Investor Issues
NSEL investors seek forensic audit of all major brokers

According to NSEL Investor's Action Group, brokers of the Exchange have played an active role in theRs5,600 crore scam and the EOW must also investigate the disparity in pair trades

Calling National Spot Exchange Ltd (NSEL) as a 'dummy exchange with Ponzi financing scheme', the NSEL Investor's Action Group has requested Mumbai police to initiate a forensic audit of all major brokers and investigate the role of brokers in the pair trade scam in the Exchange.


The Action Group, in a letter, said, "There were only 18 borrowers (after removing sister companies) on one side and 13,000-odd investors on the other side. There cannot be any genuine exchange in the world, where the disparity between the two sides of players would be so huge. The brokers who used to receive and raise bills on these 18 companies fully knew about this. Also, the prices of commodities were never ‘market discovered’ by ‘live bids and offers’ (like any other exchange), but rigged from the back-end with the full knowledge of brokers".


The Action Group has requested the Economic Offences Wing (EOW) of Mumbai Police to consider 15 points in their investigation in the Rs5,600 crore NSEL scam. The points include, disparity of number of players on both sides of NSEL pair trades, non-collection of delivery order or warehouse receipts by brokers, difference in time between purchase and sale transactions, purchase effected without order from client, manipulation of market, changing of code in the Exchange, cancellation of purchases, brokers themselves acting as carry & forward (C&F) agents, payment of sales tax where there is no stock, collection of brokerage, transaction charges and delivery charges when the stock never existed, financing clients through their non-banking finance companies (NBFCs), maintenance of Settlement Guarantee Fund (SGF), false inducement of safety, the nexus between brokers and borrowers and brokers knowledge about financing NBFC-like activity.


As pointed out by Moneylife, the fact is that it was the brokers, who lured investors in the first place to get risk-free gains from NSEL.


Earlier in August, NSEL filed a complaint against five of its defaulting members, Ark Imports Pvt Ltd, Lotus Refineries Pvt Ltd, NK Proteins Ltd, Vimladevi Agrotech Ltd and Yathuri Associates before the investigation authorities.


As per the rules and bye-laws, the Exchange also asked these defaulting members to submit their books of accounts and hand-over all the collaterals to NSEL.


Here is the letter sent by NSEL Investor's Action Group...



Job ‘offer’...but where’s the job?

The Law of Torts is still in nascent stage in India but only if the aam aadmi wakes up will it be successful

AMoneylife reader wrote to us recently, asking if this column carried true stories. The answer is an unequivocal yes. We do not need to make them up. Law is full of such stories and truth is stranger than fiction. What made us happy, when we got the question, was that readers are truly surprised by the strange cases we try to select and analyse.

 Some cases that we write about are old. A few are from the time when I was 10 years old and are still valid, 60 years later! But we do try to bring in topical information. Like the one below and, in the next issue, where two similar instances are discussed.

What does one do when one is looking for a job? The easiest way is to get enrolled with a jobsite. It costs nothing; is very impersonal; and there are so many to choose from. Type out a résumé, save it, and post it on as many sites as possible.

Then comes the wait. The candidate thinks that he (or she) is the one most likely to get that fantastic job that he has been dreaming of. Wait. Wait. Wait.

To show its efficiency, the jobsite lines up an interview. The candidate is thrilled. Takes the day off, losing his leave or salary. Gets suited and booted and goes for the interview. It goes off really well. He feels sure that the job is his.  
That is not what happens always.

A lawyer colleague went through it, not once but many times, until realisation dawned that he was being had. Taken for a ride. There were no jobs available but the agency wanted to show its reach and efficiency. The HR guy, supposedly looking for a candidate, was just filling in his time, most likely with the agency in the know.

Our friend was losing time and money, or at least his leave. Does he have recourse to any relief? Suppose he collected enough evidence to show it was all a sham, if not a scam, and sued the agency. Would he succeed?

You be the judge.
How would you decide the case? In our opinion, the lawyer is entitled to be compensated, if he can prove that the calls were a deception, a merry-go-round of useless trips. He needs to show a loss also—of time, of salary, of effort and of money. The law of torts is still in its nascent stage in our country but only if the aam aadmi wakes up will he be successful.
While writing this article, we found another source of trouble in the head-hunting business. Some unscrupulous firms, in the know of the job-seeker’s existing employment, convey, what is essentially confidential information, to the present employer! So, if the candidate has enough foresight to ensure a confidentiality clause, he will be successful in court. He can then sue for breach of contract, compromising confidentiality, loss of sanctity at the workplace, maybe even destruction of career.  You be the judge.

The Flip Side
Usually, there is another side to every story; often, closer home. Many companies have a beef with candidates they find on online jobsites. Prospective employees confirm interview appointments... and just do not turn up; or take the appointment letter and do not join. Why? Because those who say they are interested, aren’t really. They are quite happy with what they have and respond to advertisements for a lark, or to check their market value.

There is a wider ramification. Statistics-wise. Government employment bureaux are where all and sundry apply. And forget to get off the list when they do get a job. This gives a skewed picture of unemployment figures. Who is to blame?
You be the judge.

Bapoo Malcolm is a practising lawyer in Mumbai. Please email your comments to [email protected] or [email protected]


Letter from the Editor

Happy 2014!

As I write this Letter from the Editor, the year 2013 is coming to a close....

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