The former CEO Anjani Sinha's statement assumes significance as the NSEL board has been trying to distance itself from the crisis by blaming the senior management for the violation of norms and the R5,600-crore payments crisis.
A forensic report by Grant Thornton concluded the NSEL had turned into a para-banking entity with 99% of the turnover coming from ‘paired contracts’. Moreover, the report pointed out that the board had been negligent on several counts. Moreover, minutes of some board meetings showed NSEL had approached lenders to extend credit facilities to members.
Preliminary investigations by the Economic Offences Wing (EOW) into the money trail suggest a part of the money could have gone back to the promoters of NSEL, sources said.
The police, which has initiated the process of invoking the stringent Maharashtra Protection of Interest of Depositors (In Financial Establishments) Act, 1999 — popularly known as MPID — also expressed surprise at NSEL’s business model, pointing out it was operating like a para-banking entity.
“An exchange cannot have a borrower. It can only have buyers and sellers. The very fact that there is a term called borrowers means that NSEL got into the business of lending money, which cannot be the purpose of an exchange,” said Himanshu Roy, joint commissioner (crime), Mumbai Police.
Senior police officials said Anjani Sinha had stated in a fresh affidavit that the board of directors had always been in the know of the wrongdoings at the exchange and that he had been forced to take the blame.
“Anjani Sinha submitted an affidavit yesterday... He has said that he signed the earlier affidavit under duress. While he has not named any person as such, he has said that the board of directors of NSEL was aware of all the developments at the exchange. We will try to corroborate it with circumstantial and other documentary evidence,” a senior police official familiar with the investigation said. In the first affidavit, Anjani Sinha had absolved the board of any blame, claiming the senior management was responsible for the crisis.
Anjani Sinha is understood to have said in the new affidavit that he was not given full authority to take crucial decisions and that the board and the promoters were responsible for the lack of proper risk management and other systems.
Joseph Massey, an NSEL board member, was also called to the EOW, after which Anjani Sinha was questioned in the presence of Massey. Sources say this was done with a specific motive of corroborating some of the statements made by Anjani Sinha.
“The allegations made by the accused against the NSEL board members including Jignesh Shah and Joseph Massey should not be taken at face value. The matter is under investigation and we cannot comment further,” said an NSEL spokesperson.
Meanwhile, the Forward Markets Commission has given Financial Technologies India Ltd (FTIL), NSEL’s parent, until October 31 to respond to the show-cause notice issued by it questioning the ‘fit & proper’ status of the board of directors and the promoters.