The corporate affairs ministry has found that the beleaguered National Spot Exchange (NSEL)
and its Board not only violated multiple regulations but did not take action against repeated defaults which resulted in Rs 5,600- crore scam at the bourse.
According to PTI, the Registrar of Companies (RoC), Mumbai, has concluded that NSEL breached as many as 15 provisions of the Companies Act, including those related to corporate governance, sources said. The spot commodity exchange never declared any member as defaulter despite repeated instances of defaults, which is also one of the main reasons for the present crisis, sources added. Many of the defaulters were also allowed to trade and increase their exposure.
NSEL, part of Jignesh Shah-led Financial Technologies Group
(FTIL), is grappling with the crisis after it suspended trade on July 31 on government direction. It has already seen major fallouts with rejig of Boards at the exchange as well as at some other Group companies.
Besides finding corporate governance failures, including lack of transparency, integrity and compliance, sources said that the bourse did not have as many as nine committees. These panels are required under regulations.
Among others, the exchange did not set up vigilance, dispute resolution, trading, clearing and arbitration panels. There have meetings and it has been found that the Board did not discuss the exchange's compliance with various rules such as those related to admission of new members, sources said.
Flagging various concerns, the inspection found that the exchange did not have a mechanism for verification of physical stock at the warehouses. As per the findings, many NSEL directors, including Shah and Joseph Massey, were holding common directorship in Group companies of FTIL and they cannot claim to be not aware about happenings at the exchange.
The inspection of books was ordered under Section 209 A of the Companies Act.
Non-executive chairman ShankarlaI Guru and two non- executive directors Ramanathan Devarajan and B D Pawar have also quit from NSEL Board.
Courtesy: Mail Today