NSEL defaults for a fourth time, pays Rs7.77 cr to investors

The crisis-ridden National Spot Exchange Ltd (NSEL) defaulted for a fourth time in a row after the exchange realised Rs7.77 crore through auction of commodities on Tuesday, against the announced disbursal of Rs13.45 crore to investors.

The beleaguered exchange, which had announced a scheduled payout to investors of Rs174.72 crore, had defaulted on three previous occasions as well.

NSEL had announced a seven-month plan to settle the over Rs5,500-crore dues to investors.

"The commodities which are lying in warehouses under the control of NSEL are being auctioned after calling for sealed bids. So far, Rs7.77 crore has been realised and pay-out is being made of these proceeds on Sept 10, 2013. Auction of other stocks are in process," NSEL said in a statement.

NSEL has so far received Rs128 crore from its 24 registered members and recorded a total deficit of Rs417 crore. The bourse owes a total Rs5,575 crore to its 13,000 investors.

The exchange had availed a bridge loan of Rs177.23 crore from its promoter Financial Technologies (FTIL) to make payments to small investors on a priority basis.

NSEL is pursuing recovery of dues from members with pay-in obligations through civil and criminal proceedings, besides taking action under the rules of the exchange.

So far, 19 members had been declared defaulters and legal proceedings have been initiated against them, NSEL said in a statement.

While 13 defaulters have met exchange officials during the last two weeks, six are yet to do so. Legal notices against 14 defaulters have been issued under the Negotiable Instruments Act for bouncing of cheques for settlement.

So far, five defaulters, with a liability of Rs1,328.48 crore, have committed to providing their properties as collateral for recovering the dues. The defaulters claim the properties are worth Rs1,458 crore, although NSEL is yet to carry out an independent assessment of this.

NSEL hopes the realisations to go up in the coming days as the auctioning progresses.

Meanwhile, UK Sinha, chairman of the Securities and Exchange Board of India (SEBI), said the market regulator is well on guard of the payment crisis at the National Spot Exchange Ltd and has taken enough safeguards against any spillovers to equities.

Sinha, who was speaking on the sidelines of the launch of a corporate bonds database (jointly by the NSE and Prime Database) in Mumbai on Tuesday, said though there were brokers who were both in equities and commodities, these are functioning as separate legal entities.