NRI accused of pushing dabba trade in commodities

MUMBAI: Bharatiya Janata Party (BJP) legislative council member Vinod Tawde has accused the Forward Markets Commission (FMC) of going slow on initiating action against Reymount Investment Ltd and Kerford Investment Ltd, two entities that have been accused of conducting illegal commodity trading operations in India.

Three formal complaints have been lodged with the FMC by Tawde, who is also general secretary of the BJP in Maharashtra. “Both these companies are headed and controlled by a Dubai-based non-resident Indian, Puthankote Vadakeveetil Aboobacker, who has opened 100 offices in India through Reymount Commodities, which has membership on both Multi-Commodity Exchange (MCX) and National Commodities and Derivatives Exchange (NCDEX).

Reymount Commodities is run by PV Faisal and PV Shamsuddin, brothers of Aboobacker. An official from MCX said Reymount Commodities was a legal entity and authorised by FMC.

According to Tawde, the local commodities brokerage provides the cover for selling the services of foreign exchanges. Customers are provided with terminals where they can trade forward contracts in gold, silver, copper and crude oil.

According to Tawde, Reymount Investments is registered in Virgin Islands, and has been banned from operating in the US and the UK. “However, they are operating in 28 other countries, including Hong Kong, apart from India. The US has already confiscated the property and bank accounts of these companies, which have been accused of siphoning $53 million from the US. Some 34 bank accounts and six properties have been seized,” he adds.

Tawde alleges that both the companies pose as “broker firms”, but are in reality providing trading terminals for illegal foreign commodities trading - also known as ‘dabba’ trade.

These trades are violative of Sections 15,18,20,21 and 21A of the Forward Contracts (Regulation) Act, 1952. Reymount and Kerford have targeted customers in Mumbai, Ahmedabad, Jaipur, Indore, Chandigarh, Delhi, Kolkata and Chennai.  The FMC has already warned that it will take strict action against customers for using terminals of foreign commodity exchanges illegally in India. In a notice issued in April 2006, the FMC warned that persons entering into such illegal contracts would be punishable under Section 21 of the FCR Act.

According to Tawde, the two companies offer sophisticated software which is loaded on to their customers’ PCs.  The main target customers are jewellers and commodity dealers, who are familiar with forward contracts.

“Diamond traders holding pots of unaccounted money are the main traders here. They are using foreign terminals here in India. Diamond traders deposit Rs 5-10 lakh each and are charged $20-50 per transaction,” alleges Tawde.

Another company, Cosmo Trade Pvt Ltd, which owns an office in Lower Parel, Mumbai, has also been soliciting clients on behalf of Reymount. This company is indirectly funded by Reymount, alleges Tawde. So far, the FMC has not taken any action against this company as well.

When contacted, an FMC official said: “We are taking action. We have received complaints about this illegal exchange and are investigating the matter in detail. We are also conducting enquiries with MCX and NCDEX regarding this issue.”

However, FMC is not involving the police at this stage to stop the commodity exchange from operating in India.

DNA Money tried to contact Aboobacker in Dubai, but he was unavailable for comment at the time of writing.