Thursday, September 26, 2013

CBI, other bodies to take action against NSEL: Chidambaram

Finance Minister P Chidambaram on Thursday said that investors knew that they were putting money in an unregulated entity as far as the National Spot Exchange Ltd (NSEL) is concerned.



\"I think there is much more to the way NSEL started business than meets the eye. People seem to have given money to NSEL promoters with open eyes that it is not a regulated entity that is violating conditions from day one. Yet they were giving money to NSEL. Many of them made money in initial stages and some of them lost money now,\" he said.



NSEL, a subsidiary of Jignesh Shah-promoted Financial Technologies, suspended trading in forward contracts on July 31 following government directive. The suspension of trade and the consequent delay and default in payouts of over Rs. 5,500 crore to various entities is now a full blow crisis.



A panel headed by economic affairs secretary Arvind Mayaram looked into alleged irregularities in the functioning of the commodity exchange and has suggested that the CBI, the Ministry of Corporate Affairs and the Forward Markets Commission take action against NSEL.



\"These authorities are looking into the matter. They will take action,\" Mr Chidambaram told reporters.



Mr Chidambaram said although there was no fear of the NSEL crisis spilling over to other markets, he has asked capital market regulator Sebi and commodity market watchdog FMC to keep a careful watch.



\"NSEL was violating the very conditions under which they claimed they could do business,\" he said.



On whether the government is looking at changing the management of other entities (MCX and MCX-SX) with the same promoters, Chidambaram said, \"Let us wait for the report of the regulators. Let FMC give its report. I think the FMC report will be ready in a day or two. We will see the report first.\"



Mr Chidambaram said the Income Tax department is looking into the financial details of investors in NSEL to find out whether there is involvement of black money.



The government had in 2007 exempted NSEL from provisions of the Forward Contracts Regulation Act (FCRA) to operate one-day forward commodity contracts.



The exemption was given on some conditions, including delivery of commodities within 11 days and a bar on short selling by members of the exchange.



Observing that the NSEL got exemption under the FCRA even before it started business, he said, \"I have seen the exemption order. Now, whether it is valid or not -- that has to be examined.\"



He said the investors would definitely approach court as it is a matter between them and the company.



\"The government does not come into the picture at all. It is a company. It is not a regulated entity, which got exemption order even before it started business. Therefore, what legal rights flow to the company and investors, court will adjudicate that.



\"What mutual rights and liabilities between the courts and investors is there, only courts will adjudicate that,\" he said.



There are around 17,000 investors in NSEL, out of which 9,000 traded through the top eight brokers, including Anand Rathi, Motilal Oswal, India Infoline and Systematix.
News From: http://www.7StarNews.com

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