Periodic briefings to Government by NSEL

The senior management of NSEL has been meeting with the MAC appointed by the FMC on a
weekly/fortnightly basis. These are very structured meetings with minutes and action taken reports. In all, 25 committee meetings took place, between October 9, 2013, and August 8, 2014, wherein 246 agenda items were dealt with. In some of these meetings, the FMC representative also participated. All meetings were hosted at NSEL’s office and were provided with detailed agenda notes  and electronic display of further details.
Additionally, NSEL compiled and sent a detailed weekly report to the FMC, which summarized all
recovery, settlement pay-outs, legal and court cases, e-Series updates and any important developments of the week.
Thus, despite being fully aware of the various continuous efforts made by NSEL for recovery of the dues from the 22 defaulters, the FMC’s allegation of ‘no progress in recovery’ is surprising.

NSEL cooperates completely with investigating agencies

• NSEL has provided personnel and IT support to both the EOW and the Competent Authority constituted under the MPID Act in order to speed up the recovery process and assist in the ongoing
investigation. Voluminous data has been shared with both agencies | entities and four draft proposals
have been submitted to the Competent Authority in consultation with the MAC for submission to Court for the sale of commodities and properties of four defaulter members.
• The Exchange has deputed staff at the EOW to assist recovery meetings with defaulters.
• The MAC constituted by the FMC met every week/fortnight at the exchange with active participation from NSEL to review recovery proceeding. However, the same has been recently wound up by the FMC in light of the high powered Committee constituted by the Bombay High Court.
• Interaction with client groups and member groups for information, clarifications or recovery are held periodically.
• Coordination with RBI, CIBIL, banks and various government agencies to get more information and data on defaulters to make recovery case stronger is an ongoing process.

NSEL: Mature way of solving the crisis

• NSEL had a valid and legal business model

• There was no omission or commission on part of the NSEL Board

• The crisis was solvable, but was blown out of proportion by the action of the FMC, which focused on disciplinary action first, even prior to an investigation, and left out recovery and action against

defaulters completely

• FMC has been changing its stance in NSEL matter even before the crisis erupted. When on July 19,

2013 it replied to the Government that the 2007 exemption was a general exemption, then where did

the question of illegality arise for suspending the trading of NSEL?

• Due to a conspiracy, the NSEL crisis was treated differently than any other previous crisis in the financial sector including the manner in which the FMC treated other spot exchanges and NSEL

• When NSEL suspended its trading, there were 46,000 trading clients with outstanding, out of which

33,000 trading clients in e-Series got their full payment and out of the remaining 13,000 trading clients more than 50% of them, around 7,000 trading clients, were paid more than 50% of their outstanding from the loan provided by FTIL

• Comprehensive investigation by the EOW has revealed that the entire outstanding dues of the trading clients are with the 22 defaulters

Why FMC is after NSEL and FTIL?

The big issue about NSEL is about its regulation. The Forward Markets Commission, which regulates the commodity exchanges in India, disowned the regulation of the spot exchange saying that it is not under its purview, while, the Department of Consumer Affairs, Government of India through various notifications entrusted the FMC with regulation of spot exchanges and oversight which are core issues that form any regulatory mandate. Assuming for a moment that the FMC is not responsible for spot market business, then why is it so keen on punishing the promoters of NSEL for payment defaults that took place in the private market. In fact, some of the Government committees set up initially to investigate the issue observed that the affected parties were few and niche and this crisis did not cause any systemic problem. In that case what could be the motivation for the FMC to take exceptional and extraordinary interest in this issue?