While granting a bail to Jignesh Shah, group CEO and Chairman of Financial Technologies in the case of NSEL fiasco Justice Thipsay of Bombay High Court said that those who are calling themselves as investors are actually traders and court went to the extent of saying that even questioned applicability of Maharashtra Protection of Interests of Depositors (MPID) Act in the NSEL case. These observations of high court could have a far reaching impact on the way cases and investigations in the NSEL Rs.5600 crore fiasco are going on.
Court said that transactions in question were not genuine transactions of sale or purchase was well known to the so-called buyers also, who now choose to describe themselves as ‘investors’. Court call them traders rather than calling them investors who were putting money just to get safe and high returns without bothering for legalities of trades. The court observed that these investors and even brokers, who have knowledge of commercial market, were aware about illegality of the trades.
Justice Thipsay said, “persons who are raising the grievance about such fictitious trading were themselves not genuine traders, and had entered into the transactions purely as financial investments.”
Another striking point observed by the court while delivering the judgment was whether MPID act can apply to the NSEL case.
Order said, “whether the monies paid by the buyers for purchasing the commodities would amount to ‘deposit’ as defined in clause (c) of section 2 of the MPID Act, would need serious consideration.” This is significant as the case by police- EOW- has been registered under MPID Act and all properties including that of borrowers who get away with Rs.5600 crore have been attached by Mumbai police under MPID Act.
Court also said, “Whether, NSEL can be termed as a ‘financial establishment’ as defined under clause (d) of section 2 of the MPID Act, would need equally serious consideration.
Court obviously mentioned that wrong things have happened at NSEL but said that there was nothing to show that Jignesh shah was aware of the irregularities.
Thipsay however said though there were no proofs of money raised by 25 borrowers were parted with Jignesh shah, the police is investigating that the money was paid to shah through havala deals, can carry on investigations, but at present, perhaps it has been conveniently ignored that the funds had not come to NSEL, but had gone to such borrowers. According to Justice Thipsay, “the only real allegation against shah is that he allowed NSEL to violate the rules and regulations, and its own business model, which enabled the ‘borrowers’ to dupe the ‘ investors ‘.”
Even in case of investors asking Jignesh shah to pay them as he has resources and investors have lost money, court observed that that cannot be valid reason as even investors are not saying that they need money from shah because money went to his pocket. Court said by increasing volumes on NSEL and that way profit to FTIL, shah benefited only indirectly from this.
NSEL Investors Forum is exploring possibility of challenging the order and specifically observations about investors.
Pankaj Saraf, an NSEL investors who intervened in the case, said on the issue of court saying investors in the exchange actually are traders said that, “if investors are not genuine as the court has observed then even two PSUs who invested in NSEL were also not genuine investors?”