An undistorted, unbiased and 360° view of the National Spot Exchange Limited payment crisis that shook the foundation of the commodities market in India. The presentation encapsulates the entire crisis whilst also trying to incorporate the latest developments.

1. NSEL SAGA
The Inside Story

2. NSEL…. THE BEGINNING
• NSEL was incorporated in 2005; commenced live trading in
2008
• The GoI had specifically granted NSEL and other spot
exchanges an exemption under the Forward Contracts
(Regulation) Act, 1952 (‘FCRA’)
• Forward Markets Commission (FMC) - the designated
agency to oversee spot exchanges including NSEL, to
safeguard the interest of investors, w.e.f. 5th August 2011

3. HOW IT FUNCTIONED…… SERVED AS AN
ELECTRONIC TRANSACTING
PLATFORM…MANY TRADED
• Trading Clients traded through the Members on NSEL
platform
• NSEL neither received money nor paid money on its trading
platform on its own account. The money exchanged for
trading of contracts on NSEL never belonged to NSEL
• The Exchange itself just acted as a market place and got a
small transaction fee

4. WHAT HAPPENED… CRISIS
• When NSEL suspended trading due to GoI directive, 24
members defaulted to make pay-in and had a total
outstanding of Rs. 5541.12 crores, as on 31st August 2013
• Payment crisis arose due to defaulting Members
• NSEL could not takeover and sell the commodities as they
were largely missing
OCCURRED

5. HOW IT HAPPENED…..DUE TO
FELONY OF SOME…. RARING FOR
• The erstwhile MD & CEO, Mr. Anjani Sinha, was solely
responsible for daily operations, business growth and
regulatory interaction at NSEL
• Mr. Anjani Sinha, along with key officials of NSEL from
Warehousing & Business Development team, in connivance
with the defaulted Members created irregularity in physical
stock, for pecuniary benefits
• Counterfeit warehouse receipts were issued to show de-facto
possession/supervision of NSEL with respect to
commodities
PECUNIARY BENEFITS

6. HOW IT WENT UNDETECTED…. CONCEALED
TO DUPE….BY SOME WITH ILL-WILL
• Mr. Anjani Sinha and these officials misled the Board of
Directors and Relevant Authorities
• Every effort was made to conceal irregularities from all the
stakeholders
• No information was shared with the Board regarding the
Members’ margin shortfalls, pay-in defaults, unavailability/
shortfall in physical stocks etc.

7. HOW IT WENT UNDETECTED….CONTD.
• The contracts were supposed to be backed by commodities
held in warehouses
• The Members produced commodity documents and VAT
invoices
• NSEL had checks at various levels and the departments
could not find irregularities
• There was no possibility of ‘whistle blowing’; as 4 topmost
senior management including MD & CEO were involved in
the misappropriation
• The contracts were sold by large and reputed brokers like
Anand Rathi, Motilal Oswal, India Infoline, Systematic and
many more

8. WHO SUFFERED MOST….INVESTORS,
NSEL – THE VICTIMS
• Trading Clients were affected the most due to the crisis,
eroding their investments as well as confidence in the
financial markets
• The revolutionary concept of a Commodity Exchange to
support farmers has now been cast under a negative spell
due to Mr. Sinha’s wrongdoings
• Mr. Jignesh Shah as promoter of FTIL and other directors of
FTIL/NSEL suffered too because of the irregularities
committed by Mr. Anjani Sinha and his team

9. WHO SUFFERED MOST…CONTD.
• Volumes in FT Group’s major exchanges like MCX came
crashing down
• Market capitalization of the Group has shrunk
• Entire Group is in glare of the investigative agencies and
relevant regulators
• FTIL and all its stakeholders, especially the employees are
equal sufferers like the investors in the wake of the NSEL
payment crisis

10. NSEL’S
INITIATIVE….LEGAL
• NSEL was the first to file criminal complaints against the
Defaulters
• NSEL has filed 5 Arbitration petitions in Bombay High Court,
• 27 applications in MPID court and 30 complaints with the
Magistrate Court for bouncing of cheques
• Also, filed 20 complaints in EOW Mumbai Police which have
not yet been registered as FIR
• Therefore the Exchange has also filed 10 Section 156(3)
applications with the Magistrate for FIR.

11. NSEL’S INITIATIVE….. PAYOUT TO E-GOLD
Payout:
• Final closure of e-Gold units, with final settlement on 23 June
2014, final payment of Rs 14.67 Crore comprising over 10% of
Gold were made to unit holders
• Earlier, on 22 May, 2014, NSEL disbursed over Rs 140 crores
worth e-Gold units towards settlement to over 23000 unit
holders The total payout reached to Rs 154.80 Crores, at an
average rate of Rs 2909. 67 per unit of e-Gold
• NSEL sold almost 90% of 532 kgs of investors' gold, which is close
to 477 Kgs, yielding a price of Rs 2,935.9925 per gram
• Each investor was benefitted with a price of Rs 2,633 per gram

12. • On 27 August, 2014, NSEL declared closure of e-Silver with final
payouts to eligible unit holders; with total amount of Rs 141.23
crores thus far
• Averaging at the rate 41.06722 per unit, to benefit over 16,200
unit holders
• The final payment was declared towards sale of Silver worth
43.89 crore, including 29.52% of balance silver holding - with the
sale of 70.48% of Silver, to benefit 16,285 e-series investors
• On June 05, 2014, Rs 97.30 crores (70.4849%) of e-Silver holding
was released
NSEL’S INITIATIVE…
PAYOUT TO E-SILVER

13. NSEL’S INITIATIVE…..
Recovery:
• NSEL has recovered Rs 539.74, out of which Rs. 360.74 crores
were paid to investors till now, and Rs. 179 crores was given from
FTIL’s resources. This has cleared upto 50% settlement liability of
around 7000 retail investors
• Two members with a total liability of approx. Rs. 196 crores have
nearly paid all their dues
• NSEL provided IT support and shared volumnious data with the
EOW and other investigating agencies
• NSEL’s senior officials have met with police officials of the EOW,
CBI, ED and Union Minister of Agriculture for recovery

14. CURRENT SCENARIO… POSITIVE
BREAKTHROUGHS
• EOW has attached over 300 assets of the 22
defaulting members and three NSEL accused
persons, which is as per media reports, worth Rs.
3700 crores approx..
• 27 MPID matters are also going on for issues related
to selling of stocks, upholding of settlement
agreements, etc.

15. LEGAL INTERVENTION …..JUSTICE
DISPENSED… TRUTH TRIUMPHED
• 7 defaulters arrested & released recently
• Bombay High Court granted Bail to Mr. Jignesh Shah
Bombay HC’s Observations were:
• No Material to Establish Mr. Shah’s Alleged
Conspiracy
• No Sufficient Material to Support “Conspiracy
Theory”

16. BOMBAY HC’S ORDER…CONTD.
More observations:
• No Link between the Proceeds of Crime & Jignesh
Shah
• Jignesh Shah Arrested Without Any New Material
• Trading Clients & Brokers Well-Aware of the
intricacies of Trading

17. BOMBAY HC’S ORDER…CONTD.
Some more observations:
• Legalities of Transactions Expected to be known to
Brokers & Traders
• Benefits Received by NSEL, FTIL & Jignesh Shah are
Only Incidental
• Pretrial Detention Can Never Be Authorized
HC’s ruling:
• The Bombay High Court has formed a High Powered
Committee led by Retd Judge V C Daga to overlook
the process of asset sale and recovery from
Defaulters.