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Business News/ Companies / People/  Jignesh Shah bail hearing deferred until 5 August
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Jignesh Shah bail hearing deferred until 5 August

Judge says if the Economic Offences Wing files a chargesheet by 5 Aug, the case will be decided in a couple of days

Shah has been under arrest since 7 May in connection with the `5,574.34 crore fraud at National Spot Exchange Ltd. Photo: Abhijit Bhatlekar/MintPremium
Shah has been under arrest since 7 May in connection with the `5,574.34 crore fraud at National Spot Exchange Ltd. Photo: Abhijit Bhatlekar/Mint

Mumbai: The Bombay high court on Thursday deferred the hearing of a bail application by Jignesh Shah, chairman and group chief executive officer of Financial Technologies (India) Ltd (FTIL), until 5 August, when Mumbai police’s Economic Offences Wing (EOW) is expected to file a chargesheet against the entrepreneur.

Shah has been under arrest since 7 May in connection with the 5,574.34 crore fraud at National Spot Exchange Ltd (NSEL). Under the norms, EOW is required to file a chargesheet within 90 days of the arrest of a person.

Justice Abhay Thipsay, who has been hearing Shah’s bail application, said on Thursday, “If the EOW files a chargesheet (by 5 August), I will look at it and decide the case in a couple of days."

FTIL owns a 99.99% stake in NSEL.

Shah and his companies have been declared unfit to run a commodity exchange and ordered to reduce their stake in Multi Commodity Exchange of India Ltd (MCX). He has also lost control of MCX-SX with the stock market regulator declaring FTIL unfit to run exchanges on 19 March. FTIL recently sold a 15% stake in MCX to Kotak Mahindra Bank Ltd at a price of 600 per piece. FTIL now holds only a 5% stake in MCX. Shah, 47, and his family hold around 45.5% of FTIL.

Mahesh Jethmalani, senior counsel representing Shah, has said EOW of the Mumbai police had “no direct or indirect evidence to show Shah was the beneficiary of the NSEL crisis".

Shah’s arrest was the 10th and most significant by EOW since the NSEL payment crisis began in July last year.

On 31 July last year, what was then considered a settlement crisis at NSEL came to light when the exchange suspended trading in all but its e-series contracts. E-series contracts were meant to allow retail investors to buy and sell commodities in dematerialized form. These, too, were suspended a week later.

The suspension may have been prompted by an instruction from the ministry of consumer affairs to the exchange, asking it not to offer futures contracts. A spot exchange isn’t supposed to do so, but NSEL was doing that. NSEL tried to implement the change, but because its appeal was to investors and members who were not interested in spot trades, it eventually had to suspend all trading.

It later emerged that all trading on NSEL happened in paired contracts, with investors, through brokers, buying a spot contract and selling a futures one for the same commodity. The entities selling on spot photo and buying futures were planters or processors and members of the exchange. It turned out there were only 24 of them, and they used the paired contracts as a way to raise easy money.

When the trading was suspended, the investors were left holding contracts that the members couldn’t buy because they didn’t have the money to do so. On 14 August, NSEL proposed a pay-out plan, but it has been unable to stick to the schedule.

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Published: 31 Jul 2014, 04:20 PM IST
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