Government issues notice to NSEL over payment failure

India's finance ministry has issued a show-cause notice to the scam-tainted National Spot Exchange Ltd (NSEL), asking why exemptions granted to it in 2007 should not be withdrawn.

This is the second such notice to the spot commodity exchange promoted by Jignesh Shah's Financial Technologies India Ltd. A similar notice had been issued to NSEL, embroiled in a Rs5,600 crore payment crisis, by the union consumer affairs ministry in 2012.

The ministry, which regulated spot exchanges until the NSEL crisis broke last year, had exempted the exchange under section 27 of the Forward Contracts (Regulation) Act and allowed it to offer one-day forward contracts provided members do not resort to short sales.

"NSEL has received this letter from the Ministry of Finance. We are examining the letter and as per the deadline given, we will respond in 15 days' time.

"We understand from media reports that similar letter has been issued to other spot exchanges as well. This letter does not discard the response given by NSEL regarding the show-cause notice issued in April 2012. The letter will be placed before the board for appropriate advice and next action," the exchange said in a statement.

The commodities exchange suspended trading on its platform on 31 July last year. The government had directed it to end trading on most contracts on the NSEL platform after violations to the exemptions were found.

In August last year, NSEL proposed a payout plan but could not stick to the schedule and has not made a single payment.

Several investigating agencies are probing the NSEL, and some former top officials of the bourse have been arrested.