The document summarizes the Rs. 5600 crore payment default scam that occurred at the National Spot Exchange Limited (NSEL) in India. It provides background on NSEL and its parent company FTIL. It describes how NSEL illegally allowed paired contracts beyond the permitted T+11 days, using fake warehouse receipts, which led to a default when it could not pay investors. Over time from 2013-2019, various investigations and legal proceedings occurred against NSEL, FTIL, and others involved. In 2019, the Supreme Court declared the government's amalgamation of NSEL with FTIL as unconstitutional.

1. A Payment
Default of Rs.
5600 cr.
PRESENTED BY : -
SHIVAM (18/89164)
PRERNA SINGH (18/89115)
INDERJEET (18/89110)
RAHUL KUMAR (18/89165)

2. FMC
 The Forward Markets
Commission (FMC) was the
chief regulator of commodity
futures markets in India.
 Headquartered in Mumbai.
 Overseen by the Ministry of
Finance
 On 28 September 2015 the FMC
was merged with the Securities
and Exchange board of India
(SEBI).

3. Index
Company Profile
1. FTIL (Parent Company)
2. NSEL(Subsidiary)
About: Mr. Jignesh Shah
Introduction to Case
1. Important Terms to
understand the case
2. Background of the Scam
3. NSEL’s Modus Operandi
Time line: Series of
Events
Investigations Held
Wrap up
1. Appendix: Defaulters
List
2. Conclusion
3. Questions and
Answers

4. Company Profile
• FTIL stands for Financial technologies
India Ltd. , Now known as 63 moons
technologies limited.
• Founded by Mr. Jignesh Shah in 1988.
• Services the company provide in
Technology for Risk, Exchange,
Brokerage, Messaging, and
Consulting Solutions etc.
• NSEL stands for national Spot
Exchange Limited.
• Founded in 2005 with the main aim
of spot exchange for trading of
commodities.
• Subsidiary of FTIL
• In 2007, got exemption in trade from
FCRA

5. Jignesh Shah – Victim of Over
Ambition
 Jignesh Shah is the founder and the former CEO of the MCX, and co-
founder, chairman and managing director of FTIL the software firm
which launched the commodities platform in Nov 2003.
 Forbes magazine listed him as one of the richest people in India up
until 2010.
 Shah was arrested in Mumbai in May 2014 in connection with the Rs.
5600 crore fraud at NSEL, which was founded by him and promoted
by FTIL. He was charged with criminal breach of trust, forgery and
conspiracy.
 He resigned as vice-chairman of MCX on 31 October 2013.

6. Introduction To Case
Important Terms to Understand the case.
 Spot Market( Market where underlying asset exchanged for cash
on the spot)
 Spot Price (Quoted price for immediate delivery)
 Forward Contracts( Agreement for delivery of asset in near future
at pre-specified price)
 Forward or Future Price
 Expiration Date( Final Settlement date)
 Arbitrage( Buy and Sell of asset at the same time in different
markets)
 Paired Contract(Same person goes into buy and sell contract at
two different times in future when there is an arbitrage
opportunity)

7. Background of the
Scam
 Mostly Revolves around Agricultural produce.
 Fraud of Rs. 5600 Crore surfaced after the
NSEL could not pay to the investors of paired
contracts.
 Shift to Special kind of paired contracts i.e
Beyond T+11 days.
 Regulators came into action and Shut down of
NSEL

8. NSEL’s Modus Operandi ( How the
default took place)
 Four Player Involved : the buyers, the sellers, the brokers and the
exchange itself.
 Seller took commodity to NSEL’s warehouse and get Warehouse
Receipt (WR) for the same. Later on he spot sell the WR in exchange
for Rs. 100 to buyers. Due to paired contract the same seller had to
go for buy position at T+25 at Rs. 115 and a commission was given
to the exchange.
 Similarly the initial buyer goes into the seller position at T+25 at Rs.
115. This way the initial buyer was getting guaranteed 15% profit,
the NSEL used to get commission from both ends and the seller
used to get short term finance at 15% interest which was
reasonable for those looking for short term finance.
 The above trade was illegal as NSEL was allowed only T+2 contracts
and in any case spot contracts couldn’t be settled for more than
T+11 days.

9. Modus
Operandi
Continued
• The goods never lied in the
warehouse.
• Trade too place using fake
Warehouse receipts.
• In the entire process the real
gainers were brokers who used
to take commission from both
the buyers and seller and the
real losers were the investors
who’s Rs. 5600 crore got stuck
once NSEL defaulted in paying
them.

10. What roles have brokers played?
The primary allegation against the brokers was that they had made false promises to
the clients in order to attract their investment in commodities. The assurance was
given to the extent of risk-free returns to the clients. They promoted arbitrage
opportunity in the spot market by way of pair contracts. The clients were made to
believe that pair trades are backed by collaterals in the form of stocks.
The alleged brokers made statements that goods in the warehouse are backed by
insurance cover; which are in violation of provisions of various circulars, rules, and bye-
laws of NSEL and sections 21(g) of the FCRA.
Also, these brokers had failed to report suspicious transactions to the Financial
Intelligence Unit thereby violated a provision of NSEL Circulars. The accused brokers
did not segregate funds between clients account and the organization’s account.

11. 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
2005
NSEL was incorporated as a
company.
2007
Receives GOVT. exemption to
launch contracts that allow
delivery based spot trading in
52 commodities.
2008
Commences live trading
providing delivery based spot
trading, in 52 commodities.
2010
1.Launches first contract under e-series that
uses demat accounts for traders and investors.
2.FMC seeks data, suspects norm violation.
2013
1.FMC intervened and asked NSEL
to wind down existing contracts.
2.NSEL suspends trading in all
contracts including the E-series.
3.NSEL defaults on dues,
Promoters and key employees
including CEO is sacked.
NSEL SCAM (TIMELINE)

12. POST 2013
SCENARIO
2014
FMC Chairman Abhishek recommended to the Finance Ministry that NSEL should be merged
with FTIL alleging that NSEL did not have any human and Financial resources to ensure
recovery of the default money.
In 2016, The MCA gives final order of the amalgamation of NSEL with FTIL, recommending
breaking of the corporate wheel.
2017
On Dec 4, the Bombay High court ruled for the Govt. Section 396 of the Companies Act, 1956
was being invoked for the merger of two private concerns for the first time. This could be set
of warning bells in the minds of foreign investors. 63 Moons(FTIL) is challenging this in
Supreme court.
2019
On April 30, 2019 The Supreme Court declared the government’s amalgamation of the
over ₹5,600 crore scam-hit National Spot Exchange Ltd. (NSEL) with Financial
Technologies India Ltd. (FTIL), now known as 63 Moons Technologies Ltd., as a
violation of both the Constitution and the Companies Act.

13. LEGAL ANGLE
•INVESTIGATIONS HELD
ENFORCEMENT
DIRECTORATE
ECONOMIC
OFFENCE WING
MUMBAI
CENTRAL
BUREAU OF
INVESTIGATION
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.
On 6 January 2014, the EOW of
Mumbai's crime branch
submitted charge sheet
mentions the names of the
following accused:
• Amit Mukherjee (Former VP)
• Jay Bahukhandi (former AVP
at NSEL),etc.
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.
The Enforcement Directorate
arrested Shah on 12 July 2016
for assisting NSEL defaulters in
money laundering. A special
PMLA court granted bail to Shah
terming the arrest by ED was
‘illegal’.

14. Wrap Up

16. Appendix:
Defaulters List

17. Conclusion
 Promoters, Employees of NSEL who
indulged in the illegal trading,
brokers who forged documents and
were doing benami transactions,
regulators who were blind for years
to resolve the jurisdiction of NSEL all
are responsible for the crises in one
way or another.
 NSEL and FTIL did not follow
corporate governance norms and
result was the debacle of the
promising organization which could
have taken India to a next level in
the global market.

18. Thank you
QUESTIONS?