HC observes conflict in working of NSEL investor claims panel

Bombay High Court pulled up the committee that was overseeing National Spot Exchange Ltd (NSEL) investor claims as it observed a conflict of interest in its functioning.

In April 2014, the court had formed a three-member committee headed by Justice Daga to reconcile the claims of 13,000 investors who lost money in the ₹5,574.35 crore payments crisis at NSEL. The panel included solicitor member J.S. Solomon and chartered accountant Yogesh Thar.

The Daga panel passed an order in August 2014 to NSEL not to disburse any funds to investors without the consent of the court. Subsequently, in April 2016, the committee had recommended an audit of the records of the exchange, its investors and trading members after it came across discrepancies in the figures submitted by them.

Justice J.S. Patel in an order that was uploaded on the High Court website on 13 April said that there was a conflict of interest in hiring the auditor.

One of the Daga panel members is also a partner at a firm hired to conduct an audit of the NSEL investor and trading members. “And there lies the starkest conflict,” said the order.

is not naming the auditor and committee member mentioned in the Bombay High Court order as it was unable to reach out to them.

Justice Patel also expressed reservations over the terms of reference given to the auditors which included an audit of “accounts, bank accounts, income tax returns and relevant documents” of investors.

“Certainly, income tax documents are not the kind of material that should readily be allowed to be summoned in this manner or with this background by a sub-consultant appointed at the instance of the committee,” said Justice Patel.

Prakash Chaturvedi, chief executive officer of Nselsaid that the exchange has received a copy of the order and was currently examining it.