Mumbai, Aug. 21: The Forward Markets Commission (FMC) today directed National Spot Exchange Ltd (NSEL) to liquidate the realisable assets of defaulters to meet their payin obligations. It also told NSEL to ask these entities to hand over documents and other assets to the exchange.
The latest directive from the commodities futures market regulator comes a day after NSEL fell short of its first payout obligation.
NSEL had earlier announced a Rs 5,600-crore payout plan to be met in 30 weeks with the first disbursement of Rs 174.72 crore due on Tuesday. However, the exchange could settle only Rs 92.12 crore of the scheduled target mainly because of a default of payment from nine members.
In a communication to the crisis-ridden exchange today, the FMC directed it to auction commodities lying as collateral in the accredited warehouses and said books/documents seized from the defaulters should vest with the bourse for the benefit of the creditors.
According to the FMC, commodities should be auctioned and assets realised as soon as possible. Further, such realisations should be deposited in an escrow account and paid to selling members with the approval of the commission.
NSEL had earlier appointed two agencies — Group 4 and SGS — at all its warehouse locations for security and collateral management, respectively. The exchange was then told by the FMC to divulge the terms of appointment of these agencies and also provide information about the preliminary report, if any, submitted by these agencies to NSEL.
FMC today asked NSEL to bring to the notice of the commission any deficiency found by the agencies on quality, quantity and value of the stock lying in the accredited warehouses.
The regulator said it had not received any communication from the exchange on its queries such as why it had not initiated default proceedings against members who had not met their payin obligations.
“The exchange should have processed to declare the members who have failed to meet their payin obligation, as defaulters according to the by-laws and rules of the exchange and should have closed out their outstanding position on the exchange,” it observed.
It further said there was a shortfall in the payin commitment by various buyers and many of the cheques collected from these parties had been dishonoured.