Investors have been pressing for the payout of the Rs 500 crore in question to be done on a pro-rate basis between all investors.
The NSEL investors' petition seeking to stay the redemption of e-series contracts continued with exchange of heated and emotional arguments in the Bombay High Court (HC).
At stake is close to Rs 500 crore worth of bullion lying with NSEL’s vault keeper as the underlying goods for the e-series contracts. Investors have been pressing for the payout of the Rs 500 crore in question to be done on a pro-rate basis between all investors.
Investors argued that there was little difference between paired contracts and e-series contracts, as both involved trades based on an underlying commodity. Hence, the investors argued that any payout being made should be made to all investors, across the different contracts. However, the Bombay HC observed that the given the large number of investors, any such pro-rata allotment would provide a pittance for the investors.
A total of 13,000 investors are believed to have lost more than Rs 5500 crore. Meanwhile, about 33,000 investors, as per NSEL records, have invested in the e-series contacts.
The issue began with the e-series contracts scheduled to become due for redemption on October 3. E-Series contracts involve, mostly, contracts for bullion. NSEL, which was planning to use the bullion parked with the vault keeper for financial settlement of e-series contracts, came up against the road black by way of a petition filed by a few investors in the Bombay HC.
NSEL, however, has clarified in the Bombay HC that while the paired contracts are two-legged transactions, e-series contracts were akin to spot trades. Hence, the exchange, argued, there was no question of treating e-series contract holders on par with investors of paired contracts. There have been allegations made by the petitioners, that a large number of investors in e-series contracts are parties related to NSEL.
The FMC, meanwhile, made several clarifications. In response to fears expressed by investors that Settlement Guarantee Fund (SGF) had been used to buy bullion to support e-series contracts, the FMC cited a report by Grand Thornton that asserted that as on June 30 the SGF had sufficient funds.
To allegations of parties related to NSEL participating in the e-series contracts, the FMC expressed helplessness, claiming that it lacked the resources to investigate 33,000 investors. The FMC also argued against such an investigation without “reasonable doubt”, citing the logistical challenge and statements made by NSEL that no complaints had been registered.
Bombay HC hauled up the FMC, questioning how the conduct of parties involved did not evoke any apprehension.
Bombay HC has also hinted at likely safeguards that it will implement, if the e-series redemptions are allowed to go through.
All eyes are no on Monday, with Bombay HC expected to give directions on the road ahead for the exchange, FMC and the investors. Meanwhile, the stay on the redemptions has been extended till October 7.The Great Diwali Discount!
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