Bombay HC rejects plea by brokers to withdraw applications amid NSEL probe

The Bombay High Court Thursday dismissed petitions filed by four commodities brokers seeking a direction to the Securities and Exchange Board to allow them to withdraw their applications.

The petitioners--Motilal Oswal Commodities Broker, Anand Rathi Commodities, Geofin Comtrade and India Infoline Commodities, approached the court after the Sebi last month had refused to allow them to withdraw their applications on the ground that an enquiry was pending against them in relation to the over Rs 5,000 crore NSEL scam.

In April 2017, Sebi had issued show cause notices to these brokerages informing them about the enquiry initiated against them. The NSEL scam came out in the open in July 2013, post which the government merged the commodity regulator FMC with Sebi.

Following this, the companies sought permission to withdraw their applications. But the market regulator refused. The companies Thursday told a division bench of justices BR Gavai and Sarang Kotwal that the Sebi cannot hold an enquiry against them if they do not want to register themselves as commodities brokers.

The judges, however, dismissed the petitions observing that the petitioners were seeking to withdraw their applications as an afterthought and only wanted to escape the enquiry initiated against them.

Following the NSEL scam an initial investigations by the Economic Offences Wing (EOW) of the Mumbai Police, and after receiving complaints from investors against the brokers (including Motilal Oswal, Geofin Comtrade, Anand Rathi and India Infoline) of the now-defunct spot exchange, the EOW had in March and April 2015 requested Sebi to take appropriate actions.

The regulator had then appointed an auditor to carry out a performance inspection of the five brokers. Based on the findings of the auditor and further analysis by the Sebi, the regulator decided to initiate an enquiry against these brokers.