Ravi Sheth to leave Financial Technologies board; NSEL defaults for third time

MUMBAI: Jignesh Shah will soon lose a long-time and trusted shareholder director from the board of Financial Technologies (India), the promoter of the tainted bourse National Spot Exchange (NSEL) and anchor investor of the country’s only listed exchange MCX. Ravi K Sheth, who joined the board of FT in 1994, a year before its listing, confirmed he would quit as a director.

The decision comes amid NSEL’s third payout default on Tuesday and central investigative agencies and Mumbai police contemplating action shortly. “Yes, it’s true I have not sought reappointment to the board after my contract expires this month,” Sheth told ET. He will step down at the company’s next board meeting and AGM on September 25.

Asked whether his decision had been prompted by the controversies dogging NSEL and the FT group, Sheth said, “I do not wish to comment on the reasons.” Sources said Sheth, who serves as MD of Greatship (India), a subsidiary of The Great Eastern Shipping Company, had been contemplating this move ever since the crisis erupted at NSEL but Shah held him back. Sheth held 5.4% in FT as on June 30.

His brother Bharat K Sheth holds 2.84% in the company. In view of the NSEL’s default on Tuesday, consumer affairs minister KV Thomas said he will meet the consumer affairs department secretary Pankaj Agarwala and commodity futures market regulator Forward Markets Commission (FMC) on Wednesday to take stock of the situation. “There is pressure on NSEL and its promoters to ensure that investors get their money back….now that the food bill has been passed, I will be meeting the FMC and the departmental secretary to take stock of the situation.

But any action will be consequent upon the submission of a report by the high-powered committee set up under Mr Mayaram to investigate whether NSEL has violated the law,” Thomas told ET.

The committee chaired by economic affairs secretary Arvind Mayaram could file its findings by Friday and this will be the precursor to likely government action in the NSEL crisis, in which investors’ funds amounting to Rs 5,500 crore is stuck. NSEL has collected just Rs 5.37 crore, according to a press release from the exchange, from 24 borrowers against the mandated Rs 174 crore it has to pay every week since August 20.

This measly sum, collected as on Monday, is slightly more than the Rs 12.05 crore payout on August 27; it had paid Rs 92 crore a week earlier. The exchange has issued notices to 14 defaulters under Section 138 of the Negotiable Instruments Act after the cheques issued by them bounced. “As 19 out of the 24 members have been declared defaulters, the recovery from these defaulting members would now be through recovery proceedings by way of sale of commodities lying in the warehouses, sale of assets offered by these members or by payments made by the defaulting members through their own resources,” said NSEL in a late evening press release on Tuesday.

“Notices against 14 defaulters have been issued under Section 138 of Negotiable Instruments Act for bouncing of cheques for settlement".