The arrest of Jignesh Shah, founder promoter of Financial Technologies has come as a surprise to many. His name had not figured in the first charge sheet filed in January 2014, when the National Spot Exchange Ltd (NSEL) scam broke. But exactly four months after the filling of the first charge sheet in the Rs 5,600 crore case, the Economic Offence Wing (EOW) on May 7, 2014 arrested Jignesh Shah and Shreekant Javalgekar, ex-managing director and CEO of the multi commodities exchange (MCX).
"Yes the arrest of Jignesh Shah comes as a surprise at this stage," says P.H. Ravikumar, ex-managing director and CEO of NCDEX. "Unless they (EOW) have fresh evidence against Jignesh on his involvement they would not have arrested him. There is something more than what is in the public domain."
Shah and Javalgekar were arrested under the Maharashtra Protection of Interest of Depositors (MPID) act and will be held in police custody. The additional commissioner of EOW, Rajvardhan Sinha in his press conference said that the arrest was made because there was no co-operation by Shah and his people and a custodial interrogation was necessary. He also said he had evidence regarding the involvement of Shah in the NSEL scam.
According to the market grapevine, the changed affidavit by Anjani Sinha, arrested CEO of NSEL that blames Shah for the NSEL fiasco is being circulated among investors of NSEL and that has forced EOW to act against Shah..
But the larger question is: will this arrest bring back investors' money? Says Ravikumar, "Everyone knows where the money is. Most of it has also been traced but there should be a will to get back the money." He adds, "It's not possible to get the entire money, but certainly 80-85 per cent of the money can be recovered in the case of NSEL." The spot exchange owes Rs 5,600 crore to around 13,000 investors. Jignesh Shah's properties, including his Juhu bungalow, have already been attached by the Economic Offences Wing (EOW) of the Mumbai Police.
The other big question is: what happens to Financial Technologies (FT) and MCX, the big revenue pies of Shah's empire. Earlier there was talk that Shah was offloading his stakes in both the entities. Lawyer close to the FT group on condition of anonymity said, "The sale process can go on despite the arrest of Shah. The board members have to come together and decide the stake sale in MCX in which 26 per cent is owned by FT." Adds Ravikumar: "It is necessary to protect the value of the two listed entity (FT & MCX). The regulator and the board have to come together and protect the interest of shareholders." He adds: "The news of Shah's arrest is certainly going to see a sharp fall in the share price of FT and MCX unless we bring back confidence among investors,"
Meanwhile the arrest can be a move to pressure Shah to shell out the money or face arrest as it has been with Subrata Roy in the Sahara case. The EOW has also hinted action against brokers for their involvement in NSEL. Even if the arrest is a tactic to get back the money from Shah, no one can really guess how long it will take.