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National Spot Exchange Limited (NSEL) case relates to a payment default at the National Spot Exchange Limited that occurred in 2013 involving Financial Technologies India Ltd, when a payment default took place after a commodities market regulator, the Forward Markets Commission (FMC), directed NSEL to stop launching contracts. This led to the closure of the Exchange in July 2013.
Three spot exchanges, NSEL, NSPOT and National APMC were exempted by the government under Section 27 of FCRA to conduct forward trading in one day contracts. This was done to boost volumes so that their economic viability improved. While Financial Technologies (India) promoted NSEL, it was granted general exemption on June 5, 2007, whereas, NSPOT and National APMC received exemptions under the same provisions on July 23, 2008, and August 11, 2010, respectively. On the flawed recommendations of the FMC, the Ministry of Consumer Affairs ordered NSEL to settle all existing contracts and not launch any fresh contracts, which led to the crisis.
Investigations led by Enforcement Directorate (ED) and Economic Offences Wing (EOW) revealed the role of brokers and defaulters in the NSEL case. The brokers mis-sold NSEL products to their clients by assuring them fixed returns. The defaulters hypothecated stocks and produced fake warehouse receipts and siphoned the entire default money.
Initially, it was projected that there were 13,000 trading clients affected by the NSEL crisis. The genuineness and entitlement of these 13,000 trading clients is questionable. The brokers have not shown the Know Your Customer (KYC) details of any of the clients. The Mumbai High Court suggested that brokers should furnish this data to NSEL in order to protect interest of genuine claimants. Considering this aspect, SFIO which is also investigating the case, has recently asked brokers and trading clients to provide various information in a specific format which also includes KYC related information.
On July 30, 2019, The Bombay High Court summoned P. Chidambaram, the former Union Finance Minister and two other bureaucrats, K.P. Krishnan and Ramesh Abhishek, regarding the Rs 10,000 crore damage suits filed by 63 moons technologies and their role in the NSEL payment default crisis. The Bombay High Court has accepted the plea and allowed 63 Moons to sue Chidambaram and the others.