Mumbai, Maharashtra – A Special Judge for cases under the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act (MPID Act) in Mumbai has granted bail to Nimish Keshavlal Patel, 54, the Managing Director of M/s. N.K. Proteins Ltd. (NKPL). Patel was arrested on October 29, 2015, in connection with EOW Crime No. 89 of 2013, a part of the massive National Spot Exchange Limited (NSEL) scam.
The order, issued by Special Judge D.P. Surana (C.R. No. 36) on November 17, 2015, allows Patel’s release on bail, contingent on him executing a personal recognizance bond of Rs. 20 Lakhs with one or more sureties of the like amount, along with several stringent conditions.
Background of the NSEL Scam
The prosecution’s case revolves around the NSEL, which provided an electronic platform for trading various commodities. NSEL offered “pair contracts” (T+2 and T+25), where buyers and sellers could trade without physical knowledge of each other. Sellers were required to deposit goods in NSEL-accredited warehouses, where quality and quantity were supposedly checked, and electronic warehouse receipts were generated. Buyers would deposit margin money and receive copies of these receipts upon purchase.
However, the prosecution alleged that NSEL deviated from its legitimate business model. In collusion with 25 borrower companies and brokers, NSEL officials purportedly generated false and bogus warehouse receipts without any actual physical stock of commodities. This fraudulent scheme allegedly induced around 13,000 investors to invest with promises of higher returns, ultimately defrauding them of an estimated Rs. 3,500 Crores.
Allegations Against Nimish Keshavlal Patel and NK Proteins Ltd.
Nimish Keshavlal Patel, as a Promoter Director and MD of NKPL, a company known for its “Tirupati” edible oil brand, is accused of playing a significant role in the scam. NKPL started trading on NSEL in September 2009 and became a Trading Cum Clearing Member. The specific allegations against Patel and NKPL include:
- Issuing false storage receipts and quality certificates.
- Issuing fake sale invoices without actual physical delivery of goods.
- Making false statements about commodity stock.
- Diverting funds totaling Rs. 969 Crores in connivance with NSEL officials, making NKPL the biggest defaulter member among the 25 borrowing companies.
- As per NSEL’s declaration on August 6, NKPL was supposed to hold significant quantities of Castor oil, Castor seed, and Cotton wash oil at its plants in Kadi and Thor, Gujarat. However, police investigations immediately after the offense registration found no stock at these locations.
- NKPL was identified as the first company to initiate trading in paired contracts without actual stock, with other accused borrowers subsequently following suit.
Arguments for Bail
Advocate Girish Kulkarni, representing Nimish Patel, argued that his client had been sufficiently interrogated by the investigating agency, and all relevant documents had been provided. He contended that no further interrogation was required. Kulkarni also pointed out that all offenses leveled against Patel prescribed imprisonment up to 7 years.
Crucially, he highlighted the principle of parity, stating that other member borrowers of NSEL, including Patel’s brother, Nilesh Patel (Chairman of NKPL), had already been arrested, interrogated, and released on bail. Nilesh Patel was granted bail by the Hon’ble High Court on February 4, 2014, and his role was described as similar to that of the applicant. Kulkarni also mentioned that properties of the applicant, exceeding the alleged default amount, had already been seized in the crime, arguing that no purpose would be served by continued incarceration.
Arguments Against Bail
SPP Adv. Avinash Avhad, along with the Investigating Officer (I.O.) and Adv. Sandip Karnik for the intervener/informant, strongly opposed the bail. They asserted a prima facie case against Patel, emphasizing the established link between NSEL, its officials, and Patel as the MD of NKPL, indicating a conspiracy. They alleged that Patel’s company was the biggest defaulter, with Rs. 969 Crores yet to be recovered.
The prosecution also highlighted the familial nexus: Nilesh Patel is the son-in-law of Shankarlal Guru, the Chairman of NSEL. They expressed concerns that Nimish Patel, being an influential person, could threaten witnesses, tamper with evidence, and abscond. They noted that the process of identifying and securing his assets under the MPID Act was ongoing. The prosecution claimed that Patel had not cooperated with the investigation, failing to attend EOW offices despite summonses, and that his deposit of Rs. 52 Crores was merely 5% of his total liability, not proving his bona fides. They also argued that co-accused members/borrowers were released on bail only after chargesheets were filed against them, which was not the case for the applicant, thus rendering the law of parity inapplicable at this stage.
Court’s Rationale for Granting Bail
After meticulously perusing the documents, police case papers, and rival contentions, Judge D.P. Surana noted that it was undisputed that Nimish Patel was the MD of NKPL and involved in significant trading with NSEL.
However, the court found the grounds presented by the I.O. for rejecting bail insufficient to justify continued incarceration. The judge observed that no specific instance was shown as to what part of the investigation against the applicant was pending that specifically required his continued custody, or on what aspect he had non-cooperated during interrogation.
The court further noted that Patel was disputing the quantum of his liability, and his properties exceeding the NSEL’s claim had already been attached. Crucially, the court emphasized the case of Nilesh Patel, the applicant’s brother and NKPL’s chairman, who was already out on bail by order of the Hon’ble High Court. The court found no satisfactory reason why Nimish Patel’s custody was necessary for further investigation, despite the chargesheet not yet being filed against him.
The judge stated that merely because the applicant had not come up with a repayment proposal or consented to the sale of property, while disputing the amount due, he could not be detained. The court also observed that there was “no material to show that only if the applicant is kept behind the bars the further investigation will be facilitated and otherwise not.”
Furthermore, the court explicitly applied the law of parity, noting that “all the arrested officer bearers of the NSEL and arrested borrowers/member of NSEL, including Jignesh Shah of NSEL and Nilesh Patel of NKPL are already granted bail.” It also pointed out that directors of other similarly situated companies with significant outstanding amounts had also been released on bail. While acknowledging that some might have been granted bail after chargesheets were filed, the court reiterated that the prosecution failed to specify any pending investigation requiring Patel’s custody.
Regarding the allegations of tampering or absconding, the court found them to be “general in nature,” noting that the co-accused brother, Nilesh Patel, who was on bail, had not been accused of absconding or tampering with evidence. The applicant’s address was also undisputed.
Given that most of the investigation was based on documentary evidence already in the I.O.’s possession, the court decided that imposing strict conditions would allow the I.O. to complete the investigation smoothly.
Bail Conditions Imposed
Nimish Keshavlal Patel was ordered to be released on bail in EOW Crime No. 89/2013 on a Personal Recognizance (PR) bond of Rs. 20 Lakhs with one or more sureties of the like amount, subject to the following conditions:
- He shall mark his presence at the concerned police station with the investigating officer on the coming 10 alternate Wednesdays between 10 AM to 1 PM, and as and when called by the I.O.
- He shall not leave India without the prior permission of the court.
- He shall not directly or indirectly make any inducement, threat, or promise to any person acquainted with the facts of the case so as to dissuade them from disclosing any facts to any police officer or court.
- He shall not alienate or dispose of, in any manner, any of his immovable properties without the permission of the court.
The bail application was allowed, and the order was signed on November 17, 2015.