Spot exchange scam: Two NSEL auditors arrested

Forum Gandhi Mumbai | Updated on October 04, 2019

Duo worked with statutory auditor EY

Fresh arrests have been made by the Mumbai police in the NSEL spot exchange scam case. Top officials of the economic offence wing (EOW) said that they had arrested Shrawan Jallal and Amit Kalral, the two auditors of NSEL who worked with Khataria and Associates.

Both the accused were produced before the special court and remanded in police custody till October 7.

According to an official, the duo was working under the umbrella of accounting firm EY.

“These two were involved in conducting financial audit of NSEL for FY 2009-10 and 2011-12.

“They were required to audit the standing stock position in the warehouse, the exchange and the real nature of transactions taking place. The investigation has revealed that on all these accounts, the audit reports were faulty and an attempt was made to cover up to show the health of the exchange as being very good. However, the reality was very different,” the official said.

NSEL was a spot commodity exchange that went bust in 2013, leading to a payment default to the tune of ₹5,600 crore.

The Mumbai police has filed two charge-sheets in the case and are probing both the missing stock in the exchange and several top Mumbai brokers for luring clients to trade on the NSEL platform.

In a statement, the NSEL said: “We are shocked by the sudden and unwarranted arrest of two professionals associated with Ernst & Young, as it was the Statutory Auditor of NSEL, and not that of the exchange platform. Auditing of the company accounts and ‘stock-audit of an exchange’ are totally different subjects. Stock verification of an exchange is done by the buyers, the brokers and the auditors of the brokers, who had visited the warehouses more than 50 times, and had verified the stock availability in those warehouses. Ernst & Young had nothing to do with verification of these stocks.”

Published on October 04, 2019

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