RAISING QUESTIONS of propriety, Rahul Gandhi, then Congress vice president and sister Priyanka Gandhi Vadra rented their 4.69-acre farmhouse in Delhi to Jignesh Shah-promoted Financial Technologies (India) Ltd in early 2013 when the Congress-led UPA government was investigating National Spot Exchange Ltd (NSEL), a company promoted by FTIL, for alleged market irregularities.
The rent agreement between FTIL and Rahul and Priyanka, is dated February 1, 2013, almost 10 months after NSEL received a show-cause notice for alleged violation of norms. The NSEL scam became public in July 2013 and the agreement was ended in October 2013, two months before the lease would have expired on December 31, 2013.
Both FTIL and the Congress said that this was a routine business transaction.
Responding to a questionnaire from The Indian Express, the Congress said that the UPA at the Centre and the Cong-NCP government in Maharashtra had, in fact, taken “decisive civil and criminal action” against FTIL, Shah and other entities associated with him. These included Shah’s arrest.
On November 29, the Enforcement Directorate wrote to FTIL (now called 63 Moons Technologies Ltd) seeking details of its agreement with the Gandhis, The Indian Express has confirmed.
Jignesh Shah-promoted FTIL signed an 11-month lease agreement to rent Indira Gandhi Farm House in Mehrauli at a monthly rent of Rs 6.7 lakh.
FTIL also gave an “interest free deposit of Rs 40.20 lakh vide two separate cheques of Rs 20.10 lakh”, respectively to Rahul and Priyanka Gandhi. The company wanted to use the farmhouse as a guesthouse for its guests and officers, according to the lease agreement.
The Indian Express sent a questionnaire to 63 Moons Technologies Ltd and the Congress asking about the agreement and its propriety given that Shah was under the UPA’s official scrutiny.
Responding to the questionnaire, Congress spokesperson Randeep Singh Surjewala said that the farm was an ancestral property purchased in the 1960s and for several years, it was rented out.
“In the same process, Indira Gandhi Farm was rented out for 8 months and 22 days i.e. 1 February, 2013 to 22nd October, 2013 to FTIL. The entire rent received from the tenancy was disclosed in the income tax returns and income tax was paid in accordance with the law. During the period of tenancy, one Mrs. & Mr. Khairnar occupied the property.
“There was no question of any association or relationship or any intervention having been made by Sonia Gandhi, Rahul Gandhi and Priyanka Gandhi Vadra in any ongoing proceedings either against FTIL or Jignesh Shah or any other person or entity related to them,” Surjewala said.
He added that “facing imminent defeat in the election going States, overall rejection of PM’s leadership and policies as also complete failure to tackle the all round distress on various fronts of economy — agriculture — jobs has pushed Modiji to seek to divert people’s attention by running such smear campaigns.” And using the Income Tax Department and the ED as “revenge tools” to execute a “hatchet job”.
The ED’s communication comes close to the summons issued to Priyanka’s husband Robert Vadra, again in November, in relation to a probe for alleged money laundering in a land deal in Rajasthan. Robert Vadra called it “the government’s plan B every time they find themselves on the backfoot be it Rafale or the prospect of losing Assembly elections”.
During its first term, the UPA government had granted an exemption to NSEL through a notification on June 5, 2007, from complying with the provisions of the Forward Contracts Regulation Act.
Without any regulator overseeing its functioning, NSEL flourished and allowed trading in contracts that were later found to be in alleged violation of conditions under which it was granted the FCRA exemption.
In fact, the regulator for commodities derivatives then, the Forward Markets Commission (FMC), was designated as an agency that could call for information from NSEL only in February 2012. But it still was not empowered to take action.
After analysing data submitted by NSEL, the FMC submitted a report to the Department of Consumer Affairs that the exchange was violating the conditions under which it was granted FCRA exemption, and requested it to take necessary action.
The Department of Consumer Affairs issued a show-cause notice to NSEL on April 27, 2012. But no action was taken for almost 15 months until July 2013. On July 12, the department asked NSEL not to issue any fresh contracts, and settle all existing contracts. NSEL discontinued all its contracts on July 30, 2013.
The spot exchange was not able to settle outstanding trades. This sparked investigations by regulators to find out whether the exchange defrauded traders by not enforcing rules that require sufficient collateral to be set aside.
The promoter, FTIL, blamed NSEL executives and the trading parties for the default. There are 24 members who have defaulted on payment of Rs 5,600 crore to about 13,000 investors.
In December 2013, the FMC declared FTIL and Jignesh Shah among others as “not fit and proper” to be shareholder/director in the management or board of any exchange.
It also pointed out that NSEL cannot be said to be independent since 99.9998 per cent of its shares were held with FTIL and two FTIL board members were on NSEL board too, one of them being Shah, who was vice-chairman.
Since then NSEL, FTIL, its promoters, brokers and its 24 borrowing members have come under the scanner of multiple probe agencies. The government withdrew the exemption to spot exchanges in September 2014.
The FCRA itself was repealed a year later in August 2015, FMC was merged with the Securities and Exchange Board of India (Sebi), and the regulation of the commodities derivatives market shifted to the capital market regulator.
Responding to a questionnaire, an official spokesperson for 63 Moons Technologies said, “A premises was rented by 63 Moons Technologies (formerly known as FTIL) on 1st February 2013 through an official lease agreement at a monthly rent of Rs 6,20,000 and refundable deposit of approximately Rs 40 lakh, with due approval from its board. This was done in the normal course of business like most other corporates do and was for the purpose of stay of company officials and its representatives and it was used so. The said premises was vacated on October 23, 2013 and the security deposit was duly refunded back to us.”
(With inputs from Manoj C G)