Battered by Political - Bureaucratic Nexus

The way the government and its agencies are handling the NSEL crisis, it appears as though the entire crisis is being dealt with an executive fiat rather a constructive approach to resolve the crisis and mete out justice to those who lost their money on the exchange platform in July 2013. Later in August, The Centre constituted a high-level committee chaired by Economic Affairs Secretary, ArvindMayaram, to look into the issue of NSEL failure and recommend measures to fill the gaps in the oversight of spot exchanges. The main issue was whether NSEL violated the Government exemptions for one-day forward trading and also the ban on all short sales.

The Mayaram Committee comprised secretaries of the MCA, DCA, the Department of Revenue, top representatives from the ED, the Directorate of Revenue Intelligence, SEBI, RBI, FMC, the Serious Fraud Investigation Office of the MCA, the Central Board of Direct Taxes and the Financial Stability and Development Council (FSDC) that is headed directly by the Union Finance Minister.

The Mayaram Committee seen as a ray of hope by NSEL and its parent company – 63 moons, to resolve the matter to some extent, however, played a biased role in giving its report to the PMO. The findings and recommendations of the report were solely targeted towards NSEL, completely ignoring the dubious role of the FMC, brokers, and defaulters. This clearly indicated that the committee was merely set up to dramatize the NSEL crisis to force 63 moons out of all exchange businesses. The Committee did not utter a word on (brokers & defaulters) who created and perpetrated the crisis or recommend any action to recover it from them. It referred to the public interest but did not recommend any measures towards recovering the money from the 24 defaulters who had admitted to the FMC in a public durbar and even agreed to pay back in a phased manner.

One critical fact that raises eyebrows is that normally high power committees like these are given three or more months to submit reports but the Mayaram Committee was told to do so within two weeks! It submitted its report on September 23, 2013, leaving a question mark as to how it could so quickly study the voluminous documents given to it by the FMC, NSEL, and other departments, undertake consultations with top officials from the various apex agencies, gather data, etc. The Committee recommended only one thing: action against NSEL, its directors, and promoters! This was despite the fact that it admitted that the NSEL crisis would not lead to any systemic impact.

The Committee submitted its report to the Finance Minister P. Chidambaram on the alleged irregularities at the NSEL. However, the report did not reveal key shortcomings and acts of omission and commission by the bureaucrats of DCA and FMC was claimed to be more of a cover up. Mr P Chidambaram had once said the NSEL crisis was a private dispute in an open market between two parties. It is difficult to understand that if that was the case, why was the Committee set up in the first place?

Instead of targeting NSEL and FTIL in all possible ways, the Mayaram Committee should have asked all the stakeholders of the crisis to come together and fix the responsibility as per their role and liability. This would have sent a strong signal that the government t is serious about solving the crisis and ensuring that the victims get their money.

Reference: http://www.nationalspotexchange.com/Truth_About_NSEL.htm