Leading Brokers Appear In Mumbai Court As Accused For Bail

Room no. 52 in Mumbai's special MPID court was jam packed as leading commodity market brokers appeared as accused in the NSEL case and sought bail from the court. MPID court, formed to serve the interests of financial depositors in the state, has now made all leading NSEL brokers accused in the case for luring clients to trade on an unregulated exchange and thereby committing fraud with the depositors. Officials and directors who appeared in the court were granted bail on a bond but cannot travel outside India without court's permission.

For the first time the court has declared the brokerage houses as financial establishments. As a consequence of MPID Court’s observations, Maharashtra State Government is now free to attach properties of brokers or they return the deposits taken from clients. All eyes are now on market regulator SEBI, since the rules say that anybody mentioned as an accused in the charge-sheet is not fit and proper person. Brokers sold NSEL trading as a risk free guaranteed return scheme.

Brokerages who have been made accused in the NSEL scam include Philip Commodities, Motilal Oswal Commodities, IICL (IndiaInfoline Commodities) Systematix Commodities, JM Financials Comtrade, Arihant Futures and Commodities, Ventura Commodities, Nirmal Bang Commodities, Suresh Rathi Commodities, Latin Manharlala Commodities, Almondz Commodities, RK Global Commodities, Rongta Commodities, CD Commsearch and Alpha Commodities. Court has held that IICL had taken deposits and has directed the assets of its companies, promoters and directors be attached. IICL is said to have taken deposits to the tune of Rs 326 crores.

The case against the brokers is that they lured clients to trade on unregulated NSEL exchanges leading to a scam worth Rs 5600 crore. Investigations have revealed bogus client documents to forgery by the brokers and also money laundering in certain instances. All the accused will face trial in Mumbai's MPID court for taking deposits from clients and not returning them. While other agencies are conducting investigations into various other financial fraud angles.

MPID Court has confirmed that Brokers have accepted money from investors and failed to repay the same as promised by the brokers. The said money and brokers are respectively fall under the definition of section 2 and 2(d) of MPID Act., i.e. Deposit Taking and Financial Establishment. Therefore, these brokers are financial establishments as per MPID Act. MPID Court took cognizance of chargesheets against brokers on April 18, 2024 and issued summons to 16 brokers and their respective directors totaling 49 persons and entities.

The court noted, while taking cognizance of offenses against the newly added accused persons, that the matter pertains to an economic offense of a huge magnitude of Rs 5,600 crores, and several gullible investors are still awaiting justice. It added that such selective investigation and final report raises serious questions about the impartial investigation of the Economic Offences Wing (EOW) and betrays the faith of victims. Special Judge AS Sayyad, designated under the Maharashtra Protection of Interest of Depositors (MPID) Act, said in the order that the responsible persons for the wrongdoings should not be allowed to escape the process of law.