NSEL was an e-platform where Trading Clients through Brokers have bought and sold commodity contracts. Brokers had large legal and compliance departments and traded in commodities on NSEL on behalf of Trading Clients.
The NSEL Crisis came to light on 31 July 2013, when the present Defaulters of the Exchange failed to honour their pay-in obligations and Trading Members who traded on behalf of their clients could not receive their dues. After exhaustive investigations by multiple investigating agencies such as the EOW, CBI and ED, the 22 defaulters of the Exchange stand charged for perpetrating the crisis.
According to EOW, there were some brokers who played a vital role in crisis along with small brokers. EOW during interrogation with the investors, came to know that the brokers assured them of higher returns from NSEL for a higher brokerage. ” According to EOW Reports, few brokers had lent money to the investors at 10-12% interest and the investors had invested the same in NSEL trading platform expecting 15-16% returns.”
Another important aspect of the investigation, was the brokers assured investors regarding safety of their money and existence of stocks in warehouses. One of the investor, told the police that the brokers even executed bulk purchase orders without their consent. The investigation Officer told that the brokers who had to collect delivery orders or warehouse receipts for their clients did not do it and that amounts to criminal breach of trust. According to EOW charge sheet, the brokers acted as clearing and forwarding agents on behalf of their clients.
According to Media Reports, there were some of the most prominent names of Indians stock broking such as Anand Rathi Commodities, India Infoline Commodities and Geojit Comtrade. These people were being actively wooed by FT-MCX group in creating volumes in its various exchanges. While the names of members-borrowers who have defaulted are known, the list of member-brokers who funnelled the money for the borrowing-lending racket at 16%-18% fixed return has not been published so far. Here is the list of top 25. The complete list of those who owed money as well as those who were owed money from the NSEL system in early August.
|Top 25 Members-brokers Owed To||Amount owed (Rs Cr)||Paid so far (Rs Cr)||Still owed (Rs Cr)|
|Indian Bullion Markets Association||1159.55||24.94||1134.61|
|Anand Rathi Commodities||629.21||13.46||615.75|
|India Infoline Commodities||326.23||6.98||319.25|
|Motilal Oswal Commodities||262.88||5.62||257.26|
|Purvag Commodities & Derivatives||132.58||2.83||129.75|
|JM Financial Commtrade||83.62||1.78||81.84|
|Arihant Futures and Commodities||55.88||1.19||54.69|
|RR Commodity Brokers||49.02||1.04||47.98|
|Nirmal Bang Commodities||46.64||0.99||45.65|
|India Nivesh Commodities||37.92||0.81||37.11|
|Suresh Rathi Commodities||37.7||0.80||36.9|
|Chimanlal Popatlal Commodities Broker||37||0.79||36.21|
|Rainbow Commodity and Derivatives||35.91||0.76||35.15|
|Ludhiana Commodities Trading Services||34.64||0.74||33.9|