The corporate affairs ministry has sought clarifications from the law ministry and regulators, Securities and Exchange Board of India (Sebi) and Forward markets Commission (FMC), to finalise action against “gross violations” by Financial Technologies India Ltd (FTIL) and related entities.

The Jignesh Shah-led FTIL is promoter of National Spot Exchange Ltd (NSEL) and following the Rs 5,600 crore payment crisis at the bourse, these entities, along with those related to these have come under the scanner of multiple agencies for various violations.

Sources said the ministry has found “gross violations” by the FTIL board on corporate governance matters and is looking at the issue of ‘fit and proper’ status of the directors, among others. The promoters of NSEL are found to have violated the provisions of the Companies Act.

While the ministry has completed its report on FTIL, it is awaiting views from the law ministry and other agencies before taking a decision.

An inspection of NSEL books by the ministry had found the exchange’s board failed to perform its duties towards shareholders, in violation of regulations. The interim report had found corporate governance failure at multiple levels, including lack of transparency, integrity, compliance and ethics.
Besides finding discrepancies in the minutes of board meetings, it was also found that the board did not discuss the exchange's compliance with various rules such as those related to admission of new members.

Many of the NSEL directors, including Jignesh Shah and Joseph Massey, were holding common directorship in group companies of FTIL and they cannot claim to be not aware about happenings at the exchange, sources had said.

The inspection of books of NSEL was ordered under Section 209 A of the Companies Act.

Sebi is also probing corporate governance lapses at FTIL and Multi Commodity Exchange of India Ltd (MCX), the two listed entities of the group.

It has been investigating fluctuation in the share prices of the two entities and role of certain brokers ever since the NSEL crisis broke out in August last, the latest round of probe stems from an FMC ordered audit carried out by consultancy PwC, according to sources. (Business Standard)