The Mumbai Sessions Court today sent Financial Technologies (India) Ltd’s (FTIL) promoter and chairman Jignesh Shah and his aide Shreekant Javalgekar to judicial custody till May 31 in connection with the Rs 5,600 crore payment scam at National Spot Exchange Limited.

Shah and Javalgekar, former chief executive of Multi Commodity Exchange (MCX), were arrested on May 7 by the Mumbai Police’s Economic Offences Wing (EOW), eleven months after the scam broke out in July 31 last year after the bourse failed to pay about 15,000 investors in commodity pair contracts.

The duo was sent to judicial custody on grounds that the investigation was still on as Shah had failed to reveal any facts during interrogation according to the Investigating Officer.

Meanwhile, lawyers representing Shah and Javalgekar pleaded before the Judge to not send the accused to jail on concerns of safety and security. Senior advocate Harshad Ponda argued that Shah and Javalgekar might face some threat from the earlier accused Anjani Sinha and two others, who though have been granted bail are still in the Arthur Road Jail in Mumbai.

However, the Judge rubbished the argument but agreed to hear Shah’s bail plea on May 22.

Sinha, the former MD and CEO of scam-tainted NSEL, along with two other co-accused Jai Bahubali and Amit Mukherjee, was granted bail by the Bombay High Court six months after he was arrested by the EOW.

Sinha, who had taken responsibility of the scam during his arrest, had earlier this month had filed a detailed submission to the EOW where he had put all the blame on his former boss Jignesh Shah for all the problems at NSEL. The 54-page document, signed by Sinha, mentioned that Shah’s intention was to ensure NSEL conducts ‘vyaj badla’, a trading practice done on the BSE in the 1980s. However, SEBI had banned the practise in the early 1990s. Sinha also said that Shah used to look after the day-to- day matters at NSEL and took all the important decisions.

EOW investigations reveal that most of the underlying commodities never did exist and the buying and the selling of commodities like steel, paddy, sugar, ferrochrome among others was being only conducted only on paper. The pair trades in various commodities were offered in one-day forward contracts of T+2 and T+25 payment terms (bought and sold at the same time).

The investigations and rounds of interrogations have revealed the fact that about 24 borrowers were given the funds by the NSEL without any underlying commodity being deposited and that one of those borrowers is a company called NK Protein Ltd, owned by the son-in-law of former NSEL Chairman Shankarlal Guru.

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