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NSEL Defaulters are Peons, FMC Is Ticked Off, NSEL Subsidiary is owed 1160 cr. in Settlement


Kirit Somaiya (ex BJP MP) has found that the directors of Juggernaut Projects, one of the lenders to NSEL are peons at Motilal Oswal, earning Rs. 8000 per month. (I got informal news that Motilal Oswal has said they are employed by a sub-broker but do not have a link to confirm).

Updated: Motilal Oswal has confirmed these are employees of a sub-broker, so are not related to Motilal Oswal. Thanks to reader Ramnik Chhabra for the link. (Sub brokers are franchises whose peons the main broker – Motilal oswal – will have no control over)


He has also filed a complaint with the ED.

FMC Beats Up NSEL, but tells it to return the money

Meanwhile, NSEL gets rapped by FMC in a scathing letter:

  • From NSEL’s bye-laws it is very clear that the exchange stands guarantee for every settlement, as the buyers and sellers don’t know each other. Therefore, NSEL’s statement that this is a matter between buyers and sellers is completely bogus.
  • When one party doesn’t meet its obligations, the rule is to declare them a defaulter and close out their positions in an auction immediately. Why was this not done?
  • It seems NSEL has appointed SGS to verify the stock at warehouses. FMC has demanded the appointment letter and terms of the contract. My thought: It’s likely that either such a letter does not exist, or if it does, it doesn’t benefit the settlement, which is why FMC wants to know.
  • FMC is really ticked off that some parties who agreed to settle on time (about 2,000 cr.) have now reneged. Only 12 buyers are paying Rs. 1774 cr,. over 20 weeks and 10 buyers have extended the payment of 2581 cr. over 30 weeks. Changing an agreed thing within a short time is horrible for the confidence of people who need to be paid.
  • FMC is also ticked off about the switch on the guarantee fund – from 860 cr to 62 cr. and so on. They have demanded a full forensic audit of accounts within 7 days.
  • Where are these post-dated cheques and bank guarantees NSEL says it has? They have demanded details.

FMC has however said that the settlement plan should go ahead as scheduled.

NSEL owned IBMA is owed Rs. 1,160 cr.?

FMC sends another letter saying there’s a company called Indian Bullion Markets Association (IBMA) which is 60% owned by NSEL.

This company has to receive Rs. 1160 cr. from the recent settlement.

(What the heck was an NSEL owned company doing as a player in the exchange? This is insane. If the exchange is a player, then what is the sanctity of any settlement?)

FMC has demanded details.

My take: Now FMC should demand all details of FT and MCX owned companies that are members of MCX. They should immediately be suspended from trading the commodity exchanges.

Further, SEBI should ask for such declarations as well.

FT stock has gone up 3% on the huge down day that Friday was, and MCX was down a further 3.7% to 244. While things remain in flux the stocks will stay volatile. However this NSEL thing isn’t quite over yet.


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