Financial Technologies India Ltd (FTIL) promoter Jignesh Shah and former Multi Commodity Exchange managing director & chief executive Shreekhant Javalgekar will remain in police custody till May 15, the Maharashtra Protection of Interest of Depositors (MPID) court has decided. The two were on Wednesday arrested by the Economic Offences Wing (EOW) of the Mumbai Police for their alleged role in the Rs 5,600-crore payment fraud at National Spot Exchange Ltd (NSEL).
Shah and Javalgekar were on Thursday presented before the MPID court in South Mumbai, where the magistrate rejected their bail applications. The police argued NSEL, set up as a spot trading exchange, later began to operate like a financial organisation and Shah’s argument that he was unaware of this did not exonerate him from the responsibility. According to the police, Shah, former MCX MD Joseph Massey and Javalgekar (who was also controlling finances) were the brains behind the NSEL fiasco.
Another charge put forth by the police was that NSEL continuously allowed borrowers to pull out funds, even as they were already defaulting.
Lawyer Mahesh Jethmalani, representing Shah, argued no case of forgery applied on Jignesh Shah, though he might have violated certain norms of the Forward Markets Commission. Responding to EOW’s claim that Shah did not cooperate during investigations, Jethmalani said: “EOW called Shah 21 times for questioning and Shah went each time.”
The charges against Shah in this case are under 477(a) for criminal breach of trust, which is a bailable offence. Even according to the money trail, lost money has not found its way into the coffers of Shah or Javalgekar. Arresting Shah will be a setback to the recovery process in the NSEL case, Jethmalani said.
He, however, conceded Shah had been negligent in the NSEL crisis. He did not monitor the NSEL employees, who caused the crisis.
Abad H Ponda, representing Javalgekar, argued the first information report in this case was filed in September and EOW had been investigating the case since. Javalgekar had appeared before EOW every time he was called and not disobeyed any summons. Javalgekar had not committed forgery in this case and this arrest was illegal, he said.
EOW’s lawyer (public prosecutor) argued that NSEL deviated from its purpose proposed to FMC. Another charge was that the board of NSEL misrepresented facts to investors. Also, huge fund transfers from NSEL to FTIL had taken place. So, profits of NSEL were siphoned off to benefit FTIL.
Chary appointed FTIL’s interim chairman
The board of directors of Financial Technologies on Thursday appointed independent non-executive director Venkat Chary the company’s independent non-executive chairman. In the interim, the existing two whole-time directors — Dewang Neralla and Jignesh Shah’s younger brother Manjay Shah — would be in charge of the firm’s day-to-day affairs. The statement issued by FTIL late on Thursday said “the board will meet on May 10 to take a call on divestment in MCX.” The board of directors of MCX, too, are meeting on Friday to discuss various issues, including resignation of MD Manoj Vaish, who quit on April 30 citing poor health. The exchange had asked him to continue till an alternative arrangement is made.