Mumbai, 22 October 2013

The economic offence wing (EOW) of Mumbai Police today arrested the managing director of Gujarat based NK Proteins Managing Director Nilesh Patel in connection with National Spot Exchange Ltd’s (NSEL) scam.

NSEL , promoted by Jignesh Shah-headed Financial Technologies (India) Ltd (FTIL) is facing Rs.5,574.35 crore settlement crisis. It has failed to settle Rs5,600 crore due to 148 members/brokers, representing 13,000 investor clients, after it suspended trade on 31st July on government direction. NK Proteins is the biggest defaulter with dues of about Rs.970 crore, according to NSEL.

Nilesh Patel was borrower and his arrest is the first action against a borrower who has been defaulting payments to the spot exchange.

Nilesh Patel is the son-in-law of the former NSEL chairman Shankarlal Guru who had resigned from his post on 19 August. Patel’s NK Proteins was the first company that made use of sham financing facilities that NSEL provided and EOW claims that this money was used by NK Proteins.

About Rs 350 crore was used by NK Proteins for initiating a joint venture with the Adani Group for export of castor oil seeds. The EOW has confirmed that NK Proteins were well aware of the fact that they did not have sufficient goods in their godowns and they were in no position to meet their liabilities.

NSEL filed complaint against five of its defaulting members before the investigation authorities. This includes Ark Imports Pvt Ltd, Lotus Refineries Pvt Ltd, NK Proteins Ltd, Vimladevi Agrotech Ltd and Yathuri Associates.

Shankarlal Guru who is also former MLA in Gujarat claimed lack of knowledge regarding his son-in-law’s dealing or defaults. In a statement, NSEL Investors Forum (NIF), a representative body of investors in Spot Exchange, had said, “It clearly shows his (Guru’s) complicity in the fraud and by resigning from chairmanship his involvement cannot be washed away. Guru should at least give some credit to the intelligence of investors and general public. A chairman cannot be an innocent bystander when a fraud of Rs5,500 crore is being committed and almost 20% has gone to his son-in-law. Investors are confident that the law will catch up with him sooner or later”.

Speaking with PTI, Guru had said, “I understand he is my son-in-law, but if he has done the wrong thing, he should be punished for it. I have nothing to do with this. I am being associated with it as I was the board chairman”.