The Securities and Exchange Board of India (SEBI) has said that action has been initiated against 300 brokers involved in the ₹5,600 crore National Spot Exchange scam of 2013. However, the market regulator has not revealed their names lest it affects the market sentiment. The submission was made by SEBI’s counsel Prasanna Venkatesh before a Division Bench of the Madurai High Court comprising Justice KK Sasidharan and Justice Adhikesavalu, according to P Wilson, counsel for petitioner T Palpandi.

Palpandi wanted the Centre to initiate proceedings on amalgamation of defaulting members of the exchange with their promoter/holding companies and to take action against their directors, named in a report by Grant Thornton Ltd, the forensic auditor.

Wilson recalled the Bench’s order of July 2, 2018, that stated that neither SEBI nor the Ministry of Corporate Affairs (MCA) took action against the brokers named in the Grand Thornton report in the case involving siphoning of ₹5,600 crore. The exchange alone was amalgamated with the promoter company by the Ministry, and no similar action was initiated against brokers who indulged in the scam.

After hearing the arguments and the counter-affidavit filed by the MCA, the judges directed SEBI to give, in a sealed cover, the names of the 300 brokers involved in the scam and directed it to file an affidavit about compliance of the July 2 order. The judges also posted the writ and contempt petitions for hearing on December 12, said Wilson.

Meanwhile, the MCA— in its detailed Speaking Order in compliance with the July 2 order of the Madurai Bench to dispose the representation of Palpandi’s contempt petition — said that Grant Thornton LLP was appointed as the forensic auditor of the National Spot Exchange pursuant to a direction of the then Forward Markets Commission (FMC).

The Commission examined the report of Grant Thornton and requested the MCA to effect amalgamation of the National Spot Exchange with Financial Technologies — the parent company of the Exchange — and to take over the management of Financial Technologies.

The MCA also observed that the Commission has not made any other recommendation to the MCA regarding the contents of the Grant Thornton report.

The MCA, on August 28, directed an investigation by the Serious Fraud Investigation Office (SFIO) into the affairs of 20 group companies of Financial Technologies (India) Ltd-National Spot Exchange Ltd and 18 other defaulting entities. It also wanted the role of the brokers involved in the payment crisis at the exchange to be examined.

The report dated September 4, 2018, was examined and instructions were given by the Ministry to the SFIO to file appropriate prosecutions/proceedings. It cannot be said that the MCA has not taken further action other than in respect of the National Spot Exchange as action has been initiated under the law against the members of the exchange. Thus, the petition styled as Public Interest Litigation is based on superficial and incomplete knowledge of facts and the petitioner cannot claim to have been diligent, the MCA said.

As the petitioner’s grievance has already been addressed by the government on September 28, 2016, nothing survives for consideration at this stage, and therefore, the representation dated February 21, 2018, of the petitioner is disposed of as infructuous.

The Registrar of Companies, Chennai, produced the MCA Speaking Order to the Division Bench with request to close the contempt petition.

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