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Commentary

NSEL “Settles” with Mohan India, EOW Freezes Jignesh’s Accounts

!A quick update on NSEL: Mohan India has “reached a settlement” with NSEL to pay back Rs. 771 crores out of the Rs. 950 cr. it owes, over the next 12 months.

It’s paid back Rs. 25 cr. to date. The “left over” bit (925 cr. minus 771 cr.) is the “haircut” investors will have to take. Before you outrage, consider that recovering the haircut will involve court cases and enforcement of forward contracts that weren’t legal in the first place, so let’s just sit the F down.

But it’s not entirely clear this settlement means anything. NSEL has proved to be a fraud over and over again, so why should anyone believe them?

They first said they had agreed with all defaulters that payments would be made over six to nine months with a detailed payment schedule. But not ONE payment was met in entirely. Only two of the 24 defaulters are current with their dues.

NSEL itself has lied through its teeth over the last few months. They said there was a settlement guarantee fund of 800 cr, then it turned out there wasn’t even 1% of that. They said there were enough stocks to back the castor seed contracts (in July) and then Anjani Sinha (then CEO of NSEL) stated that they knew that NK Patel, Chief of NK Proteins who was NSEL Chairman Shankarlal Guru’s son-in-law and who was supposed to have maintained the stock, didn’t have it. 

Troublesome is Mohan India owner Jagmohan Garg’s remarks noted in the past in  Businessworld:

“I went to Delhi and inspected the stock. There’s hardly any stock there. I also spoke to Jagmohan Garg, who owns Mohan India. He told me that he didn’t owe anybody anything and all the money that came through Mohan India was routed back to Financial Technologies and its promoters,” said Arun Dalmia, chairman of Watermark Financial Consultants, at a press conference convened by ‘NSEL Investors Forum’ on 13 August.

And consider that the EOW is enforcing its power and seizing properties and bank accounts. They have seized Rs. 233 cr. worth assets from other defaulters.

According to the EOW sources, the agency has recovered and seized over Rs23.69crore worth balance amount kept in over 80 frozen bank accounts. Apart from this, they have seized Rs210 crore worth properties such as 16 warehouses, three oil tanks, stock of wool, castor seeds, cumin seeds, sugar, steel, nickel, soya bean, grams and ferro-chromes.

And then, the cops have frozen Jignes’ Bhai’s accounts – Jignesh Shah is the founder of Financial Technologies, the promoter of NSEL.

“We have frozen the bank accounts of Jignesh Shah and Joseph Massey and all other accused persons named in the FIR of September 30,” said Rajvardhan Sinha, additional police commissioner, Economic Offences Wing (EOW) Mumbai police.

The noose is tightening, and now settlement plans are coming around to prevent further searches. But if there is one thing that we should not settle for, it’s that the perpetrators of this fraud – and all evidence points to the NSEL management and promoters, along with the defaulters – should go to jail. Jignesh Shah is at the center of it, and he needs to be investigated and proper evidence found to prove guilt.

And then IIFL – Nirmal Jain’s broking house – has shut down retail broking and will focus on advisory services. IIFL had to receive – as a broker – over 326 cr. from NSEL, and was the third biggest “lender”. 

(Update: IIFL has notified us of another news article at the Hindu, dated December 2013, two months after the one in the paragraph above, that says they won’t exit their retail business completely, but scale it down. FYI.)

This is hilarious. IIFL in all likelihood “advised” its clients about the NSEL investments – and now they’re going to focus on the advisory model. That’s a great testimonial to start with!