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.