Shah’s 3rd arrest: Vendetta or persecution?

Jignesh Shah, once described as the poster boy of Indian commodities markets, has once again been arrested, this time by the Central Bureau of Investigation (CBI), albeit not in the National Spot Exchange Ltd (NSEL) case but on charges related to the licencing of MCX-SX.

On September 20, close on heels of Enforcement Directorate’s arrest of Shah, the CBI took him into custody. It is the third time a different investigating agency has arrested Shah, the promoter of Financial Technologies (India) Ltd, in a span of three years ever since the payment default of Rs 5,600 crore hit the NSEL.

The CBI's latest decision to arrest him seems even more intriguing. The Securities Exchange Board of India (SEBI) accuses Shah of suppressing information about alleged buyback arrangements with individual financial institutions. And, this remains the moot point. The battle between SEBI and Shah over matters related to MCX-SX was an old one. But, when in the fight over renewal of licences reached the courtrooms, the law of the land was in MCX-SX’s favour. The Bombay High Court stated that the buyback arrangements were legal. Despite the validity, the SEBI challenged the order in the Supreme Court, only to have their plea dismissed.

The CBI also alleged that Shah was instrumental in getting the renewal of a license to MCX-SX by unfair means despite the fact that the permission was duly granted by SEBI, its former chairman CB Bhave and whole time director KM Abraham after following due process. But, at some level, this does not sound right. Why would Shah have to knock the doors of the courts, if he had allegedly connived with the SEBI officers to get his renewal for MCX-SX? And even if there is a case of corruption, shouldn’t the then top management of SEBI also be under the radar? These questions remain unanswered.

Curiously enough, all three agencies cited the same reason for Shah's arrest—his lack of cooperation. And none of these organisations including the Economic Offences Wing, Mumbai Police, and the ED, could produce any evidence against him. In fact, the Special Court that heard ED’s case released Shah on bail ruling that his very arrest was illegal. Even at the time, there were whispers in the financial markets that Shah has become a target due to vendetta politics. Is there a conspiracy against him driven by some vested interests? When the CBI wants to run through a resolved case, it does raise a few eyebrows. Is Shah a victim of character assassination?

The Prevention of Money Laundering Act (PMLA) Court’s bail order was no less than a dressing down for the ED. It ruled: “The ED has failed to satisfy the Court how Shah’s arrest is legal in a different case. There is no vicarious liability unless a statute expressly provides so. This court does not find any force in ED’s contentions that it wanted to file a supplemental complaint against Shah…who has already been released on bail in the Maharashtra Protection of Interest of Depositors Act (MPID) case. He has not attempted to flee from justice. There is no question of Shah tampering with any evidence since the EOW, Mumbai, has already collected all the evidence. There is no material before this Court also to show that Shah will attempt to influence the witnesses.”

So, while legal cases against Shah are falling flat as there is no proof of culpability, another question arises: Why are all cases centred on Shah? In the aftermath of the 2013 NSEL crisis, all actions are diverted against Shah, NSEL and 63 moons (formerly FTIL). All the other stakeholders – brokers and defaulters are not constantly under the lens of the government or the investigating agencies. Action against defaulters and brokers appear as a mere eyewash, given that there has been no concentrated effort towards the recovery of money.

In 2014, the Bombay High Court, while granting Shah bail, ruled: “Though projected a ‘scam of Rs 5,600 crore,’ the ill-gotten money has not gone to Shah, or for that matter, to NSEL. In fact, it is not the case of anyone…It is almost conceded that there has been no material to show any direct connection or link between the defaulting borrowers and Shah.” One would like to believe that the government of the day is serious about resolving the NSEL crisis and ensuring that those who lost their money get it back. But, this constant attempt to put Shah on the dock, gives the impression that there is more to this than meets the eye.

No court in the country has pronounced him guilty nor have the courts fixed the culpability of NSEL/FTIL in the payment crisis. It cannot be disputed that the investigative agencies have traced the disputed amount to 22 defaulters. So when this truth is out in the open. Isn't it strange that the ED, EOW-Mumbai, and CBI have taken concerted actions against Shah, leaving out the brokers and defaulters? So, will Jignesh Shah be hounded and harassed repeatedly or will there be serious steps to solve this payment crisis? Can the monitoring team in the government also look into actions against defaulters and other stakeholders? Can the government provide the status of this investigation to the public?