Thursday, May 8, 2014

NSEL chief held in 5,600cr mkt fraud

Jignesh Shah

Mateen Hafeez TNN

Mumbai: The economic offences wing (EOW) of the Mumbai police, which is probing the Rs 5,600 crore cheating case involving the National Stock Exchange (NSEL), on Wednesday arrested Jignesh Shah, chairman of the Financial Technologies (FTIL) group, and MCX CEO Sreekanth Javalgekar for their alleged role in the biggest payment default in the Indian commodity market.
    With the two fresh arrests, the number of people behind bars has gone up to 11. Shah was initially summoned by the EOW at 3pm for questioning and allowed to go. However, he was again called at 6pm and placed under arrest. He and Javalgekar have been kept at the Mumbai crime branch’s lock-up in the police commissionerate compound near Crawford Market, and will be produced before a special court on Thursday.
EXCHANGE CRISIS July 31, 2013 | Jignesh Shah-led NSEL suspends trading after govt nudge on faulty contracts
Who was to pay 5,600cr | 21 commodity suppliers/planters
Who was to get it | 13,000 investors, mostly HNIs 

Shah, Javalgekar knew about fraud, says EOW

Mumbai: Rajvardhan Sinha, additional commissioner of police (EOW) who has been supervising the NSEL fraud probe, said, “The EOW has arrested Shah and Javalgekar and they are being interrogated. Earlier, we arrested certain borrowers and middlemen like Sanjeev Bhasin, Rajesh Mehta of Lotus group and Indrajit Namdhari of Namdhari Food International. During Javalgekar’s interrogation, it transpired that as group financial manager of FTIL, he was in full control of the Indian Bullion Merchants Association (IBMA, in which FTIL has a major stake) and NSEL for a long time. We found that he was in criminal conspiracy with other accused in the NSEL crisis.”
    Sinha added that it was found that IBMA had a large chunk of bogus clients whose addresses and other details could not be traced, leading to suspicion that black money and other unaccounted funds were flowing into the exchange circuit. He said that Shah, head of FTIL, director of NSEL and a member of the NSEL audit committee, had approved the entry of all borrowers as members of the exchange.
    “He also approved several contracts. Shah personally represented to the government the scheme of NSEL, which was nothing but a platform for running a non-banking financial company. It was found that their (Javalgekar and Shah) defence claiming ignorance of this fraud is incorrect,” said Sinha.
    Shah was earlier questioned and summoned at least 16 times by the EOW. “However, he could not give satisfactory replies. The accused also evaded crucial replies and hence their custodial interrogation was felt necessary,” added Sinha. “Till today we have secured properties and assets of the accused worth Rs 5,100 crore.”
    Shah and Javalgekar are also accused of using their clients’ bank accounts without their knowledge. Sinha said that the probe was still open about the role of brokers and auditors. In December 2013, the EOW had attached properties, frozen shares and sealed a bungalow and a row house belonging to Shah. They were collectively valued at Rs 192 crore. 

    Police had seized 1.2 lakh shares of Shah that were in FTIL. The estimated value of these shares was around Rs 179 crore. Besides this, police also sealed Shah’s Juhu

bungalow, a row house at Aarey Colony (worth Rs 78 lakh), a plot in Pune worth Rs 1.6 crore, shares worth Rs 51 lakh in India Energy Exchange, and FDs worth Rs 11.8 crore in a private bank. Five demat accounts were also frozen. Shah earned Rs 160 crore by way of dividend from FTIL, police said.
    The police in January chargesheeted five persons including Anjani Sinha, NSEL’s former managing director; Amit Mukherjee, exassistant vice-president of business development at NSEL; Jai Bahukhandi, exassistant vice-president of warehousing at NSEL; Nilesh Patel, MD of N K Proteins Ltd; and Arun Kumar Sharma, MD of Lotus Refineries Pvt Ltd. Later, the police arrested Surendra Gupta, MD of Dunar Food, Indrajit Namdhari of Namdhari Food International Limited, Rajesh Mehta of Lotus and Sanjeev Bhasin.
    Till date, the EOW has frozen 322 bank accounts holding Rs 171 crore, attached over 210 properties worth Rs 2,600 crore and seized 15 high-end cars worth Rs 5.8 crore.

The Times of India, May 8, 2014

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