Several commodity brokers at National Spot Exchange (NSEL) facing investigation in a case involving borrowing of funds against non-existent commodities have sought fresh relief from the Securities Appellate Tribunal (SAT), after they were disqualified to settle the case due to a criminal proceeding against them.
As per legal sources, as many as 17 brokers have found themselves disqualified from settling the case after Mumbai Police’s Economic Offences Wing (EoW) filed chargesheet against them. The brokers have filed a fresh appeal before the Securities Appellate Tribunal seeking a stay on the Sebi proceedings against them.
As per the SAT’s case list, Ventura commodities, JM Financial Comrade, Almondz Commodities, Systematix Commodities are among the major names that have filed a fresh appeal for a stay.
The SAT had passed an order on December 12, 2023, suggesting Sebi to explore a settlement scheme in the case involving NSEL’s commodity brokers. The SAT order has said, “Sebi should consider and seriously give a thought in coming out with a scheme under Clause 26 of the Settlement Regulations.”
The SAT order added, “Such scheme can be a one-time scheme for this class of person. The terms of settlement should be attractive so that it could attract the noticees/entities/ appellants to come forward and settle the matter and at the same time would help to clear the backlog of these pending matters before various quasi-judicial authorities.”
During its board meeting on June 18, the regulator had approved such a scheme and subsequently a public notice was issued on July 9. However, the notice for the scheme detailed that it will not be applicable for those brokers who have been named in the chargesheet by investigating agencies.
“The Scheme would not be applicable for those brokers whose names are appearing in the charge- sheet filed by the Economic Offences Wing/Enforcement Directorate/MCA/SFIO or any other law enforcement agency in the NSEL matter and those brokers who are defaulters at the Stock Exchanges as on the date of the filing of the application for the Scheme,” said the notice.
Sebi also said that in case a chargesheet is filed in the future by any law enforcement agency against any broker who availed the scheme, the settlement with such brokers shall stand void.
In the SAT, Sebi argued that if an entity is named in a chargesheet by an investigative agency, then it becomes automatically not ‘fit and proper’ under Sebi’s intermediary regulations. “Our hands are tied by our own regulations,” Sebi had argued before the SAT.
The commodity brokers countered that Sebi filed a complaint on September 24, 2018 while the FIR was filed on September 28, 2018. After three years, Sebi amended the regulation on November 17, 2021. The Intermediary regulations said that beyond integrity, honesty, ethical conduct and reputation, the criteria specify that a person must not be facing a criminal complaint or FIR filed by Sebi, nor be chargesheeted by any law enforcement agency in connection with economic offences. Brokers have challenged the fit and proper criteria of the Intermediary Regulations at the Bombay High Court, questioning how merely filing an FIR by SEBI or a charge sheet by any agency can disqualify them without a trial in a court of law.
The SAT heard the matter and posted the issue for hearing on October 14, and directed that the parties shall maintain status quo till next hearing. The NSEL Settlement Scheme has commenced on August 25, 2025 and will end on February 25, 2026.
What Was the NSEL Case?
The NSEL (National Spot Exchange) case was uncovered in 2013 when the exchange could not pay investors after failing to deliver commodities, which were non-existent in some cases.
It was found that different companies had defrauded investors by diverting money intended for commodity investments. With no commodities against the borrowed funds, it led to a Rs 5600 crore default and payment crisis. Brokers were blamed for luring investors for such paired contracts, and the regulator Sebi cancelled the licenses of commodity brokers, lodging a case against them.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
