HC hauls up FMC for e-series settlement stance

Written by fe Bureau | Mumbai | Updated: Oct 1 2013, 02:51am hrs
The lack of a clear regulator for the National Spot Exchange (NSEL) came into question at the Bombay High Court on Monday during the hearing of a petition to stall NSELs settlement plan for its e-series products.

In response to a petition filed by two parties Tarun Amarchand Jain HUF and Ashish Seth HUF the court asked the Forward Market Commission (FMC) to provide clarity on whether the commodity market regulator will oversee the settlement of the e-series contracts at the troubled NSEL.

The courts remarks came in response to FMCs stance that it is not mandated by the ministry of consumer affairs to oversee the e-series settlement , but only to supervise the settlement of the one-day forward contracts.

The court asked the FMC to step up its efforts as a designated agency, or the courts would have to intervene to pass on the regulatory responsibilities to another agency.

The hearing addressed a petition filed in mid-September that requested the court to direct NSEL to merge the delivery and settlement of e-series contracts with other contracts. The petitioners have pleaded that the payment and settlement under the e-series should be made on the same terms as the proposed settlement for the paired contracts. NSEL is facing a R5,600-crore payment crisis linked to non e-series contracts

The petition, which names FMC as one of the six respondents, claimed that the commodity market regulator, along with NSEL, has adopted arbitrary and discriminatory attitude between the two sets of investors. The court asked the FMC to also submit a copy of the forensic audit conducted by Grant Thornton on the irregularities found at NSEL.

The hearing also brought the issue of NSELs Settlement Guarantee Fund (SGF) back to the fore. Immediately after the breakout of the NSEL settlement crisis, the depletion in the claimed SGF from R860 crore to R62 crore within a matter of four days was regarded as an indicator of the lax attitude of the NSEL management.

The investors alleged that part of the SGF funds may have been used to buy gold and silver stocks to support the e-series contracts. They added that related parties account for a substantial portion of the total 33,000 e-series investors and that related party outstanding holdings stood at 257 kg of gold. In response, the court asked the spot exchange to file an affidavit stating that no amount of SGF has been used to make such purchases in the last 6-12 months. The court also asked NSEL to furnish further details of such investors and to try and make available the ledgers of the vault managers, Brinks Arya.

The court has scheduled the next hearing on October 3,2013, the same day that the e-series settlement is scheduled to begin.

Lotus Refineries files R2,773-cr claim suit against NSEL

Lotus Refineries filed a claim suit worth R2,773.29 crore against the National Spot Exchange (NSEL) for goods being in the possession of NSEL acting in fiduciary capacity in the warehouse owned and managed by the commodity exchange. The suit, filed in the Bombay High Court, says the claim amount has been arrived based on the pending goods to be delivered to Lotus Refineries by NSEL worth R2,640.79 crore with interest thereon at the rate of 18% per annum from the date hereof till payments and/or realisation. It has also demanded that pending the hearing and final disposal of the suit, the court receiver be appointed to oversee and all powers including inspection of the goods and securing them of the goods/commodities in NSELs possession. Lotus Refineries in its prayer to the court has also requested that the defendant NSEL be restrained by permanent order of injunction from disposing of its assets or dealing with the same in any manner, whatsoever.