New Delhi: The CBI is looking into alleged irregularities at the National Spot Exchange Ltd (NSEL), Finance Minister P Chidambaram said Thursday, indicating the agency may take appropriate action.
"A complaint has been received by the CBI of violations of the Indian Penal Code and some other laws. The CBI is looking into that complaint and they will decide what further action needs to be taken on the complaint," he told reporters.
Chidambaram said three authorities -- the CBI, the Forward Markets Commission (FMC) and the Ministry of Corporate Affairs (MCA) -- are looking into the payment crisis at the commodity exchange, as per recommendations of the high-level committee headed by Economic Affairs Secretary Arvind Mayaram.
"I cannot possibly give a timeline for when each of these authorities will take action, but from what I have gathered, each of these authorities will take action as early as possible...They have listed out the irregularities," he said.
NSEL, a part of the Jignesh Shah-led Financial Technologies (FTIL) group, is grappling with a Rs 5,600 crore payment crisis after it had to suspend trading on July 31 after a government directive. It has defaulted on six consecutive weekly payments to its investors.
NSEL was not a registered or recognised association under the FMC and got exemption even before it started its business, Chidambaram said, adding investors who put in money in the exchange knew it was an unregulated entity.
"I think there is much more to the way NSEL started business than meets the eye. People seem to have given money to NSEL promoters with open eyes that it is not a regulated entity, that is violating conditions from day one. Yet they were giving money to NSEL. Many of them made money in initial stages and some of them lost money now," he said.
Chidambaram said although there was no fear of the NSEL crisis spilling over to other markets, he has asked capital market regulator Sebi and commodity market watchdog FMC to keep a careful watch.
"NSEL was violating the very conditions under which they claimed they could do business," he said.
NSEL promoter FTIL has also promoted two other trading platforms -- the Multi Commodity Exchange of India Ltd and MCX Stock Exchange Ltd.
On whether the government is looking at changing the management of other entities with the same promoters, Chidambaram said, "Let us wait for the report of the regulators. Let FMC give its report. I think the FMC report will be ready in a day or two. We will see the report first."
The minister said once the FMC report is received, the CBI and MCA will look into it and decide what action needs to be taken.
Chidambaram said the Income Tax department is looking into the financial details of investors in NSEL to find out whether there is involvement of black money.
The government had in 2007 exempted NSEL from provisions of the Forward Contracts Regulation Act (FCRA) to operate one-day forward commodity contracts.
The exemption was given on some conditions, including delivery of commodities within 11 days and a bar on short selling by members of the exchange.
Observing that the NSEL got exemption under the FCRA even before it started business, he said, "I have seen the exemption order. Now, whether it is valid or not -- that has to be examined."
He said the investors would definitely approach court as it is a matter between them and the company.
"The government does not come into the picture at all. It is a company. It is not a regulated entity, which got exemption order even before it started business. Therefore, what legal rights flow to the company and investors, court will adjudicate that.
"What mutual rights and liabilities between the courts and investors is there, only courts will adjudicate that," he said.
There are around 17,000 investors in NSEL, out of which 9,000 traded through the top eight brokers, including Anand Rathi, Motilal Oswal, India Infoline and Systematix.