HISTORY of post-independence India is replete with examples of men like Harshad Mehta, Ketan Parikh and Jignesh Shah who bent the financial system and made money exploiting its weaknesses. They ruled like financial czars till their day of reckoning came.
Shah wanted to be a billionaire by the age of 40 and retire at 45. He nearly made it and was listed as Forbes billionaire by the age of 41. But overnight, allegedly ‘the master-mind and biggest beneficiary’ behind the Rs. 5,600 Crore FTIL-NSEL scam crashed and fell on the ground. A plethora of agencies like Serious Fraud Investigation Office (SFIO), Mumbai Police, Crime Branch, Central Bureau of Investigation (CBI), Economic Offenses Wing (EoW) and Enforcement Directorate (ED) pounced on him. He spent 107 days in jail before being granted bail by the Mumbai High Court.
Apart from his wife and teenage daughter, all his business associates, childhood friends, those who had either taken favours or were in a position to do favours—politicians, bureaucrats, police officers (local police and those in the investigative agencies), scribes, judges, lawyers, investment bankers, traders, staffers, and money handlers—and those on board of his nearly two dozen companies started distancing themselves. He was a badly battered, heavily bleeding boxer, waiting for the final solid knockout punch that would make him indefinitely fall flat.
He asked for help, but no one came forward. People in authority ignored him. He had almost given up hope. Above all were the 13,000 beleaguered investors—who had lost Rs. 5,600 crore, their entire savings, due to market abuse, speculative and allegedly manipulative algorithmic trading—who wanted their money back. Shah allegedly had no answer: why or how his unregulated and rigged exchanges dealing in bullion, currency, metals, agricultural, weather and energy should be allowed to function. It was an open secret that the exchanges managed by him were purportedly dens for illegal paired, manipulative, price volatile, wash-trade or insider-trade, algorithmic and dabba trade in spot, derivatives and commodity futures. He couldn’t even justify why these exchanges, ostensibly started to help farmers, weren’t or shouldn’t be shut down? To put it candidly, it was a case where a set of buyers paid money but never got delivery of products, which existed only on paper or should have been auctioned long ago to pay back the buyers.
As usually happens in such situations, endurance played a part. Abruptly, the winds began to change. Shah turned the tables and the whole battle spun 360 degrees. He has stepped backward and is no longer exposed to a frontal attack in the highly volatile battlefield. His job now is to plan a strategy with his legal, financial and strategic advisors and give orders from the Ops Command Room. His team of top lawyers is working round the clock to figure out ways to save him—extensively with the money invested by investors, which he is now using to oppose them in courts of law. The actual battle is now being fought by his 1,000-odd employees and if available intelligence inputs are to be believed, they aren’t doing a bad job.
THEY interact with people, convince them to change their opinion about Shah, sit in a dharna or even launch an image building or social media campaign on his behalf. Each time someone suggests things like shutting down the commodity exchanges or arresting Jignesh Shah, they raise a hue and cry about their unstable future and impending economic crisis. A case in point is how Shah’s employees sat on a silent protest when the bank accounts of Shah and his companies were sealed. It was more like a psychological operation. They tried almost every trick in the trade to give shape to a case of human right violation. Almost a similar emotional blackmail seems to have been used to ‘silence’ and ‘win over’ a small but vocal and articulate group of investors from the enemy camp. They have been told to shut up and ensure that they are the first to be paid if Shah survives. However, on the other hand, if he loses they also don’t gain anything.
Another big change over the horizon is that the man who on November 20, 2014, was unceremoniously made to resign from the post of Chairman & Managing Director of Financial Technologies (India) Limited—a company initially founded by him, with his own and borrowed funds is now back in pavilion to play another innings. As he himself was quoted as saying in an interview, “to live like a king, you have to act (behave) like one.” This itself is a big development as the tarnished CMD of FTIL is now back in action as the Founder, Chairman, Emeritus, and Chief Mentor of 63 Moons Technologies Limited.
This seems to be the essence of his new subterfuge to create a halo around himself, influence the witnesses, side-track investigations, manage the media and generate sympathy to influence the political leadership and, as far as possible, get a favorable judgment in the FTIL-NSEL case.
HELPING him in his ‘comeback and anti-slander’ campaign are many ex-bureaucrats and pen-pushing babus who have spent almost their whole life playing hide and seek with files. They are either operating from behind the curtain or have been re-employed post-retirement in a number of his companies. They have adequate experience of working in different economic ministries, planning and regulatory bodies, and are now using it to enable him to shoot and scoot without being caught. A classic example is that of Pritam Singh, a former joint secretary and later Additional Secretary, Ministry of Corporate Affairs and DG and CEO of Indian Institute of Corporate Affairs (IICA), Government of India. Throwing caution to the winds, Pritam Singh, a 1984 batch Rajasthan cadre IAS officer, proceeded on furlough to help Shah draft his replies to showcause notices by various government departments. He and the then Secretary, Ministry of Law, reportedly tried to organise personal hearing of both sides. He is now posted as Director General, National Archives, in the rank and pay of Additional Secretary to the Government of India.
There is a saying that when everything is not happening right, turn left. This is what Pritam Singh did when all of a sudden he proceeded on medical leave on the pretext of having bypass surgery and kept extending his leave for 3-4 months appearing before the Mumbai High Court, which had to close for winter vacations. This according to NSEL investors, amounted to a deliberate effort to hoodwink the judiciary.
A series of books like ‘The Target—Criminal Conspiracy to Annihilate Jignesh Shah’ and ‘Jignesh Shah: Why This Persecution’ try to uncover the conspiracy by a powerful group of politicians, bureaucrats and crony capitalists to decimate Shah. According to the author, the above mentioned ‘conspirators’ hated Shah and the financial empire because it upset and challenged their existence and monopoly in the market. But, however hard they may try, these books can hardly be ‘objective and impartial’.
Though they make a feeble attempt to conceal the fact that they were commissioned by Shah to share his version of ‘truth and reality’, their own not so ‘hidden’ agenda from cover to cover, is to overwrite history and unveil “who did, what and how?”
Even the new-born ‘63 Moons’ launched its first counter-offensive by shooting off a legal notice to former finance minister P Chidambaram, former Additional Secretary (Finance and in-charge of capital markets) KP Krishnan and former Forward Markets Commission (FMC) Chairman Ramesh Abhishek. The legal notice, which does not mention the court where the so-called-suit has been filed, seeks damages worth Rs. 10,000 crore saying they suppressed evidence about the conspiracy to “misuse” the powers with the “malafide intention” to destroy and eliminate NSEL and give an unfair advantage to NSE the largest equity bourse. Significantly, NSEL was the first and only commodity spot exchange in the country and fully-owned by Shah’s Financial Technologies.
Moreover, pessimistic traders and investors have almost given up hope to recover their money. So the best thing to do, as they feel, is to forget the past, square-off the money lost and make a new beginning. This is also something that a few professionals engaged by Shah are reportedly trying to propagate.
Stepping into the fray, a Sessions Court in response to a plea from the Maharashtra government passed the order to freeze Shah’s personal and corporate account to ensure that 63 Moons did not squander the money. While freezing old accounts, the court ordered 63 Moons to deposit the revenue generated from the sale of its trading software ODIN into an escrow account. This was contested by 63 Moons which submitted that this would make it potentially difficult for it to sell ODIN to third parties and to keep paying statutory dues and salaries.
Shah is now devoting his time and energies to mentor new-age, young, innovative start-ups like JS Innovation Lab and Networkz bubbling with grand ideas to ‘change the world’.
SFIO moves ahead
Meanwhile, the Serious Fraud Investigation Office (SFIO), the statutory corporate fraud investigating agency in India, has been given a go-ahead by the Corporate Affairs Ministry in its order dated January 15, 2019, to file winding up petitions against 17 defaulters, including 63 Moons, Lotus Refineries, Juggernaut Projects, Mohan India, Jignesh Shah and his 12 auditors including SV Ghatalia and Mukesh Shah. Sections 227, 233 and 628 of the Companies Act define the powers and duties of auditors and determine the penalty for non-compliance. Significantly SFIO in its investigation report dated September 4, 2018, had recommended winding-up proceedings under Section 243 of Companies Act, 1956. The agency also requested market regulator SEBI to give its feedback and advice about the action to be taken against the non-defaulting brokers.
The SFIO has submitted a 28,000- plus-page supplementary charge sheet against 63 accused, including Shah, former NSEL Managing Director Anjani Sinha and three non-defaulting brokers. A few months back, the Economic Offences Wing (EOW) of Mumbai Police probing the NSEL scam arrested the former CFO Shashidhar Kotian unearthed some fresh facts which warranted forensic audit and required Kotian’s corroboration.
The SFIO report made it clear that NSEL was the counter guarantor for all trades on its exchange and it was the duty of the auditors to verify the financial figures and to ensure adequate internal controls. Without beating around the bush, the SFIO report squarely blames the auditors for not verifying the fact about the authenticity of NSEL accredited warehouses with the Warehousing Development and Regulatory Authority (WDRA) or tallying the actual stock position of commodities in the warehouse on March 31 every year. This led to a situation where the warehouses (instead of being used by NSEL) came to be misused by the defaulters.
ALL this has helped Shah to claim that he is innocent because his guilt hasn’t been proved investigators in a court of law. Bubbling with confidence, Shah was reported as saying, “When the truth is on your side, you have to withstand all pressure. I have full faith in the judiciary, and I am convinced that I will get justice. I am not a quitter. I haven’t run away from the country. I am not saying that my ordeal is over. But I am available 24×7, and have answered all summons and notices.”
This is precisely what sources close to him have in mind when they saythat the investigators probing the case so far haven’t been able to build a water-tight case and find a money trail leading to him.