1 arta gern yer whee ( eet 154g. whan SigaT a are) Paget FIRST INFORMATION REPORT (Under Sec. 154Cr.P.C.) SPEC. 990 wad aa. Book No. Serial No. 2 (} 1. fren: art: at: Wa. fein : District Ps Year FIR No. Date Mumbai CBV/EOW/Mumbai 2018 RC.0682018E0001 01.03.2018 2 (1) fear: are Sections Act indian Penal Code 120-8 IPC r/w. See. 420 of IPC (2) faa: are: Act Sections PC ACT, 1988. 13 (2) rw 13(1) (@) (3) far: sare: Act Sections (4) 34 far wi ond: Other Acts & Sections Criminal Conspiracy and Cheating and Criminal misconduct by Public Servants. 3. (mH) fla arate : (ahi Sispected fence From the year 2002 to 2012 (a) fa: fee wa (b) Day Date Time ‘Thursday 01.05.2018 17.00 hrs. @) aa gat a eA feria (c) Information received at PS Date CBI, BOW. MUMBAI __ _01.03.201 SRT feats . Entry No. Date Time GD SI. No. 66 01.03.2018 17.00 hrs. 4. WER: fofaartior Type of Information Written/Oral Source Inform: = Wet Fl Ta PigosrotiOcourrence Mumbai and other places in Maharashtra Cm) oh a Reena ga: (2) Direction & Distance from PS ‘ate 7. / Beat No.(@) wt (0) Address Source Information (a) Fearera ory ent Starfire HB at aA - (¢) In case, outside the limit of this Police Station, then NAL ‘ofera art aa ‘faren Name of PS District afrinht qearreai : Complainant / Informant os (#) am (a) Name (a) fray ofa at ar (b) Father's / Husband's Name (a fafa (a) aga: (c) Date of Birth we (d) Nationality (3) wats a. coves TT FTTH een " . ard eR at A (@) Passport No Date of Issue Place of Issue (a) aE {f) Profession a (8) Ta (g) Address are aaa / tara / aa ar ye fare Details of known / suspected / unknown accused with full particulars (Cafe saga tat ser 8 TT ders BL) (Attached separate sheet, if necessary) (2) Shri Jignesh Shah, the then MD, MCX. a) 2) Mis (2) Mis. Financial Technologies tndia Limited (FIL 2) (3) Mis. Multi Commodity Exchange of Indie Limited (MCX, @) (CH) Shri Bishou C. Khatua, the then Chariman, Forssurd Market Connmission (89De Kewl an, the than Chaiman, Forward Marke! Commins (6) Shi Avan Kuno Bat the thn laa, Forward Market Commission () Shi: jes Kumar Agar he thn Chan, Foraré Marker Comms (8) Shri Joseph Massy. the then Dy. MD. MCX . (9) iris Nae the then Deputy Den, Forard Market Camasion {10)Sb.Bhinrao Rail the he SRA. TNC. Muna {11s wala Tatar se thon PAM. Mii Andon Othe3 pasar great fee or A rete a: . arn {for delay in reporting by the complainant / informant No delay | 9. area / eae Beat ar Te FACT: (cafe sarees 81a ater A TA Hera FE) Particulars of properties Stolen (Attach separate sheet, if necessary) NA 10, Trea / TE wea ST HoT AKA + Total value of property stolen N/A 41, owe) oar yy Ya wT: Inquest Report / U.D. case No. if any NIA 12, we eer free :~ (cafe arrerers Oat ster Ba sierra HE) First information contents (Attach separate sheet. if required) NIA Information was received by the CBI, EOW, Mumbai against the officials of Forward Markets Commission (FMC) and SEBI for giving illegal benefits to M/s Multi- Commodity Exchange of India Ltd. (MCX) and allowing MCX trading as a private commodity exchange. Based on the information, an enquiry was conducted by the CBI, EOW, Mumbai which revealed that on the instruction of Minisiry of Consumer Affairs, Food and Public Distribution, Department Consumer Affairs, New Delhi, a press release was issued by the Forward Markets Commission (FMC) inviting applications for setting up of the Nationwide Multi Commodity Exchanges (NMCEs) in March 2002. In response to the press release, FMC received 16 applications, including that of M/s Multi-Commodity Exchange of India Ltd. (MCX) dated 18.04.2002, promoted by M/s Financia] Technologies India Ltd. (FTIL) under the signature of Sh Jignesh Shah, Chairman of MCX. Out of the 16 applicants. Shri Anand Kumar Bhatt, Chairman, FMC vide his letter dated 18.07.2002, recommended names of the following 4 applicants for approval by the Ministry:Consortium led by ICICI; ‘The proposed MCX Exchange led by FTIL; National Board of Trade, Indore; On-line Commodity Exchange (now NMCE), Ahmedabad PeNe ‘The application of MCX was accepted and recommended for setting up the exchange, despite the fact that MCX was not fulfilling the stipulated criteria for being eligible for setting up the NMCE. The following shortcomings were noticed:- 1. MCX was a new company and it did not have the system of online trading and clearing system put in place. 2. The Efficient Clearing, Settlement and guarantee system was not available. 3. The applicant MCX neither had its own warehouse, nor did it have any tie up with warehouses for delivery of the underlying commodities. 4. The system of well organized and capitalized brokerage houses was not in place. 5. The real time price and trade information dissemination was not in place. 6. The operations had not started as such there was no scope for ensuring transparency in operations and decision making, 7. Since the operation has not started, it was not possible to judge the effectiveness and impartiality of the management, 8. The investment support from investors, including Institutional Investors was limited to FTIL. and individuals including Sh. Jignesh Shah himself. 9. The MCX, being New Company, did not have experience in handling commodity markets and proper business plan. 10. The MCX also did not have all India presence. ‘The MCX, claiming to be a new company, did not submit Audited accounts of Company for the last 3 years and Net worth of the Company/ association organization. They also did not submit the business plan for proposed NMCE and scheduled operationalization of the exchange and informed that the NMCE would start operation after setting it up. They did not even mention the clear confirmation of place of business. Regarding the Proposed investment expenditure with phasing and source of funds, MCX has mentioned that it has been promoted by M/s FTIL and M/s La Fin Financial Services Pvt. Ltd. with 51% and 49% investment, Phasing and source have not been mentioned. Despite the above shortcomings, the processing officer, Ms. Ujwala Tharthare, Senior Research Assistant (SRA), FMC did not call for clarification from MCX and wrongly mentioned in her notes dated 30.05.2002 and 14.06.2002 that the application of FTIL (promoter of MCX) was complete in all respect. Her notes were approved by Sh. A.K. Bhatt, the chairman, FMC. However, the Ministry of Consumer Affairs, Food and Public Distribution granted NMCE status only to Online Commodity Exchange india Ltd. (OCEIL), Ahemdabad and National Board of Trade (NBOT), Indore. When Shri Jignesh Shah, Chairman MCX learnt that the Ministry has not considered the application of MCX, he approached Shri A. K. Bhatt, Chairman, FMC for help. Shri A. K. Bhatt wrote a letter dated 27.01.2003 to the Director (Industrial Trade), Ministry of Consumer Affairs, Food and Public Distribution, Department of Consumer Affairs, New Delhi for reconsidering the application of MCX. Based on the request of Shri A. K. Bhatt, the Ministry conveyed its “In- principle” approval to MCX, Mumbai for setting up the NMCE with direction to completeformalities and their facilities to be of National Status within 10 months of time. The MCX was informed about the “In-principle” approval and the said conditions through letter dated 14.02.2003 of Sh Anupam Mishra, Dy. Director, FMC. These facts clearly indicate that the officials of FMC had extended undue favour to MCX in recommending its name for reconsideration and getting “In-principle” approval of the Ministry of Consumer Affairs, Food and Public Distribution, New Delhi, for setting up of the NMCE by MCX. As per the requirements mentioned in the Press Release issued by the Forward Markets Commission, the NMCEs ought to have institutional support. It was conveyed to MCX vide letter dated 18.07.2002, signed by Shri A.KBhatt, Chairman, FMC that MCX would be required to rope in institutional support for the project, so that equity is widely distributed and no single promoter has dominant control on the Exchange. It was also conveyed to MCX to tie up with chain of warehousing companies, preferably Central/State/ Private Sector warehouses. In reply, Shri Jignesh Shah, MD, MCX submitted a letter dated 25.04.2003. Surprisingly, after receiving this letter, Shri A.K. Bhatt, Chairman, FMC, completely departed from the earlier stand of the department and in order to help MCX, Shri A.K. Bhatt, by abusing his official position as Chairman, FMC, advised his subordinate officers not to insist upon MCX to bring in institutional investor. It indicates that Shri A.K. Bhatt, helped Sh. Jignesh Shah and FTIL by allowing them to hold on to their own equity shares and exercise dominant control over the exchange, thereby acted against the criteria fixed by the Ministry for setting up of NMCE and also acted against the interest of the investors, Sh. Anupam Mishra, Dy. Director, FMC vide his Note dated 14.05.2003, has mentioned that, “the Exchanges were given recognition for Forward Contracts of commodities, requiring provision for delivery of goods. In the absence of a definite provision for delivery, they shall be wagering contracts and as such illegal’, On the said note of Sh. Anupam Mishra, on 14.05.2003 itself, Sh A.K. Bhatt, Chairman put his remark, “Whatever it is, it has to be a level playing field for all the four players”. The Chairman, thereby ignored a vital aspect in the operation of the commodity exchange which is based on delivery of the goods. This clearly shows that the relaxation on this issue was given by ignoring the interest of the investors, in order to illegally favour MCX. For according approval to the Bye laws, Rules and Memorandum and Articles of Association of MCX, Sh B.D. Raibhole, SRA, FMC had put a note dated 14.07.2003. On this note, Sh. Kolamkar, Director, FMC remarked that number of person subscribing to MoA is not clear, which was a legal requirement for Public Ltd. Company. Following this, Sh B.D. Raibhole, SRA put up a draft letter addressed to MCX seeking clarification on the point raised by Sh. Kolamkar, Director, FMC. Instead of signing the letter, Sh. Kolamkar, vide his note dated 28.07.2003, called the file for discussion. The same day, the FMC officials held a meeting with Sh. Jignesh Shah, Managing Director and Sh. Joseph massy, Dy. Managing Director of M/s MCX. There is no record as to what transpired in the said meeting. Surprisingly after this meeting, the FMC officials, including Shri Kewal Ram, Chairman, FMC became silent on the issues of equity contribution, number of subscribers as well as valuation of the IT sourcing. As per the note dated 29.07.2003 put up by Sh. B.D. Raibhole, SRA, “In-principle” approval to the Rules, Bye laws and Memorandum of Association (MoA) of MCX was given by Sh. Kewal Ram, Chairman, FMC on 31.07.2003. Further no effort was made by the officers of FMC to ascertain the details of the MoA of MCX.Further Sh Jignesh Shah, MD, MCX submitted an application dated 8.9.2003 to FMC for permanent recognition of the Exchange. in the Compliance Report submitted along with the application, he has mentioned that MCX is wholly owned subsidiary of FTIL. But immediately next day i.e. on 9.9.2003 a note was prepared by Sh Raibhole, SRA, FMC mentioning that as per explanation of MCX, they meet the conditions of having support from Institutional Investors and referred a letter dated 8.09.2003 from Crawford Bayley and Co, in support of its claim. But the letter from Crawford Bayley dated 08.09.2003 show that the entire contribution was from FTIL and there was no institutional support. Thus, Sh Raibhole, SRA gave a false information in his note in order to help MCX to obtain recognition from the Ministry. Further, Sh Raibhole, SRA drafted a letter to the Secretary, Ministry of Consumer Affairs, Food and Public Distribution, recommending grant of recognition to MCX on 09.09.2003. This draft was approved by Sh Kolamkar, Director and Smt. P. Swaminathan, Member and the letter was signed by Sh Anupam Mishra, Dy. Director on 10.09.2003. In this letter it is mentioned that MCX has completed almost all the requirements as prescribed in the Press Note & recommended grant of permanent recognition to MCX as NMCE. In the last para it is mentioned that “this issues with the approval of Chairman”. During that period Sh. Kewal Ram was functioning as Chairman, FMC. Shri Alice Chacko, Under Secretary to the Government of India, MCAFP, Department of Consumer Affairs, New Dethi issued letter dated 26.09.2003 to FMC directing FMC to grant trading permission to MCX only after they meets the following conditions:- (i) Exchange should give undertaking to FMC that within one year exchange would set up/ avail Independent Clearing facility and (ii) There will be minimum Trade Guarantee Fund (TGF) of Rs. 2 crore. However, FMC officials extended undue favour to MCX. They have put up a note dated 14.10.2003 to the effect that MCX has given the undertaking that they would either set up their own independent clearing house or take the facility of other independent clearing houses and raise the TGF of Rs.2 crores within a period of one year and hence met the condition of recognition. The records of FMC show that on 22.10.2003, FMC gave trading permission to MCX for commencement of futures trading in gold, silver & castor seeds and MCX started trading wef 10.11.2003, without raising TGF of Rs. 2 Crore. The fund is required to be created in order to guarantee settlement of bonafide transactions of the Members inter-se, so as to ensure timely completion of settlements of contracts, even within 1 year. [t shows the involvement of the FMC officials. It has also come to light that the Ministry of Consumer Affairs, Food & Public Distribution (MCAFP), Govt. of India issued a set of instructions dated 29.07.2009 on the equity structures of the commodity exchanges in the form of “Guidelines on the Equity Structure for Existing National Exchanges after 5 years of operations”. It was mentioned in the Guidelines that, “last date of compliance with the above guidelines shall be 30.09.2010 which can be extended by FMC up to 30.09.2011 in exceptional cases on genuine grounds”. However, MCX vide its letters dated 15.02.2010 and 24.02.2010 sought exemption from Commission/ GOI questioning the conditions prescribed in the said Guidelines and giving their own justifications. Sh. D.N. Bagali, Asst. Director and Sh. D.K. Soni, Dy. Director of FMC jointly prepared a note dated 08.03.2010 requesting the commission to take an appropriate view on the proposalof MCX to exempt them from the Guidelines of the Ministry dtd.29.07.2009 from the point of view that the ownership restrictions were already in place in securities market and banking sector. Sh. D.N. Bagali, Asst, Director and Sh. D.K. Soni, Dy. Dir. of FMC and Sh Anupam Mishra, then Director were of the opinion that no exemption should be granted to MCX. Sh Rajeev Agarwal, the then Member, FMC and Sh. B.C.Khatua, the Chairman, FMC had already conspired with Sh. Jignesh Shah to favour MCX. In furtherance of the said conspiracy, Sh Rajeev Agarwal put a remark in the file that “the issue may be deliberated in the Commission meeting” which was scheduled to be held on 06.04.2010. The FMC records show that as per the draft letter dated 26.3.2010, the Commission was of the opinion to give approval to the request of MCX. This indicate that Sh. B.C.Khatua, the Chairman, FMC had already made up his mind to allow exemption to MCX much prior to the Commissions Meeting to be held on 06.04.2010, There were two more unsigned draft letters dated 06.04.2010 and 7.4.2010 prepared in connection with the proposed exemption to MCX. ‘The officials of FMC fraudulently accepted the false claim of M/s. FTIL and Sh. Jignesh Shah that IPO was the only way of diluting the equity to 26% to comply to clause 3.3 of the Guidelines, even though contrary to the said false claim of FTIL and Sh. Jignesh Shah, the other shareholders of MCX, namely, M/s. Edelweiss Capital Limited and M/s. FID Funds (Mauritius) limited have sold their shares @ Rs. 612/- and @ Rs. 500/- per share during the period from 26.03.2010 to 31.03.2010 and 07.05.2010 to 14.05.2010 respectively. The FMC officials had not taken any steps for cancellation of registration of the MCX for its defiance and failure to comply with the statutory Guidelines issued by the Government and thereby allowed the MCX to function illegally. Thereby showing undue favours by deliberate and fraudulent non- enforcement of guidelines dated 29.07.2009, issued by the Government of India, with regard inter alia to the dilution of the equity in MCX of the original / anchor promoter M/s. FTIL to 26% from 31.18% during the period from 20.09.2009 till 07.03.2012 and thereby not only illegally allowed M/s. PTIL and Sh. Jignesh Shah to retain predominant control over the exchange but also facilitated them to reap undue windfall gain in the IPO. On the other hand, by resorting to various subterfuges they have illegally and fraudulently allowed M/s. MCX to operate by allowing M/s. FTIL and Sh. Jignesh Shah to illegally retain the shares beyond the permissible 26% till 2012 and thereby facilitated Sh. Jignesh Shah to make a windfall gain by selling excess shares @ Rs. 1,032/- per share on 07.03.2012 in the IPO. The 5.18% of illegal excess holding by M/s. FTIL in M/s. MCX translates to 26,41,715 shares. During IPO in March, 2012 M/s. FTIL sold its shares at a price of Rs. 1,032/- per share. The approximate price difference between March 2012 and March, 2010 is Rs. 1,032 - Rs. 612= Rs. 520/-. Thereby the FMC officials facilitated windfall gain of 26,41,715 shares x Rs. 520/- = Rs. 1,37,36,91,800/- or Rs. 137 Crore approximately to Sh. Jignesh Shah and M/s. Financial ‘Technologies India Limited (FTIL). Sh. B.C. Khatua, Chairman, retired from FMC in July 2011. After his retirement, his son Sh. Rohit Khatua was given appointment as Vice President, Grade G-8 in MCX-SX, promoted by Sh. Jignesh Shah to deal with Marketing and Corporate Communications etc. He worked with MCX-SX from 17% Sept 2012 to 10 April 2014. His salary was fixed at Rs. 40 lacs per annum, all inclusive. It indicates dishonest understanding/quid pro quo between Shri B.C. Khatua, the then chairman, FMC and Sh. Jignesh Shah, promoter of MCX and MCX-SX.From the details as mentioned above, it is disclosed that the promoters of MCX conspired with above mentioned officials of FMC and have operated MCX illegally and fraudulently and have thereby cheated SEBI / Government of India:- * Without fulfilling the stipulated criteria of eligibility for setting up of the NMCE. * Without provision for delivery of goods. * By falsely claiming support from inst obtain recognition from ministry. * By repeatedly obtaining extensions to comply with guidelines of Government of India. * Byseeking exemptions from instructions/guidelines of MCAFP, GO! dated 29.07.2009. * _ By defying the aforesaid guidelines and not diluting their equity to 26% till March 2012 and have derived undue, unlawful and fraudulent windfall gain of Rs. 137 Crores approximately. tional investors in order to enable MCX to The facts stated above, disclose commission of offences u/s 120-B r/w 420 IPC and Sec-13(2) r/w 13(1)(4) of P.C.Act, 1988 as well as substantial offences thereof by the following persons:- SI.No. Name of the accused 1.__| Shri jignesh Shah, the then MD, MCX (A-1) 2. _| M/s. Financial Technologies India Limited (FTIL) (A-2) 3. __| M/s. Multi Commodity Exchange of India Limited (MCX) (A-3) 4. | Sh Bishnu C. Khatua, (4-4) the then Chairman, Forward Market Commission. Dr. Kewal Ram, (A-5) the then Chairman, Forward Market Commission. 6. | Sh Anand Kumar Bhatt, (A-6) the then Chairman, Forward Market Commission. 7. | Sh. Rajeev Kumar Agarwal, (A-7) the then Chairman, Forward Market Commission. 8.__| Shri foseph Massy, the then Dy. MD, MCX (A-8) 9. | Sh. Vishal Nair, (A-9) the then Dy. Director, Forward Market Commission, Mumbai 10. | Sh. Bhimrao Raibhole, (A-10) the then SRA, FMC, Mumbai Presently working as AGM, SEBI 11. | Ms. Ujwala Tharthare, (A-11) the then SRA, FMC, Mumbai Presently working as AGM, SEBI and Unknown others, a1B. 4 arden Sh at ag: fin setae fara seats 2H sfecrad era ail) & storia wea Te TTT Bl squtea arm Action taken : Since the above information reveals commission of offence(s) u/s as mentioned at Item No. 2 C1) aeren site faren rar ua Sra wee Ea are Registered the case and took up the investigation or Registered the case (2) feta (ata arfiranrt a 1) Sd a wa tg fren Directed (Name of 10) Rank No. ‘Took up for investigation Sh. ALN. Ghuge Inspector of Police (3) SR 8 aia ange ara, (Ok up the cuse for Refused investigation due to or investigation. (4) fea arta earrtatee fan ra ‘fon aafean & sree wT Transferred to PS District ‘on point of jurisdiction afd / gaara 19g, a Ter / TGC GT way, Ra wwe arf Aa seit Prom raat ww wf ait / garner a) Flog wer at 1 FIR read over to the complainanvinformant, admitted to be correctly recorded aed axeopy given to the complainanvinformant, free of cost. ~ ug a Ga a wel ig ST TT xa? ROAC. ov (SHASHAKUMAR NAIR) SUPDT. OF POLICE aafurcintt / yprranet & weet carat fire & erage! FOW MUMBAI Signature/Thumb impression Signature of Officer in-charge of the complainant/informant Police Station Ta / Name (Wa) /Rank No. Sarre ws ar feat el aT Date and time of despatch to the court (SHASHI\KUMAR Nal SUPDT. OF POLIC CBI EOW MUMBAI Card aiftrerd & ener atta afea) Signature of recording Officer with datewom gern fete ar angen 7 eT Attachment to item 7 of First Information Report afere wafer at edit ferttrand, farsa sen ara ferret :~ Physical features, deformities and other details of the suspect/accused : (If known / seen) wal fem} mat | enter | sat a. val vaear Fae st. | (Sex| ata at (Built) wa (Complexion) (tdentification No. Date/Year (Height) Markis) of Birth (in Cms) 3 4 6 7 farsuavfacarren aa aa aa at Tera (Deformities! (Teeth) | (Hair) (Eye) (Habits) (Dress Habis) peculiarities) 8 9 70 it 12 13 sar / act 24H / Place of wet ar Fre waa SS frat we fae Tet (Language/Dialect| (Burn Mark) (Leucoderma) | (Mole) (Scar) (Tattoo) 14 15 16 7 18 19, afar ;qereral, sro afens / safirgaa & at A ee an often fracr fee wa oe et see fae at am ‘These fields will be entered only if complainanVinformant gives any one or more particulars about the suspect/accused. OICIGIPIRB ND—-213-CBUDE dt. 6-04—000