NSEL crisis: Jignesh Shah questions Grant Thorntons forensic audit report

Written by fe Bureau | Mumbai | Updated: Nov 13 2013, 14:16pm hrs
Jignesh ShahFMC has issued a showcause notice to Jignesh Shah and two others, along with FTIL, for their alleged role in the NSEL crisis.
Financial Technologies India Ltd (FTIL) founder & Group CEO Jignesh Shah has questioned Grant Thorntons forensic audit report on the Rs 5,600-crore settlement crisis at the FTIL-owned National Spot Exchange (NSEL).

Shah and FTIL are defending their 'fit & proper status before the Forward Markets Commission, which has issued a showcause notice questioning their suitability to remain part of the commodity futures exchange business in India.

Additionally, Shah wants the FMC to hold its decision on the groups fit & proper status until investigations by other probe agencies are completed.

According to sources familiar with the development, the submissions were made on Tuesday when Shah appeared before FMC officials as part of a personal hearing on the showcause notice. Along with Shah, Joseph Massey and Shreekant Javalgekar were also present at the meeting, assisted by their lawyer Somasekhar Sundaresan. FMC has issued a showcause notice to the three individuals, along with FTIL, for their alleged role in the NSEL crisis.

They want to cross-examine Grant Thornton officials on certain issues raised in their forensic audit report. They also want to submit some more documentary evidence in support of their argument. Finally, they said that since criminal investigations are currently on, FMC should wait for the probe to be over before passing any order on their fit and proper status, said a person privy to the discussions.

The FMC is yet to decide on the request to cross-examine Grant Thornton. Sources sugges n1ted that the regulator will continue with its process to make a final decision on the groups fit & proper status alongside ongoing investigations. The Economic Offences Wing (EOW) of the Mumbai Police, which is looking into the NSEL matter, has already made five arrests in the case, including top former officials of NSEL.

Shah, along with the other two individuals and FTIL, has already submitted an 80-page reply to the FMC notice. Shah said that he wanted to meet the FMC officials to explain personally the rationale of actions taken by the board members of NSEL after the settlement crisis came to light on July 31.

It was one of our bonafide, which was to be submitted and our legal advisors have submitted our view, we will wait for the outcome. We have already resigned. We wanted to submit the reasons and logic for our action and now we will wait for the outcome. We are extending cooperation to FMC, said Jignesh Shah after meeting FMC officials.

RoC may seek FTIL board change

Meanwhile, the Registrar of Companies (RoC) is looking into possible instances of violations of the Companies Act by NSEL and FTIL. According to a person familiar with the RoC probe, if certain violations are found in the case of FTIL, the agency could even recommend changing the board of the listed entity.

Company law violations will be looked into. One option could be to move the Company Law Board (CLB) to get the board changed. FTIL is the parent company and, so, it should have exercised due control. That they have not done that, said the source on conditions of anonymity, adding that the aspect of software charges would be definitely looked into. We are told that the (software) usage charges were variable in nature and was linked to the turnover, he said.

Cross-questioning

* Along with Shah, Joseph Massey and Shreekant Javalgekar were present at the meeting with FMC, assisted by lawyer S Sundaresan

* Forward Markets Commission has issued a showcause notice to the three individuals, along with FTIL, for their alleged role in the NSEL crisis

* Shah wants the FMC to hold its decision on the groups fit & proper status until investigations by other probe agencies are completed