NSEL case

Pursuant to the then Prime Minister's vision to create a single market across the country for both manufactured and agricultural produce, NSEL (National Spot Exchange Limited) was conceptualized in the year 2004. According to the Economic Surveys of the government done in 2003–2006, 3 consecutive years of survey also recommended setting up a national-level, integrated market for agricultural products, as did the planning commission, which was aware of the benefits of the spot markets. This was followed by the Rangarajan Committee, which too sought a national spot market.{{ cite news | url= http://www.thehindu.com/2005/04/10/stories/2005041004690800.htm | work= The Hindu | date= 2005-04-10 | title= UPA committed to reversing neglect of agriculture sector: Manmohan}}{{dead link|date=April 2021|bot=medic}}{{cbignore|bot=medic}}

Following the invitation from Ministry of Consumer Affairs (MCA), the Multi Commodities Exchange Ltd. (MCX) which was earlier a sister company of NSEL, submitted a project report for establishing a nationwide spot market for commodities. NSEL was set up as a company incorporated under the Companies Act, 1956 on 18 May 2005 with its registered office in the State of Maharashtra. NSEL was incorporated by MCX and the nominees of FTIL.{{Citation needed|date=December 2024}}

Subsequently, in view of the regulatory concerns between regulated commodities exchanges holding equity shareholding in spot exchanges, the shareholding of MCX and nominees were transferred and consolidated later in 2005 with FTIL. On 5 June 2007, NSEL was approved as a Spot Exchange by Department of Consumer Affairs (DCA). National Spot Exchange Limited (NSEL), commenced live trading on October 15, 2008, and was the first commodity spot exchange of the country. Within a few years, as many as six state governments issued licences under the model Agricultural Produce Market Committees (APMC) Act to NSEL, because their own APMCs mostly short-changed the poor farmers. NSEL turned out to be a boon for such farmers because they could now sell their produce at competitive rates and make better profits.

The Exchange was promoted by National Agricultural Cooperative Marketing Federation of India (NAFED). In August 2011, FMC was appointed as the ‘designated agency’ to fill the regulatory vacuum in the commodities market. A series of bizarre actions by the FMC spooked the market and as a result NSEL had to suspend the trading of all contracts on July 31, 2013

The investors of NSEL formed an organization by the name of NSEL Investor's Forum (NIF) in the month of August 2013.{{Cite news |last= |first= |date=21 August 2013 |title=Loser pays all |url=https://www.business-standard.com/article/opinion/loser-pays-all-113082101062_1.html |access-date=17 December 2024 |work=Business Standard}} However investors who were dissatisfied with brokers' role in NIF formed a pure investors' organization by the name of NSEL Investors' Action Group (NIAG).{{Cite news |last=Kumar Jha |first=Dilip |date=26 December 2013 |title=Split among NSEL investors |url=https://www.business-standard.com/article/markets/split-among-nsel-investors-113122600678_1.html |access-date=17 December 2024 |work=Business Standard}} Many writs, PILs, Suits have been filed in Mumbai HC against NSEL/FTIL and Jignesh Shah.

As of 2019, the EOW (Economic Offences Wing) of Mumbai Police was investigating this crisis and the Mumbai police has conducted various raids.{{cite web|first1=Khushboo |last1=Narayan |first2=Ami |last2=Shah |first3=Anirudh |last3=Laskar |url=http://www.livemint.com/Companies/TqvjpRhV0kBDckHP7HhgoK/NSEL-crisis-Search-operations-at-Jignesh-Shahs-residence.html |title=NSEL crisis: FTIL chief Jignesh Shah's home, offices raided |publisher=Livemint.com |date= 30 September 2013|accessdate=2019-11-02}} On 9 October 2013, Amit Mukherjee, the Assistant Vice-president (Business Development) of NSEL, was arrested by the EOW of the Mumbai police marking the first arrest in the payment crisis.{{cite web|url=http://www.thehindubusinessline.com/economy/agri-business/nsel-case-mumbai-police-makes-first-arrest/article5218258.ece |title=NSEL case: Mumbai police makes first arrest |publisher=The Hindu BusinessLine |date=2019-09-16 |accessdate=2019-11-02}} Subsequently, a day later on 10 October 2013, the EOW of Mumbai Police arrested Jai Bahukhandi, the former Assistant Vice-president of NSEL. Former CEO and MD, Anjani Sinha, was arrested a week later on 17 October 2013. The EOW has since invoked the MPID (Maharashtra Protection of Investors Deposit) Act, under which it can attach properties and assets of the accused, for the interest of the investors. Nilesh Patel of NK Proteins Ltd., the biggest borrower from the NSEL, was arrested on 22 October 2013 who got out on bail subsequently. Surinder Gupta of PD Agroprocessors was arrested by EOW on 5 March 2014.

The EOW also arrested Rajesh Mehta of Swastik Overseas Ahmedabad who was one of the borrowers on 1 April 2014. On 6 January 2014, the EOW of Mumbai's crime branch submitted its first chargesheet in connection with NSEL payment crisis. The chargesheet mentions the names of the following five accused:

• Amit Mukherjee (Former VP, Business Development at NSEL)
• Jay Bahukhandi (former AVP at NSEL)
• Anjani Sinha (Former Chief Executive of NSEL)
• Nilesh Patel (MD of NK Proteins)
• Arunkumar Sharma (Promoter and Director of Lotus Refineries)

In October 2013, EOW registered a case under the MPID Act in the NSEL case. In the process, EOW attached defaulters' properties worth close to ₹4,500 crore across the country, and the MPID court initiated procedures to liquidate them so as to recover dues of depositors. The ED has attached properties of defaulters, worth around ₹800 crores in NSEL case.{{Cite web |url=http://www.afternoondc.in/city-news/first-nsel-chargesheet-submitted/article_100106 |title=Not Available |access-date=8 October 2014 |archive-url=https://web.archive.org/web/20190415055709/http://www.afternoondc.in/city-news/first-nsel-chargesheet-submitted/article_100106 |archive-date=15 April 2019 |url-status=dead }}

The EOW arrested defaulter borrowers Nilesh Patel (NK Proteins),{{Cite web |date=2013-10-23 |title=NSEL crisis: NK Proteins MD Nilesh Patel arrested |url=https://indianexpress.com/article/news-archive/web/nsel-crisis-nk-proteins-md-nilesh-patel-arrested/ |access-date=2024-04-25 |website=The Indian Express |language=en}} Arun Sharma (Lotus Refineries),{{Cite web |date=2013-11-11 |title=NSEL case: Lotus Refineries Director arrested |url=https://www.thehindubusinessline.com/economy/nsel-case-lotus-refineries-director-arrested/article20688050.ece1 |access-date=2024-04-25 |website=BusinessLine |language=en}} Surinder Gupta (PD Agro){{Cite web |last=Narayan |first=Khushboo |date=2014-03-05 |title=NSEL case: EOW arrests MD of PD Agroprocessors |url=https://www.livemint.com/Companies/1LXhiqEQuWMPR5w4NT3tAK/NSEL-case-EOW-arrests-MD-of-PD-Agroprocessors.html |access-date=2024-04-25 |website=mint |language=en}} and Indrajit Namdhari (Namdhari Foods).{{Cite news |date=2014-05-06 |title=Mumbai EOW arrests ninth accused in the NSEL case |url=https://timesofindia.indiatimes.com/city/mumbai/mumbai-eow-arrests-ninth-accused-in-the-nsel-case/articleshow/34746056.cms |access-date=2024-04-25 |work=The Times of India |issn=0971-8257}} On 11 August 2014, the EOW arrested the following officials from six defaulting companies on NSEL:

• Kailash Aggarwal (Ark Imports)
• Narayanam Nageswara Rao (NCS Sugar)
• B V H Prasad (Juggernaut Projects)
• Varun Gupta (Vimladevi Agrotech)
• Chandra Mohan Singhal (Vimladevi Agrotech)
• Ghantakameshwar Rao (Spin-cot Textiles)
• Prashant Boorugu (Metcore Steel and Alloys)

The EOW arrested Shah and Shreekant Javalgekar on May 7, 2014, on charges of non-cooperation [http://www.business-standard.com/article/companies/jignesh-shah-arrested-in-rs-5-600-crore-nsel-scam-114050701186_1.html NSEL case: Law Finally Catches up with Jignesh Shah ], Jignesh Shah's arrest Reports however suggested that Shah was fully cooperative with EOW and had gone to EOW office 21 times against being summoned 7 times. Not only that, in order to facilitate the probe, NSEL had also deployed server in EOW office.{{cite web|url=http://www.firstpost.com/business/curious-case-of-repeated-arrest-and-release-of-jignesh-shah-or-how-rs-5600-cr-lost-without-trace-3082368.html |title=Curious case of repeated arrest and release of Jignesh Shah (or how Rs 5,600 cr lost without trace?) |publisher=Firstpost |date=2016-11-01 |accessdate=2019-11-02}}

He was released on bail on August 22, 2014, by the Bombay High Court. The court observed that "…the names of 25 different companies who are the defaulters have been mentioned in the FIR itself". Thus, though projected payment default of ₹5,600 Cr, the ill-gotten amount has not gone to the applicant (Jignesh Shah), or for that matter, to NSEL.{{Cite web|title=Bombay High Court Grants Bail to Financial Tech's Jignesh Shah in NSEL Scam Case|url=https://www.ndtv.com/business/bombay-high-court-grants-bail-to-financial-techs-jignesh-shah-in-nsel-scam-case-652303|access-date=2020-11-09|website=NDTV.com|date=22 August 2014 }}

The Enforcement Directorate arrested him on 12 July 2016 for assisting NSEL defaulters in money laundering.[http://economictimes.indiatimes.com/news/politics-and-nation/nsel-scam-ed-arrests-jignesh-shah-for-assisting-defaulters-in-money-laundering/articleshow/53180.cms ED arrests Jignesh Shah ], ED arrests Jignesh Shah for assisting defaulters in money laundering A special PMLA court granted bail to Shah terming the arrest by ED was ‘illegal’.{{cite web|url=https://www.scribd.com/document/350882679/Pg-42-43-Jignesh-Shah-Case |title=Pg 42-43 Jignesh Shah Case | Arrest | Bail |publisher=Scribd.com |date=2017-06-10 |accessdate=2019-11-02}} After hearing both sides, Judge P.R. Bhavake, Special PMLA Court, Mumbai, ruled: "The learned counsel for the ED failed to satisfy me that this arrest is for a separate crime… I do not find any force in the contention that the ED wanted to file a supplementary complaint against the applicant (Shah) in respect of the investigation made against him as Chairman of FTIL. The ED has come with specific averments that the applicant is not arrested in special PMLA case no 04/2015 but in other Enforcement Case Information Report (ECIR). The ED has failed to satisfy the Court how the applicant’s arrest is legal in different ECIR....."

On 18th Jan 2021, the EOW arrested Anjani Sinha, former CEO of National Spot Exchange Ltd, for fictitious trading on the exchange and for creating false stocks.{{Cite web|title=Former NSEL CEO Anjani Sinha held for fake trading|url=https://www.moneylife.in/article/former-nsel-ceo-anjani-sinha-held-for-fake-trading/62695.html|access-date=2021-01-24|website=Moneylife NEWS & VIEWS}}{{Cite web|last=IANSLive|title=Former NSEL CEO Anjani Sinha held for fake trading|url=http://ianslive.in/index.php?param=news/Former_NSEL_CEO_Anjani_Sinha_held_for_fake_trading-753881/Top+Story/30|access-date=2021-01-24|website=IANS Live}}

It was discovered that even 15 months before the NSEL case went public, India's financial journalist Sucheta Dalal knew all major aspects of the fraud. An email dated 8 May 2012 from Sucheta to Jignesh Shah, Anjani Shah etc. came in public domain which revealed that Sucheta knew about illegality and lack of safety of NSEL product.{{Cite web |last=Mehta |first=Nirwa |date=2023-10-21 |title=Sucheta Dalal and NSEL Case: The Journalist Who Finds Herself In Middle Of Financial Scams |url=https://www.thepamphlet.in/english/sucheta-dalal-nsel-scam-mahua-moitra/ |access-date=2025-01-29 |website=The Pamphlet |language=en-US}} A complaint has been filed with Mumbai police by NSEL Investors' Action Group to investigate Sucheta Dalal's role. Sucheta knew about illegality of contracts, role of IBMA and the fact that the warehouses were in so called borrowers' own premises.[https://www.scribd.com/document/285183669/nsel-15-10-2015-pdf Role of Sucheta Dalal in NSEL Scam ]'NSEL Investors Letter to Mumbai police to investigate the role of Sucheta Dalal in scam'

The Central Bureau of Investigation raided NSEL and borrowers' offices as well as the residence of Jignesh Shah. An FIR was booked under prevention of corruption act for the funds that MMTC and PEC, two public sector units, were made to invest in NSEL.[https://web.archive.org/web/20140316082935/http://articles.economictimes.indiatimes.com/2014-03-14/news/48222151_1_jignesh-shah-nsel-scam-ceo-anjani-sinha CBI books FIR in NSEL case ], Jignesh Shah and Joseph Massey have been booked in this FIR. The investors have argued that CBI has taken no action against politicians/bureaucrats involved in the case. The CBI has filed a charge sheet where they have charged 20 entities, including Jignesh Shah and FTIL, for cheating PSUs, PEC and MMTC in the NSEL case.[http://www.livemint.com/Companies/tqpCgjzO75ndjk45SYnm3I/NSEL-scam-CBI-accuses-Jignesh-Shah-of-cheating-criminal-co.html CBI Charges Jignesh Shah and others in NSEL scam], CBI chargesheet on Jignesh Shahand others

In 2016, the Government of India ordered Serious Fraud Investigation Office probe on FTIL and its 18 associates, brokers and defaulters pertaining to irregularities on NSEL.{{Cite news |last=PTI |date=2016-11-01 |title=Government orders SFIO investigation against FTIL, 18 associates |url=https://www.livemint.com/Companies/imWZmK36e3uMrn8TGB1rmI/Government-orders-SFIO-investigation-against-FTIL-18-associ.html |archive-url=http://web.archive.org/web/20210126023732/https://www.livemint.com/Companies/imWZmK36e3uMrn8TGB1rmI/Government-orders-SFIO-investigation-against-FTIL-18-associ.html |archive-date=2021-01-26 |access-date=2025-01-29 |work=mint |language=en}}

After petition by certain investors who wanted to derail the Eseries settlement by NSEL, the Bombay High Court directed the FMC to appoint a forensic auditor for Eseries products of NSEL. An audit firm by the name of Choksi and Choksi was given this assignment and their audit report had given a clean chit regarding the Eseries contracts on NSEL, which made the FMC give a NOC for Eseries settlement and over 40,000 genuine claimants of Eseries benefitted eventually.{{cite web |last=Rukhaiyar |first=Ashish |date=26 June 2014 |title=NSEL completes financial closure of e-series gold contracts |url=http://www.livemint.com/Companies/JzIQrrj2xjKCcmmn7ioWNL/NSEL-completes-financial-closure-of-eseries-gold-contracts.html |accessdate=2019-11-02 |publisher=Livemint.com}}{{cite web |date=2018-03-12 |title=NSEL pays ₹44 crore as final settlement to e-silver investors |url=http://www.thehindubusinessline.com/companies/nsel-pays-44-crore-as-final-settlement-to-esilver-investors/article6357437.ece |accessdate=2019-11-02 |publisher=The Hindu BusinessLine}}

The investors of NSEL formed an organization by the name of NIF in the month of August 2013. However investors who were dissatisfied with brokers’ role in NIF formed a pure investors’ organization by the name of NIAG (NSEL Investors Action Group). The NIAG has written multiple letters to Enforcement Directorate and CBI alleging lax and compromised investigation.

A Delhi PMLA Appellate Tribunal on September 17, 2019, directed that a provisional attachment by the Enforcement Directorate in 2016-2017 of over Rs 1,000 crore assets belonging to Jignesh Shah headed 63 moons technologies be quashed and the assets released. The action came in response to an appeal filed by the company. The order was passed by Justice Manmohan Singh, Chairman of the tribunal along with member G C Mishra.{{cite news|url=https://timesofindia.indiatimes.com/business/india-business/pmla-appellate-tribunal-quashes-attachment-by-ed-of-63-moons-rs-1000-crore-assets-but-seeks-indemnity-from-founder-jignesh-shah/articleshow/71174037.cms?from=mdr|title=PMLA appellate tribunal quashes attachment by ED of 63 Moons' Rs 1000 crore assets, but seeks indemnity from founder Jignesh Shah}}{{cite news|url=https://economictimes.indiatimes.com/markets/stocks/news/ed-to-release-63-moons-assets-against-indemnity-bond/articleshow/71171277.cms|title=ED to release 63 Moons' assets against indemnity bond}}{{cite news|url=https://timesofindia.indiatimes.com/business/india-business/tribunal-asks-ed-to-release-assets-of-63-moons/articleshow/71175651.cms|title=Tribunal asks ED to release assets of 63 Moons}}

There are serious allegations on Mumbai Police EOW of tampering with NSEL-FTIL email servers. While earlier it was confirmed by Rajvardhan Sinha of Mumbai EOW that the mail server of NSEL/FTIL has crashed and has been sent to Bangalore for investigation. Ketan Shah, the man leading NSEL investors' association NIAG, has leveled charges on the investigating agencies of misleading the court. The EOW of Mumbai Police has appointed Mahindra Defence Arm as the digital forensic auditor to probe the NSEL crisis.{{cite news|first=N Sundaresha|last=Subramanian |url=http://www.business-standard.com/article/economy-policy/mahindra-defence-arm-to-probe-rs-5-600-crore-nsel-payment-crisis-117060300738_1.html |title=Mahindra defence arm to probe Rs 5,600-crore NSEL payment crisis | Business Standard News |newspaper=Business Standard India |publisher=Business-standard.com |date= 3 June 2017|accessdate=2019-11-02}}{{cite news|url=http://economictimes.indiatimes.com/markets/stocks/news/mumbai-police-investigating-ketan-shahs-complaint-about-nsel-server/articleshow/53946651.cms |title=Mumbai police investigating Ketan Shah's complaint about NSEL server - The Economic Times |newspaper=The Economic Times |publisher=Economictimes.indiatimes.com |date=2016-08-31 |accessdate=2019-11-02|last1=Sahgal |first1=Ram }}

SEBI has issued show-cause notices to the top five brokers namely Anand Rathi Commodities, India Infoline Commodities (IIFL), Geofin Comtrade, Motilal Oswal Commodities, and Phillip Commodities, on charges of mis-selling NSEL contracts by promising assured returns without ensuring delivery.{{cite web|url=http://www.thehindubusinessline.com/markets/sebi-issues-fresh-showcause-notice-to-brokers-in-nsel-case/article9670170.ece |title=SEBI issues fresh showcause notice to brokers in NSEL case |publisher=The Hindu BusinessLine |date=2018-01-27 |accessdate=2019-11-02}}

Since the brokers have also been accused of indulging in massive manipulation of client KYCs, large-scale modification of client codes for doing multiple deals and infusion of unaccounted money through their NBFCs, SEBI has asked them as to why they should not be declared not "fit and proper" since they were found to have violated securities regulations. In the notice, SEBI has conveyed to these errant brokers that ‘it is alleged that your continuance as a market intermediary in the securities market is detrimental to the interest of this market…’

In the first show-cause notice, the allegations include several irregularities/violations such as false assurances to investors, wrong and misleading statements, arbitrage products sold with assured returns and as risk-free products, funding of clients and client code modification for those trading on NSEL.{{cite web|first=Jayshree P. |last=Upadhyay |url=http://www.livemint.com/Money/CTVNyKXp11mSXVJuZV7g4M/NSEL-case-Sebi-serves-five-brokerages-showcause-notice-for.html |title=NSEL case: Sebi serves five brokerages showcause notice for misselling products |publisher=Livemint.com |date=2017-04-28 |accessdate=2019-11-02}}

"For grant of certificate of registration, the application has to be a fit and proper person in terms of regulation of the Stock Brokers Regulations, read with Schedule II of the SEBI (Intermediaries) Regulations, 2008. Further, the conditions stipulate that the stock broker shall at all times abide by the rules, regulation, byelaws of the stock exchange and code of conduct as specified in Schedule II of the stock exchange regulations...it is alleged that your continuance as a market intermediary in the securities market is detrimental to the interest of this market," the SCN states. "Therefore, it is alleged that you are no longer a ‘fit and proper' person for holding the certificate of registration in the securities market."

In the second show-cause notice, media reports said, SEBI sent notices to five broker firms, as it was not satisfied with the explanation offered by them on allegations of mis-selling. The SEBI officers have formed an opinion that the brokers should not be granted licences for commodity business.{{cite news|first=Shrimi |last=Choudhary |url=http://www.business-standard.com/article/markets/sebi-s-nsel-audit-finds-lapses-at-five-brokers-117042701351_1.html |title=Sebi issues final show-cause notice in NSEL scam case to five big brokers | Business Standard News |newspaper=Business Standard India |publisher=Business-standard.com |date= 27 April 2017|accessdate=2019-11-02}}

The Economic Offences Wing (EOW) of Mumbai Police also found evidence of large scale irregularities on the part of these brokers in the NSEL case. A forensic audit by the EOW also revealed hawala transactions, benami trades and client code modifications by these brokers. The NSEL Investors' Action Group (NIAG) – a forum of NSEL investors requested the EOW to take strict action against these brokers who "falsely sold NSEL as an 'arbitrage product.' Several key brokers including Motilal Oswal undertook Power of Attorney to buy/sell/receive/deliver NSEL commodities on behalf of the investors and also opened DMAT (dematerialized) accounts to handle warehouse receipts of commodities in electronic form. "These brokers have also been accused of criminal breach of trust for parting with investors' monies without securing warehouse receipts as promised," the NSEL investors said in a letter to the Commissioner of Mumbai Police.

The Hon. Bombay High Court in its judgment dated August 22, 2014 also observed that "...brokers do have their own legal team and a full knowledge of how the market operates. The legalities of the transactions were quite expected to be known to the brokers ... the brokers being quite experienced, and the investors being informed persons, it is apparent that the issue of illegality of the transactions raised by them is not out of their concern to adhere to legalities, but in order to project the applicant (Jignesh Shah) as the main offender, rather than the defaulting parties.{{Cite web|url=https://www.ndtv.com/business/bombay-high-court-grants-bail-to-financial-techs-jignesh-shah-in-nsel-scam-case-652303|title = Bombay High Court Grants Bail to Financial Tech's Jignesh Shah in NSEL Scam Case| date=22 August 2014 }}

On March 3, 2015, the EOW, Mumbai arrested 3 top brokers in the NSEL case. Those arrested were Amit Rathi, managing director of Anand Rathi Financial Services Ltd; C P Krishnan of Geojit Comtrade Ltd; and Chintan Modi of India Infoline Ltd (IIFL). The three were charged with mis-selling NSEL products, cheating, forgery and criminal conspiracy, among other charges.

On December 21, 2018, SEBI issued supplementary notices to 300 brokers, which suggested cancellation of license if the broker found themselves unable to provide necessary explanation regarding any wrong-doing pointed out by the SFIO.{{cite web|first=Tarun|last=Sharma |url=https://www.moneycontrol.com/news/business/markets/sebi-to-send-supplementary-notice-to-300-brokers-in-nsel-case-3317131.html |title=SEBI to send supplementary notice to 300 brokers in NSEL case |publisher=Moneycontrol.com |date=2018-12-21 |accessdate=2019-11-02}}{{cite news|url=https://www.thehindu.com/news/cities/Madurai/sebi-submits-list-of-brokers-involved-in-nsel-scam-madurai/article25712142.ece |title=SEBI submits list of brokers involved in NSEL scam |newspaper=The Hindu |date=2018-12-10 |accessdate=2019-11-02}} SEBI will be using EOW's report of 2015 to corner brokers. The detailed investigation report was shared by EOW in 2015 with the then market regulator, FMC, specifically highlighting the role of brokers.{{cite web|url=https://www.thehindubusinessline.com/markets/nsel-scam-2015-police-report-gives-sebi-fresh-ammo-against-brokers/article25926034.ece |title=NSEL scam: 2015 police report gives SEBI fresh ammo against brokers |publisher=The Hindu BusinessLine |date=2019-01-06 |accessdate=2019-11-02}} Even, in the supplementary charge sheet filed by EOW, the top brokers have been named for the first time.{{cite news|first=Rajesh |last=Bhayani |url=https://www.business-standard.com/article/markets/mumbai-police-files-charge-sheet-against-brokers-in-nsel-default-case-118122800048_1.html |title=Mumbai police files charge sheet against brokers in NSEL default case | Business Standard News |newspaper=Business Standard India |publisher=Business-standard.com |date= 28 December 2018|accessdate=2019-11-02}}{{cite news|first=Dilip Kumar|last=Jha |url=https://www.business-standard.com/article/finance/sebi-issues-another-show-cause-notice-to-nsel-brokers-in-2013-scam-probe-119010301169_1.html |title=Sebi issues another show-cause notice to NSEL brokers in 2013 scam probe | Business Standard News |newspaper=Business Standard India |publisher=Business-standard.com |date= 3 January 2019|accessdate=2019-11-02}}{{cite news|url=https://economictimes.indiatimes.com/markets/stocks/news/5-brokers-issued-supplementary-notices/articleshow/67376051.cms |title=NSEL: 5 brokers issued supplementary notices - The Economic Times |newspaper=The Economic Times |publisher=Economictimes.indiatimes.com |date=2019-01-04 |accessdate=2019-11-02|last1=Sahgal |first1=Ram }}

In the last week of February 2019, SEBI declared 5 major brokerages ‘not fit and proper’ as commodity derivative brokers through several orders. In the first two separate orders, the markets regulator stated that the reputation of Motilal Oswal Commodities Broker and India Infoline Commodities has been "seriously eroded", which is indispensable in declaring them "not fit and proper" for commodity trading.{{cite news| url=https://www.businesstoday.in/markets/company-stock/nsel-scam-sebi-declares-motilal-oswal-iifl-not-fit-and-proper-commodity-derivatives/story/321560.html | title= NSEL Scam: SEBI declares Motilal Oswal, IIFL 'not fit and proper' as commodity derivative brokers}}{{cite web| url=https://www.livemint.com/market/commodities/nsel-case-commodity-arms-of-motilal-oswal-iifl-not-fit-and-proper-says-sebi-1550903694516.html | title= NSEL case: Commodity arms of Motilal Oswal, IIFL not fit and proper, says Sebi| work= mint| date= 23 February 2019| last1= Upadhyay| first1= Jayshree P.}}{{cite news| url=https://economictimes.indiatimes.com/markets/stocks/news/sebi-declares-commodity-arms-of-motilal-iifl-as-not-fit-and-proper/articleshow/68123136.cms | title= Sebi rules Motilal Oswal, IIFL commodity arms 'not fit and proper'}}

Within a few days, Geofin Comtrade and Anand Rathi Commodities were also declared as ‘not fit and proper’ in the second set of orders.{{cite news| url=https://economictimes.indiatimes.com/markets/commodities/news/two-more-commodities-brokers-not-fit-proper/articleshow/68177417.cms?from=mdr | title= Two more commodities brokers 'not fit & proper'}} The same orders were issued against Phillip Commodities India. These firms have been found guilty for violating the erstwhile Forward Contract and Regulation Act (FCRA) 1972.{{cite news| url=https://www.business-standard.com/article/markets/sebi-declares-phillip-commodities-india-not-fit-and-proper-in-nsel-case-119022800067_1.html | title= Sebi declares Phillip Commodities India 'not fit and proper' in NSEL case}}{{cite news| url=https://timesofindia.indiatimes.com/business/india-business/sebi-says-philips-commodities-not-fit-and-proper-to-be-commodities-derivatives-broker/articleshow/68190654.cms | title= Sebi says Philips Commodities not 'fit and proper' to be commodities derivatives broker}}

As a result, these firms are disallowed to act as brokers, indirectly or directly.

On November 30, 2022, the Securities and Exchange Board of India (Sebi) barred five brokerages involved in the National Spot Exchange (NSEL) fraud from registering as commodity brokers for the next six months. Anand Rathi Commodities, Motilal Oswal Commodity Broker, Phillip Commodities India, India Infoline Commodities, and Geofin Comtrade are those brokerages.{{Cite news |date=2022-11-30 |title=NSEL scam: Sebi bans 5 commodity brokers for up to 6 months |work=The Economic Times |url=https://economictimes.indiatimes.com/markets/stocks/news/nsel-scam-sebi-bans-5-commodity-brokers-for-up-to-6-months/articleshow/95869587.cms?from=mdr |access-date=2023-08-01 |issn=0013-0389}}{{Cite web |title=NSEL scam: Sebi bans five major commodity brokers for six months |url=https://www.business-standard.com/article/markets/nsel-case-sebi-slaps-six-months-ban-on-five-commodity-brokers-122112901304_1.html |access-date=2023-08-01}}

Jignesh Shah came on TV on 5 August 2013, and said that all defaulters have promised a financial settlement in front of the FMC and brokers. In case, the defaulters do not honor their commitment, the FMC would take necessary actions against them.{{cite web |date=2013-08-05 |title=Financial Tech promoter Jignesh Shah on NSEL payment crisis |url=http://www.ndtv.com/video/business/news/financial-tech-promoter-jignesh-shah-on-nsel-payment-crisis-285683 |accessdate=2019-11-02 |publisher=Ndtv.com}} He was arrested by EOW Mumbai Police on 7 May 2014 for his role in NSEL scam but was eventually granted bail by Bombay High Court on Aug 22, 2014 as there was no money trail to Jignesh Shah/NSEL/FTIL and the entire money was traced by EOW to 22 defaulters.{{cite news |title=Jignesh Shah arrested in NSEL scam |url=https://www.deccanherald.com/content/405059/jignesh-shah-arrested-nsel-scam.html}}

Anjani Sinha, the sacked CEO and the MD of the company, confessed and owned up the entire responsibility of the crisis in his first affidavit.{{cite news |title=I didn't flee to London, groundwork ready for refund to genuine NSEL claimants: Jignesh Shah |url=https://timesofindia.indiatimes.com/business/india-business/i-didnt-flee-to-london-groundwork-ready-for-refund-to-genuine-nsel-claimants-jignesh-shah/articleshow/71032357.cms}}{{cite news |title=NSEL an 'employee fraud', could have been resolved within 6 weeks: Jignesh Shah |url=https://timesofindia.indiatimes.com/business/india-business/nsel-an-employee-fraud-could-have-been-resolved-within-6-weeks-jignesh-shah/articleshow/70962696.cms}}{{cite news |title=NSEL an 'employee fraud', could be resolved in 6 weeks: Jignesh Shah |url=https://economictimes.indiatimes.com/markets/stocks/news/nsel-an-employee-fraud-could-be-resolved-in-6-weeks-jignesh-shah/articleshow/70965436.cms}}{{cite news |title=NSEL an 'employee fraud', could have been resolved within 6 weeks: Jignesh Shah |url=https://www.livemint.com/companies/people/nsel-an-employee-fraud-could-have-been-resolved-within-6-weeks-jignesh-shah-1567522432243.html}} However, after his arrest, he did a complete U-turn retracting his earlier affidavit. In his custodial statement to the EOW authorities, Anjani Sinha squarely blamed Jignesh Shah and even called him ‘mastermind’ of the entire crisis. Sinha also claimed that Shah forcibly took away the passports belonging to him and his wife and made them sign confessional statements which were allegedly drafted by FTIL.{{cite web |date=2017-06-08 |title=Affidavit - Mr. Anjani Sinha - 11.09.2013 |url=https://www.scribd.com/document/350720392/Affidavit-Mr-Anjani-Sinha-11-09-2013 |accessdate=2019-11-02 |publisher=Scribd.com}}

However, later on, in a statement to the Enforcement Directorate, Sinha disowned his custodial statement to the EOW and admitted to the contents of his first affidavit.{{cite web |date=2017-06-08 |title=Statement to ED | Clearing (Finance) | Cheque |url=https://www.scribd.com/document/350720467/Statement-to-ED |accessdate=2019-11-02 |publisher=Scribd.com}}

Mukesh P Shah, who is a maternal uncle of Jignesh Shah, has been internal as well as external auditor of NSEL from time to time. Mumbai police while opposing his anticipatory bail confirmed that he was doing insider-trading in FTIL shares and by virtue of possession of FTIL shares alone he should have been disqualified as an auditor. Besides, Mumbai police has confirmed that most companies of 'Rawal Group' where La Fin Financial Services P. Ltd. (promoter of FTIL) had a stake were registered at NSEL at the address of Mukesh Shah and Mukesh Shah was the auditor of all these companies which traded on NSEL to the tune of ₹1352 Crores and moved out in May–June 2013 without losing a penny showing their knowledge of the case.{{cite web|url=https://www.scribd.com/doc/260985340/mukesh-shah-trading-in-ftil-shares |title=Mukesh Shah trading in FTIL shares |publisher=Scribd.com |date=2015-04-06 |accessdate=2019-11-02}}

In a show cause notice dated April 27, 2012, the Ministry of Consumer Affairs asked NSEL certain clarifications regarding the trades. NSEL promptly replied to this notice but for a year and half after the show cause notice, no action was taken by the Ministry. Instead, merely on the recommendation of the FMC, it ordered sudden and abrupt closure of NSEL on July 12, 2013. On July 19, 2013, the FMC revised its position and wrote to the Department of Consumer Affairs (DCA), stating that the exemption notification did not clarify whether it applied to all or only specific provisions of the FCR Act. Following the DCA's orders, NSEL suspended trading on July 31, 2013. This sudden and abrupt closure of the Exchange market led to the payment default of ₹5600 crore.{{cite web |date=10 February 2015 |title=NSEL: Did Forward Markets Commission's action spook the market? |url=http://www.dnaindia.com/money/report-nsel-did-forward-markets-commission-s-action-spook-the-market-2059598 |accessdate=2019-11-02 |publisher=Dnaindia.com}}

On 21 October 2014, invoking Section 396 of the Companies Act, 1956, the Ministry of Corporate affairs announced a draft order for merger of NSEL, a subsidiary of FTIL. All stakeholders were given 60 days to report to MCA. FTIL challenged this merger in Bombay HC. Hearing an application filed by the government, the Bench comprising Justices SC Dharmadhikari and BP Colabawala granted the govt time till 15 February 2016.

On 12 February 2016, the MCA passed the final order of merger between FTIL and NSEL. The order was challenged by FTIL in Bombay High Court and it was upheld.

Based on MCA's own circular dated April 20, 2011, it is a known fact that for any merger to materialize, permission of 100% shareholders and 90% creditors needs to be obtained. By forcing the merger on 63,000 shareholders of FTIL without so much as giving them a chance to consent/object to the amalgamation, MCA not only went against its own circular but also against Article 14 of the Constitution. The forced merger violates the sacrosanct concept of ‘limited liability’ and is not in public interest. Third, the "corporate veil" between NSEL and FTIL cannot be lifted until the so-called "parental fraud" by FTIL is proven in a court of law.{{cite web|url=http://www.financialexpress.com/opinion/financial-technologies-national-spot-exchange-merger-bad-in-law-and-policy/178737/ |title=FTIL-NSEL merger: Bad in law and policy? |publisher=The Financial Express |date= 15 December 2015|accessdate=2019-11-02}}{{cite web|url=http://blogs.economictimes.indiatimes.com/et-editorials/why-the-nsel-ftil-merger-may-be-a-bad-precedent/ |title=Why the NSEL-FTIL merger may be a bad precedent |publisher=Blogs.economictimes.indiatimes.com |date= 16 February 2016|accessdate=2019-11-02}}

In a significant judgement, the apex court decided against the forced merger of NSEL and FTIL that was ordered by the Ministry of Corporate Affairs,{{ cite news |url= https://timesofindia.indiatimes.com/business/india-business/sc-quashes-centres-call-to-merge-nsel-ftil/articleshow/69122788.cms |title= Supreme Court quashes Centre's call to merge NSEL, FTIL }} which was the first ever instance of invocation of Section 396 of the Companies Act 1956.{{ cite news |url= https://www.livelaw.in/top-stories/sc-public-interest-forced-merger-set-aside-144706 | title= 'No Public Interest'-SC Sets Aside The First Forced Merger Of Two Companies Ordered By Central Govt }} The Union Ministry had ordered the compulsory amalgamation of National Spot Exchange Ltd (NSEL) and its parent company Financial Technologies India Ltd, currently known as 63 Moons Technology Limited. Justice Rohinton Fali Nariman and Justice Vineet Saran set aside the Bombay High Court's judgment on amalgamating the two companies. The centre had issued a final order for the merger in the light of public interest.{{ cite news | url= https://www.business-standard.com/article/markets/63-moons-rallies-21-in-two-days-as-sc-rules-against-nsel-merger-119050200367_1.html | title= 63 Moons rallies 21% in two days as SC rules against NSEL merger}} However, the Supreme Court reckoned that the merger doesn't satisfy the criteria of ‘public interest’ and laid down a set of guidelines on what ‘public interest’ would amount to.{{ cite news | url=https://premium.thehindubusinessline.com/portfolio/commodity-analysis/sc-nixes-nsel-merger-plan-what-next/article27045013.ece|title=SC nixes NSEL merger, what next?}}{{ cite news | url= https://www.newindianexpress.com/business/2019/may/01/sc-shoots-down-order-for-nsel-63-moons-merger-1971105.html | title= SC shoots down order for NSEL, 63 Moons merger }}

On 28 February 2015, even as the MCA had gone ahead with its idea of forced merger, it moved a petition before the Company Law Board, now known as the National Company Law Tribunal (NCLT), to take over the board of FTIL and replace it with government nominated directors. FTIL challenged this, too. On 30 June 2015, the NCLT barred FTIL from selling its assets which was promptly stayed by the Madras High Court on appeal by FTIL. However, on 19 April, the Supreme Court reversed this stay and froze all assets of FTIL barring day to day expenses.{{cite web|first=Rama |last=Mundra |url=http://ramamundrablog.blogspot.in/p/imposing-section-397-on-ftil.html |title=Rama Mundra: Imposing Section 397 on FTIL |publisher=Ramamundrablog.blogspot.in |date= |accessdate=2019-11-02}}

In 2016, FIU (under Finance Ministry) held that NSEL came under the purview of Forward Contracts (Regulation) Act (FCRA) and therefore guilty of failing in several of these obligations under the law. The black money watchdog has slapped a penalty of ₹1.66 crore for several counts of violating the provisions of Prevention of Money Laundering Act (PMLA) on NSEL. The watch dog further held that failures is deliberate and willful and hence, invite penalties. NSEL is fined Rs.1 lac for each failure and the collective fine was Rs.1.66 crore.{{cite news |last=Subramanian |first=N Sundaresha |date=23 January 2016 |title=Watchdog penalty on NSEL raises investors' hopes | Business Standard News |url=http://www.business-standard.com/article/markets/investors-see-hope-in-fiu-order-on-nsel-116012300408_1.html |accessdate=2019-11-02 |newspaper=Business Standard India |publisher=Business-standard.com}}

A Metropolitan Court quashed{{when|date=March 2020}} allegations of a ₹900 Cr case at MCX.{{cite web|first=nitish |last=kashyap |url=http://www.livelaw.in/magistrate-court-accepts-c-summary-report-rules-rs-900-cr-mcx-fraud-alleged-pwc/ |title=Magistrate Court Accepts C-Summary Report That Rules Out Rs. 900-Cr MCX Fraud Alleged By PWC |publisher=Livelaw.in |date=2017-04-29 |accessdate=2019-11-02}} This is the latest update in response to an earlier FIR filed by Mumbai Police raising questions of insider trading at MCX.{{cite web|url=http://www.moneycontrol.com/news/business/companies/mumbai-police-files-fresh-fir-against-jignesh-shah-1518741.html |title=Mumbai Police files fresh FIR against Jignesh Shah |publisher=Moneycontrol.com |date=2015-04-24 |accessdate=2019-11-02}} The court in its findings cited an audit report conducted by PWC, ruling that it was based on hearsay and dismissed the protest petition. It however accepted the C-summary report filed by the investigating officer.{{cite news| url= https://www.livelaw.in/magistrate-court-accepts-c-summary-report-rules-rs-900-cr-mcx-fraud-alleged-pwc/ | title= Magistrate Court Accepts C-Summary Report That Rules Out Rs. 900-Cr MCX Fraud Alleged By PWC}}

The CBI has filed a chargesheet against FTIL, Jignesh Shah, NSEL and various shell companies in NSEL case matter.[http://indianexpress.com/article/india/cbi-finds-evidence-against-9-shell-companies-in-nsel-scam-4646223/ CBI files chargesheet in NSEL case on shell companies ]'CBI finds evidence against 9 shell companies in NSEL scam' The EOW of Mumbai police has also filed chargesheet against Jignesh Shah which lists out how he cooked the books of NSEL.[http://indiatoday.intoday.in/story/how-nsel-jignesh-shah-cooked-the-books/1/375707.html EOW Files chargesheet on Jignesh Shah in NSEL scam ]'EOW chargesheet lists how NSEL's Jignesh Shah cooked the books' On Dec 27, 2018, the EOW-Mumbai filed a supplementary charge-sheet against 63 entities including top brokers for the first time.{{cite news|url=https://www.business-standard.com/article/markets/mumbai-police-files-charge-sheet-against-brokers-in-nsel-default-case-118122800048_1.html|title=Mumbai police files charge sheet against brokers in NSEL default case|newspaper=Business Standard India|date=28 December 2018|last1=Bhayani|first1=Rajesh}}

Under the MPID Act, NSEL officials and 24 defaulters were booked by the EOW of Mumbai police. The EOW had invoked the MPID Act mainly to recover the money of traders that was lost by attaching the promoter assets. In August 2019, the Bombay High Court held that NSEL is not a financial institution. Hence, under the MPID Act, all notifications for attachment of the company's assets including bank accounts and properties stand quashed.{{cite news|url=https://timesofindia.indiatimes.com/business/india-business/committed-to-rise-like-post-world-war-japan-jignesh-shah-after-winning-asset-attachment-case/articleshow/70791300.cms|title=Committed to rise like post-World War Japan: Jignesh Shah after winning asset attachment case}}{{cite news|url=https://www.livelaw.in/news-updates/nsel-not-a-financial-establishment-under-mpid-act-rules-bombay-hc-lifts-attachment-of-properties-worth-over-8000-cr-read-judgment-147421|title=NSEL Not A Financial Establishment Under MPID Act Rules Bombay HC, Lifts Attachment Of Properties}}{{cite news|url=https://barandbench.com/nsel-case-63-moons-properties-cannot-be-attached-under-mpid-act-bombay-hc/|title=NSEL case: 63 Moons properties cannot be attached under MPID Act, Bombay HC}}{{cite news|url=https://www.moneylife.in/article/63-moons-assets-cannot-be-attached-under-mpid-act-in-nsel-case-rules-bombay-hc/58000.html|title=63 moons Assets Cannot be Attached under MPID Act in NSEL case, Rules Bombay HC}}{{cite news|url=https://timesofindia.indiatimes.com/business/india-business/63-moons-gets-relief-from-hc-on-assets-attachment/articleshow/70795517.cms|title=63 Moons gets relief from HC on assets' attachment}}{{cite news |date=23 August 2019 |title=63 Moons shares hit upper circuit after company wins MPID case in Bombay HC |url=https://economictimes.indiatimes.com/markets/stocks/news/63-moons-shares-hit-upper-circuit-after-company-wins-mpid-case-in-bombay-hc/articleshow/70798533.cms |work=The Economic Times}}{{Citekill|reason=citations are excessive and easily noticeable.|date=December 2024}}

Subsequently, petitions were filed challenging the Bombay High Court's order. The Supreme Court sought a response from 63 Moons Technologies regarding this. However, it asked the organization to maintain the status quo in regard to its assets.{{cite news |date=25 September 2019 |title=Supreme Court seeks response from 63 Moons on plea against Bombay HC order |url=https://www.financialexpress.com/industry/supreme-court-seeks-response-from-63-moons-on-plea-against-bombay-hc-order/1716541/ |work=Financial Express (India)}}

Supreme Court vide Judgement dated 22 April 2022 rejected the Bombay High Court Judgement and held NSEL to be a financial establishment and upheld the attachment of assets under MPID Act.{{cite news |date=22 April 2022 |title=The State of Maharashtra Versus 63 Moons Technologies Ltd |url=https://www.livelaw.in/pdf_upload/400-state-of-maharashtra-v-63-moons-technologies-ltd-22-apr-2022-415584.pdf |access-date=17 December 2024 |work=LiveLaw.in}}

A detailed table listing asset seizures by the ED in connection with the NSEL case from 2013 to 2025, specifying the year, entities involved, and the value of assets seized. As of May 2025, the total value of assets attached amounts to {{INRConvert|888.47|c|year=2025}}.

In November 2024, brokers associated with the NSEL Investors Forum (NIF) proposed a one-time settlement of ₹1,950 crore to investors which had a consent from NSEL Investor Action Group (NIAG). This amount represents approximately 42% of the ₹4,650 crore principal owed to unpaid investors. According to the proposal, investors in the ₹10-20 lakh category had already recovered about 37%, with 6.6% from NSEL and 30.75% from the Competent Authority. If accepted, the settlement would increase their total recovery to approximately 79% of the outstanding amount.{{Cite web |last=Iyengar |first=K. Ram Kumar & Suresh P. |date=2024-11-09 |title=NSEL Investors Forum proposes ₹1,950-crore settlement plan |url=https://www.thehindubusinessline.com/markets/nsel-investors-forum-proposes-1950-crore-settlement-plan/article68849224.ece |access-date=2025-01-29 |website=BusinessLine |language=en}} However, in early December 2024, NIAG withdrew its support because it disagreed with FTIL's approach to the MIPD court, seeking access to ₹300 crore of attached assets to cover the operational expenses of the settlement, with the company offering ₹300 crore worth of securities as collateral. NSEL emphasized that the assets currently attached under the MPID Act, valued at approximately ₹2,500 crore, were more than adequate to cover the proposed settlement. At that time, NIAG's withdrawal of consent brought the settlement to a halt.{{Cite news |last=Joshi |first=Neha |date=2024-12-10 |title=Investor consent withdrawal puts NSEL settlement in jeopardy |url=https://www.livemint.com/market/nsel-settlement-offer-63-moons-technologies-nsel-investor-action-group-nsel-investors-forum-nsel-scam-11733817253439.html |archive-url=http://web.archive.org/web/20250108220502/https://www.livemint.com/market/nsel-settlement-offer-63-moons-technologies-nsel-investor-action-group-nsel-investors-forum-nsel-scam-11733817253439.html |archive-date=2025-01-08 |access-date=2025-01-29 |work=mint |language=en}}

Parallelly, by mid-December 2024, the settlement proposal received 65% approval from the members of the NSEL Investors Forum{{Cite web |last=Iyengar |first=Suresh P. |date=2024-12-10 |title=One-time settlement of NSEL gets 65% approval |url=https://www.thehindubusinessline.com/markets/commodities/one-time-settlement-of-nsel-gets-65-approval/article68969280.ece |access-date=2025-01-29 |website=BusinessLine |language=en}} and was finally approved by the FTIL board.{{Cite web |last=Pant |first=Asmita |date=2024-12-15 |title=63 Moons approves ₹1,950 crore one-time settlement for NSEL investors - CNBC TV18 |url=https://www.cnbctv18.com/market/63-moons-approves-rs-1950-crore-one-time-settlement-for-nsel-investors-19524430.htm |access-date=2025-01-29 |website=CNBCTV18 |language=en}}{{Cite web |last=Mudgill |first=Amit |date=2024-12-16 |title=63 Moons Technologies shares in focus as board okays Rs 1,950 cr settlement; key details |url=https://www.businesstoday.in/markets/stocks/story/63-moons-technologies-shares-in-focus-as-board-okays-rs-1950-cr-settlement-key-details-457413-2024-12-16 |access-date=2025-01-29 |website=Business Today |language=en}}

On 6 March 2025, 63 moons reached a one-time settlement agreement with the claimants in the NSEL case, agreeing to pay ₹1,950 crore as a full and final resolution. A formal settlement application has been filed with the NCLT, Mumbai. To ensure transparency, an escrow agent and monitoring authority will oversee the disbursement of funds to the trading clients.{{Cite web |last= |first= |date=2025-03-06 |title=63 moons, NSEL Investors Forum to appoint settlement monitoring panel |url=https://www.thehindubusinessline.com/news/63-moons-nsel-investors-forum-to-appoint-settlement-monitoring-panel/article69298000.ece |access-date=2025-04-18 |website=BusinessLine |language=en}} This settlement will release the 63 moons group from ongoing legal proceedings, and the trading clients will assign their claims against defaulters in favour of the Company.{{Cite news |date=7 March 2025 |title=63 Moons agrees to one-time settlement of Rs 1,950 crore in NSEL matter |url=https://www.business-standard.com/markets/news/63-moons-agrees-to-one-time-settlement-of-rs-1-950-crore-in-nsel-matter-125030600901_1.html |access-date=18 April 2025 |work=Business Standard}}

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Category:Commodity exchanges in India

Category:Finance fraud

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