2013. The huge sum of Rs.5600crore was defaulted by the brokerage firms and defaulters. The issue came under scanner of the various agencies since then. Exchange was enforced to stop all trading activities & contracts.  After the payment crisis Securities Exchange board of India (SEBI), Investigating Agencies and NSEL had declared 22 members as NSEL Defaulters.

Investigation of these defaulters and brokers resulted in evidences where fraudulent transactions they made are reveled. According to NSEL and FTIL final merger order, it has been said that the outstanding amounts will be recovered from the selling defaulter’s assets. Hemce pursuing NSEL defaulters for recovery should be of chief importance.

NSEL has always been cooperating with all the investigating processes. They are willing to work with all parties to make sure complete resolution and has been continuously involved in recovery efforts. There has been various recovery efforts carried out by NSEL with the only focus to ensuring that genuine clients receive their claims. NSEL has taken efforts to affect recovery from defaulters. Recovery suits against all defaulters had been filed.

NSEL also lend a hand to Investigative Agencies in recovery process. Time to time NSEL had extended all assistance required to Economic Offences Wing (EOW), to discover & freeze assets of defaulters. Enforcement Directorate (ED) is supporting them to attach assets pertaining to defaulters. 


NSEL has been doing well in getting decrees on admission against 5 defaulters from the Bombay High Court to the sum of Rs. 1233.02 crores. NSEL has also been successful to obtained injunctions against the assets of defaulters from the Bombay High Court in respect of claims of Rs 4515.93 crores. A important part of the entire claim has therefore been secured and Rs 542.99 crores is already paid by NSEL. In view of foregoing, more than 100% of the claims of the traders are secured by way of decree, attachments and injunctions against defaulters. 

Dir.of ARK Imports involved in NSEL arrested

Ludhiana based businessman got arrested in NSEL case by Enforcement Directorate. The court gave permission to ED, five days of Aggrawal's custody to enable the agency to interrogate him and investigate the case.  The accused is brought him to Mumbai from Delhi for interrogation. He was earlier arrested in Mumbai in August 2014.The ED had arrested Krishna Aggrawal on Friday and produced him before a holiday judge at the sessions court on Saturday in Mumbai.

Holiday judge remanded Mr.Aggarwal for the custody of the agency till September 29 just a day after the ED arrested director of Ludhiana-based ARK Imports. The ED case is that the director Kailash Aggrawal has an outstanding payment default of Rs 719 crore. 

According to Vikram Chaudhary, senior counsel from Punjab, his arrest was illegal with reference to an order of Punjab & Haryana high court not to arrest him. H S Venegaonkar, counsel for ED said that this said protective order was valid only till August 12 of this year It was not continued by the HC. "Hence his arrest was absolutely legal,'' he submitted in court as he sought his custody for the probe. Venegaonkar said the ARK Industries director was one of the leading defaulters and had allegedly laundered almost Rs 719 crore from the NSEL platform and was "not divulging information''. 

NSEL case : Kailash Aggarwal from ARK Imports behind bars

On the grounds of money laundering the Enforcement Directorate (ED) arrested a businessman from Ludhiana in NSEL case. On Friday the they decided to take the actions against Mr.Kailash Agarwal from ARK Imports who is one of the biggest defaulter in NSEL crisis.

The accused, Kailash Agarwal of ARK Imports, had allegedly looted Rs 719.21 crores from trading clients through the NSEL platform. It was his strategy to fool the trading clients by saying that he had stocked woollens of the same worth in his godown. Afterwards, he allegedly defaulted on payments. On Saturday, Aggarwal was produced before an ED court which sent him to the custody of the agency till September 29.

NSEL sources stated that, Aggarwal is among the key accused who is guilty for cheating 13,000 investors of Rs 5,600 crores in 2013. Anubhav Aggarwal, son of Kailash Aggarwal is absconding for a long time and he is currently living in Dubai. They have invested the NSEL’s defaulted money in real estate and most of the funds are diverted to overseas. It was realized that they assured the trading clients about having possession of trading commodities like wool, paddy, wheat, mustard oil at their warehouses at Ludhiana, Samrala and Nawanshahr. If found guilty he can be imprisoned for 7 years.

Top Broker in NSEL proved guilty - Geojit Comtrade

National Spot Exchange Ltd. came into discussion on a larger basis when NSEL crisis surfaced in 2013. The matter came under scanner of multiple agencies since then. Exchange was forced to shut down and suspend all its trading contracts. When the NSEL and its parent company FTIL was getting targeted, in actuality it was a well planned strategy of defaulters and brokers. It was stated that many investors claimed that the brokerage firms used their money & account details fraudulently.

Reportedly Udaipur-based NSEL investor Achal Agarwal invested his money through a well-known broker Geojit Comtrade. Mr. Achal filed a complaint against his broker and has suspected that his broker has swindled money under his name. Mr. Agarwal also learned about the unsought-disbursement of loan against Geofin Comtrade and Geojit Credits’ Ltd. These brokers together dishonestly used Mr. Achal’s account and PAN details to invest their huge amounts on NSEL platform.

Mr. Agarwal told Business Line that the outstanding receivable amount mentioned on his name was shocking. The outstanding receivable amount mentioned in NSEL was Rs. 4 Crore whereas the actual amount was only 9.75 lakh. Achal also stated that he has not taken any loan from anywhere for investing on the NSEL platform. He has also not received any such amount in any of his personal account. However, the actual trading amount of Achal Agarwal on NSEL platform through GeojitComtrade was Rs. 9.75 lakh.

The Bombay High Court gave instructions to the High Court Committee to seek KYC (know your customer) details from NSEL investors. Bombay High Court also asked NSEL and investigative agencies to be acquainted with the actual truth from the broker.

Mr. Achal has filed a complaint to the High Court Committee (HCC) on 4th July 2015. He has probed to investigate in this matter and consider this money laundering a serious manner. The forgery is done by Geofin Comtrade and Geojit Credits Ltd; a company owned by C P Krishna.  

NSEL Defaulters and Defaulting Brokers

On July 31^st, 2013 the Rs.5600crore National Spot Exchange Ltd. (NSEL) crisis surfaced. The matter came under scanner of multiple agencies since then. Exchange was forced to shut down and suspend all its trading contracts.  After the payment crisis Regulatory Body, Investigating Agencies and NSEL had declared 24 members as NSEL Defaulters.

Brokerage firms involved in the NSEL crisis were also under the observation due to their fraudulent behavior. It came into light that some of the brokers gave promise of assured returns to the trading clients, which turned out to be wrong resulting into crisis. Corporate Affairs Ministry and other agencies including Enforcement Directorate (ED) have been investigating the defaulting brokers in the Rs.5600crore NSEL crisis case. SEBI was also been asked by government to take necessary action against these defaulting brokers.

Mr.Arun Jaitely the Finance Minister had told Lok Sabha that other than Corporate affairs Ministry Economic Offences Wing (EOW) and ED are also investigating the NSEL matter. EOW had attached properties of the accused worth Rs5757crore (approx.) and Rs.1222.89crore, 32 common properties had been attached by ED of Rs.740crore (approx.). Arun Jaitely in a written reply to Lok Sabha had said that SEBI is directed to examine and take necessary actions against defaulting brokers.

 In case of brokers various agencies are investigating into their role. It is proven in the audit report that defaulting brokerage firms named Anand Rathi Commodities, Geofin Comtrade, Motilal Oswal Commodities, India Infoline Commodities and Philip Commodities are guilty. SEBI with EOW and ED is investigating the role if these brokers in NSEL crisis Case.

NSEL Broker’s face recovery suits

Brokerage firms played a major role in the Rs.5600crore National Spot Exchange Limited (NSEL) payment crisis. Investigation agencies have been investigating brokers over cases filed against them. Trading clients in the case had earlier filed recovery suits against brokers alleging that they were involved in various fraudulent activities in regards to trading on NSEL platform.

On July 2013 the NSEL crisis came to light. Since then matter is investigated by many agencies. Exchange was forced to suspend all its trading contracts. Trading clients have filed separate cases against top five leading brokerages. Suits are filed in over brokers for mis-selling and wooing them to invest in agri commodities.

Economic Offences Wing (EOW) of Mumbai police had arrested officials of some commodity brokerage firms on charges of inducement and mis-selling of NSEL products in the past. Enforcement Directorate (ED) is also interrogating the top officials of broking firms to ascertain their role in the case. Evidently, some brokers had high exposure in the NSEL case. Among them were Anand Rathi (Rs.629crore), India Infoline Commodities (Rs.326crore) and MotilalOswal Commodities (Rs.263crore). Other broking firms with explore in NSEL are Phillip Commodities (Rs.140crore), Geofin Comtrade (Rs.313crore) and Systematix Commodities Services (Rs.277crore).

SEBI has also launched probe against leading brokerages into alleged mis-selling of products with the promise of assured returns from commodities traded on the NSEL. SEBI is also investigating brokers over various complaints including false assurances, inducements and misrepresentation, trading without appropriate authority from clients, misuse or unauthorized modification of unique client code, funding by NBFCs related to the brokers and non-receipt of payouts by clients.

Recovery suits against AnandRathi, India Infoline Commodities, MotilalOswal Commodities and Phillip Commodities are filed by trading clients in Bombay High Court. These six trading clients have put their hope in the legal system and investigating agencies; we can hope that they receive justice in least possible time, thus ending their long awaited suffering. 

Aastha Minmet the NSEL Defaulter

National Spot Exchange Limited was a well-established exchange platform until the day when the crisis surfaced. The Economic offences wing of Mumbai Police and Enforcement Directorate are investigating the case along with other investigating agencies. FTIL the parent company of the NSEL is also targeted for the same. The Brokers and Defaulters who are responsible for the actual money laundering are roaming scot-free where NSEL is targeted. Defaulter AasthaMinmet, Yathuri Associates, Namdhari Foods, White Water are some of the defaulters who are investigated by investigating agencies.

Aastha Minmet and Juggernaut Projects are among the major defaulters in the National Spot Exchange Limited case. MohitAggarwal, Managing Director of the Aastha Group. The group is alleged to have defaulted to the tune of Rs. 241.75 crore in the NSEL crisis. However the same was not taken on record.  Aastha was directed to file the VAT Returns and VAT payment challan with their affidavit. Apart from that amount upto 12.50 crore. Worth decrees are obtained with the help of NSEL recovery group.

NSEL brought to the notice of the HCC that MohitAgarwal was not cooperating with the proceedings of the Committee. Also it was observed that the MD of Aastha Minmet was absent at some of the HCC meetings earlier. HCC then directed that Mr. MohitAgarwal be present on the next dates of hearing and comply with the earlier directions and file the required documents.

There are other defaulters like Aastha Minmet who are spending their lives on the defaulted money of NSEL investors. Enforcement Directorate is considering freezing assets of some other defaulters for the recovery of NSEL money. 

SEBI the hope for NSEL crisis

SEBI the market regulator will be pursuing the guilty parties in the NSEL crisis with more determination, as the securities market regulator’s merger with the commodities market regulator was getting closer to completion, as decided by Government. It was said that SEBI was looking to begin enforcement measures against entities involved in the case. They would also initiate adjudication & disgorgement proceedings against guilty entities in the crisis if necessary.  SEBI was then likely to play a bigger role after completion of FMC integration. Legal matters related to NSEL too would be handled by SEBI’s legal department. Latest action was expected soon.

It was said that SEBI has sought a report on the entire NSEL crisis from the regulator. A popular question that was floating at the time was as to why was SEBI now been given charge of the guilty in the NSEL crisis? Was FMC not able to take a call on the crisis even though they had the powers to do so? It’s had been a substantially long time since FMC has been sitting on the NSEL matter. The guilty are still at liberty with all their assets still not discharged. It has also come to light after a fresh probe that commodities law violation would continue to be tried under the Forwards Act, however SEBI would have to enforcement powers over them.

This had come as a major relief to FMC, as sources say they were facing difficulties in the NSEL cases due to personnel issues.  For example, they were facing problems to defend the challenge of ‘fit & proper’ against FTIL due to lack of in-house legal department. FMC on many occasions had to rely on outside help on the legal matters. But, unfortunately did not have the provisions to get legal consultants on board.

Hopefully now since SEBI is going after the guilty in the crisis hit NSEL, we can hope this matter will take a worthy turn, relieving the innocent and taking appropriate actions against the guilty.

Brokers modified UCC in NSEL crisis

NSEL crisis surfaced in the year of 2013 and then brokers connection in misleading clients was raised by few clients such as Moti Dadlani ,Rita Vadodaria, and Achal Agarwal. On 18^th March 2015, Rita Vadodaria, client of Anand Rathi Commodities registered a fresh complaint against Anand Rathi Commodities.

Mr. Dadlani filed a suit against his broker and has supposed that his broker has defrauded money under his name. The broker dishonestly; used Mr. Dadlani account and PAN details to invest huge amounts on NSEL platform.

ED said that they are investigating the broker’s role in the entire case and asked them to furnish the details of funding of clients through non-banking financial companies and their unexplained write-offs as per media reports. The Investigating agencies are questioning about the illegal changes made on the NSEL platform.  NSEL suspected in their charge sheet that the brokers were involved in miss-selling products of NSEL by deceiving their clients on the NSEL platform were found to be different from those on brokers’ records.

Almost two years ago, three officials of leading brokerage firms Anand Rathi Financial Services, Geofin Comtrade and India Infoline were arrested by the economic offences wing of Mumbai police, and were later released on bail. The ED registered a criminal case under the PMLA Act in 2013, to probe the case. So far, it has made an attachment of Rs 800 crore in the case. A additional charge sheet could be expected.

Evidences point out NSEL Defaulters

National Spot Exchange Ltd. (NSEL) came into focus when the crisis surfaced in the year of 2013. Since then various agencies are investigating the case. Exchange platform was shut down immediately and enforced to stop all its trading contracts. After the payment crisis Regulatory Body, Investigating Agencies and NSEL had declared 24 members as NSEL Defaulters.

Defaulters are the borrowers. The defaulters who are accountable for the NSEL payment crisis are N.K.  Proteins, Mohan Group, LOIL Group, Ark Imports Pvt Ltd, PD Agroprocessors Pvt Ltd, Yathuri Associates, Lotus Refineries Pvt Ltd, Aastha Group, Metkore Alloys & Industries Ltd, Swastik Overseas Corporation, White Water Foods Pvt Ltd, Namdhari Group, NCS Sugars Ltd, Spin-Cot Textiles Pvt Ltd, Vimladevi Agrotech Ltd, Shree Radhey Trading Co and MSR Food Processing.

All the officials who are investigating the NSEL case have the money trail traced to all these defaulters. It states clearly that defaulters have all the money laundered in NSEL case and it is siphoned to middle east where defaulters own assets in forms of properties and lands. Even after three years after the NSEL crisis the defaulters who have 100% of the traders’ amount are still roaming free. The defaulters diverted trading clients’ money into parallel businesses instead of returning the outstanding dues. The defaulters cheated the trading clients by hypothecating stocks to banks, investing the default amount in purchasing benami properties and also slowed down the recovery process by making it difficult. All the evidences point out to the defaulters.

On August 12, 2013, FMC in its letter had stated that there was a possibility that the defaulters have violated the Prevention of Money Laundering Act (PMLA). The Honble’ Bombay City Civil Court, vide its order has observed that it appears the persons responsible for default in payments are the defaulters where all the trading clients are targeting NSEL and FTIL.

Defaulters of NSEL crisis

NSEL payment crisis surfaced on July 31, 2013 and then exchange suspended trading in all its contracts. The crisis was assessed at a surprising amount of around Rs. 5,600 crores. However a enormous sum of this amount is recoverable from the real culprits, borrowers connected to NSEL. Borrowers are also known as Defaulters of the crisis which are roaming scot-free till date. This recoverable amount is estimated to be as high as around Rs. 5,300 crore which is to be made from the sale of property belonging to defaulters. Most of these properties are known to be located in Middle-east.

NSEL had declared 22 members as ‘Defaulters’ in 2013 as per Rule 41 of the Exchange Bye laws. Let us know these NSEL Defaulters closely by their defaulting amounts, Injunctions and Decrees obtained against their assets till date. 

These defaulters who have 100% of the traders’ amount are still roaming free even three years after the 2013 crisis emerged. The defaulters pushed out the trading clients’ money into parallel businesses, instead of returning the outstanding dues almost to the tune of Rs.5600crore. The amount received as a result of sale of attached assets will later be paid to as many as 13,000 investors when they will finally receive justice.  

Brokers at Fault

In the National Spot Exchange Ltd. (NSEL) crisis case trading clients had earlier complained about brokers alleging that they were involved in different fraudulent activities in regards to trading on the NSEL platform. Hence it was not surprising that the trading clients have now filed different cases against top five brokers for mis-selling and assuring them to invest in agriculture commodities.

It is in context with the Enforcement Directorate’s (ED) process of top officials of broking firms to establish their role in the 5,600 crore settlement crisis which broke out in July 2013. Some broking firms had considerably high exposure in NSEL. Among them were Anand Rathi with a 629 crore exposure, India Infoline Commodities with 326 crore exposure and Motilal Oswal Commodities with a 263 crore exposure. Phillip Commodities and JM Financial are both with a 140 crore and 90 crore exposure respectively. SEBI has also launched a probe into alleged mis-selling of products by some brokers with the assured returns from commodities traded on the NSEL and is looking into various complaints against brokers, including false assurances, inducements and parody, trading without proper authority from clients, misuse or illegal modification of unique client code, funding by NBFCs related to the brokers and non-receipt of payouts by clients.

Trading clients have filed recuperation cases in the Bombay High Court against Anand Rathi, India Infoline Commodities, Motilal Oswal Commodities and Phillip Commodities. Only time will tell if these trading clients will get justice in legal system or not. We can hope that they will receive justice in the least possible time, by putting full-stop to their long awaited suffering. 

Tax notice sent to Trading Clients ofn NSEL case

In 2013 when National Spot Exchange came into light for the crisis there were 13K trading clients who lost their money. Few days back Income Tax Department had sent tax notices to some of the trading clients and entities involved in the National Spot Exchange Limited (NSEL) crisis. Since then the case is being investigated by several agencies. Exchange was forced to suspend all its trading contracts.  After the payment crisis Regulatory Body, Investigating Agencies and NSEL had declared 24 members as NSEL Defaulters.

The trading clients and entities who lent them finance to trade on the currently invalid NSEL received notices from tax authorities. 13000 trading clients lost their money. Some to these trading clients have received notices from the income tax department. Income tax department has issued notice seeking details, other than source of funds, investment made in NSEL and bad debt claimed during assessment year 2014-15 and 2015-16. The trading clients are upset over the notices and are considering same as troubling.

Securities and Exchange Board of India (SEBI), Enforcement Directorate (ED), and Economic Offences Wing (EOW) are investigating the matters of NSEL with several other agencies. Leading Broking Firms are investigated by these agencies. They are also interrogating some of the top officials of these broking firms. Brokers, trading clients and entities everyone’s role needs to be probed to carry out an investigation in the NSEL case. Government is also investigating NSEL crisis case in detail and role of everyone involved.

ED's investigation against defaulters at halt

The Enforcement Directorate’s (ED’s) research of alleged National Spot Exchange Ltd (NSEL)  crisis has reportedly come to a twist because some suspects are no longer returning to the agency’s summons.

It is known that the agency’s summons are no longer backed by the threat of arrest after two judgments delivered by the Punjab and Haryana High Court on 22nd and 25th of July as per information from ED officials. In these rulings, the High Court has stated that if a person is not in detention or summoned during investigations that take place instantaneously after a case is filed, he or she cannot be arrested after a charge sheet has been filed in court.

In the bargain of these rulings, the accused in the NSEL crisis are now no longer cooperating with the investigations. Summons to defaulters and other accused to appear for questioning are not being honored as the ED may not be able to arrest them on charges of not cooperating with investigations, following the High Court orders. The agency is said to be planning to appeal against the court’s ruling in the Supreme Court and are currently taking legal counsel on the tenability of approaching the apex court, considering these are interim orders.

Rogue brokers carried out Money Laundering in NSEL case

Brokers have been in light in the NSEL case for their act of mis-selling. SEBI is investigating the work of brokers in NSEL crisis. There was 60 Days of time given to the brokerage firms to have their books of accounts vetted, by the Investigating agencies. In addition to that it is said that SEBI has came across fresh evidence against the top five brokerage firms involved in NSEL case. The evidence states that there is high possibility of brokers involved in using the ‘Exchange Mechanism’ for money laundering. SEBI had appointed a third party auditor, who has submitted an audit report and that report are reviewed by regulator. As a result ‘show cause’ notices would be sent to the brokers according to the evidence found.     

There are number of audit findings which require through explanations. Some of the disturbing audit findings which are evidence against brokers are given below:-

• According to the audit, it comes to knowledge that upto five brokers had sold products NSEL goods by giving out false promises of getting returns upto 16%
•  It was also found that some of the brokers had facilitated loans to investors through their non-banking financial companies despite being aware that there were no such goods with the borrowers/defaulters.
• Further facts state that the transactions that took place were very complicated in nature, and all the entities involved were used to trading on the NSEL platform with the intent to legitimize the funds.
• The audit report also include instances of mishandling or unofficial modification of unique client code. There were several instances of discrepancies and manipulation of books of accounts.

 The audit report clearly fulfilled that many spiteful activities including manipulation, mis-selling & deceit have been carried out by the brokers which possibly lead NSEL to the gigantic Rs. 5600 crore crisis. In the bargain of these fraudulent activities carried on by some spiteful brokers many entities connected to NSEL have been greatly affected. These malicious activities by brokers need to be verified further and strict action needs to be taken against these rouge brokers.

The Market Regulator - SEBI

In the NSEL crisis which came into light in 2013 there is latest development in terms of fraudulent behavior of Brokers. SEBI completed investigation against top 5 brokerage firms involved. According to Sebi official the delays by brokers occurred when Sebi was not their regulator. At the time when violations took place in NSEL contracts the Sebi or FMC were never under the ambit in the first place. 

It is stated that from a regulatory perspective if Sebi would have faced jurisdiction issues if it would have tried to act against the 24 NSEL Defaulters and Brokerage firms involved. In the NSEL crisis, since FMC itself had no regulatory jurisdiction over the commodity spot and ready-delivery contracts. Hence, Sebi may not assume jurisdiction which was originally never there mentioned by Tejesh Chitlangi, partner at law firm IC Legal. 

As the merger of FMC and Sebi took place brokers are abided by the Securities Act and have come under the purview of the Sebi broker regulations. In the current rules applied for brokers, Sebi evaluates brokers and intermediaries to make sure they meet its ‘fit and proper’ criteria. 

Sebi also has the rights to impose rules on brokers unlike FMC, where brokers were governed by exchange guidelines. The regulator can act against an intermediary for violation of FUTP and under Section 11B for protecting the rights of investors if it finds the conduct of a broker questionable. 

One of the official mentioned that code for brokers will be strict and very precise for do’s and don’ts. There will be eye on the broker who carry out misrepresentation, lack of due diligence, material un-disclosed conflicts and/or any other shortcomings on part of such brokers. Sebi would be well within its right to penalize them  in case of any faulty practices. Sebi, on its part, is going to refer the report to the department of economic affairs. They would apprise the ministry of their findings with respect to the NSEL brokers as they move towards finalizing a course of action.

Trading was stopped on NSEL in July 2013 after the payments crisis, which assumed the dimensions of a scam, surfaced at the supplies bourse, which is 99.99% owned by Financial Technologies India Ltd

NSEL Brokers investigated by SEBI

SEBI ordered an audit report of brokerage firms involved in the NSEL crisis which came into light in 2013. It was due to the suspicion of these top brokerage firms being involved in the mis-selling of NSEL goods, according to the sources. However SEBI is facing difficulty in finalizing regulatory action in opposition to the brokers. It is because neither SEBI nor the previous commodities futures regulator, which has since merged with SEBI, were involved in oversight of NSEL, the three persons said on condition of anonymity. Investigation of brokers is probably completed and SEBI is lettering to the department of economic affairs in the finance ministry.

 Audit of brokers’ books was carried out by a third party, found that brokers mis-sold NSEL contracts by assuring high returns without ensuring delivery, said the second person. Mis-selling is one of the explanation areas that Sebi is considering while analyzing whether brokers complied with the ‘fit and proper’ criteria.

In case of NSEL brokers SEBI ordered audit books of top five brokers for the year of 2011, 2012 & 2013. These brokers involve Anand Rathi Financial Services Ltd (Rs.629 crore), India Infoline Commodities Pvt. Ltd (Rs.326 crore), Geojit Comtrade Ltd (Rs.313.25 crore), Motilal Oswal Commodities (Rs.263 crore) and Phillip Commodities (Rs.140 crore). 

A team was formed after the Ministry of finance asked SEBI to look into defaulting NSEL members. The team included executive directors heading three crucial Sebi divisions: surveillance, investigation and commodities. 

Around 200 brokers are alleged to have sold NSEL products by promising an assured return to investors to be sure. But there have been no specific complaints against them. When contacted the brokerage firms, their spokesperson had no idea or denied to comment on the same.

Even though the audit report is ready, Sebi is finding it difficult to finalize regulatory action as it is facing jurisdiction issues. SEBI was merged with the Forward Markets Commission (FMC), the commodities futures market regulator last year. FMC is one regulator which did not oversee NSEL, a commodities spot exchange.

Real Face of NSEL Brokers

Since NSEL crisis came to light there has been series of events where, FTIL the parent company of NSEL is questioned. The defaulters and brokers are sidelined when the money trail of the defaulting amount of 5600 Cr. is traced to the defaulters. Since 2013 when the crisis came to knowledge there has been a needle of doubt on brokers as they fraudulently used details of investors for NSEL platform.

Securities and Exchange Board of India (SEBI) the market regulator has launched a probe against brokers for the act of selling goods with assured returns of 16% and misleading the investors. This is altogether new turn into the NSEL proceedings as this probe has fresh evidences against brokers. According to the sources there are six leading brokers involved.

Accounts of brokers that sold NSEL schemes are also being investigated. It is suspected that these brokers conducted selling of products of NSEL with promise of assured returns. There is also possibility of involment of black money diverted to sister concerns. Apart from SEBI, a high-level committee constituted by the Bombay High Court and other probe agencies are also investigating the matter. 

It is stated that the committee as also other regulators and investigative agencies have found major differences in the data and details submitted by various investors as part of their claims, as against the data submitted by NSEL. These discrepancies include submission of wrong PANs (Permanent Account Numbers), raising doubt about source of funds, while authorisation letters and trade execution documents submitted by brokers have also been questioned. There are also cases of some brokers that they created fake ledger accounts in the name of their clients without their knowledge, sources said. Complaints against brokers include false assurances, enticement and falsification by brokers, trading without right authority from clients, misuse or unauthorised modification of unique client code, funding by NBFCs related to the broker and non-receipt of payouts by clients. 

NSEL Defaulter: Metkore Steel and Alloys Limited

In the year 2013 when National Spot Exchange Limited crisis came into light the parent company FTIL is blamed. But the defaulters who are actually responsible for all the money laundering are roaming scot-free. Defaulter AasthaMinmet, Lotus Refineries, Metkore  Alloys are some of the defaulters who are investigated by investigating agencies.

Metkore  Alloys is Andhra Pradesh based company. It turned out to be one of the biggest defaulter. Metkore  Alloys owes Rs 94.83 crore  to National Spot Exchange. Metkore  Alloys led by Prashant Boorugu and Savitha Boorugu. Amongst them Prashant Boorugu was arrested on 11 Aug 2014 but released on 11 Sep 2014. Metkore Steel and Alloys Limited (MAIL) has declared lockout at its Ferro-chrome manufacturing plant located in the north coastal Andhra district of Srikakulam.

In 2014 the factory employees reportedly blocked the representatives of the public sector Steel Authority of India (SAIL) and NSEL from inspecting the Ferro-chrome stocks that were kept at the company's warehouses in Tekkali town. The inspection was planned after the Maharashtra Protection of Interest of Depositors (MPID) court allowed the auction of Metkore's Ferro-chrome stocks worth of Rs 91 crore under the supervision of the monitoring and auction committee appointed by the Forward Markets Commission. NSEL NSEL invites bids to sell ferrochrome stock of defaulter Metkore Alloys.

There are other defaulters like Metkore  Alloys who are spending their lives on the defaulted money of NSEL investors. Enforcement Directorate is considering freezing assets of some other defaulters for the recovery of NSEL money.

Lotus Refineries: One of the NSEL Defaulter

In the year 2013 when National Spot Exchange Limited crisis came into light the parent company FTIL is blamed. But the defaulters who are actually responsible for all the money laundering are roaming scot-free. Defaulter AasthaMinmet, Lotus Refineries, White Water are some of the defaulters who are investigated by investigating agencies.

Lotus Refineries is Maharashtra based company with assets situated in Punjab & Chandigarh. The Seventh-biggest defaulter Lotus Refineries owes Rs 252.48 crore to the National Spot Exchange. Lotus Refineries  led by Arun Kumar Sharma and Prashant Kumar Anand. Amongst them Arun Kumar Sharma was arrested on 11 Nov 2013 but released on 11 Feb 2014.

The Maharashtra Protection of Interest of Depositors (MPID) court has ordered transfer of Rs 12.74 crore from 27 bank accounts of Lotus Refineries Pvt Ltd to the account of the competent authority in the Rs 5,600 crore National Spot Exchange Ltd (NSEL) crisis case.

There are other defaulters like Lotus Refineries who are spending their lives on the defaulted money of NSEL investors. Enforcement Directorate is considering freezing assets of some other defaulters for the recovery of NSEL money. 

ARK Imports the NSEL Defaulter

In the year 2013 when National Spot Exchange Limited crisis came into light the parent company FTIL is blamed. But the defaulters who are actually responsible for all the money laundering are roaming scot-free. Defaulter AasthaMinmet, ARK Imports, White Water are some of the defaulters who are investigated by investigating agencies.

ARK Imports is the Punjab based company. The fourth-biggest defaulter ARK Imports owes Rs 719.21 crore to the National Spot Exchange. ARK Imports led by Kailash Aggarwal and Anubhav Aggarwal. Amongst them Kailash Aggarwal was arrested on 11 Aug 2014 but released on 11 Sep the same year. Anubhav Aggarwal is absconding.

NSEL recovery group is working hard for the recovery of defaulted money from all of the defaulters & giving it back to the investors. Due to the continuous efforts of the recovery group they are successful in obtaining decrees for the assets of NSEL defaulters. They are successful for getting decrees for the assets of ARK Imports worth Rs.719 crore.

There are other defaulters like ARK Imports who are spending their lives on the defaulted money of NSEL investors. Enforcement Directorate is considering freezing assets of some other defaulters for the recovery of NSEL money.

NSEL Defaulter P.D. Agro Processors

Since the National Spot Exchange Limited crisis came into light the parent company FTIL is taking up blame. But the defaulters who are actually responsible for all the money laundering are roaming scot-free. Defaulter AasthaMinmet, Yathuri Associates, Namdhari Foods, White Water are some of the defaulters who are investigated by investigating agencies.

The fifth-biggest defaulter P.D. Agro owes Rs 673.85 crore to the National Spot Exchange. P.D. agro led by Surendra Gupta and his wife Sheetal Gupta. Both of them were arrested but released on bail.

P.D. Agro requested stay of proceedings due to the appeal pending in the High Court and submitted that the appeal is likely to be listed on 13th October 2015. NSEL submitted that PD Agro had not taken any steps for getting their appeals listed and have only been applying for adjournments. It was pointed out that 8 adjournments have been given to P.D. Agro.

NSEL further argued that in absence of stay from the High Court, HCC should recommend the High Court to issue directions to appear before the HCC. NSEL has filed affidavit for crystallization of liability and copy of the same is to be served upon the advocate on record for PD Agro.

There are other defaulters like P.D. Agro who are spending their lives on the defaulted money of NSEL investors. Enforcement Directorate is considering freezing assets of some other defaulters for the recovery of NSEL money. 

NSEL Defaulter White Water Foods

Since the National Spot Exchange Limited crisis came into light the parent company FTIL is taking up blame. But the defaulters who are actually responsible for all the money laundering are roaming scot-free. Defaulter AasthaMinmet, Yathuri Associates, Namdhari Foods, White Water are some of the entities who are investigated by investigating agencies.

Haryana based NSEL Defaulter Mohit Dewan, Managing director of White Water Pvt. Ltd also involved in the Rs.5, 600 crore. Crisis and the defaulted outstanding amount is 84.82 crore

NSEL Defaulter White Water informed the HCC that they had not received any notices concerning the meetings of the committee post 28thApril, 2015 when the HCC had adjourned the matter. They further submitted that after the order was passed, they did not receive any notices regarding the meetings of the HCC. The Advocate asked for an adjournment.

There are other defaulters like Namdhari Group who are spending their lives on the defaulted money of NSEL investors. Enforcement Directorate is considering freezing assets of some other defaulters for the recovery of NSEL money.

NSEL Defaulter Namdhari Foods

In 2013 when National Spot Exchange Limited crisis came into light the parent company FTIL is taking up blame. But the defaulters who are actually responsible for all the money laundering are roaming scot-free. Defaulter AasthaMinmet, Yathuri Associates, Namdhari Foods, White Water are some of the entities who are investigated by investigating agencies.

Namdhari Group is one of the Produces two varieties of rice brands namely Namdhari Food and Namdhari Rice. Namdhari Foods is a NSEL Defaulter with the defaulting amount of total 61.41 Cr.

Advocate appearing for Namdhari submitted that paddy has been sold as per the HC order and money is lying with the Competent Authority. He was not aware whether the goods were lifted or not. He was then given an affidavit filed by NSEL with a direction to file their reply with additional directions to comply with earlier directions, failing which applicable recommendations will be made by the Hon’ble Committee to the Hon’ble Bombay High Court.

There are other defaulters like Namdhari Group who are spending their lives on the defaulted money of NSEL investors. Enforcement Directorate is considering freezing assets of some other defaulters for the recovery of NSEL money. 

Yathuri Associates - one of the Defaulters in NSEL

Since the National Spot Exchange Limited crisis came into light the parent company FTIL is taking up blame. But the defaulters who are actually responsible for all the money laundering are roaming scot-free. Defaulter AasthaMinmet, Yathuri Associates, Namdhari Foods, White Water are some of the defaulters who are investigated by investigating agencies.

Yathuri Associates is one of the biggest NSEL Defaulter with defaulted amount of 399.60 Cr. Gagan Suri is the proprietor of  Yathuri Associates. Apart from that 264.96 Cr. Worth decrees are obtained with the help of NSEL recovery group.

In the earlier court meetings it was seen that no one was present on behalf Yathuri Associates. The Hon’ble Committee detected that MrGaganSuri was not co-operating with the ongoing proceedings. NSEL was directed to file their Affidavit for determination of liability, the same was filed. 

There are other defaulters like Yathuri Associates  who are spending their lives on the defaulted money of NSEL investors. Enforcement Directorate is considering freezing assets of some other defaulters for the recovery of NSEL money.

NSEL Defaulters the main culprit

Since the National Spot Exchange Limited crisis came into light the parent company FTIL is taking up blame. But the defaulters who are actually responsible for all the money laundering are roaming scot-free. Defaulter AasthaMinmet, Yathuri Associates, Namdhari Foods, White Water are some of the defaulters who are investigated by investigating agencies.

Aastha Minmet and Juggernaut Projects are among the major defaulters in the National Spot Exchange Limited case. MohitAggarwal, Managing Director of the Aastha Group. The group is alleged to have defaulted to the tune of Rs. 250 Cr in the NSEL crisis. However the same was not taken on record.  Aastha was directed to file the VAT Returns and VAT payment challan with their affidavit. Apart from that amount upto 12.50 Cr. Worth decrees are obtained with the help of NSEL recovery group.

NSEL brought to the notice of the HCC that MohitAgarwal was not cooperating with the proceedings of the Committee. Also it was observed that the MD of Aastha Minmet was absent at some of the HCC meetings earlier. HCC then directed that Mr. MohitAgarwal be present on the next dates of hearing and comply with the earlier directions and file the required documents.

There are other defaulters like Aastha Minmet who are spending their lives on the defaulted money of NSEL investors. Enforcement Directorate is considering freezing assets of some other defaulters for the recovery of NSEL money. 

GeojitComtrade in NSEL Crisis

NSEL crisis is turning to be a well planned strategy of defaulters and brokers. It was stated that many investors claimed that the brokerage firms used their money & account details fraudulently. Udaipur-based NSEL investor Achal Agarwal invested his money through a well-known broker 

GeojitComtrade. Mr. Achal lodged a complaint against his broker and has alleged that his broker has swindled money under his name. Mr. Agarwal also learned about the unsought-disbursement of loan against Geofin Comtrade and Geojit Credits’ Ltd. These brokers together deceptively used Mr. Achal’s account and PAN details to invest their huge amounts on NSEL.

Agarwal told Business Line that the outstanding receivable amount mentioned on his name was shocking. The outstanding receivable amount mentioned in NSEL was Rs. 4 Crore whereas the actual amount was only 9.75 lakh.  Achal also mentioned that he has not taken any loan from anywhere for investing on the NSEL platform. He has also not received any such amount in any of his personal account. However, the actual trading amount of Achal Agarwal on NSEL platform through GeojitComtrade was Rs. 9.75 lakh.

The Bombay High Court gave instructions to the High Court Committee to seek KYC (know your customer) details from NSEL investors. Bombay High Court also asked NSEL and investigative agencies to be acquainted with the actual truth from the broker.

Mr. Achal has filed a complaint to the High Court Committee (HCC) on 4th July 2015. He has probed to investigate in this matter and consider this money laundering a serious manner. The forgery is done by Geofin Comtrade and Geojit Credits Ltd; a company owned by C P Krishna.  

NSEL-FTIL a forced merger

The National Spot Exchange Ltd payment crisis Rs 5,600 surfaced on July 31, 2013, when the exchange suspended trading in all its contracts. NSEL proposed a payout plan on August 14, 2013, but the commodity spot exchange had not been able to make a single successful payout till date.

MCA proposed an amalgamation of NSEL with FTIL by invoking Sec 369 of Co. Act 1956 on Oct 21 2014. FTIL-NSEL merger was recommended by the commodities market regulator Forward Markets Commission (FMC) Without issuing final order Ministry of Corporate Affairs (MCA) moved Co Law Board 2 supersede FTIL assailed Draft Order before Bombay High Court.

HC has given Government time until 30th Oct 2015 to pass a final order on proposed amalgamation of NSEL. Forced amalgamation of FTIL-NSEL will corrode confidence of the investor community. Forced merger on appeal of “public interest” with room 4 ambiguities will drag down India’s rank NSEL.

Section 396 of the Companies Act has never been used by the government to merge two companies and use assets of one company to pay for the liabilities of the other. Forceful amalgamation of FTIL and FTIL constitutes expropriation of property rights of FTIL and its shareholders. Prerequisite of “Essential public interest” for exercise of power under Sec 396 is absent, as interests of 63,000 shareholders of FTIL have been ignored vis-a-vis (in relation to) the interests of the 13,000 trading clients of the NSEL. So why is only FTIL being targeted under Sec 396? Also did the Forward Market Commission (FMC) conduct a fact finding exercise before the merger, especially when such an order was being sent out for the first time and could have had a cascading impact on corporate India? No private company has even been forced to merger with another independent company.

Again, the forced amalgamation of two private sector companies is unfair and ignores the MCA’s own circular dated April 20, 2011. Significantly, while hearing the case, the Bombay High Court has allowed the FMC to be a party to the case. The High Court has also allowed the FTIL shareholders to be party to the case who unanimously (99.55%) voted against the amalgamation of the NSEL with the FTIL.

FMC had all the powers to take any action deemed appropriate against defaulters and brokers, but the FMC chairman turns a blind eye to them. FMC has always been chasing only FTIL. It is high time that FMC starts chasing other parties like brokers and also defaulters to whom the money trail has been traced to, instead of concentrating only on FTIL.

Motilal Oswal misrepresented investor’s money on NSEL Platform

Brokerage firms were equally responsible for NSEL crisis just like defaulters. Many investors were misrepresented by their brokers. In the same manner, Gujarat- based NSEL investor Moti Dadlani invested his money through reputed broker MotilalOswal Financial Services Ltd. Mr. Dadlani lodged a complaint against his broker and has alleged that his broker has defrauded money under his name. The broker deceptively used Mr. Dadlani’s account and PAN details to invest huge amounts on NSEL.

Affected by the crisis at the National Spot Exchange Ltd (NSEL), Moti Dadlani has moved the Maharashtra Protection of Interest of Depositors (MPID) court. MrDadlani requested EOW of the Mumbai Police that, Motilal Oswal Financial Services Ltd forged his documents, PAN card number and used his personal account details to invest huge amounts of money on NSEL platform.

Moti Dadlani mentioned to Mumbai Mirror that “I had invested Rs 2.22 crore with NSEL, but the documents show that I have taken a loan from a finance company to invest Rs 9.66 crore in the NSEL; Forward Market Commission as well as the High Court of Bombay with the help of investigative agencies is making efforts to get back the money traded on the NSEL platform. Brokers have also tried swindling money of various trading clients without their consent. Such fraudulent acts carried out by the brokers should be stopped and strict action must be taken by the investigative agencies with the help of the law.

NSEL’s journey towards recovery

Since 2013 when NSEL crisis came to surface the recovery group was formed.

This group started working towards recovery efforts. Bombay HC by its order

dated September 2, 2014 appointed a three member fact finding committee to assist

it in settlement and recovery at the time of the intervention of this case. The

recovery group is functioning day and night for filing suits against all the

defaulters From time to time, it has been distributing, among clients. Since that day

NSEL has made determined efforts to affect recovery from the defaulters by

attaching their properties. These properties include Overseas and inland assets. It is

clearly stated that the efforts are constant and with intention of helping out

shareholders.

Recovery group is progressing day-by- day to ensure that clients receive the money

from the defaulters and the efforts are genuine as compared to any other defaults. It

has assertively followed up with various legal measures to speed-up recovery. The

group is also supporting the Economic Offences Wing of Mumbai police, in

investigating and freeze assets of the defaulters. It has extended all assistance

required for the Enforcement Directorate to attach assets pertaining to the

defaulters.

NSEL Recovery group is supporting from time to time informing the government,

regulators, and general public on the progress made in recovery. It has been also

dealing with misconceptions and rumors spread by certain vested interests to

interrupt development of continuous recovery and resolution.

ED’s move against Defaulters & Brokers

Enforcement Directorate is investigating the case of NSEL for 5600 Cr crisis

occurred. Under Prevention of Money Laundering Act ED has decided to secure

the immovable properties of NSEL Defaulters. The defaulters are the large

borrowers who are responsible for the crisis.

According to the sources the investments of these 14 defaulters are under ED’s

observation. He also stated that there is high possibility of freezing assets of one

the defaulters. According to ED most of the properties of the defaulters are

considered to be situated in Middle East. ED states that from 5%-10% of the NSEL

crisis amount is pumped out overseas which is calculated up to 280-560 Cr. The

defaulters who are under ED’s eye are Ark Imports, LOIL, NK Proteins, Mohan

India, etc. It is a clearly stated fact that reimbursement of the affected investors of

NSEL is possible after ED confiscates properties of defaulters in India & overseas.

On the other side ED is also taking action against brokerage firms who were

equally responsible for money laundering in NSEL crisis.  For the first time senior

officials from brokerage firms like MotilalOswal, India Infoline Commodities,

GeofinComtrade& Phillip Commodities were called for questioning. One of the

ED official mentioned that many of the investors could also have been in the loop

about such structured products being in contravention of the extant norms. They

are looking at certain clues on unauthorized changes made on NSEL platform. The

names of clients on NSEL servers were found to be different from those in

brokers’ records.

Apart from the ED, the Securities and Exchange Board of India and the EOW of

the Mumbai Police are also investigating the case, and looking into brokers’ roles

in the matter. A committee appointed by the Bombay HC also had raised doubts on

the role of brokers and recommended audit of books of leading brokers.

According to NSEL disclosures, subsidiary Indian Bullion Markets Association

had the highest exposure to NSEL at Rs 1,159 crore, in June 2016. Other brokers

with high exposure include AnandRathi (Rs 629 crore), India Infoline

Commodities (Rs 326 crore), GeofinComtrade (Rs 313.25 crore), Systematix

Commodities Services (Rs 277 crore), MotilalOswal Commodities (Rs 263 crore)

and Phillip Commodities (Rs 140 crore). However, some of these dues have been

paid to the brokers.

Since 2013 when NSEL crisis came into light & ED registered a case under the

Prevention of Money Laundering Act, upto 800 Cr has been attached till date. A

supplementary charge-sheet could be expected stated by ED official.

Brokers arrested – NSEL Crisis

NSEL crisis came into light in 2013. On one side where there are defaulters who

are responsible for money laundering, brokerage firms are equally responsible. In

this case Economic Offenses Wing of Mumbai police arrested three brokers of the

top brokerage firms involved. This was the first time that brokers were arrested

making it significant that brokers are the culprits.

CP Krishnan Dir. of Geofincomtrade, Amit Rathi Dir. of AnandRathiCommodities

and ChintanModi Dir. of India Infolinecommodities  were taken for questioning.

Jt. Commissioner of police, EOW Mumbai Rajvardhan Sinha mentioned that

investigating officers observed their doubtful, non-cooperative behavior. It was

clear that these brokers were not giving out correct information and their

statements were contradicting according to the sources. Hence their arrests were

obvious under multiple sections of IPC which included bluffing, falsification,

criminal conspiracies and misdeeds. They were presented in Maharashtra

Protection of Investors Depositors court and through investigation is going on

along with other 139 broking houses who traded on NSEL platform.

As AnandRathi commodities had 12900 clients giving them access to 19132 Cr.

which accounting for 16 percent of NSEL’s revenue on the other hand India

Infoline Commodities had 9183 Cr. at the time their operations were suspended by

exchange. GeofinComtrade had 1000 clients and they recorded 5527 Cr. turnover.

It was assumed that these broking houses delivered fake assurance to their

investors and enticed them to invest in exchange by dishonest statements.

EOW of police revealed that brokers performed fictitious transactions. As it was

found that they manipulated the Unique client code information given to them &

the modifications were done only at brokers side. Mr.Sinha clarified some name of

investors having certain commodities in NSEL records as the broking houses were

different. In few cases, client account was used to perform trade for the sum of

1061 Cr. without clients consent. Brokers also falsely indulged in short selling and

circular trading to artificially increase volumes on exchange. Investigating agency

also questions proprietary trading by brokers.