Police arrests seven more from six defaulting companies in the NSEL scam

MUMBAI: The Mumbai police arrested seven owners and directors from six defaulting companies that owe a cumulative Rs 1,164 crore to thousands of investors in the National Spot Exchange (NSEL) which was hit by a Rs 5,600-crore fraud.

"The seven owners and directors of the companies were arrested on Monday after sustained interrogation since early morning," said Rajvardhan, additional commissioner of police, Economic Offences Wing, who heads the probe. "The investigating official felt that custodial interrogation was necessary as the accused were not cooperating and even sometimes failed to respond to summons."

The arrests, all of which were made in Mumbai, came three months after Jignesh Shah, alleged mastermind of the scam according to the police, was arrested on May 7. The Bombay High Court has reserved its order on Shah’s bail application. Shah is chairman of Financial Technologies India (FTIL), which owns the defunct NSEL.

Those arrested on Monday include Kailash Aggarwal, director, Ludhiana-based Ark Imports, Prashant Boorugu, MD, Hyderabad-based Metkore Alloys, Narayanam Nageswara Rao, MD, Hyderabad-based NCS Sugars, BVH Prasad, director, Mumbai-based Juggernaut Projects Pvt Ltd, Varun Gupta and Chandra Mohan Singhal, directors of Vimladevi Agrotech, and Ghanta K Rao, MD, Andhra Pradesh based Spin-Cot Textiles.

According to the police, Ark Imports has a liability of Rs 719 crore, Metkore Alloys’ is Rs 114.28 crore, that of NCS Sugars is Rs 58.9 crore, that of Juggernaut Projects is Rs 220 crore, that of Spin-Cot is Rs 38 crore and that of Vimladevi is Rs 14 crore.

Ark Imports is one of the largest importers and traders of wool in the country. Juggernaut, part of the Aastha group, trades in steel. Metkore Alloys trades in ferro alloys.

Mohit Aggarwal, MD, Aastha Group, with its office in South Mumbai’s Indiabulls Finance Centre, has applied for anticipatory bail in the Bombay High Court and the hearing is likely to come up on Tuesday. The Aastha Group last year withdrew its IPO in the wake of the NSEL scam coming to light last July. So far 15 arrests have been made in the NSEL fiasco. Many of those arrested like Anjani Sinha, former MD & CEO of the bourse, and Nilesh Patel, director of NK Proteins, allegedly the largest defaulter on NSEL, are out on bail.

These companies allegedly borrowed money against commodities such as wool, steel, cotton, sugar, etc, which were found to be negligible or non-existent after NSEL suspended trading following government pressure in July last year. The modus operandi involved selling the commodity to investors on a trade plus two basis and to simultaneously undertake to buy back the same after 25 to 36 days at a higher price. The scheme fell apart when the borrowers were forced to cough up money after trading in so-called paired contracts was suspended as the government felt NSEL was running forward contracts on a spot exchange, which is not allowed under the rules. With no commodities to back the trade, investors were left staring at a huge loss.