Even after three years, officers from Economic offences Wing (EOW) of the Mumbai Crime branch — investigating the National Spot Exchange Limited (NSEL) scam — are yet to submit any evidence from the data they retrieved from the crashed servers of NSEL and Financial Technologies (India) Ltd (FTIL), promoter of NSEL, in the alleged Rs5,600-crore scam. The court has now given the EOW six months to submit its report.
The original complainant and investor, Panakaj Saraf, had approached the special court set up under the Maharashtra Protection of Interest of Depositors Act (MPIDA) for a speedy investigation to retrieve evidence from the severs of NSEL and FTIL, containing the crucial e-mail trails and other information related to transactions of the alleged fraud.
A year after Saraf’s plea, the special court passed an order on August 26 and gave the investigating agency six months to submit report on the recovery and analysis of data it retrieved from the servers. According to EOW, servers were seized and data recovered was sent to the state forensic science laboratory in Kalina on December 10, 2013. But the agency is yet to secure any evidence from the data it sent for analysis.
Investors claimed after they learnt that the severs had crashed, they approached the authorities concerned on several occasions. But as they failed to receive a reply, Saraf moved court in April 2015.
“The server on which the disputed transactions were under operation crashed and it is the important evidence. Thus the server is liable to be retrieved along with all its data. The applicant, who is the original informant, has the right to information about the progress of the steps taken by the EOW towards the recovery of the server and its data and claimed that the status report be called from the EOW,” Saraf alleged in his application.
The application was kept on hold for more than a year until last month, when finally the EOW filed a reply objecting to Saraf’s demand on August 25. In its reply, the agency claimed that mirror images of these servers have been obtained and the analysis of the same is in progress. Seeking dismissal of the application, the agency contended that Saraf have no locus to ask for such report.
However, the court dismissed the objection, observing that for having the vigilant watch over the investigation, status report can be called from EOW for timely progress in the matter.
When contacted, Deputy commissioner of police (EOW) S Jaykumar said the process to retrieve the data is on and they will submit the report at the earliest.
Seizures made by EOW from Jignesh Shah
• Original audited balance sheet of NSEL, original IT returns, journal ledger of margin money, original of Grant Thorton forensic report, original warehouse receipts, annual report of FTIL, original files of membership details of 24 borrowers and 5 CDs (from NSEL office).
• 22 hard disks (6 from server and 16 from storage) from the FTIL office.
• 15hard disks from 3 servers of NSEL.
• 9 hard disks of NSEL server from NSEL office at FT Tower in Andheri (East).
• A hard disk and a CPU from NSEL office at Palanpur in Gujarat.
• From Chennai office: one hard disk mirror image on blank hard disk each of FTIL, MCX and NSEL. AMC bills of FTIL, hard disk from the computer of Metkore Alloys and documents of Metkore Alloys.
• From Shah’s residence bank statements, demat account number files, books of account, documents related to the IT returns, cash book, bank book, ledger, etc.
• A file containing details of the FTIL office in Baroda, 2 hard disks from the office of one Chandrakant Kamdar in Baroda.
Shah’s role in the alleged fraud
>>As per the Economic Offences Wing (EOW) officials, Jignesh Shah is a promoter director and vice chairman of NSEL. The chargesheet submitted against Shah mentions him as the face of the Financial Technologies India Ltd (FTIL) and NSEL, with FTIL being the controlling shareholder of NSEL with holdings of 99.99 % of total share capital of NSEL.
>>NSEL started its full-fledged operations around October 15, 2008.
>>Shah is also charged with giving several assurances and presentations in different forums regarding the business model of NSEL that attracted several market participants bringing substantial trade on NSEL’s platform. While stating that NSEL allowed trading on its platforms, even after show cause notices from the Ministry of Consumer Affairs, the officials charged Shah for not doing anything to eliminate risks relating to the financial exposure.
>> Shah, who headed the audit committee of the NSEL, is alleged to have neglected the basic functions relating to risk management and allowing NSEL to create huge exposure without checks, balances and internal control.
>>The EOW also charged Shah of taking the unregulated nature of NSEL to compromise with the risk management parameters and expansion of pared contracts in NSEL in 2012-2013 which led to jump in the company’s profit from Rs30 crore to Rs130 crore.
>>However, the officials stated in the charge-sheet that at the same time, it created huge market exposure of around Rs5,600 crore on NSEL, which resulted in the fraud.