Monday, January 6, 2014

NSEL charge sheet - Synopsis

The EOW filed a 9,000 page charge sheet against the NSEL cheating case before an MPID court in Mumbai on Monday.


A portion of the charge sheet is as below:




                   FINAL REPORT                    FORMForm: 5-A                                                                             

                                                    
                                       (Under Section 173 Cr.P.C.)

            IN THE COURT OF Hon’ble Sessions Judge,
                         Spl. Court under MPID Act, Sessions Court, Mumbai.


1-         Dist     Mumbai PS E.O.W. Year 2013  FIR No. 89/13   Date: 30.09.2011.
                                                (PS M.R.A.Marg CR No. 216/13)



2.         Final Report/Charge Sheet No.                                           Date:   06  .01.2014.
                                                                     

4.         (i) Act  IPC                                                         

Sections  409,465,467,468,471,474,477(A) r/w 120 (B).                                                                             
                                                                                                                          
                         
            (ii) Act - M.P.I.D., 1999                     Section -  3 and 4

                       
5.         Type of Final Form/report Charge Sheeted /Not Charge Sheeted for want of evidence/FR Undetected/ FR untraced/FR offence abated/FR Un-occurred                  ----   Charge sheeted.                          
             

6.         If F.R. Unoccured :-  False/Mistake of Fact/Mistake of Law/Non-cognizable/Civil Nature  ------   Occurred
           
  
7.         If charge sheeted                Charge sheeted
            Original Supplementary

8.         Name of the I.O. – Arvind Wadhankar    Rank:  Sr.Police Inspector. 
           
            9.         (a)        Name of Complainant/Informant:  Mr Pankaj Saraf.
                         
                           Father's/Husband's Name :  Mr Ramnaresh Saraf.
                            fiR;kps@irhps ukao             %&
10.       Details of Properties /Articles/Documents recovered/Seized during investigation and relied upon:  (Separate list can be attached, if necessary)
           
Sr. No.
Property
Description
Estimated Value (Rs.)
P.S. Property Register No.
From whom / where Recovered or Seized.
Disposal

As per separate list attached








10.       Details of Properties/Articles/Documents secured/recovered/seized during investigation and relied upon:
   I)  Properties /Articles/Documents secured/recovered/seized at the instance of accused no.1 Amit Mukherji : _-
            1) Flat no.801/ Ivory Heights, area 575 sq.ft.,vd. Rs 21.5 lakh (agreement value) in the name of
                  wife Bonhi Mukharjee.
            2)  Flat no.902/Ivory Heights, area 1000 sq.ft., vd. Rs 41.3 lakh (agreement value), Kanaikiya
                                                                                                                                                    Road, Mira Road.
              3) Flat no.1202/Royal Samarpan, area 1550 sq.ft, vd. Rs 4.5 cr (agreement value),near Rivali
                  Park, Western  Express Highway, Borivali (E).
            4) Range Rover Evogue Car No. – HR-26-BW-9013 vd Rs. 55 lakh approx. (total property worth
                  Rs 5,67,80,000).  
            5) 7 CDs, American Express Membership Cards, Country Club (India) letter, Axis
            Bank & HSBC Bank letters & cards - from flat No. 902, Ivory Heights,
            Beverley Park, Mira Road (E), Thane, the residence of accused.
          6) copies of documents of properties and his bank accounts are recoverd. A
            summory of this along with documents collected are kept in file No. 16.

            II)  Properties /Articles/Documents secured/recovered/Seized at the instance of accused no. 2 Jai Bhaukhandi : _-

1)      Flat no.703, Ambika Tower, Panchpakhadi, Thane admeasuring 580 sq.ft vd.Rs 20 lakh
(agreement value).
2)      Mahindra XUV 500 car No. HR-26-BW-8030, vd Rs 14 lakhs.(total property worth Rs 34 lakh)

            3) HDFC Bank a/c No. 11979 Cheque book, Sale Agreement in respect of flat
           No.703, Ambika tower, Thane standing in the name of this accused, NSEL
            stock Statement,Declaration/ undertaking given to Board of Directors of NSEL by
           this accd. and such other documents recovered from Flat No.1/B/19, Model
           Town,Mahakali Road, Andheri (E) ---- the temporary residence of accused.

          4) The copies of documents of properties and his bank accounts are recoverd. A
            summory of this along with documents collected are kept in file No. 16.

            III)  Properties /Articles/Documents secured/recovered/seized at the instance of accused no. 3 Anjani Sinha :-

1)    Flat No. 1601, Odissy-II Apt, admeasuring 2200 sq.ft.,vd. Rs 4.5 cr (agreement value), Hiranadani Garden, Powai
2)      Flat No. 1404, Panchwati CHS, Powai, Mumbai
3)      Flat No.1405, Panchwati CHS, Powai, Mumbai
4)       Flat No. G1-602, Bhimashankar Society, Nerul (W), Navi Mumbai.(total property worth Rs 4.5 cr)
5)                  4 Hard Disks from his computer, two attendance registers of Board of
      Directors meeting, 5 outword registers etc
6)                  Blue colour Dell Laptop, Black Colour Sony Laptop & Copies of document,
    Agreement. 
7)      The copies of documents of properties and his bank accounts are recoverd. A summory of this along with documents collected are kept in file No. 16.

            IV)  Properties /Articles/Documents secured/recovered/seized at the instance of accused no. 4  Nilesh  Patel  :-

1)     One Hard disk & file containing documents from the residence of Rajesh Mehta, POA holder of Swastik Overseas Corporation, Ahmedabad.
2)      Files of documents, Registers, Cash Books from the office of N.K. Proteins Ltd. Usmanpura, Ahmadabad.
3)     Factory, land & building, plant & machinery situated at 745, Kadi, Ahmadabad belonging to N.K. Industries Ltd.
4)      Factory, land & building, plant & machinery situated/fixed at survery No. 275,229,278, 279, 273,274,276,292,293, Thor, Ahmadabad belonging to N.K. Industries Ltd.
5)      Factory, land & building, plant & machinery situated at & known as Banpal Factory, 144/64, Mouje Chandiser, Tal. Palanpur, Dist.- Banakshetra belonging to N.K. Industries Ltd.
6)     Land bearing survey No. 436, 437/2,436/1,436/2,436/3,436/4 at Patan, Ahmadabad standing in the name of Ashita Nilesh Patel & Sonal Nimesh Patel, Directors of N.K. Group of Industries Ltd.
7)     Land admeasuring 4600 sq yard, vd Rs 10 cr situated off S G Highway, Opp Ashwavilla, Ahmedabad.
8)     Land admeasuring 2,24,000 sq yard & 80 Biga, vd Rs 32 cr situated at Thor, near Thor Plant, Ahmedabad.
9)     Bunglow on land admeasuring 4500 sq yard vd Rs 15 cr situated at Shantakeshav, Amali Bopal Road Ahmedabad.
10)   Bunglow on land admeasuring 2600 sq yard vd Rs 15 cr situated at
      Ashwavilla, Ahmedabad.
11)     Flat Flat- No. 1203, 12th flr, Bhagtani Krishaang, Powai, near    
   Hiranandani, Mumbai- 76 with 4000 sq ft area vd Rs   
  5 cr. standing in the name of N K Proteins Pvt Ltd, Ahmedabad.
12)   Two Flats- 403A & B standing in the name of Smt Sonal Nimesh Patel and Smt Ashita
       Nilesh Patel situated in  Lhencroft, Hiranandani Garden, Pawai, Mumbai. with joint
      area- 1470 sq ft Vd Rs. 4.5 Cr.
13)   Flat- Unit No.TPD K 1505 Gurgaon, The Palm Drive Sector- 66, Urban Estate area- 2000
     sq ft Vd Rs. 1 Cr. statnding in the name of N.K.Proteins Pvt. Ltd.
14)   Flat- Apartment Unit No.KBA-22-2503, Kensington, Boulevard, Jaypee
      Greens, Noida, Delhi vd Rs. 1 Cr. standing in the name of N.K.Proteins
      Pvt. Ltd.
15)   Shop Unit No.- Kensington, Boulevard, Jaypee Greens, Noida, Delhi vd.
     Rs. 1 Cr., statnding in the name of N.K.Proteins Pvt. Ltd.
16)   Office situated at 2nd,3rd, 7th & 9th floor of Popular House, Ashram
      Road,Ahmedabad standing in the name of           Priyam Patel, N.K.Proteins Pvt.
      Ltd.,Smt Sonal Nimesh Patel and Smt Ashita Nilesh Patel respectively.
17)   Office at Ratnam Shopping Centre, C.G. Road, Ahmedabad with area-
      800 sq yard,vd Rs.50 lacs statnding in the name of N.K.Proteins Pvt. Ltd.
18)   Documents of N.K. Proteins and other sister concerns recovered from the
      office of NSEL (File No. 13)
19)  Documents collected during investigation (File No.15)
     

V)  Properties /Articles/Documents secured/recovered/seized at the instance of accused no. 5  Arun kumar Sharma :-
1)  Two Hard Disks having mirror image of the data of the hard disk, documents  related to sales & purchase with NSEL & other documents from the office of Lotus Refineries, A-204, Boomrag Complex, Chandivali Farm Road, Andheri (E), Mumbai.

2)  Files containing photo copies of documents related to Lotus Refineries Pvt.ltd.,
    Purchase orders, Show Cause Notice by Customs, copies of documents related to
    Lotus Pharma Ltd. Photo copies of Form No, 32, Photo copies of Pan Card, Ledger 
    accounts details, bank statement,  etc  from the office of Lotus Refineries Pvt Ltd,.
    Plot No, 509, Industry Area, Phase 2, Chandigarh.
3)  Office –  A/204, Boomrang, Chandivali Road, Andheri East, Mumbai.with area – 10,000 Sq ft,vd Rs. 25 Cr.
4)  Flat-  905, A Wing, Maifil Leaf, Chandivali Road, Pawai, Mumbai with area- 1200 sq ft, vd Rs. Rs. 2.25 Cr
5)  Bungalow - House No. 1155, Sector- 34, Chandigarh with area- 500 gaj, vd. Rs.  5.00 Cr.
6)  Bungalow - House No. 2569, Sector- 35, Chandigarh with area- 500 gaj, vd Rs. 12.00 Cr
7)  Industrial Area Plot situated in Phase I, Industrial Area, Chandigarh with area- 1000 gaj, vd. Rs. 8.00 Cr.
8)  Factory Plant - Plot No. Badi Haiboval, Hamada Road, Ludhiyana (15 km from Ludhiyana) vd. Rs. 20 Cr.
9)  Flat-201,Building No. 3A, Phase III, N G Suncity, Thakur Village, Kandivali (E), Mumbai-101, Vd Rs. 125 Cr.
10)  Inova Car No. MH-04-FN- 124 of accused vd Rs. 13 lacs.
11)  Cash at Bank /FDRs of accused and his wife vd Rs. Rs. 12.67 crores with UCO
     Bank, Andheri.
12)  Documents of Lotus Refineries Pvt Ltd., and sister concerns recovered from the
     office of NSEL (File No. 14)
13)  Documents collected during investigation (File No.15)

VI)     Documents collected in respect of accused arrested during investigation :-

1)     Copies of documents submitted by Mr. Saji Cherian, the present MD & CEO of NSEL company wide its statement dated 02-01-2014. By his statement, he has mentioned in detail how the present offence is committed and how the accused persons are involved in the case. He has supported his statement with copies of documents which are kept in File NO. 6,7,8 and 9 respectively.
2)     Copies of documents are also recovered from the office of NSEL directly. These copies of documents are kept in file No. 17,18 and 19.


VII)          Properties /Articles/Documents recovered/Seized from the offices/
Residences of the suspects involved in the case :-
Ø         Original audited balance sheet of NSEL, Original IT Returns, Copies of IT Retuns, Journal Ledger of Margin Money, Original copy of Grant Thorton Forensic report, Original copy of Warehouse receipt, Annual report of FTIL, Original Membership files of 24 Borrowers and 5 CDs.--------- From NSEL office.

Ø          22 Hard Disks (6 from Server and 16 from storage) from the office of FTIL.
Ø            15 Hard Disks from 3 Servers of NSEL.

Ø             9 Hard Disks of the Server of NSEL------ from the office of NSEL, FT Tower, Andheri (E), Mumbai.

Ø            Hard disk along with CPU of Dell Computer from the office of NSEL, Palanpur, Gujarat.

Ø             I) One Hard Disk Mirror Image on blank Hard Disk of FTIL Chennai, ii) One Hard Disk Mirror Image on blank Hard Disk of MCXSX, Chennai, iii) One Hard Disk Mirror Image on blank Hard Disk of NSEL, Chennai, iv) AMC Bill Copies of FTIL with pages 1 to 381, v) A Hard Disk from the computer of Metkore Alloys Chennai, One Old Hard disk from the same computer of Metkore Alloys & documents of Metkore Alloys with pages 1 to 165. ----- From their offices at Chennai.

Ø            Axis bank account No. 9392& 3117 cheque books,  Valuation Report, letter issued by Aastha Group to Mr. Prasad, MOU paper between Mohit Agarwal & Mr.Prasad,  sale deed between Aastha Project & Mr. Prasad, ID & Visiting cards issued by Aastha to Mr. Prasad and such other papers------ From flat No. 302, building No. 12, Pokharan Road No. 2, Thane of B.V. Prasad.

Ø            HDFC A/c No. 49982 statements,   demat a/c No. 17121719 & 17121752 files,  Books of account, documents of IT Returns, Cash Book, bank Book, Ledger,  NSC file, investment file etc. ----- from the residence of Jignesh Shah.
Ø            A Silver colour Sony Vaio Laptop and Apple I pad, file containing documents of NSEL. A confidential File, Axis Bank statement, IT Returns etc.------ from the residence of Joseph massey.

Ø            Flat No. A- 302, EC- 93, Krishna Saravor, Evershine City, Vasai (E) Thane belonging to Shashi Kotiyan of NSEL is secured for attachment.

Ø             6 PD’s of Sony, Scandisk and Transcent company, Visiting Cards and a statement dt. 13-07-09, ------ from the residence of Ashish Sharad Dalal, Andheri (W), 

Ø             Document such as appointment letter by MCX, MCX Board metting books, MCX & Mulgi Commodity Exchange ------- from the residence of Mr. Padmanabh Barpande

Ø             Document such as agreement between Deva Lalwani & Capital Services, DRF of Umesh Sharma, DPID Statement of Umesh Sharma ------ From the residence of Pawan kumar Chabra.

Ø             Files containing document of accounts from 2006/07 onwards------- from the residence of Mr. Dewang Nerala

Ø            HDFC Bank Statement, Citi Bank A/c Statement, IT Returns of Padmanbhan Ramnathan, one hard drive ------ from the residence of Padmanabhan Ramnathan.

Ø             File containing documents of Income tax of Mr. S Venkatraman & Hard disk from the Laptop containing Mails between NSEL & Metkore Alloys Ltd. ------ from the residence of Mr. Venkatraman, Nagpur.

Ø               A file containing documents of FTIL, Baroda with pages 1 to 15, Samsung          
     Hard Disk, Seagate Hard Disk------- from the office of Mr. Chandrakant
     Kamdar, Fortune Tower, Baroda.

Ø               Hard Disk 250 GB, recovered from the office of Mohan India Pvt Ltd,
    354, Tarun Enclave, Pritampura, New Delhi- 34, one of the accused
    companies..

Ø            Bunglow situated at Plot No. 50/51, RHB Colony, 2nd main, 2nd Cross, Mahadeopura, Banglore- 48 belonging to Mohit Aggarwal. The Bunglow is sealed.

Ø            1 Segate Hard Disk, 2 WD Blue Hard Disk, Photo copies of documents, Tax invoices from the office of Juggernut Project, Raheja Chamber, Nariman Point, Mumbai.

Ø            Documents such as Bank Pass book, G mail Copies, Correspondence with Juggernaut Project, proposal settlement  Cycle, sealed from the residence of Sunil Ganjave, Director of Juggernaut Project Ltd.

Ø            1 laptop Hard Disk, 7 Bank Pass Book from the residence of Mr. Yogendra
       Mehta, Director of Juggernaut Project Ltd.

Ø             Three Computer Hard Disks of Western Digital, Malaysia from the office of
        Loil Heath Foods Ltd., SCO- 18/19, 1st floor, Madhya Marg, Sector –
        9D,Chandigarh (UT)       

Ø            Dell Insperion Black Colour Laptop  from the residence of Prashant Kumar Anand , Director of Lotus Refineries Pvt Ltd.

Ø            One Hard Disk from the office of Master Commodities Services Ltd., Master Chamber,19, Firoj Gandhi Market, Ludhiana, Punjab.

Ø            Data of 37 computer downloaded  in blue colour pen drive and data of a Laptop downloaded in black colour pen drive & Printout of server having 405 pages in connection with NSEL recovered from the office of Topworth Steel & Power Pvt Ltd, Raheja Center, Nariman Point.

Ø            Lenovo company Desktop Computer from the residence of Rajesh Kumar Jain situated at Ranjangaon, Chattisgarh.
,
Ø            2 Samsung hard Disks from the office of Loil Overseas Food Ltd. 807, Kailash building, Kasturba Gandhi Marg, New Delhi.

Ø            1 Pen Drive Containing Hard Disk Data of the Computer from the residence i.e. Flat No. 703, Vijay Apt. Malad (w), Mumbai- 64 of Rajendra Bhusan Javdala.

Ø            Documents such as cheque books of various bank accounts, 1 personal diary, 1 bank pass book, MOA of NSEL, Agenda for the meeting of the board of directors, etc from the residence of Shankarlal Guru, chairman of NSEL.

Ø            One file containing bank statement from the residence of Shri. Manish Kella, Ahmedabad.

Ø            36 files Containing document related to the offence and Dvd containing books of account and Mirror image of server from the factory of N.K. Proteins, thor Gaon and from the office of the said company situated in Popular house, Ashram Road, Ahmedabad of N.K. Proteins Ltd.

Stocks & Warehouses Secured:-
1)     5 Box files containing buying invoices of Raw material of HR Coil of Topworth  Pipes & Tubes, 28 box files containing shares invoices of the said company, Inword & Outward stock Registar of comupterise hard copy prints, Pen drive of Soft copies data of the said company and 22 tone of stock of HR Coil of Iron  valued Rs. 21,13,00,000/-  lying in the premises of the said company is also secured.

2)      399 bags of Cummin seeds of 50 kg each valued Rs. 24 lakhs---- from the   Narsanga Vir, Nagderi, Opp. CNG Petrol pump, Tal. Unja, Dist- Mehsana, Gujarat.  16 bags of Cummin seeds of 50 kg each valued Rs. 1 lakhs---- from Muktupur Village Warehouse, Muktupur, Tal. Unja, Dist.- Mehsana, Gujarat,  70 bags of Cummin seeds of 50 kg each valued Rs. 4,20,000/- & 60 bundles of 14 emty bags each vd. 2,40,000/-  --- From Martin Godown, Opp. APMC Unava, Tal. Unja, Dist- Mehsana,& 112 bags of Cummin seeds pf 50 kg each valued Rs. 6,72,000/- ---- from the Shivganga Estate warehouse Opp. APMC Unava, Narsanga Vir, Nagderi, Opp.CNG Petrol pump, Tal. Unja, Dist- Mehsana, Gujarat & the copies of documents, Agreement, Out word register etc.  All these warehouses are sealed.

3)      Mild Steel, 624.245 M. Tonne Vd Rs. 2,49,60,000/- from Champion Steel Industries Pvt. Ltd. warehouse, Taloja , Mild steel 16,240.89 M. Tonne Vd Rs. 64 Crore from  Akshta Mercantile Pvt Ltd. warehouse, Taloja , Mild steel 5,000 M. Tonne Vd Rs. 20 Crore from Realm services warehouse, Taloja , All these three warehouse are sealed & 12 Stock registers, 9 copies of agreement & stock detail documents are taken charge of.

4)     I) 16 bags of Soya been from Siddhartha warehouse Godown No. 2, ITC Chaupal Sagar, Ganj basoda, Vidisha, MP. II) 2507 bags of Channa Vd Rs, 78,62,157/- and 5 files of documents from --- Karan Warehousing Corporation, Vidisha, MP, III) 32 bags of Channa Vd Rs, 80,000/- and 19files of documents from --- NBHC Warehouse, Sagar road, Vidisha, MP & document such as inword & out word registers, stock plan register, spray & fumigation register, commodity inword slips & other documents related to trading with NSEL & related to warehousing business,

5)     I) 47 bags of Channa----- from NBHC warehouse, Meuli, Ganj Basoda, II) NBHC deposit register, daily stock summary registar, warehouse receipt, & such other documents----- from NBHC warehouse, Meuli, Ganj Basoda, III) 1294 bags of channa & various documents from shakuntalam warehouse, jivaji pur, vetoli Village, Ganj Basoda, MP.

6)      21477 bags of red Chilly of 40 kg each vd Rs. 6,87,26,400/-, stock register, dilvery order books, bill books two ----- from Rama cold storage, Bhadrachalam Road, Thallada, Dist- Khammam, AP.

7)       I) 2045 bags of Castrol Seeds of 75 kg each valued Rs. 53,68,125/- from Thakkar Pushpa warehouse, Khalli Gaon ,Sidhapur, Patan, Gujarat and the same godown, II) 259 bags of Jirra of 55 kg each vd Rs. 17,09,400/- along with 7 god owns by name Tirupati warehouse, 17, Khalli Gaon ,Sidhapur, Patan, Gujarat, & documents such as copies of  Lease agreement & others related documents.

8)      38 M. Tonne Makka ------ from Arunkumar Chaudhari warehouse, Mirzapur Gaon, Next to Sultan gung- Bhagalpur, National Highway 80 Junction, Bihar & correspondence between the concerns persons with sealing of God own.

9)      I) 28 bags of Jirra weighing 1375 kg from Arpita warehouse, Unjha, Gujarat and the said god own is also Sealed, II) 34 bags of Jirra weighing 1675 kg from Bajoriya warehouse, Unjha, Gujarat and the said god own is also sealed, III) Agreement copy of NSEL & Gujarat state warehouse.

10)  35,000/- bags of Sugar lying in the NSEL Warehouse situated at Khasara    
No.389/2,Village Hamidpur, Near Dalmil, Delhi- 36 belonging to Mohan India Pvt Ltd. The warehouse is sealed.

11)  17,000/- bags of Sugar lying in the NSEL Warehouse situated at 106/  
  255,Kheda kala, Delhi belonging to Mohan India Pvt Ltd. The warehouse  is
  sealed

12)  Stock of coper pipe wire lying in warehouse no. 78/157, Extended, Lal Dora  Village, Bakoli, Delhi-36 belonging to Indian Bullion Marketing company.

13)  I) Godown No. 5, Villagae Seerah, Rohan Road, Ludhiyana, Punjab in the possession of M/s. ARK Import Pvt. Ltd. containing 4,000 Bialys  of Raw wool & attendance Diary. The Godown is sealed. II) Stock of Nickel Plates vd Rs. 1.70 Crores, Computer Hard Disk, Inword registers from the Warehouse No. 577/8, Vishwakarma street, Gill Road, Ludhiyana, Punjab in the possession of Singhanya Chemicals. The Warehouse is sealed.
         
14)  2 Hard Disk & Agreement paper from the warehouse of Sampatrao Mechnani situated at Village & Mandal Hasanpatti, Warangal, AP.      

----------




........

16.     Brief Facts of the Case ( Add Separate sheet, if necessary):

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          The NSEL was incorporated as a company under the Indian Companies Act, 1956 in or around May 2005. The promoters of NSEL are Financial Technologies (India) Ltd (“FTIL”) and the National Agricultural Cooperative Marketing Federation of India Limited (“NAFED”). FTIL owns 99.99% of the shareholding of NSEL and NSEL is a subsidiary of FTIL. FTIL is a company also registered under the Companies Act, 1956.
          The National Spot Exchange Limited is a spot exchange, which was originally conceptualized by the Government in consultation with FMC in the year 2006. NSEL commenced operations pursuant to the Gazette notification dated June 5, 2007, issued by Ministry of Consumer affairs, Food and Public Distribution, Govt. of India, and has been working under various segments; one such segment was of ‘one day forward’ contract. NSEL is an electronic platform that facilitated trading in 52 commodities
          Commodity spot trading is about buying and selling a commodity, paying cash for and receiving your goods on the ‘spot’. This is called ‘ready delivery contract’ under FC(R) Act, 1952. Which signifies that the buyer and seller agree on a price and ‘deliver’ their side of the contract immediately. NSEL is a spot exchange designed to help this activity, with the added feature of being electronic (so buyers and sellers can be in different locations) and anonymous (the buyer and seller don’t know who the other side is). The important feature of any such exchange is that the exchange has to stand guarantee subject to its bye laws to either party that it will ensure that the contract is settled. If the buyer can’t bring in the money for any reason, the exchange should then sell the goods to someone else and recover the money (and make up the difference). And a similar exercise if the seller defaults.  Now, when the seller and buyer are far away from each other, how does the exchange guarantee delivery? The idea is that the seller must come to an exchange-designated warehouse and give his goods, which are then tested and verified for quality and weight. He then gets a warehouse receipt (WR) that is used for electronic trading. When he sells on the exchange, the warehouse receipt is transferred to the buyer; this receipt entitles the buyer to take the goods out of the warehouse, or if he chooses, to retain the goods there (to sell them later) by paying the warehouse rental charges.
          There are FCR Act and rules governing commodity trading, which is regulated firmly by the Forward Market Commission (FMC). Under the Forward Contracts Regulation Act, any contract that is called “spot” must be settled within 11 days – that is, both delivery of goods and transfer of money must happen within 11 days (called “T+11”). The 11 days give the buyer and seller time to complete the contract. Thus, this would then not become a “forward” contract. Spot contracts, by their nature, were deemed to be out of FMC regulation by a notification in 2007 by the Department of Consumer Affairs. This exemption was given specifically for one-day duration forward contracts – or, technically those contracts are concluded within two days  and both delivery of goods and transfer of money happens within the time period as per one day forward contract .
          The NSEL started its full-fledged operations around 15th October 2008. They launched their first trader contract namely Silver/Gold in intra trading in Kolkata. Thereafter they launched different types of contracts like farmer contract, paired contract and E-series contract. The T+2 and T+25 days contracts are together traded are called duel contracts/paired contracts. The first trader duel/paired contract was launched on 22nd September 2009. Thereafter several such contracts were launched.
The Trader’s Contracts were represented to work as under:-
          The seller was required to deposit his stocks in warehouses which were approved and designated by NSEL on or before T, with T being the ‘trade date’. NSEL was responsible for checking and verifying the quality and quantity of the underlying commodities and goods are required to be compulsorily weighed at the designated weigh bridge/weigh scale and will be monitored and certified by the warehouse supervisor. Upon NSEL certifying the same, NSEL issued a warehouse receipt which was evidencing proof of ownership of a stated quantity of commodities of a stated grade and quality by the beneficial owner or the holder of the certified warehouse receipt. The depositor receives the photo / scanned copy of the warehouse receipt and the original is retained by the Exchange to transfer to the buyer upon the onward sale by the depositor. Additionally, , a delivery margin of around 10% of the value of the goods was to be paid by the depositor to the Exchange.
          On T, the Investor would enter into a contract to buy the commodities with T + 2 delivery cycle. Simultaneously, the Investor would also enter into a contract to sell the commodities with a T + 25 delivery cycle. On T+2, NSEL would issue a delivery allocation report in which the quantity and location of the commodities purchased would be mentioned. The allocation report contained details of the end client, warehouse receipt No, Lot/QC No. and warehouse location. Further, it included a confirmation from NSEL that the original warehouse receipts were in their custody.
          As the original warehouse receipts were in the custody of the Exchange, NSEL vide its policy asked the Investors (who were the sellers in the T+25 contract) to retain the goods in the Exchange certified and designated warehouse until 25 days passed as pre pay-in through warehouse receipts against sale obligation. On the 25th day, the Exchange would then collect the money for the Investor and would then release the goods to the buyer. NSEL was therefore the custodian of the goods from the time of purchase under the T+2 contract till the time of its sale and was responsible for its safe custody.
          As is usually the norm in any electronic exchange, when a client trades on the anonymous order driven trading system on the Exchange, the buyer does not know the seller and in the same way the seller does not know the buyer. But in case of the paired contracts, always the counter party is known through invoices.
          Not only did NSEL permit investors to participate in these contracts but in fact NSEL actively encouraged and induced investors to enter into such dual transactions. This active inducement was not just by highlighting the possible benefits available due to the price differential but also by providing economic rationale to investors by waiving storage charges for those members and their constituents who sell the product on the longer duration contract out of delivery receivable against the purchase position of the shorter contract. Accordingly, many Members also actively marketed these contracts. Moreover, NSEL retained the warehouse receipts issued by it which were to be used to discharge margin obligations on the trades.
          The NSEL has 820 members of different categories which are as under:-
TCM - Trading Cum Clearing Member, TM - Trading Member,
ITCM - Institutional Trading Cum Trading Member, PCM - Professional Clearing Member, TCM - A - For All Agri-Commodities all Delivery Centres in a State, TCM - B - For Single Agri-Commodity All Delivery Centres in a State, TCM - C - For Single Agri-Commodity Single Delivery Centre in a State, TCM - Pulses - For Pulses in a Particular State
          The members were required to register the client prior to executing trades on their behalf. For this purpose, the members required their clients to submit the duly filled in prescribed ‘Know Your Customer’ form and execute the member – client agreement with the members. Thereafter, the members would upload the relevant details in the Exchange software in order to generate the Unique Client Code (“UCC”). Once the UCC was generated, the client was permitted to execute trades through the members. There are around 13,000 clients of the above Members of the NSEL.
          The trades were generally executed by members on behalf of their clients in the following manner: 
                               i.            On the Trade Date (T), the following actions take place:
a.     the trade is executed by the member on behalf of the client; and
b.    pursuant to execution of the trade, a confirmation E-mail was sent by the member to the client along with the provisional return computation on the trade;
                             ii.            On T+1, a contract note is issued by the member to the client for the Buy and Sell side;
                          iii.            On the same day or prior to it, Member collects monies from the clients
                           iv.            On T+2, the following actions will take place:
a.     pay in of funds by the member on behalf of the client for the trade; and
b.    pay out of commodity (the Warehouse Receipt for which is retained by the Exchange as early pay in for the pay in obligations for the T+25 trade);
                             v.            On T+3, client wise delivery allocation report for the executed trade is available on the Exchange interface for download by the member;
                           vi.            On T+25, the trade is settled by way of pay out of funds.
All trades, T+2 and T+25, are settled in accordance with the Settlement Calendar issued by NSEL for that month.
          Following is one of the examples of a trade carried out at the platform of NSEL in T+2 & T+25 contract.
          One client buys 5,100 bags of paddy Basmati traditional contract ex Haryana (Settlement cycle T+2) @ Rs.3651.70/- (Total amount Rs.93,11,835/-) on trade date (21/05/2013) and sale the same quantity (Settlement cycle T+25) @ 3712/- (Total sale amount Rs.94,65,600/-). On T+2 i.e. on 23/05/13 client makes payment to the NSEL through trading member and gets the delivery of commodity, which is retained by the exchange against the sale position of the client. Similarly, counter party sells the commodity on T+2 and deposit the goods in the designated warehouse of the NSEL and issues warehouse receipts to the depositor who in turn give it to the NSEL. On the same day the seller of T+2 buys the same goods in T+25 contracts. Selling and buying prices are reflected on the online platform of NSEL. On T+2 the seller receives money from NSEL. On T+25 the same seller becomes buyer and buyer will receive goods whereas the T+25 sellerwho is the original buyer in T+2 (the investor) will get the monies back i.e. on 25/06/13.
          The trading on the platform of NSEL continued smoothly till mid July 2013.
          Suddenly, NSEL informed the public, for the first time, by way of the Press Note issued on July 15, 2013 that NSEL had received a directive from the Department of Consumer Affairs on July 12, 2013 (“DCA Directive”) to submit certain undertakings to the effect that (a) new contracts would not be launched until further instructions from the concerned authority; and (b) existing contracts should be settled on the due date. However, in the said Press Note, NSEL clarified that the existing business in the running contracts traded on spot exchanges will continue without any disruption and further stated that since spot exchanges do not have concepts like ‘due date’ (unlike futures contracts), NSEL was seeking further clarifications on the same. Effectively, the Complainants were led to believe that the trades on NSEL would continue without disruption and would continue to remain safe and risk free.
          By a circular dated July 16, 2013, NSEL issued certain further clarifications on the DCA Directive. The said Circular stated that NSEL was in the process of submitting the required undertaking to the Government and therefore, no fresh circulars for launching new commodities, products or centres will be issued by NSEL. The Circular further stated that all trades will continue to be settled on the respective delivery dates in accordance with the delivery and settlement procedure.
          NSEL issued a Circular dated July 22, 2013 making certain changes to the settlement procedure for trades with effect from July 23, 2013. This announcement changing the settlement schedule at such short notice sparked panic in the market, resulting in a further reduction of the volumes being traded on NSEL, which in turn impacted the margins of the trades
          The NSEL issued circular on July 31, 2013 stating that there had been “loss of trading interest in the market due to underlying uncertainties, which led to trade in-equilibrium”. Further, the Circular stated and directed that the NSEL Board was satisfied that continuation of trade in one day forward contracts other than e-series contracts is not in the interests of the market and that it is expedient in the general interests of trade to inter alia suspend trading in all one day forward contracts (except e-series contracts) until further notice and, notwithstanding anything in the NSEL Bye-laws or any contract, merge the delivery and settlement of all such contracts and defer settlement by 15 days.
          In a declaration published on the website of NSEL that, as of July 29, 2013, the Exchange had maintained approximately Rs. 840,00,00,000 (Rupees Eight Hundred and Forty Crores) in the settlement guaranty fund (SGF). However, the details of SGF were not given.
          NSEL then issued a Circular dated August 3, 2013 for the closeout or annulment of trades executed on July 29, July 30 and July 31, 2013, which are due for settlement on or after July 31, 2013. By this circular NSEL informed all members that it had refunded the pay-in received from the members pertaining to trades done on July 29 and 30, 2013 and had reversed the trades done on July 30 and 31, 2013.
          The Defaulting Members of NSEL and the Management team of NSEL had a meeting with senior officials of FMC and investing Brokers and agreed with a settlement plan on 4thAugust, 2013.
          In order to allay concerns of stakeholders, on August 6, 2013, 2013 NSEL published a Notification on its website that the stock lying in the exchange controlled warehouses is worth approximately Rs. 6,032.46 crores, which amount was more than sufficient to settle all outstanding dues.
          On August 14, 2013 NSEL uploaded a circular setting out details in respect of the revised schedule for settlement of outstanding dues payable to the members (“Settlement Schedule”).
          On August 20, 2013 the FMC directed NSEL to distribute proportionately the amounts received, including to Indian Bullion Market Association Ltd. (“IBMA”). However, instead of the scheduled pay-out of Rs. 174 crores as assured by NSEL only Rs. 92 crores was disbursed proportionately.
          On August 21, 2013, the FMC inter alia directed NSEL to auction all the commodities lying in the accredited warehouses of NSEL and in its custody as collateral. Accordingly, on August 22, 2013 NSEL uploaded a list of defaulters on its website.
          On August 21, 2013, the FMC inter alia directed NSEL to auction all the commodities lying in the accredited warehouses of NSEL and in its custody as collateral. Accordingly, on August 22, 2013 NSEL uploaded a list of defaulters on its website. Notably, N. K. Proteins Ltd. was one of the defaulters.
          It is pertinent to note, that while approximately Rs. 174 crores were to be paid to the members by NSEL as per the Settlement Schedule, the first payment by NSEL on August 20, 2013 was a meagre amount of Rs. 92 Crores as received as pay-in from the defaulters. Thereafter, on the second payment date of August 27, 2013, NSEL notified the public that the total funds received for settlement was merely Rs. 12.05 Crores. Most recently, NSEL reported that the total funds received for the third payment date on September 3, 2013, was Rs. 15.32 Crores and for the fourth payment date on September 10, 2013, was Rs.13.45 Crores only. These monies correspond to what was received as pay-in from the defaulters.
          Notification issued on July 26, 2013, provides a detailed commodity wise breakup of the underlying stock.
          In a Circular issued by NSEL on August 31, 2012, NSEL has categorically stated that no member will indulge in short selling and the seller must be in possession of commodities or buy position before entering his sale order.
          The FMC was requested to provide information about the business affairs of the NSEL. The FMC in its reply dated 5th September 2013 clarified that the NSEL is neither a recognized nor a registered Association under FCRA, 1952. Section 27 of FCRA, 1952 provides that the Central Government may, by notification in the official gazette, exempt, subject to such conditions and in such circumstances and in such areas as may be specified in the notification, any contract or class of contracts from the operation of all or any of the provisions of FCRA, 1952. Vide notification dated the 5th June, 2007, Department of Consumer Affairs, Ministry of Food, Consumer Affairs and Public Distribution, under power conferred upon it under section 27 of FCRA, 1952, have exempted one day forward contract traded at NSEL from the operation of the provisions of FCRA  subject to certain conditions as stipulated under:
i)       No short sale by members of the Exchange shall be allowed,
ii)     All outstanding positions of the trade at the end of the day shall result in delivery
iii)   The NSEL shall organize spot trading subject to regulation by the authorities regulating spot trade in the areas where such trading takes place
iv)   All information or returns relating to the trade as and when asked for shall be provided to the Central Government or its designated agency
v)     The Central Government reserves the right to impose additional conditions from time to time as it may deem necessary; and
vi)   In case of exigencies, the exemption will be withdrawn without assigning any reason in public interest
          Because of this exemption, the trading and other activities of NSEL were outside / beyond the regulatory powers of FMC and from the beginning itself, the Commission has no authority over the trading activities of NSEL. 
          Ready delivery trades (spot transaction) in commodities are not within the purview of the FCRA. Therefore, the role of FMC with respect of NSEL was never that of a regulator unlike in the case of commodity futures exchanges which are recognized under Section 6 of FCRA.
          The FMC further clarified that FMC has been authorised to supervise settlement of all outstanding one day contracts at NSEL. However, it doesn’t ipso facto, empower FMC to apply the provisions of FCR Act to the business affairs of NSEL. As such any failure on the part of NSEL in compliance of the directives of the FMC and  / or non submission of the information desired by the FMC, may be deemed to be violation of the conditions stipulated while granting exemption under section 27 of the FCRA to the trade in one day forward contracts, but may not amount to violation of any other provisions of FCRA by virtue of the exemption granted to it vide the notification.
Contents of the letter No.7/3A/2010-MD-I(Pt) Dated the 16th August, 2013 sent by the FMC to the NSEL published on the website of FMC are reproduced below.
1. Please refer to your letter No. NSEL/FMC/2013-14/1503, dated the 14th August, 2013, forwarding the settlement plan. In this regard, you may please refer to this office email dated 14th August,
2013 and 16th August, 2013.
2. Your attention is drawn to the Bye-laws of NSEL (Exchange) which inter-alia provides as under:
i. Bye-law No.5.26 heading ‘Transaction Where the Exchange to Act as a Legal Counter Party’: ‘The Relevant Authority of the Exchange may specify from time to time the types of transactions in specific commodity or commodities, with regard to which the Exchange shall act as a legal counter party and the transactions that may be excluded for this purpose.”
ii. Bye-law No.7.9.1:“In respect of commodities, or price indices, as may be determined by the Exchange from timep to time, and traded and cleared by the Exchange in the manner specified in these Bye-Laws, the Exchange shall be deemed to guarantee the net outstanding financial obligations to clearing members.
iii. Bye-law No.7.9.2: “If any party to such contract defaults in respect of his financial obligations or fails to deliver goods on maturity of the contract, the defaulting member shall be liable for appropriate disciplinary action by the Relevant Authority and his contract will be closed out by the Relevant Authority in accordance with the Bye-Laws, Rules, Business Rules and Regulations or notices, or orders issued thereunder.
“The Exchange shall then be entitled to recover dues of any defaulting member from his security deposit and other funds, if any lying with the Exchange.”
iv. Bye-law 9.6: “Once a trade is matched and marked to market by the Clearing House, the Exchange shall be substituted as counter party for all net financial liabilities of the clearing members in specified commodities in which the Exchange has decided to
accept the responsibility of guaranteeing the financial obligation”
v. Bye-law No. 12.2.3: “The settlement, as a result of multi lateral netting followed by it in respect of settlement of transactions, guarantee financial settlement of the transactions to the extent it has acted as a legal counter party, as may be provided in the relevant Bye-Laws from time to time”.
3. Your attention is also drawn to the Rules of the National Spot Exchange Ltd (hereinafter referred as ‘Rules’), wherein under Rule 41 on ‘Default’ provides that “A member of the Exchange shall be declared by the relevant authority a defaulter, where the monies, commodities, securities and bank guarantees deposited with the Exchange are not adequate to discharge the member’s obligations and liabilities. A member of the Exchange being declared a defaulter, a notice of that effect shall be posted forthwith on the notice board of the Exchange and defaulter shall hand over all his books, documents, papers, assets, cheque books and other Page 3 of 6 documents, as may be specified by the Exchange, to the Relevant Authority”. Rule 41(i) also provides that “Ipso facto on declaration of a defaulter / deemed defaulter automatically as provided hereinabove, all monies, commodities, securities, bank guarantees lying with the Exchange in respect of a defaulter shall vest with the relevant authority for the benefit and on account of the creditors, who may have a tenable claim and the relevant authority shall deal with such monies, securities or bank guarantees and claims, as provided in the relevant Rules herein and specifically as provided in these Rule”.
4. Further, in the communication to the members, Exchange have communicated that deliveries of the ‘Warehouse Receipt’ to the Exchange will be taken as early commodity pay-in against the sell position and Exchange shall release margin / commodity pay-in obligation of respective sell transactions. As such what need to be settled on settlement date is net financial obligation between buyer and seller.
5. During the presentation before the Secretary, Ministry of Consumer Affairs, Food and Public Distribution, on 10th July, 2013, wherein you along with Mr. Jignesh Shah, Director, NSEL had presented that the model followed by NSEL offers highest level of safety for participants as the model has over 100% stock as collateral (managed by independent collateral manager), 10-20% as margin money and backed by 100% of post dated cheques from participants.
6. From the plain reading of the above Bye-laws, Rules and communication by Exchange, it is very clear that Exchange guarantees the settlement of net financial obligation. When a client trades on the anonymous order driven trading system on the Exchange, the buyer does not know the seller and in the same way the seller does not know the buyer and Exchange guarantees the settlement of trade executed in compliance with the Bye-laws.
7. In the settlement plan submitted by NSEL on 14th August, 2013, in Para 12 and 14, it is mentioned that pay-in schedule submitted herewith is subject to realization of funds from payable members. As such Exchange appeared to have dis-owned its responsibility of guaranteeing the financial settlement. Whereas the Exchange has the sole responsibility of settlement of trade on the Exchange as per the pre-announced settlement schedule and it cannot simply depend upon the realization of pay-in obligation from buyers. Page 4 of 6
8. In this office mail dated 14th August, 2013, it was desired that the Exchange shall make payment to selling members as soon as possible and in order to have credibility of adhering to the
payment schedule agreed to by buyers, you were advised to submit party wise details of post dated cheque with date, number and amount, and also confirm whether you have taken Bank Guarantee from these buyers at least for the first month commitment which shall roll over to next month. Your reply vide e-mail, dated 16th August, 2013, did not submit the details as desired.
9. As per the Rules and Bye-laws of the Exchange where participants have failed to meet their payin obligations, the Exchange should have
i) closed out their position and
ii) declare them defaulter and initiate default proceedings against them.
In this regard you are directed to submit details of all members who had failed in meeting their pay-in obligation. The details should include the first day of pay-in shortages and any other subsequent pay-in shortages on daily basis. You are called upon to explain in the case of members, who did not meet their pay-in obligation in time: (a) why their position is not closed out in auction, (b) Why they were not declared defaulters and (c) why default proceedings were not initiated against them.
10. During the meeting with the Commission on 13th August, 2013, Mr. Jignesh Shah, Director, NSEL and Mr. Joseph Massey, Director, NSEL inter alia raised the concern on the quality and quantity of commodities lying at the various accredited warehouses of NSEL and they have informed that they have appointed a collateral management firm, SGS to make detailed assessment of quality and quantity of stocks of commodities lying at all the accredited warehouses of NSEL. In this regard you are directed to submit the terms of appointment along with letter of appointment of SGS by NSEL and preliminary findings, if any of the SGS.
11. In submission of information asked by Commission, NSEL had given different information on different occasion, for example while its meeting with Commission on 1st August, 2013, Shri Anjani Sinha, MD & CEO of NSEL informed that Exchange had settlement guarantee fund(SGF) of Rs. 860 crores, where as in written reply to the mail dated 1st August, 2013, submitted that exchange had SGF of Rs.738.55 crores. However, during interaction with Board of NSEL, buyer, and seller on 4th August, 2013, it was informed that SGF had only Rs.62 crores. Similarly with regard to the details on stocks of commodities lying at warehouses, three sets of information had been given within a span of 7 days against the same buyer. The credibility of information given and the books of Accounts / records maintained by NSEL have raised serious doubt on its authenticity. You are therefore, directed to appoint a reputed forensic Auditor firm to establish the credibility of Books of accounts, record maintenance by the Exchange in next 7 days. The appointment of Auditor, however, shall be with the consent of the Commission.
12. As per the advice of the Commission, NSEL had already opened an escrow account with Axis Bank wherein the entire amount received on and after 31.7.2013 against pay-in obligation shall be deposited. You are advised to inform Commission on daily basis; the party wise amounts deposited in the escrow account and also disclose the same on daily basis on your website.
13. The Press Release issued by NSEL on 4th August, 2013 mentioned that 8 buyers have agreed to pay-in obligation as per original schedule which means that NSEL shall collect 2181 crores from 8 buyers before 13th September, 2013. The Press Release also mentioned that in respect to 13 buyers, amount due from them was Rs.3107 crores, had agreed to pay 5% of their total dues every week. During the meeting with these buyers, sellers and Commission on 4th August, 2013, it was impressed upon the buyers that they should make the payment as per the original settlement schedule or otherwise as soon as possible without waiting for 20 weeks period. As per the settlement schedule submitted by you, no borrower has agreed to meet its obligation as per the original settlement schedule and only 12 buyers from whom Rs.1774.01 crores are to be received have agreed to pay over a period of 20 weeks and other 10 buyers have extended the payment of Rs.2580.60 crores to 30 weeks. 2 buyers having total pay-in obligation of Rs.1219.71 crores have not given any payment schedule. The settlement plan submitted by the
Exchange therefore does not inspire confidence as the Exchange has gone back on its earlier commitments. This has also raised serious doubts on credibility of the commitments made by buyers as per settlement schedule.
14. The Exchange has not given the details of the post dated cheques collected from these participants or the details of any Bank Guarantee obtained against their financial obligation. In the meeting held with the Commission on 16th August, 2013 selling participants have raised serious doubts on the commitment of these buyers to meet their obligations as per schedule and hands-off approach of the Exchange to meet the obligation ‘subject to realization of funds’ from the buyers. This implies that settlement will be made ‘if and when’ buyers choose to pay their dues where as the Exchange is duty bound to complete settlement as per Bye-laws according to which it stands guarantor for all financial obligations for trade executed on the Exchange.
15. You may, however, go ahead with your settlement plan for the time being as the payouts are already seriously delayed which is causing deep anxiety and resentment among the sellers, However, you are directed to comply with the directions and observations of the Commission to ensure that the plan is credible and the Exchange performs its settlement obligations in the shortest possible time.
          From mid August 2013, Economic Offences Wing, Crime Branch, CID, Mumbai started receiving applications from the investors and also from NSEL. On 30.09.2013, an offence was registered at PS MRA Marg, vide their CR No. 216/13 U/Sec. 120 (B), 409, 465,467,468, 471, 474, 477(A) of IPC on the complaint of one of the investors Mr. Pankaj Ramnaresh Saraf. Investigation of this case was immediately taken over by the EOW and the case is renumbered as EOW CR No. 89/13.

          Mr. Pankaj Saraf lodged complaint against FTIL, NSEL, their board of directors, Mr. Jignesh Shah, Mr. Jospeh Massey, Mr. Anjani K Sinha, Mr. Shantilal Guru, Mr. B D Pawar, Mr. Shreekant Javalgekar,  Mr. R. Devarajan, Amit Mukherjee, Jai Bahukhundi, Maneesh Chandra Pandey, Santosh Mansingh, H. B. Mohanty, Shashidhar Kotian, Nirav Pandya and the Auditor Mukesh P Shah and 25 borrowing companies/trading members viz. Mohan India Pvt. Ltd., N. K. Proteins Pvt. Ltd., ARK Imports, LOIL Health Foods Ltd., LIOL Overseas Foods Ltd., LIOL Continental Ltd., PD Agro Processors Pvt. Ltd., Lotus Refineries, Jaggurnaut Projects Ltd., Top Worth Steel & Power Pvt. Ltd., Metkore Alloys & Industries Ltd., White Water Foods Pvt. Ltd., NCS Sugars Ltd., Namdhari Food International Pvt. Ltd. Shri Radhey Trading Corporation Pvt. Ltd. Spin Cot Textiles Pvt. Ltd., Vimladevi Agrotech, Namdhari Rice & General Mills, Swastik Overseas Corporation, Tavishi Enterprises Pvt. Ltd., MSR Food Processing, Sankhya Investment, Yathuri Associates, Aastha Minmet India Pvt. Ltd. and Brinda Commodity Pvt. Ltd., along with their directors and some of the trading members/ brokers for defrauding him and other 13000 investors  to the tune of Rs. 5600/- Crores.
              It is alleged in the FIR that during the period from Oct., 2008 to July, 2013, NSEL allowed 25 Members, named as accused, to trade on the exchange as sellers. It is alleged that in authenticating these companies due diligence was not followed. It is further alleged that during the relevant period these 25 Members (Sellers) in connivance with NSEL traded fictitious stocks on the exchange for which they raised fake documents. During the initial contracts between these Member Companies as  sellers & buyers, the companies squared off the contracts on the date of maturity, but later on when the investments in these companies grew substantially, they did not honour their commitment and thereby caused wrongful loss to the tune of Rs. 2.2 Crores to the complainant and approximately around 5600 Crores to the other investors numbering more than 13000.

          
A ) Searches / Seizures :-
Immediately after registering the FIR, this office undertook search operations at residencies, offices & warehouses of the accused Companies and their Directors/ Partners/ Proprietors. This office identified 193 spots (Offices- 27, Residencies- 96 , Warehouses- 68)  across 16 States in the Country, for which 63 teams were formed comprising of 121 Officers and 241 men.  Till date searches have been successfully completed at 192 places and have resulted into seizure of more than 24 TB of electronic data ( 8 Laptops, 1 Desktop, 45 Hard Disks, 7 Pen Drives and CDs / DVDs), Commodities i.e. Wool, Castor seeds, Jeera, Sugar, Steel, Nickel,Soyabeen & Chana, Ferro chrome  etc worth of worth more than Rs. 210 Crores as well as other incrimination documents / articles,  which are under scrutiny.

B)        Freezing OF Bank accounts u/s 102 Cr PC   In order to secure siphoned off funds, till date 317 bank accounts of the accused Companies (4 accounts of NSEL) have been identified and frozen  (Amt frozen Rs. 94.55/- Crores)
C)   Details of assets of the accused persons/defaulters identified, secured for attachment  & its valuation: - The EOW has identified properties of defaulters as under & Process of its attachment is under progress.

Sr. No.
Defaulters Name
No. of Properties
Properties Situated at
1
Mohan India
10 
New Delhi, Rajasthan
2
Tavishi Enterprises
08
New Delhi
3
Laxmi Overseas
03
Punjab
4
Aastha Group of Companies
08
Karnal, Bangalore, Orissa, Thane
5
MSR Foods
02
Warangal, AP
6
Loil Continental
04
Chandigarh, Delhi
7
Loil Health Foods
03
Punjab, Chandigarh, Delhi
8
Loil Overseas Foods
05
Delhi
9
Shree Radhey Trading
04
Saharanpur, UP
10
Yathuri Associates
07
Haryana, Punjab
11
Vimladevi Agrotech
01
Kota ,Rajasthan
12
Spin Cot Textiles
02
Guntur, AP
13
NCS Sugar
03
Hyderabad
14
Metkore Alloys
03
Hyderabad
15
ARK Imports
84 Pieces of Land
Karnal, Haryana
16
N.K. Proteins
12
Mumbai, Ahmadabad, Delhi
17
P.D. Agro
09
Karnal, Punjab
18
White Water Foods
05
Chandigarh, Simla

Total
166


Details of properties are given in the accompanying list.

D) Bogus Companies & Warehouses:-
          During the course of investigation, following companies (defaulters) and also warehouses are found to be not genuine companies/warehouses and are found to be incorporated for the purpose of utilizing the funds received from NSEL for purposes other than the intended purposes.
Bogus Companies: 1) Loil Continental Foods Limited (LCFL), 2) Loil Health Foods Ltd., 3) White Water Foods Pvt. Ltd. (WWFPL), 4)  Swastik Overseas Corporation, 5)  Namdhari Food International Pvt. Ltd. 6)  TAVISHI ENTERPRISES PRIVATE LIMITED, 7)  Yathuri Associates Ark Imports Pvt. Ltd. (AIPL)  & 8) Aastha Minmet India Pvt. Ltd.
Bogus warehouses: 1) M/s Dunar Food Limited 6  Warehouse ,2) Jai Hanuman Rice Mill, Kamla Road , Gharaunda, Karnal , Haryana- 132001.,3) Plot No.3, Pwd Lane, Alipur, Delhi, 4)Village Janga, Tal Palanpur, Dist – Banaskantha, 5) Godown No -1,M/S. Rajena Agro Pvt  Ltd., At. Sedrana, Opp. Gokul Ref. Oil, 6) Palanpur Highway, Siddhpur, Dist-Banaskantha, 7) Khali Char Rasta,  Village- Khali Ta- Siddhpur, Dist- Patan,  8) Leaf Khamanon, Chandigarh - Ludhiana National Highway, Khamanon, Dist - Fatehgarh Sahib - 140801 Punjab, 9) White Water, Barmalipur Road(Adj) C/O V.I.R Foods Ltd, Godown No-1, Payal, Ludhiana, Punjab -141 001 10) Ark Imports Pvt. Ltd. (Section I) Village Purba , Tehsil Samrala, Disst. Ludhiana

E) Look Out Notices:-
          Similarly, Look out Notices have been issued against 73 key officials of FTIL, NSEL & chair persons of accused Member Companies in order to ensure that these accused persons do not flee from India and are available for investigation purpose.

  (F )  Assistance of Experts in the Investigation :-
This office has also requested Shri U.S. Gandhi, CA, to act and assist in the  investigation as Forensic Auditor. This office has requested the State Government for his appointment in the said case.


  (G) Invoking Provisions of MPID Act, 1999 :-
The provisions of The Maharashtra Protection of Interest of Depositor Act, 1999 (MPID Act) are invoked on 18/10/2013 for the seizure/attachment of Properties of the suspects involved in the case to recover the loss caused to the Investors.  
(H) Arrests: -
        In the present case till date 5 accused persons namely 1) Amit Ashok Kumar Mukharjee, Asst. Vice President/Business Development, NSEL, 2), Jai Sukhsadan Bahukundi, 43 yrs, A.V.P/Ware House, NSEL, 3) Anjanee Sinha, Managing Director & CEO/NSEL, 4) Nilesh Patel of N.K. Proteins Ltd, Ahmedabad ( a defaulter which owes Rs.960 cr to NSEL ) and 5) Arunkumar Sharma of Lotus Refineries Pvt Ltd ( a defaulter which owes Rs 252.56 cr to NSEL)  have been arrested. All of them are in judicial custody presently.
Accused No.1 - Amit Ashok Kumar Mukherjee, 42 yrs, Asst. Vice President/ Business Development/NSEL. His key responsibilities area as provided by NSEL was as under:
           This accused was working as Asstt. Vice President/ Business Development with accd company NSEL for the last 8 years. He was drawing salary package of Rs 22 lakhs per annum. He was promoted 4 times in his tenure of 8 years, His key responsibilities areas were 1) to assist in marketing and promotional activities resulting in Member Growth Development of Spot Contracts in multiple locations, 2) identify business opportunities and assist in tie-ups with Regional Mandis and Commodity Associations, 3) maintain strong relationship with members and work as a catalyst to increase their participation, 4) introducing members, ascertaining their net worth, preliminary background verification of members to trade on Exchange, Timely solutions to members’ Queries/problems.
           However, this accused in collusion with other accused deliberately violated the laws and guidelines of the Exchange for personal benefits. He in collusion with borrowers and clients 1) created and issued fake warehouse receipts i.e. receipts without support of adequate physical stock of commodities, 2) arranged loan facilities in guise of trading facilities which was against the guidelines issued in this behalf, 3) received kick backs from the borrowers for arrangement of the above facility. He was key management person who perpetrated the fraud with the help of his associates and MD & CEO. They conspired to cheat the investors and thereby colluded with the borrowers to get money from unsuspecting persons under the garb of assured returns. They promised the investors that their money was safe and guaranteed by underlying commodities, which were not in existence. They devised such a scheme that would facilitate the borrower accused to utilize investors money without proper security i.e. commodities. It is estimated that he has received kickbacks to the tune of more than Rs. 12 Crores from the borrowers to provide them the loan facility. He was instrumental in introducing borrowing members who did not fit the criteria laid down in this regard. Following properties of the accused have been identified and secured under the provisions of MPID Act, 1999.
Properties of accused  No. 1-- 1) Flat no.801/ Ivory Heights, 575 sq. ft., Rs 21.5 lakh (agreement value), in the name of wife Bonhi 2) Flat no.902/Ivory Heights, 1000 sq. ft., 41.3 lakh (agreement value), Kanaikiya Road, Mira Road(E) and 3) Flat no.1202/Royal Samarpan, 1550 sq. ft, Rs 4.5 cr(agreement value), near Rivali Park, Western Express Highway, Borivali (E) and 4) Range Rover Vogue Car No. – HR-26-BW-9013  vd Rs. 55 lakh approx. (total Rs 5,67,80,000)
Accused No. 2- Jai Sukhsadan Bahukhandi, 43 yrs, Asstt. Vice President/Ware Housing/NSEL.
          This accused was working as an Associate Vice President of Warehousing Department and has been working with the NSEL since October 2008. He was drawing salary package of Rs. 20 lakhs per annum.
          His key responsibility areas were 1) complying to the norms of Exchange for Warehousing, 2) Maintaining the legal status of the warehouses, 3) appointment of the warehouse manager, 4) Maintaining the profitability in WMS (Warehouse Management Services), 5) Maintenance of MIS (Management Information System) for the warehouses, 6) Monitoring the inward & deliveries of corporate and the retail clients, 7) Streamlining the existing process and make EWDMS live to ease and automate all the warehouse activities especially avoiding delays in WH storage charges collection and 8) Warehouse agreements compliance.
          However, he along with his other colleagues, MD & CEO and borrowers blatantly flouted all the norms and guidelines issued in respect of delivery based contracts, created a web of false stocks of commodities by way of bogus warehouse receipts and thereby cheated the innocent investors. It is estimated that he has received kickbacks to the tune of Rs. 3/5 crores from the borrowers to provide them the loan facility.  He had information about the wrong deeds committed by him and others. He in collusion with borrowers and clients 1) created and issued fake ware housing receipts i. e. receipts without support of adequate physical stock and 2) arranged loan facilities in guise of trading facilities which was against guidelines issued in this behalf. Following properties of the accused have been identified and secured under the provisions of MPID Act, 1999.
Properties of accused No. 2 – 1) Flat no.703, Ambika Tower, Panchpakhadi, Thane, 580 sq. ft, 20 lakh (agreement value), 2) Mahindra XUV 500 vehicle No. HR-26-BW-8030, valued at Rs 14 lakhs. (Total Rs 34 lakh).
Accused No.3 - Anjani Jagdishprasad Sinha, 48 yrs, Ex-Managing Director & CEO/ NSEL.
           The accused was the Managing Director and Chief Executive Officer of NSEL and was responsible for managing complete business operations, compliance and company affairs. It is revealed that the accused received personal gains from the borrowers/accused for granting them finance facilities. He shaped the idea of long term loan facility to the borrowers under the guise of underlying stock of commodities. He is the brain behind this scam of Rs. 5600/- Crores. He is the person who He is the person who was pioneer in bringing paired contracts system and getting approval for launch of same from the concerned authorities. He was the sole approving authority for all the limits granted to the borrowers, subsequently siphoned off the money. He was responsible for functioning of warehousing, clearing and settlement, trading and surveillance, membership and compliance, delivery and finance department apart from business development departments. He misled and misinformed general public fraudulently by giving wrong information to FMC and agencies. The accused has owned up the responsibility for the entire scam in his affidavit. Following properties of the accused have been identified and secured under the provisions of MPID Act, 1999.
Properties of accused No. 3 —1) Flat No. 1601/Odyssey-II, 2200 sq. ft., Rs 4.5 Crores (agreement value), Hiranadani Garden, Powai, Mumbai, 2) Flat No. 1404 & 3) 1405/Panchwati CHS, Powai, Mumbai & 4) Flat No. G1-602, Bhimashankar Society, Nerul (W), Navi Mumbai. (Total Rs 4.5 Crores).
Accused No.4 - Nilesh Keshavlal Patel, 48 yrs. Promoter Director of N K Proteins Ltd.
          This accused is the Promoter Director of N K Proteins Ltd. a company having registered office at 7th Floor, Popular House, Ashram Road, Ahmadabad. The company is in the business of refining of edible oil and its brand is Tirupati. The accused is also a son-in-law of Mr. Shankarlal Guru, the Chairman of accused company NSEL His company started its trading on NSEL since September 2009 and became Trading Cum Clearing Member of NSEL. The company used to trade in Castor Seed, Castor Oil and Cotton Seed Wash Oil. The accused gave false quality and quantity certificates for commodities, issuing fake sale invoice without having physical delivery and making false statement about the stock of commodities and diverged funds totally to the tune of Rs. 964/- Crores in connivance with NSEL officials.
          The company of the accused is the first company to start trading in paired contracts without stocks; other accused borrowers followed the suit. The accused is son-in-law of Mr. Shankarlal Guru, the Chairman of NSEL, and it is suspected that he had some underhand dealings with some officials of the NSEL. The accused has confessed having accepted money from the NSEL and this fact has also been established from his books of accounts. Most of the funds have been diverted for making personal investments such as Mutual Funds, Stock & Securities and also to acquire properties through its sister concerns viz. N K Industries Ltd and Tirupati Proteins Ltd. Money Trail prepared from these concerns also established that above funds have been transferred for making investments and properties. Summary of money trail for financial years 2009-10, 2010-11 and 2011-12 is appended with the charge sheet.
           Details of articles and properties of the accused identified and secured under the provisions of MPID Act, 1999 are given in the Form 5A of this report.
Accused No. 5 - Arunkumar Jaiprakash Sharma, 39 yrs. directors of M/s Lotus Refineries Pvt. Ltd. (LRPL),
          This accused is one of the directors of M/s Lotus Refineries Pvt. Ltd. (LRPL), having registered office at A-204 Boomerang, Chandivali Farm Road, Andheri (E), Mumbai. The LRPL has been incorporated in 2012 and promoted by this accused for import, manufacture; distribution and trading for refine edible oil, vegetable oil and Vanspati Ghee. Lotus Refinery was introduced to NSEL as a trader of Edible Oil and that they would be procuring oil seeds and crushing them at multiple locations. The contract was to be launched for the Edible Oil at Jaipur and at two different locations.  Finally LRPL had warehouse at Sarda Agro Oils Ltd Tank R 4, Survey No. 287, Near Light House, Tammavaram, Kakinada - 533005 Andhra Pradesh.
          It is revealed that the LRPL in connivance with officials of NSEL issued stock offer letter to NSEL stating that there was stock available for trade on the basis of which bogus warehouse receipts were generated. As per the bank statement of LRPL an amount of Rs. 218.88/- was credited to LRPL out of which an amount of Rs. 60.75/- was returned to the NSEL. An amount of Rs. 19.22 Crores was adjusted against purchase of Stock by LRPL and its outstanding is now Rs. 177.34 Crores. However, as per the balance sheet of the LRPL nothing is mentioned regarding stock of commodities. As per the ledger account of the company LRPL has given advances of Crores of rupees to many entities, which clearly indicates diversion of funds for other purposes. According to NSEL this company has outstanding of Rs. 252.48 Crores.  On the contrary the LRPL claims that NSEL owes the company and amount of more than 2000 Crores and has initiated Arbitration proceedings against the NSEL. His ledger account shows that besides giving advances to many parties he has given advances to himself and his relatives that include his wife’s account. It clearly indicates that he has utilized the funds for his own purposes. He has spent lavishly on decoration of his office premises. He has also spent money in production of films. A chart of money trail has been prepared. His admission has made it crystal clear that he made it possible in connivance with officials of NSEL. The accused has admitted in writing the outstanding amount of Rs. 241, 36, 26, 831/- payable to NSEL by his company. This is reflected in a letter dated 16.05.2013 written by the accused company to the NSEL. The company has made payment of approximate Rs. 70/- Crores to the promoters and directors for making their personal investments in properties. There are many instances of heavy cash withdrawal from the accounts of the company as well as directors. Money trail of the same is incorporated in the charge sheet.
          Details of articles and properties of the accused identified and secured under the provisions of MPID Act, 1999 are given in the Form 5A of this report.
          During the course of investigation statements of witnesses have been recorded so also documentary evidence has been collected as per the attached chart of evidence.
          During the investigation carried out so far it is seen there is ample evidence against the arrested accused to prove that they have committed offences punishable under sections 409, 465, 467, 468, 471, 474, 477 (A), 120 (B) of Indian Penal Code and sections  3 & 5 of MPID Act, 1999.
          Investigation in respect of afore mentioned accused as well as other accused that have not been charge sheeted viz. M/s Financial Technology of India Ltd. National Spot Exchange Ltd., its Directors/Key Management Persons/its Borrowers, some brokers and others is still in progress. Further final report will be submitted against them under section 173 (8) of Code of Criminal Procedure.

January 6, 2014 

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