NSEL, the now defunct commodity spot exchange, has put leading brokerage houses in the dock.

The exchange has moved the Bombay High Court seeking attachment of the property of top brokers named as accused in the ₹5,600-crore scam. Assets of NSEL and its promoters, led by Financial Technologies (renamed 63moon Technologies), were attached by police some five years ago after the scam broke out in 2013.

But brokers have not been touched despite their involvement, multiple first information reports, and notices by market regulator SEBI naming them, NSEL said in its petition. Most of the leading brokerages have been named in the NSEL case.

‘Hasty action’

NSEL has accused the Maharashtra government of favouring brokers while acting hastily in attaching the properties of NSEL and its promoters under the Maharashtra Protection of Interest of Depositors (MPID) Act.

The exchange told the court that the attachment of assets of brokers under the MPID Act was inevitable and the same was also stated categorically by a Division Bench of the High Court in October 2018. As many as 600 brokerages have been named in this case.

“Division Bench of Bombay HC in its October 24, 2018, order had categorically observed that there was no justification for Maharashtra government for not attaching properties of brokers under section 4 of MPID,” stated the NSEL petition, seen by BusinessLine .

An NSEL investor told BusinessLine: “Nobody has any love lost for Jignesh Shah or FT but brokers were the ones who lured investors into trading and due diligence was their legal obligation. Properties of brokers, who are also an accused in the scam, should be attached.”

MPID provision

“There is a provision in the MPID that properties of all other accused should be attached if the assets of key players are not enough. So, brokers too should bear the burnt,” said another leading investor.

Market regulator SEBI had issued show-cause notices to some 300 brokers in October 2016 and again in April 2017 alleging various violations of laws. The petition says that SEBI’s notice was challenged by brokers in the Bombay High Court, which choose to dismiss it.

NSEL further said that while there was a previous FIR against brokers, the Economic Offence Wing of Mumbai Police had registered a fresh FIR in September 2018 too.

NSEL said since the properties of the Indian Bullion Market Association, a broker member of NSEL, was attached as it was a subsidiary of the exchange, the government had powers under the MPID Act to act against other brokers too.

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