HC to hear fresh PIL against NSEL and Jignesh Shah tomorrow

Written by PTI | Mumbai | Updated: Feb 16 2014, 19:43pm hrs
Jignesh ShahHC to hear fresh PIL against NSEL and Jignesh Shah tomorrow. (Reuters )
The Bombay High Court will tomorrow hear a fresh PIL seeking transfer of a probe by Mumbai police into the alleged Rs 5,500-crore scam involving National Spot Exchange Ltd (NSEL) and Jignesh Shah, to CBI.

The PIL filed by activist Ketan Tirodkar argues that since the scam has national and international ramifications only CBI has the necessary jurisdiction to probe this matter.

The NSEL case pertains to alleged financial embezzlements by the Multi-Commodity Exchange (MCX) and the Financial Technologies India Ltd (FTIL)--both promoted by Shah.

The Economic Offences Wing (EOW) of Mumbai Police is currently probing the case.

Though a bunch of PILs were filed in the high court, Tirodkar's PIL would come up for hearing tomorrow.

The petition alleged those arrested so far like Nilesh Patel, a major borrower, and three employees of NSEL, including Anjani Sinha, were mere pawns in the game while concerted efforts were made to project Shah, the alleged mastermind in the fraud as a "victim".

"This attempt to project the mastermind of the scam as a victim of conspiracy by his employees and borrowers is an outcome of the pressure of vested interests in the corridors of power who have been benefitted by the NSEL-MCX-FTIL triangular operations", according to the PIL.

During the market stint of MCX, NSEL and FTIL, Shah launched many international platforms (Bourses and Trading companies) in tax-heavens, namely Mauritius, Botswana in Africa, Singapore and in Middle-east nations such as Dubai and Bahrain, to take advantage of the Double Taxation Avoidance Agreement [DTAA] signed by India as a member of a Consortium of multiple nations, the PIL alleged.

These platforms were in form of bourses facilitating trading in futures for various commodities. The revenue from these bourses was transferred to India without inviting any tax liability and also revenue from Indian entities was siphoned off to these countries in the guise of payment schedules to be honoured, the PIL further alleged.

In reality, there were no payment schedules honoured and it was a financial market gimmick to avoid paying taxes in India, the PIL contended.

It further argued that Mumbai EOW has not yet sent any team abroad for interacting with the market regulators in these nations as well as the tax authorities. Letters Rogatory (to seek information from foreign countries about Shah's entities) also were not dispatched for a long time.

According to the PIL, the borrowers of NSEL were granted funds by Shah in nexus with each other with the prior knowledge that the same would not be refunded. The same funds were diverted overseas by Shah via these front-men borrowers for various activities not documented either in the Articles of NSEL or for allowing the borrowings.

Moreover, PIL said, the bankers of NSEL, MCX and FTIL include nationalised banks such as SBI, Union Bank of India along with foreign banks and private sector banks which are guided by the Reserve Bank rules.

These rules make it mandatory for banks to intimate RBI of any fraud above Rs 15 crore and lodge a complaint with CBI's Bank Fraud Cell.

NSEL, MCX and FTIL have cheated their bankers by furnishing false compliances and documents fabricating a projection that these three entities were rightfully operating in financial markets. Thus, the bankers have raised liabilities on account of having facilitated these three entities to operate transaction through bank accounts, it alleged.

The Income-Tax department had launched a probe into the undisclosed income of MCX, FTIL and Shah in 2006-07 and amount detected by then was to the tune of Rs 16 crore, it said.

This was informed to SEBI by Union Finance Ministry in two letters written in October 2007 and June 2008. Despite this, SEBI allowed permissions to FTIL group to operate in market by way of an Exchange trading in commodities and currency derivatives, the PIL alleged.