Sept. 28--MUMBAI -- Anjani Sinha continues to be associated with National Spot Exchange Ltd (NSEL) despite taking the blame for a large part of the mess at the exchange. The crisis-ridden spot exchange said he is still with NSEL, and another company co-founded by him even bid for some of the stock auctioned by the exchange this month. This was long after he was asked to step down from the post of managing director and chief executive of NSEL.
At the annual general meeting of NSEL's parent firm Financial Technologies (India) Ltd (FTIL) on Thursday, chairman Jignesh Shah said he was a victim of "management fraud" at the exchange. But Sinha continues to be with the exchange as an officer on special duty, despite saying in an affidavit that he took "full responsibility for the entire issue faced by NSEL today, due to misrepresentation, miscommunication, and wrong deeds of the senior management staff of NSEL".
It now emerges that Sinha is involved in NSEL's current affairs in more ways than one. The company he co-founded used to trade on the Multi Commodity Exchange of India Ltd (MCX), also an FT group firm, which brings to light another conflict of interest.
Sinha co-founded and owned 50% of Agri Vistas Trading Pvt. Ltd, incorporated in 2008. Until early July, he was also one of the directors of this company and signed on the company's balance sheet.
Agri Vistas was one of the bidders for NSEL's castor seed stock auctioned on 2 September. The firm that won the auction, Abans Commodities (I) Pvt. Ltd, is owned entirely by Abhishek Bansal and related parties. Bansal partnered Sinha in setting up Agri Vistas and owned a 50% stake.
Like Sinha, Bansal submitted his resignation from the board of Agri Vistas in early July, just before the NSEL crisis erupted. Abans Commodities successfully bid for 1,708.72 tonnes of castor seeds for Rs.5.6 crore.
"If this is true, it is unethical," Motilal Oswal, chairman and managing director of Motilal Oswal Financial Services Ltd, said in a phone interview. "He (Sinha) is roaming scot-free despite his own admission of guilt. There are no moral or ethical standards in place in this group."
Brokers were also concerned about more mishaps and pressed for more clarity.
"After whatever has happened, if such auctions are not supervised by a proper authority, it serves no purpose. The element of trust is missing," said Ashok Mittal, chief executive of Emkay Commotrade, which has Rs.100 crore exposure to NSEL.
"The way the information about IBMA (Indian Bullion Market Association) is public and clear now, the details about other such entities having links with officers at NSEL should be revealed," he added.
Sinha said the auction of castor seeds was conducted in a transparent manner by inviting sealed bids and the highest bidder won. He said it had nothing to do with shareholding or directorship or commonality between Abans Commodities and Agri Vistas.
FTIL didn't respond to an email, except to say that Sinha is still with NSEL. It facilitated a response from Sinha.
"NSEL/FTIL has no business links with Agri Vistas and Abans Commodities, other than the fact that Abans Commodities is a member of NSEL. Agri Vistas is not a member of NSEL. Abans Commodities is a member of NSEL and was trading regularly on NSEL in various agriculture commodities," Sinha said.
Abans Commodities is mentioned as a related party in Agri Vistas' fiscal 2012 annual report, owing to its close association with Bansal, Sinha's partner in Agri Vistas.
Sinha further said, "When the company was formed around five years back, its paid up capital was Rs.2 lakh, out of which (Rs.)1 lakh was subscribed (to) by me. It was done in my individual capacity. NSEL has got nothing to do with it."
Documents reviewed by Mint show that Agri Vistas' paid-up capital was Rs.1 lakh and Sinha invested Rs.50,000.
According to the shareholding documents of Agri Vistas, Sinha held a 50% stake as on 29 September 2012. For 2011-2012, Agri Vistas' total revenue was Rs.21 crore. Its annual report lists Abans Commodities as a related party of the company. Under significant related party transactions, it lists a loss of Rs.2.44 lakh on trading of commodities on MCX through Abans Commodities. In other words, Abans was a trading member of MCX and Agri Vistas traded on MCX through it.
Agri Vistas' other income details also list "profit from commodity derivatives trading" as a source of income in fiscal years 2012 and 2011.
On 20 August, Sinha and the management team were stripped of their responsibilities, pending an enquiry. Neither FTIL nor NSEL has disclosed any action taken against him post the admission he made in his affidavit owning responsibility for the crisis at the exchange.
On 23 August, Sinha also signed a letter addressed to Arun Kumar Sharma, managing director of Lotus Refineries Pvt. Ltd, one of the defaulters declared by NSEL, according to email exchanges reviewed by Mint.
Sinha in this letter was clarifying claims made by Lotus Refineries that disputed the amount (Rs.252.56 crore) it owed to the exchange. Sinha signed off as "special officer" in the communication to Lotus.
"It is a clear case of conflict of interest and needs to be probed," said Arun Dalmia, one of the aggrieved investors in NSEL and a member of NSEL Investors' Forum. "Anjani Sinha is unaffected despite the way events have unfolded and he himself has admitted to wrongdoing. I am aware that he is even meeting borrowers on behalf of NSEL."
Sunil B.S. contributed to this story.