Several defaulters have used the money with them to buy properties, one defaulter even built a shopping mall.
Senior EOW officials added investigations revealed he had taken bribes while heading the exchange. NSEL is a subsidiary of Financial Technologies India Ltd (FTIL), promoted by Jignesh Shah.
The working of NSEL was reported to the board by Sinha in his capacity as MD & CEO. He was the key person. The decision of allowing or rejecting any borrower and the due diligence related to KYC (know your customer) procedures was done by Sinha. We believe that in some cases he (Sinha) has also taken bribes just like (former assistant vice-president) Amit Mukherjee. Sinha was the main conspirator, Balsing Rajput, deputy commissioner of police (EOW), said.
While it could not be independently verified, a statement from the NSEL Investors Forum suggested that Sinha has blamed the board of NSEL for the crisis during his interrogation. "Investors are surprised that Anjani Sinha has gone back on his affidavit and has implicated Jignesh Shah and directors of NSEL," said Sharad Saraf, chairman, NSEL Investors Forum.
The police will present Sinha in the magistrate's court on Friday to seek police custody for him. Interestingly, the police has also put on record the fact that Sinha took almost 15 days to present himself before the EOW after being issued summons. We have placed it (delay) on record, Rajput said, pointing out that the first information report (FIR) was filed on September 30.
This is the third arrest in the NSEL case. On October 9, Mukherjee was arrested while Jay Bahukhundi, also former assistant vice-president, was arrested the following day.
The Enforcement Directorate has registered a 'preliminary inquiry' under the Prevention of Money Laundering Act, suspecting large-scale money laundering on the spot exchange, PTI reported. Sinha and his wife Shalini, who is managing director of family-run firm SNP Designs, were questioned by both ED and EOW.
The crisis on the NSEL came to light in late July when it was discovered that settlements of Rs 5,600 crore were outstanding. Although a payments schedule was chalked out subsequently, the exchange has been unable to meet its obligation of Rs 174 crore a week.
In an affidavit filed with the EOW and the Forward Markets Commission (FMC), Sinha had absolved the NSEL board but blamed two officials Mukherjee, who headed business development, and Bahukhundi, responsible for warehousing. "I do not have comprehensive, concrete and specific information about personal benefits derived by senior management team of NSEL from any of the buying members. However, I suspect that they might have entered into dealings with the buying members for their personal benefit, Sinha had observed in the affidavit.
Sinha maintained in the 13-page affidavit that the board of directors and the promoters namely, Shah were not aware of the crisis that was building up in the exchange. Our promoters have not derived any advantage out of NSEL operation, said Sinha adding: They (promoters) have given their own funds for settling dues of small clients of NSEL.
With the arrest of key management members of NSEL, the focus will now shift to promoters and promoter entity FTIL, which have until the end of this week to reply to a show-cause notice issued by the FMC questioning the fit & proper status of NSEL's promoters. If revoked, FTIL would have to have to sell its 26% stake in FMC-regulated Multi Commodity Exchange (MCX).
On September 23, FTIL's auditors Deloitte Haskins & Sells informed it that the accounts were no longer to be relied on following the payments problems on NSEL. The auditors noted that ...in accordance with Standard on Auditing (SA) 560, the auditors report dated may 30, 2013, on the standalone and the consolidated financial statements of the company, for the year ended March 31, 2013 should no longer be relied upon, an exchange filing read.
Following the auditors remarks, Securities and Exchange Board of India whole-time member Rajeev Agarwal said the regulator will ascertain facts from FTIL on the audit report, adding that Sebi will examine the findings of other regulators and act if there is any breach of the 'fit and proper' criteria.
Brokers and investors, meanwhile, say that though the arrest is a right step, they are wary that the delay could impact the revelation of any fresh information. We are wary that he may not give out significant information, said Ketan Shah, a petitioner who has challenged the e-series settlement proposed by NSEL in the high court.
CP Krishnan, whole-time director, Geojit Comtrade, says that the arrest could prove that Sinha has not culminated the crisis single-handedly and the board was also aware of the spot exchange's working.
FTIL, which houses the software business of the group, holds 26% in the commodity futures exchange MCX, 99.9% in NSEL, 5% in MCX-SX and 33.5% in IEX, a power exchange.