Shah evasive, not helping in probe: Mumbai police
May 09 2014 , Mumbai
Duo in EOW custody; Chary new FTIL chairman
In a hurriedly called meeting, the FTIL board on Thursday elevated Venkat K Chary as the non-executive chairman. Chary is already an independent director of the company. The board also approved handing over of powers to two whole-time directors to manage the company's day-to-day affairs, the company said in a statement without naming them.
The police said the arrest made after hours of interrogation on Wednesday was necessary as Shah had not been “cooperating” in the questioning and was being “evasive” throughout.
The two repeatedly blamed NSEL chief executive officer Anjani Sinha for the crisis, which EOW officers believe, was merely “blame shifting”. They claim the two were equally responsible for flouting of rules and misappropriation that led to the huge payments crisis.
“They were at the helm of affairs. It is not possible that the scam happened without their knowledge. Shah practically nurtured the entire organisation right from its infancy. So he should be fully aware and involved in what was happening,” an EOW officer said.
While arguing for their custody in the court, the EOW officials said they wanted to unravel the entire chain of events starting with the violation of trading rules and use of bogus ‘clients’, and establish the roles of Shah and Javalgekar in the scam.
Shah’s lawyer Mahesh Jethmalani, however, argued that the EOW had in an earlier affidavit claimed that Shah had been cooperative in the questioning.
“He visited EOW’s office 21 times to record his statement and provided the company’s sever and technical staff to assist the probe. His arrest would make it difficult to recover investor money, as he wouldn’t be able to manage affairs from inside a jail cell,” Jethmalani said.
PTI adds: Police told the sessions court that Shah was the ‘financial controller’ of the FTIL and there was a huge transfer of funds from NSEL to FTIL. Profits of NSEL were siphoned off so that FTIL may benefit, they said.
During his interrogation on Wednesday, Shah told the police that he too was a ‘victim’, though he could not substantiate his claim. “I am also one of the victims in this entire crisis. I tried my best to recover money from defaulters,” he said soon after his arrest.
“During the questioning, he maintained all along, that he was not at fault for the mess surrounding the NSEL platform, but we pointed out that all documents procured by us so far suggested his involvement very clearly,” a police officer privy to the investigation told PTI.
The EOW investigators countered saying: “We (police) have attached movable and immovable properties of directors, members and defaulters of NSEL, which is worth over Rs 5,100 crore so far. However, these records do not show any efforts from your end to recover money at all. Please show us any record that substantiate your claims.”
Hundreds of aggrieved investors who turned up at the court to witness the proceedings related to Shah’s arrest, demanded that the case be fast-tracked, so that he was convicted and his assets were liquidated at the earliest.
One of the victims, Kirit Seth, (55), said not only 13,000 investors, but also their family members have become destitute after they lost crores of rupees by investing in NSEL.
“He (Shah) should not be granted bail and the case should be fast-tracked,” Seth demanded while waiting outside the court.
Mumbai police sources said the investigators had shifted focus to brokers and warned that they would face the same fate if they did not cooperate with the probe.
“If the brokers are not forthcoming during the probe, we would be left with no option but to take them into custody for interrogation," said a senior police officer privy to the probe.
Brokers’ role is under investigation for certain malpractices. Brokers have charged certain percentage on fake warehouse receipts as per the investigators.
Police have also found that certain broking houses used client accounts without their knowledge for doing purchases. Many rules were modified for brokers' gain.
In Delhi, finance minister Chidambaram said it was the decision of the investigating agency and the government had no say in the matter.
He said MCX and MCX Stock Exchange, set up by FTIL, are under the ‘careful’ watch of regulators Forward Markets Commission and the Securities and Exchange Board of India, respectively. “The government does not directly supervise and regulate them. It is done through the statutory regulators,” he said.Mumbai court on Thursday remanded Financial Technologies (FTIL) and Multi Commodities Exchange (MCX) promoter Jignesh Shah and former chief executive of the exchange Shreekant Javalgekar in police custody till May 15.
The economic offences wing (EOW) of Mumbai police arrested the duo on Wednesday in connection with the Rs 5,600 crore payment crisis at the National Spot Exchange (NSEL), a commodities bourse owned by FTIL.
The investigators now plan to interrogate the two to establish how the irregularities were committed and under whose directions. Nearly 18,000 investors allegedly lost money in the scam.
FTIL and MCX shares plunged 5 per cent and 7 per cent in Mumbai trading on Thursday. FTIL informed the stock exchanges about the arrests but did not provide any further information. This was the 11th arrest in the scam.
Shares of FTIL hit its lower circuit of 5 per cent at Rs 276.70 as soon as market opened. The stock is down 66 per cent from its 52-week closing high of Rs 817.04 hit last May.
MCX plunged 9 per cent in the morning trade before closing at Rs 496.35, down 6.99 per cent.
“We do not think Shah’s arrest will impact the sale proceeding in MCX,” said Prakash Diwan, director at Altamount Capital.
FTIL has been asked to reduce its stake in MCX to 2 per cent from 26 per cent after the regulators in December 2013 declared it ‘not fit and proper’ to run an exchange.