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 NSEL’s 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 court’s remarks came in response to FMC’s 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 NSEL’s 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