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.

Speedy Liquidation Order of NSEL Defaulter Assets by Court

The Maharashtra Protection of Interest of Depositors (MPID) court had observed and stated that there had been delays in liquidation of certain NSEL defaulter properties which were attached by various authorities. Complaints were previously raised, to which the Economic Offences Wing (EOW) had attached properties of the borrowers under the MPID Act.  

The order to liquidate the attached defaulter properties had already been passed before.  Judge D.P. Surana presiding over the matter interrogated the Competent Authority represented by Deputy Collector,AjitSakhare about the progress in the matter. The court had passed an order in allowing Competent Authority to liquidate properties of some Defaulters of NSEL. There still seems to be little or no progress taken in liquidation of the attached defaulter properties by the authority so far.

Attached properties were transferred to the Competent Authority which had to then auction and distribute the funds raised among those who have lost money. However there seems to be no action taken place in the matter.

In the case of defaulter Swastik Overseas Corporation who has a payment obligation of 102.98 crores, the court had passed an order allowing the authority to liquidate properties of Rajesh Mehta. No efforts have been seen in this matter till date. Swastik Overseas has paid just Rs. 12.18cr. EOW & crime investigating department of Mumbai has also attached the company’s property in Gujarat.

 The Court has sought help from NSEL &the group representing NSEL Investors to arrive at valuation based on ready reckoner rates of State Government.  The Court has also ordered the Competent Authority to comply with its order and file a report in one month.

In another case connected to NSEL payment crisis, the court ordered Competent Authority to take control of the five immovable properties owned by NarayanamNageswarRao, Managing Director of NCS Sugars Ltd. This Hyderabad based company has paid only Rs. 7.85 Crores of its total obligations of Rs. 58.5 crores till date.

 Yathuri Associates, yet another defaulter in the NSEL payment crisis along with its group company has a payment obligation of 640 crores. In this case GaganSuri Proprietor of Yathuri Associates also has attached properties. The court ordered the Authority to proceed with liquidation of the attached property & report back in one month. The estimated value of attached property is 300 crores

Various other cases of defaulter properties were also given in the hands of the Competent Authority to expedite the liquidation of attached properties.One can only hope and wait and watch, if these orders by the court will be immediately acted upon, thus bringing relief to the current NSEL crisis situation.

Brokers taking undue advantage of Trading Clients

Trading Clients of NSEL had made huge financial gains while trading with the exchange. They made financial advances until July 2013, when the market paused due to government directions at that time. Trading clients of NSEL were lured into trading due to fixed costs of borrowing & a higher spread of returns against commodities by brokers. Purchase price & sale price of commodities with a fixed return of 13-14 % pa was clearly mentioned in the contract issued by brokers.

Trading Clients participated in financing schemes of commodities in which they had no specific domain knowledge or expertise. They invested large funds, without proper assessment of risk management. Billing activities were outsourced by trading clients to brokers who acted as a Clearing & Forwarding agents to fulfill requirement of contracts. Physical market side involved producing, buying, purchasing, storing and trading of commodities.

Brokers took due advantage of trading clients since they had no proper domain knowledge or expertise and all billing and trading activities were in their hands. None of the trading clients obtained VAT & TIN numbers against purchases & sales though specific nature of transactions were well known. Trading clients also never collected warehouse receipts from these brokers for purchases.

The High Court Committee on the 22^nd of January 2015 had directed NSEL to collect data of 13000 trading clients through their respective trading members and brokers in order to ensure and streamline the recovery process. Following the direction of the Honorable High Court Committee, NSEL issued the circular on February 2015 to trading members to collect the required information of the trading clients and furnish their details by February 2015. This would determine the legitimate, genuine, undisputed and clean claims of the trading members and their respective clients.

NSEL has stated that only 45 trading clients have verified their claims totaling to Rs.12 crores as of now. The Exchange had also disclosed of a large scale client code modifications done by NSEL brokers for a few months namely from April to July 2013. Value of client modifications stood at over Rs. 2000 crores as per most recent findings.