Main accused in the Rs 5,600 crore National Spot Exchange Limited (NSEL) scam, Jignesh Shah, was under tremendous pressure to save his flagship company Financial Technologies India Limited (FTIL), the Economic Offences Wing (EOW) has alleged in its charge-sheet filed against Shah.
According to the EOW, all of Shah's other ventures under the flagship of FTIL were incurring heavy losses and to save them, Shah allegedly broke the law and compromised on management parameters.
The 9,000-page chargesheet throws light on Shah's FTIL, and states that all of Shah's other ventures after MCX were not profitable. This was denting the market image of FTIL and also, severely affecting the image of Shah, the police have said. Hence, it was a challenge for Shah to show good profitability in at least one of the FTIL subsidiary so that he can claim that other companies will also give good performance in the near future.
"It was the question of survival for the FTIL group and since most of the exchange set up by him were regulated entities, and Shah had such a leverage only in NSEL which was an unregulated entity. As a result of compromising in the management parameters, the profit of NSEL jumped from Rs 30 crores to Rs 130 crore. However, at the same time it created a huge exposure of around Rs 5,600 crore on NSEL which resulted in the NSEL scam," the charge-sheet states.
The chargesheet submitted by the EOW in the MPID court states that NSEL deviated from its own business model submitted to the Forward Market Commission (FMC). The chargesheet claims that the trades launched by the NSEL were neither backed by actual or physical delivery of goods and there was no spot trading that was done and hence, it operated like a financial transaction.
The chargesheet highlights the fact that Anjani Sinha, MD and CEO of NSEL, admitted that the borrowers were allowed to trade even after committing a series of defaults confirmed that the board was aware of the siphoning of the funds of the investors. It is further stated in the chargesheet that Shah deliberately misrepresented that trading on NSEL was safe and smooth in spite of knowing about the financial activity being undertaken by the NSEL.
Explaining role of Shah, the chargesheet states that as head of Audit Committee of NSEL, it was his responsibility to look after all the financial matters relating to the company and also to take proper action for eliminating any risk relating to the financial exposure. However, Shah neglected the basic functioning to risk management and this created NSEL fraud.