defaulter, the entire system comes to a halt. If we continue his trading, liability was increasing day by day due to the rollover effect,” states Sinha, adding the “exchange staff were virtually requesting him to continue trading.”
Another borrower N K Proteins that has the largest outstanding of Rs 970 crore came up with the concept of T+3 and T+36 contracts in castor seed. “By end of December 2011, it was known to us that he was not having stock to back the exposure. Still, we allowed him to continue because of the fear of widespread default, if we choose not to allow him to roll over,” says Sinha in his 13-page affidavit.
Audit finds defaults were on for years
Preliminary findings of a forensic audit conducted by Grant Thornton into the dealings at the National Spot Exchange Limited (NSEL) suggest that defaults at the exchange had been taking place for years. The audit found hundreds of cases of default over the years from the same set of borrowers, say sources. The final report is likely to be submitted to the Forwards Markets Commission (FMC) on Wednesday. Meantime, sources also suggest that the FMC continues to examine whether the “fit & proper” status of the promoters of NSEL should be revoked. The regulator is not entirely convinced by the affidavit filed by former CEO Anjani Sinha, which tries to absolve the promoters and the board of NSEL by suggesting they were unaware of the wrong-doings at the exchange, say sources.