9 ANNUAL REPORT 2010-11 - Nmce.com

th 

9 ANNUAL REPORT 2010-11 

NATIONAL MULTI-COMMODITY EXCHANGE OF INDIA LIMITED

Trade with the Pioneer 

Sr. No. Index Page No. 

1 Our Vision & Mission 4 

2 Notice calling AGM 5 

3 Director’s Report 8 

4 Corporate Governance 16 

5 Discussion and Analysis 28 

6 Auditor’s Report 30 

7 Balance Sheet, PL Account and Schedules 36 

8 Event Photo 60 

1

NATIONAL MULTI-COMMODITY EXCHANGE 

CORPORATE INFORMATION 

Board of Directors 

Shri B. B. Pattanaik - Chairman 

Shri Shyamal Ghosh (IAS Retd.) - Independent Director 

Shri K, Rajendran Nair (IAS Retd,) - Independent Director 

Shri Krishna Mohan Sahni (IAS Retd.) - Independent Director 

Dr. Sidharth Sinha - Independent Director 

Shri G. N. Nair - Director 

Shri Kevin D’sa - Director 

Shri Rajinder Mahajan - Director 

Shri Prem Nath Tiwari - Nominee Director FMC 

Shri Anil Kumar Mishra - Managing Director & CEO 

Chief Financial Officer & COO 

Shri Shyam Sundar Vyas 

Company Secretary 

Shri Anil Maloo 

Statutory Auditors 

Haribhakti & Co. 

Chartered Accountants, 

Ahmedabad 

Bankers 

HDFC Bank Limited 

Punjab National Bank 

Indusind Bank 

Registered Office 

th 

Office No.- 4, 4 Floor, H K House, 

Ashram Road, Ahmedabad - 380 009. 

Phone: 079-4008 6000 / 39 

Fax: 079-4008 6041 

Website: www.nmce.com 

NMCE Senior Management Team 

Vice President - Market Watch & Surveillance 

Dinesh Shukla 

Vice President - Business Development 

Narayan Rai 

Vice President - Information Technology 

Neeraj Gupta 

AVP - Clearing & Settlement 

Rajendrasinh Chudasama 

AVP - Finance & Accounts 

Sarita Baxi 

Vice President - Business Development (North) 

Mahendrakumar Khattar 

General Manager - Logistics (South) 

Wilfred Noronha 

2


Board of Directors 

Shri B. B.Pattanaik 

(Chairman) 

Shri Shyamal Ghosh 

(Independent Director) 

Shri K R Nair 


Shri K. M. Sahni 


Dr. Sidharth Sinha 


Shri G N. Nair 

(Director) 

Shri Kevin D’sa 

(Director) 

Shri Rajinder Mahajan 

(Director) 

Shri Prem Nath Tiwari 

(Nominee Director FMC) 

Shri Anilkumar Mishra 

(Managing Director & CEO) 

3


Our Vision 

National Multi-Commodity Exchange of India Limited is committed to provide world class services of 

on-line screen based Futures Trading of permitted commodities and efficient Clearing and guaranteed 

settlement, while complying with Statutory/Regulatory requirements. We shall strive to ensure 

continual improvement of customer services and remain best service provider leader amongst all 

commodity exchanges. 

Our Mission 

 

Improving efficiency in commodity supply chain through on-line trading. 

 

Minimization of settlement risks. 

 

Improving efficiency of operations by providing best infrastructure and latest technology. 

 

Rationalizing the transaction fees to optimum level. 

 

Implementing best quality standards of warehousing, grading and testing in tune with trade 

practices. 

 

Improving facilities for structured finance. 

 

Improving quality of services rendered to suppliers and users of commodities 

 

Promoting awareness about the benefit of on-line trading futures trading services of NMCE to all 

the stake holders pan India. 

4


NATIONAL MULTI-COMMODITY EXCHANGE OF INDIA LIMITED 

NOTICE 

Notice is hereby given that the Ninth Annual General Meeting of the Members of the Company will be 

th 

held on Friday, September 30, 2011 at 11 a.m. at the registered office of the Company at Office No. 4, 4 

Floor, H. K. House, Ashram Road, Ahmedabad – 380 009 to transact the following business: 

Ordinary Business: 

st 

1. To receive, consider and adopt the Audited Balance Sheet as at 31 March, 2011 and the 

Profit and Loss Account for the year ended on that date together with the reports of Directors 

and Auditors thereon. 

2. To re-appoint Shri B B Pattanaik, who retires by rotation and being eligible offers himself for 

re-appointment. 

3. To re-appoint Dr. Sidharth Sinha, who retires by rotation and being eligible offers himself for 

re-appointment. 

4. To re-appoint Shri Shyamal Ghosh, IAS (Retired), who retires by rotation and being eligible 

offers himself for re-appointment. 

5. To appoint Statutory Auditors of the Company and to fix their remuneration and in this regard 

to consider and, if thought fit, to pass with or without modification(s), the following resolution 

as an Ordinary Resolution: 

“RESOLVED THAT M/s. Haribhakti & Co., Chartered Accountants, Ahmedabad 

(Registration No.: 103523W), be and are hereby appointed as Statutory Auditors of the 

Company, to hold office from the conclusion of this Annual General Meeting until the 

conclusion of the next Annual General Meeting of the Company on such remuneration as 

shall be fixed by the Board of Directors of the Company.” 

Special Business: 

6. To consider and if thought fit, to pass with or without modification the following resolution as an 

Ordinary Resolution: 

“RESOLVED THAT Shri Kevin D'sa, who was appointed as an additional Director of the 

Company with effect from November 30, 2010 pursuant to Section 260 of the Companies Act, 

1956 and holds office up to the ensuing Annual General Meeting of the Company and in 

respect of whom the Company is in receipt of a notice under Section 257 of the Companies 

Act, 1956 proposing his candidature for the directorship of the Company, be and is hereby 

appointed as a director of the Company, whose period of office shall be liable to determination 

of retirement of directors by rotation.” 


Ordinary Resolution 

“RESOLVED THAT Shri Krishna Mohan Sahni, IAS (Retired), who was appointed as an 

additional Director of the Company with effect from May 23, 2011 pursuant to Section 260 of 

the Companies Act, 1956 and holds office up to the ensuing Annual General Meeting of the 

Company and in respect of whom the Company is in receipt of a notice under Section 257 of 

the Companies Act, 1956 proposing his candidature for the directorship of the Company, be 

5


and is hereby appointed as a director of the Company, whose period of office shall be liable to 

determination of retirement of directors by rotation.” 


Ordinary Resolution 

“RESOLVED THAT Shri Premnath Tiwari, Director, Forward Markets Commission, who was 

appointed as an additional Director of the Company with effect from August 20, 2011 pursuant 

to Section 260 of the Companies Act, 1956 and holds office up to the ensuing Annual General 

Meeting of the Company and in respect of whom the Company is in receipt of a notice under 

Section 257 of the Companies Act, 1956 proposing his candidature for the directorship of the 

Company, be and is hereby appointed as a director of the Company, whose period of office 

shall be liable to determination of retirement of directors by rotation.” 

Place: New Delhi 

By order of the Board of Directors 

Date: September 7, 2011 Anil Maloo 

AVP (Legal) & Company Secretary 

Notes: 

1. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO 

APPOINT A PROXY TO ATTEND AND VOTE INSTEAD OF HIMSELF AND A PROXY NEED 

NOT BE A MEMBER OF THE COMPANY. 

2. Proxies, in order to be effective, must be received by the Company not later than 48 hours 

before the commencement of the meeting. 

3. The related Explanatory Statement pursuant to Section 173(2) of the Companies Act, 1956 

setting out all material facts concerning items 6 to 8 is annexed. 

Item No.6 

Explanatory Statement pursuant to Section 173(2) of the Companies Act, 1956 

Shri Kevin D'sa was appointed as an additional director of the Company with effect from November 30, 

2010 pursuant to Section 260 of the Companies Act, 1956 and read with Article 120 of the Articles of 

Association of the Company. 

In terms of Section 260 of the Act, Shri Kevin D'sa would hold office up to the date of ensuring Annual 

General Meeting of the Company. 

Mr. Kevin D'Sa is presently President (Finance) & Chief Finance Officer of Bajaj Auto Ltd. He is also the 

Chief Finance Officer and President (Business Development) of Bajaj Finserv Limited and Chief 

Finance Officer of Bajaj Holdings & Investment Limited. He is also serving on the boards of some of the 

Bajaj Group companies. A brief profile of Shri Kevin D'sa is given in the Corporate Governance Report. 

The Company is in receipt of a notice under Section 257 of the Companies Act, 1956 proposing his 

candidature for the directorship of the Company, along with a security deposit of ` 500/-. 

The Board recommends passing of the resolution set out at item no. 6 of the accompanying notice. 

6


None of the directors, except Shri Kevin D'sa, the appointee himself, may be deemed to be concerned 

or interested in the proposed resolution. 

Item No.7 

Shri Krishna Mohan Sahni, IAS (Retired), was appointed as an additional director of the Company with 

effect from May 23, 2011 pursuant to Section 260 of the Companies Act, 1956 and read with Article 120 

of the Articles of Association of the Company. 

In terms of Section 260 of the Act, Shri Krishna Mohan Sahni, IAS (Retired), would hold office up to the 

date of ensuring Annual General Meeting of the Company. 

Shri Krishna Mohan Sahni is a Retired I.A.S. A brief profile of Shri Krishna Mohan Sahni, IAS (Retired), 

is given in the Corporate Governance Report. 




None of the directors, except Shri Krishna Mohan Sahni, the appointee himself, may be deemed to be 

concerned or interested in the proposed resolution. 

Item No.8 

Shri Premnath Tiwari, Director, Forward Markets Commission was appointed as an additional director 

of the Company with effect from August 20, 2011 pursuant to Section 260 of the Companies Act, 1956 

and read with Article 120 of the Articles of Association of the Company. 

In terms of Section 260 of the Act, Shri Premnath Tiwari, would hold office up to the date of ensuring 

Annual General Meeting of the Company. 

Shri Premnath Tiwari is presently a Director of the Forward Markets Commission. A brief profile of Shri 

Premnath Tiwari is given in the Corporate Governance Report. 




None of the directors, except Shri Premnath Tiwari, the appointee himself, may be deemed to be 

concerned or interested in the proposed resolution. 


By order of the Board of Directors 

Date: September 7, 2011 Anil Maloo 

AVP (Legal) & Company Secretary 

7


To, 

The Members, 

DIRECTORS' REPORT 

Your Directors are pleased to present the Ninth Annual Report of the Company together with the 

Audited Accounts for the Financial Year 2010-11: 

Financial Results: (` In Lacs) 

Particulars 2010-11 2009-2010 

Income 

From Operations 1687.11 1625.08 

Other Income 314.05 157.58 

Total Income 

Expenditure 

Operating and Other Expenses 910.22 

423.65 

Depreciation 541.78 

202.98 

Profit before tax 549.16 

1156.03 

Deferred Tax Liability / (Asset) 

Profit after tax 

Appropriations : 

Dividend 

Dividend Distribution Tax 

Transfer to Trade Guarantee Fund 

Balance available 

Balance brought forward from Previous year 

Balance carried to Balance Sheet 

2001.16 1782.66 

Prior Period Adjustments 107.48 0 

Provision for Taxation (Including Wealth Tax) 129.40 196.47 

291.86 128.28 

20.42 831.28 

0 208.33 

0 35.41 

11.42 9.72 

General Reserve 0 21.00 

9.00 556.82 

877.44 320.62 

886.44 877.44 

Operations: 

This year the trade volume has seen a drop of 4.17% over last year. It was ` 4,36,822 Crores as 

compared to ` 4,55, 803 Crores (two-way) during the year 2009-10. 

There was significant improvement in participation and turn over in Rubber. The turnover increased 

from 11,61,532 MT to 23,56,568 MT almost 103% growth, but since rubber price also had seen 

significant rise in value terms it grew from ` 14,246 Crores to ` 47,693 Crores which was the growth of 

about 235%. There has been increased participation from all the stakeholders, producers, traders, 

investors and industry. We conducted various awareness programmes and interaction meets to 

remove the myths about the futures market. The deliveries were also quite high. 

8


NMCE Rubber Futures (MT) 02-11 

2500000 

2356568 

2000000 

1500000 

1532214 

1115810 

1083578 

1161532 

1000000 

796992 

500000 

361774 

221946 

188926 

0 

678 

FY 2002-03 FY 2003-04 FY 2004-05 FY 2005-06 FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10 FY 2010-11 FY 2011-12 

Your Company has a prudent delivery mechanism making it more suitable for the participants in 

physical commodity markets. 

During the year under review, the income from operation of the Company has increased from 

` 1625.08 Lacs in the previous year to `1687.11 Lacs in the year under review. The other Income during 

the year under review also increased and was ` 314.05 Lacs as compared to ` 157.58 Lacs during the 

previous year. After providing for operating and other expenses amounting to ` 910.22 lacs and 

depreciation of ` 541.78 Lacs, your Company has earned a profit before taxation of ` 549.16 Lacs as 

compared to ` 1156.03 Lacs in the previous year. The Company after making provision of ` 129.40 

Lacs for taxation (including wealth tax) and ` 291.86 Lacs for deferred tax liability, has earned a net 

profit of ` 20.42 Lacs as compared to ` 831.28 Lacs in the previous year. Thus, ` 886.44 Lacs has been 

carried forward to the Balance Sheet. 

Guidelines Issued by Department of Consumer Affairs, Government of India on Capital 

Structure of Existing Nationwide Exchanges after five years of operations: 

The Department of Consumer Affairs, Ministry of Consumer Affairs, Food and Public Distribution, 

Government of India, New Delhi had vide its letter No.12/1/2007-IT dated July 29, 2009 come out with 

Equity Structure of Nationwide multi Commodity Exchanges after five years of operations. The 

Guidelines, inter alia, specify the minimum paid up equity share capital, inter se holding of 

shareholders, net worth requirements, eligibility criteria for prospective investors of commodity 

exchanges, etc. 

As per Guidelines, all National Commodity Exchanges should have paid up equity capital of at-least 

` 50 Crores and Net-worth of at-least ` 100 Crores. The Exchange is required to adhere to these 

guidelines on or before September 30, 2011. The Exchange has sought an extension of time from 

Forward Markets Commission up to March 31 2012, to comply with the Guidelines. 

9


Dividend for the year 2010-11: 

. 

In view of the Guidelines of Government of India / Forward Markets Commission, the Exchange has to 

raise the net-worth to ` 100 Crores. Hence, your directors do not recommend any dividend for the year 

2010-11 on the equity shares of the Company. 

Preferential Allotment of Equity Shares of the Company 

In order to increase the paid-up share capital and net worth, the Company had issued and allotted 

24,50,000 Equity Shares of ` 10/- each at a price of ` 102/- per share (including premium) to Bajaj 

Holdings and Investment Limited aggregating to ` 24,99,00,000/- on preferential allotment basis. 

Transfer of Equity Shares of the Company 

To comply with the above mentioned Guidelines, during the year, Central Warehousing Corporation 

and Neptune Overseas Limited had acquired 17,78,347 and 17,09,949 Equity Shares of the Company 

of ` 10/- each respectively from Shri Anil Singhania. This has reduced the shareholding of Shri Anil 

Singhania to less than 1% of the paid up capital of the Company. 

Reliance Capital Limited had acquired 16, 66,667 Equity Shares of the Company of ` 10/- each from 

Reliance Money Infrastructure Limited. The updated Shareholding Pattern of the Company as at 

March 31, 2011 is given in the Corporate Governance Report. 

Global Commodity Markets – Price Volatility and Financialisation 

A significant increase in the level and volatility of many commodity prices over the past decade has led 

to a debate about what has driven these developments. A particular focus has been on the extent to 

which they have been driven by increased financial investment in commodity derivatives markets. The 

available evidence suggests that while financial investors can affect the short-run price dynamics for 

some commodities, the level and volatility of commodity prices appear to be primarily determined by 

fundamental factors. 

The substantial increase in commodity prices over the past decade has been supported by a number of 

fundamental drivers. One of the most significant has been the shift in the composition of global growth 

over this period, as emerging market economies – like China , Brazil, Russia and India – have come to 

prominence as the engines of world growth. Since these emerging market economies are generally at 

a relatively commodity-intensive stage of development, there has been a corresponding shift in global 

demand towards commodities as these countries industrialise and expand their infrastructure . Food 

prices have also been affected by economic development, with the composition and volume of food 

intake changing as per capita income in these economies rises, generally resulting in a shift away from 

grains towards higher protein foods such as pulses, livestock and dairy, which have high resource 

footprints.These trends are likely to continue for some years. 

There is Slowing growth in developed nations and high inflationary expectations in emerging markets 

due to increased demand for commodities . This has also benefited producers of commodities. 

Investors have found a 'store of value' in commodities. The intrinsic value of commodities in 

comparison with other asset classes is very high. There is a secular bull run in the complex since the 

10


past decade. However, the year 2008 was an exception. Despite the drop in crude oil prices, the 

biggest worries for Asia continue to be rising food prices, weather concerns, depleting carry forward 

stocks and growing demand, making a perfect case of a bull run in agro commodities. 

Growth potential of Indian Commodity Bourses : 

Though it is still at a nascent stage, the volumes in the Indian commodities futures market have been 

growing incessantly. From ` 27,480 Crores, in 2003 the volumes have reached ` 11,85,260 Crores 

in FY10-11. This kind of a spurt in volumes is despite the absence of options, index trading and 

institutional participation. Currently, there are five National Multi Commodity Exchanges and several 

regional exchanges in India. The growth in trading volumes has been primarily propelled by non Agri 

commodities which draw their liquidity from the international exchanges and are bench marked against 

them. They also have higher daily price limit. 

The future growth would come from Agri Commodities. There is however fear that price rise in Agri 

commodities might be blamed to futures market and Agri commodity Futures trading may be banned 

as a measure to control inflation. The broker members therefore are not encouraged to significantly 

push the Agri commodity. With introduction of WDRA and later GST , there could be more opportunity 

for opening more delivery centres for agri commodities and thus increased participation. 

In international exchanges there is increasing awareness about commodities among people and more 

and more people can be seen parking their money in agricultural commodities like soybean, coffee, 

cocoa and corn, thus adding to the volumes on the exchange. 

Opportunity: There is huge opportunity in future growth of commodity exchange business. There is a 

long awaited amendment in the Forward Commission Regulation Act 1952 (FCRA), which will 

strengthen the regulator, Forward Markets Commission and enable it to introduce new products like 

Options, index trading and open up the market for new participants, which will help achieve the next 

phase of growth. Globally, commodity derivatives volumes are 35x-40x of the physical market but in 

India it is just 4x. As the number of participants is increasing by the day and the overall interest in 

commodity futures market among traders and investors is increasing rapidly, the growth potential of 

this market is immense. 

Foreign institutional investors, domestic institutions, banks and insurance companies are not allowed 

to trade on the Indian commodity bourses and a majority of volumes come from jobbers, arbitrageurs, 

retail traders and small scale enterprises and corporates (for hedging). Even portfolio management 

services are not permitted. Once all the above stakeholders are allowed to participate the business 

growth would be significant. 

Interaction with Automotive Tyre Manufacturer Association : 

The tyre manufacturers consume about 60% of rubber. More and more tyre companies are setting up 

their manufacturing base in India. Their participation is very important. After various interactions with 

them we have seen good participation coming from them. We continue to engage with them and 

explain various opportunities available to them to reduce the cost of Rubber procurement. 

Interaction with All India Rubber Manufacturer Association : 

The non tyre manufacturers consume about 40% of rubber. Their association represents small and 

medium enterprises. They have been badly affected by rising price of rubber and need to hedge their 

price risk. We conducted training programme for their members along with FMC and also 

independently in Mumbai, Delhi and Jallandhar. Some of our member brokers have registered their 

members as client. 

Early delivery system in Rubber: 

The increased participation by industry required either to increase the open interest limit or increase 

the delivery period. With FMC we were able to get approval for early delivery system in Rubber. This 

st 

has gained popularity. Now the delivery can be taken from 1 of every month. This has reduced the 

burden of squeeze in short window of delivery and producers are also getting paid early and industry as 

11


well as the exporters are able to get early delivery to meet their requirements. The exchange does the 

matching on first cum first serve basis and the delivery offers are shown on the trading screen. 

Training programme for the Commercial Tax Officials: 

We conducted training programme for the commercial tax officials. Many of them were not aware about 

actual functioning of commodity futures and used to tax the participants. This was organised with the 

help of FMC and was very well appreciated. 

Interaction with Parliamentary standing Committee: 

We interacted with parliamentary standing committee members who visited Ahmedabad to 

understand about the working of commodity futures market. They had lots of apprehensions and myths 

which we tried to remove along with senior members of FMC including the chairman. This was required 

for the passage of FCRA Amendment Bill. 

Price Dissemination Project: 

Your Exchange has been at the fore front of price dissemination project being run by the FMC and all 

the national exchanges. The price ticker board provides the price information for both spot and futures 

to the farmers in local language for the commodities produced in their areas. Your exchange is handling 

the states of Gujarat, Karnataka, Tamilnadu and Kerala. The state governments have to play key role in 

this and we coordinate with APMCs to install and run this project. 

Awareness Programmes: We conducted 71 awareness programmes, 4 exclusively for farmers, 42 

for the members and traders, 13 for students and 12 for others like media, investors, government 

officials etc. 

Deposits: 

The Company has not accepted deposits from public under the provisions of Section 58A of the 

Companies Act, 1956 and rules made there under. 

Directors' Responsibility Statement 

As required u/s. 217A (2AA) of the Companies Act, 1956, your directors confirm that:- 

In the preparation of Annual Accounts, the applicable Accounting Standards have been 

followed and that no material departures have been made from the same. 

They have selected such accounting policies and applied them consistently and made 

judgments and estimates that are reasonable and prudent so as to give a true and fair view 

of the state of affairs of the Company at the end of the Financial Year and of the Profit of the 

Company for that period. 

They have taken proper and sufficient care for the maintenance of adequate accounting 

records in accordance with the provisions of the Companies Act, 1956, for safeguarding the 

assets of the Company and for preventing and detecting fraud and other irregularities. 

They have prepared the Annual Accounts on a Going Concern basis. 

Inquiry conducted by Forward Markets Commission in the affairs of the Exchange: 

Forward Markets Commission had initiated an inquiry into the affairs of the Exchange vide its letter 

reference no.FMC/COMP/VI /2010/12/14/00095 dated December 22, 2010. 

The Forward Markets Commission vide its letter reference no.FMC/COMP/VI /2010/12/14(Part) dated 

July 25, 2011 had forwarded to the Exchange a copy of its Final Order dated July 23, 2011 for various 

irregularities committed by Shri Kailash R. Gupta, ex-Managing Director and Executive Vice Chairman 

of the Exchange. The Final Order is available on the website of the Commission www.fmc.gov.in . 

12


th 

The Exchange has been directed to take various steps in this regards. The Board of Directors at its 54 

meeting held on August 20, 2011 authorized the Managing Director and other officials of the Company 

to implement the Final Order of the Commission. The Company is in the process of taking effective 

steps to implement the Order of the Commission. 

The Financial impact of the directions given by the Commission has been properly disclosed in the 

Notes to the Accounts forming part of the Financial Statements for the year ended March 31, 2011. 

Remarks of Statutory Auditors and Management Clarification 

The Statutory Auditors have made their observations and qualified their report to that extent. The 

Management's explanation to the reservation, qualification or adverse remark contained in Auditors' 

Report are dealt with in the Notes to the Accounts. The Auditor's Report read with the Notes to the 

Accounts give adequate disclosures with regards to the impact of various directions of the Commission 

on the Financial Statements of the Company. Thus, the Management comments given in the Notes to 

the Accounts may be considered as compliance of the provisions of Section 217 (3) of the Companies 

Act, 1956. 

The qualifications in the Auditors' Report referred in Para 3 are self explanatory, However, the Board 

has decided to take following steps:- 

(a) Regarding physical verification of fixed assets of the Company and internal control for 

purchase of the same, the Board has devised Fixed Assets verification plan, which will cover 

physical verification of all the assets of the Company in phased manner over a staggered 

period of 2 years and has also framed the policy regarding purchases of fixed assets. 

(b) Regarding amounts debited to parties covered u/s 297 and u/s 299 of the Companies 

Act, 1956 all the parties are related to only one director who has ceased to be so with effect 

from August 20, 2011, and to avoid any failure in future the Board has decided to take fresh 

declarations from all the directors. 

The qualifications in para no. 4 and 5 of the Auditors' Report are self explanatory. The Board has 

decided to follow the order of Forward Markets Commission referred to in note no. 4 of the Schedule “L” 

to the notes forming part of the accounts after ascertaining the amounts and its implications on the 

carrying value of the assets. Regarding applicability of AS 28 – “Impairment of Assets”, in view of the 

above stated order of the Commission, the Board has decided to ascertain the impairment loss to the 

intangible assets after obtaining opinion of experts for determining the carrying amount of those 

intangible assets. 

Statutory Auditors: 

M/s. Shah & Dalal, Chartered Accountants, had resigned during the year as Statutory Auditors of the 

Company. 

M/s. Haribhakti & Co., Chartered Accountants were appointed as Statutory Auditors of the Company 

for the year 2010-11 after taking necessary approval of the members at the Extra-Ordinary General 

Meeting held on July 2, 2011. 

M/s. Haribhakti & Co., Chartered Accountants shall hold office until the conclusion of the ensuing 

Annual General Meeting and being eligible, offer themselves for re-appointment. The Company has 

received a certificate from the Statutory Auditors to the effect that their reappointment, if made, would 

13


be in accordance with the ceiling laid down under Section 224 (1B) of the Companies Act, 1956. 

Change in Registered Office of the Company 

With effect from March 12, 2011, the Registered Office of the Company has been shifted to its own 

th 

premises at Office No.4, 4 Floor, H. K. House, Ashram Road, Ahmedabad. 

Intrusion in the Premises of the Company 

On February 21/22, 2011, there was unfortunate incidence of Intrusion in the Information Technology 

Department of the Company, aimed to sabotage the systems of the Exchange, but due to robust 

protection system nothing happened. Necessary actions are being taken against the suspects/ 

culprits. Penetration Test and System Audit were conducted by the Company with the help of outside 

expert agency who verified that due to robust system installed in the IT department, there was no loss 

to the system and the data stored therein were intact and it was fully secured from any future intrusion 

as well. 

Creation of NMCE Employees' Group Gratuity Trust 

The Company has approached the Life Insurance Corporation of India for providing Gratuity benefits to 

the employees of the Company in the name of NMCE Employees' Group Gratuity Scheme to take 

effect from April 1, 2011. 

Directors: 

During the year, Shri Shyamal Ghosh, IAS (Retired) and Shri K. Rajendran Nair, IAS (Retired) were 

appointed as Independent Directors with effect from May 26, 2010 after obtaining prior approval of 

Forward Markets Commission, Government of India. 

Shri Joy Cheenath, IAS (Retired) was appointed as a Director in place of Shri Anil Singhania at the 

Eighth Annual General Meeting of the Company held on September 30, 2010. 

Shri Kevin D'sa, Chief Financial Officer of the Bajaj Holdings and Investments Limited was appointed 

as an additional director by the Board, with effect from November 30, 2010. 

Shri Krishna Mohan Sahni, IAS (Retired) was appointed as an Independent Director by the Board on 

May 23, 2011 after obtaining prior approval of Forward Markets Commission, Government of India. 

Shri Premnath Tiwari, Director, Forward Markets Commission who was nominated by the Forward 

Markets Commission in place of Shri D. K. Soni, was appointed as an Additional Director with effect 

from August 20, 2011. 

Shri Anil Kumar Mishra was re-designated as Managing Director of the Company with effect from May 

26, 2010. 

th 

The Board of Directors at its 54 meeting held on August 20, 2011 noted the cessation of directorship of 

Shri Kailash R Gupta from the Board of Directors of the Company pursuant to the Final Order of 

Forward Markets Commission, Government of India dated July 23, 2011. 

The Board places on record its appreciation for the valuable services, advice and contribution made by 

Shri Anil Singhania and Shri Dinesh Kumar Soni, as Directors of the Company. 

14


Shri B B Pattanaik, Dr. Sidharth Sinha and Shri Shyamal Ghosh, IAS (Retired) retire by rotation at the 

ensuing Ninth Annual General meeting, and being eligible, offer themselves for re-appointment. The 

Board of Directors recommend their re-appointment. 

Corporate Governance: 

Being an unlisted Company, the Exchange does not fall into the preview of Clause 49 of the Standard 

Listing Agreement. However, as a measure of good Corporate Governance, the Exchange has 

voluntarily adopted most of the Corporate Governance Practices as enumerated in aforesaid Clause 

49. A Report on Corporate Governance as at March 31, 2011 is forming part of Annual Report. 

Conservation Of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo: 

In view of the nature of activities which are being carried-out by the Company, Section 217(1) (e) of the 

Companies Act, 1956 read with Rules 2A and 2B of the Companies (Disclosures of Particulars in the 

Report of Board of Directors) Rules, 1988, concerning conservation of energy and technology 

absorption, respectively, are not applicable to the Company. 

During the year, the Company has expended ` 4,54,989/- on travelling of its executives, in foreign 

currency. The Company has not earned any foreign exchange during the year under review. 

Statement under Section 217 (2A) of The Companies Act, 1956 read with the Companies 

(Particulars of Employees) Rules, 1975: 

During the period under review, there was no employee, who was in receipt of remuneration exceeding 

the ceilings laid down in the Rules specified under Section 217(2A) of the Companies Act, 1956. 

Particulars under Section 9(2) of Forward Contracts (Regulation) Act, 1952 read with Rule 12 of 

the Forward Contracts (Regulation) Rules, 1954: 

In terms of provisions of Section 9(2) of Forward Contracts (Regulation) Act, 1952 read with Rule 12 of 

the Forward Contracts (Regulation) Rules, 1954, exchanges are required to include certain particulars 

in their annual reports. These particulars are enclosed as Annexure to this Annual Report. 

Acknowledgement 

The Board appreciates the cooperation and advice received from the Forward Markets Commission, 

Ministry of Consumer Affairs, and other ministries of the Government of India and State Governments. 

The directors gratefully acknowledge the support received from its members, vendors, shareholders, 

bankers, depository participant, print and electronic media and all other service providers, the 

Exchange has been working with. The Board also expresses its gratitude to all the employees, for their 

dedication and sincere efforts in the growth of the Exchange. 


For and on behalf of Board of Directors 

Date: September 7, 2011 B B Pattanaik 

Chairman 

15


REPORT ON CORPORATE GOVERNANCE 

National Multi-Commodity Exchange of India Limited (NMCE) is an Unlisted Public Limited Company, 

therefore, Clause 49 of the Standard Listing Agreement dealing with Corporate Governance Practices 

is not applicable to NMCE. However, in continuation of its pursuit to adhere to good Corporate 

st 

Governance practices, NMCE is voluntarily furnishing this Report for the financial year ended on 31 

March, 2011 for the information of all its stake holders. 

1. Company's Philosophy on Corporate Governance 

Corporate Governance is based on principles of integrity, fairness, equity, transparency, 

accountability and commitment to values. Good governance practices stem from the culture and 

mind set of the organization. It is therefore not merely set of rules but it is way of life, about 

enacting regulations and procedures but also about establishing an environment of trust and 

confidence among various stakeholders. It is about maintaining highest level of transparency, 

accountability and equity in all facets of a Company's operations, and in all its interactions with its 

stakeholders including shareholders, employees, trading and clearing members, warehousing 

agencies and the regulators. 

NMCE is the De-mutualised Electronic Multi-Commodity Exchange of India and is operational 

th 

since 26 November 2002. It is committed to provide world class services of on-line screen based 

Futures Trading in permitted commodities with best international risk management practices. 

The unique strength of NMCE is its settlement via a Delivery Backed System, an imperative in the 

commodity trading business. These deliveries are executed through a sound and reliable 

warehouse receipt system, leading to guaranteed clearing and settlement. NMCE facilitates 

Electronic Derivative Trading Robust and Tested Trading Platform through Derivative Trading 

Settlement System (DTSS). 

Corporate governance is the practice for constantly improving sustainable value, trust and 

confidence of the Stakeholders as well as fulfillment of Company's commitments. Your Company 

has formulated a Code of Conduct which is applicable to the Directors and members of the Senior 

management (i.e. upto designation of Vice President) of the Company, which delineate their 

roles, responsibilities and authorities for conducting the business on a highly ethical and efficient 

manner. 

16


2. Board of Directors 

Presently, the Board of Directors consists of 11 Directors, out of which five directors are 

Independent Directors, 1 Managing Director and rest of thedirectors are shareholders' directors. 

The detailed composition of the Board and other related information is given in the table below: 

Name of the Director Designation No. of Board Attendance 

meetings at the last 

attended during Annual 

the year General 

2010-2011 Meeting 

Shri B. B. Pattanaik Chairman 7 Yes 

Shri Shyamal Ghosh, IAS (Retd.) Independent 

(Appointed w.e.f. May 26.2010) 

Director 

7 Yes 

Shri K. Rajendran Nair, IAS (Retd.) 

(Appointed w.e.f. May 26, 2010) 

Independent 

6 

Director 

Independent 


7 

Director 

Yes 

Yes 

Shri Krishna Mohan Sahni, 

IAS (Retd.) 

(Appointed w.e.f. May 23, 2011) 

Independent 

Director 

Not Applicable 


Shri D. K. Soni Nominee 

5 NO 

(Ceased w.e.f. August 20, 2011) 

Director (FMC) 

Shri Kailash R. Gupta 

(Ceased w.e.f. August 20, 2011) 

Director 

7 YES 

Dr. Joy Cheenath, IAS (Retd.) 

(Appointed w.e.f. September 30, 2010) 

Director 4 NO 

Shri G. N. Nair Director 6 NO 

Shri Anil Singhania 

(Ceased w.e.f. September 30, 2010) 

Shri Kevin D'sa 

(Appointed w.e.f. November 30, 2010) 

Director 

2 NO 

Director 

2 NO 

Shri Rajinder Mahajan Director 7 NO 

Shri Premnath Tiwari Nominee 

Not Applicable Not Applicable 

(Appointed w.e.f. August 20, 2011) Director (FMC) 

Shri Anil Kumar Mishra Managing Director 7 YES 

17


During the year, seven Board meetings were held, details of which are given in the 

table below: 

Serial Meeting Date of meeting No. of total No. of 

No. No. Directors on the Directors 

date of meeting attended 

1. 

th 

45 May 26, 2010 

10 8 

th 

2. 46 September 7, 2010 

10 10 

th 

3. 47 September 30, 2010 

10 7 

th 

4. 48 November 19, 2010 

10 10 

th 

5. 49 January 19, 2011 

11 10 

th 

6. 50 February 26, 2011 

11 11 

st 

7. 51 March 12, 2011 

11 11 

The time gap between any two meetings was less than four months. 

3. Director's Profile 

Brief resume of the Directors and nature of their expertise in specific areas are provided below: 

Shri B.B. Pattanaik – Chairman 

Shri B. B. Pattanaik, is the Chairman of the Board of Directors of the Company and is the Managing 

Director of Central Warehousing Corporation, New Delhi. (CWC) 

Shri Pattanaik is M.Sc. (Ag.) in Entomology and Agril Zoology (Gold Medalist) (BHU) and also P G 

Diploma in Marketing and Sales Management (Bhartiya Vidya Bhavan, Mumbai) and P G Diploma 

in Human Resource Development (IGNOU). He Joined Central Warehousing Corporation in the 

year 1979 and handled various key positions in CWC and is Managing Director of CWC since 

July 1, 2008. He was Chairman cum Managing Director of National Seeds Corporation Limited 

during September, 2004 to June, 2008. He is also a Director on the Board of Central Rail Side 

Warehouse Co. Ltd., New Delhi and Food Corporation of India, New Delhi. Shri Pattanaik has 

experience of over 32 years. 

st 

Shri Pattanaik does not hold any shares in the Company as on 31 March, 2011. 

Shri Shyamal Ghosh, IAS (Retired) – Independent Director 

Shri Shyamal Ghosh, IAS of 1965 batch, is Bachelor of Arts, Degree in Economic from Scottish 

Church College, Kolkata and Masters Degree in Economics from Kolkata University and also 

receipient of Parvin Fellowship by Princeton University, USA for the M.P.A. program of Woodrow 

Wilson School (Princeton University). 

Shri Ghosh has held various senior positions in both the State Government of Gujarat and 

Government of India. 

18


He was the Chairman of Telecom Commission and Secretary, Department of Telecommunications, 

th 

st 

Government of India from 7 February, 2000 to 31 May, 2002 when he retired from Civil Service. 

He was Administrator, Universal Service Obligation Fund, Department of Telecommunications 

during May 2002 to May 2005. Shri Ghosh is on the Board of Span Diagnostics Ltd., Burn Standard 

Co. Ltd., Spentex Industries Ltd., Quippo Telecom Infrastructure Ltd., IDBI Intech Ltd., Data 

Security Council of India (DSCI), Indo-German Social Service Organization, IPTV Forum and 

Sesame Street Trust India. 

st 

Shri Shyamal Ghosh does not hold any shares in the Company as on 31 March, 2011. 

Shri K Rajendran Nair, IAS (Retired) - Independent Director 

Shri. K. Rajendran. Nair, IAS of 1967 batch, is Bachelor of Veterinary Science, from Kerala 

University and Masters Degree in Management with Specialisation in Financial Planning & Control 

from Leeds University, U.K. (1982). 

Shri K. Rajendran Nair is presently SEBI appointed public interest director on the Board of 

Inter-Connected Stock Exchange of India Limited and is Chairman of the Board. 

He is also associated with IILM as Advisor for training programs for IAS and IPS Officers sponsored 

by Govt. of India. 

Shri Nair has held various senior positions in both the State Government of Punjab and 

Government of India. He was Secretary, in the Ministry of Textile, Government of India. 

st 

Shri K.Rajendran Nair does not hold any shares in the Company as on 31 March, 2011. 

Shri Krishna Mohan Sahni – Independent Director 

Shri Krishna Mohan Sahni, IAS of 1969 batch of UT cadre, is Bachelor of Arts (Hons.), English 

Literature, Masters of Arts, History from St. Stephens College, New Delhi and M.Sc. (Economics) 

from London School of Economics. 

Shri Sahni has held various senior positions in the Government of India. Since year 2004, he held 

the position of the Secretary to Government of India, Ministry of Labour & Employment, New Delhi. 

In the above capacity he was India's official delegate on the Governing Body of the International 

Labour organization (ILO), Geneva. Mr. Sahni was superannuated on December 31, 2006. Since, 

January 2007, he was re-appointed by the Government of India in the rank and pay of Secretary to 

Government of India for three years as Member Secretary, National Wage Boards for Journalists 

and other Newspaper Employees, Ministry of Labour & Employment, New Delhi. 

Shri Krishna Mohan Sahni was appointed as Director on the Board of the Company with effect from 

May 23, 2011. 

st 

Shri Krishna Mohan Sahni does not hold any shares in the Company as on 31 March, 2011 

19


Dr. Sidharth Sinha – Independent Director 

Dr. Sidharth Sinha is a Professor in Indian Institute of Management, Ahmedabad since 1992. From 

1987 to 1992, he was in employment with School of Management, University of Massachusetts, 

Amherst, USA. From 1978 to 1982, he was associated with Foundation to Aid Industrial Recovery, 

New Delhi as Project Manager. 

Dr. Sidharth Sinha is a Graduate from School of Business Administration, University of California, 

Berkeley, USA and took Ph.D in Finance in the year 1987. He has completed Post Graduate 

Diploma in Management from Indian Institute of Management, Ahmedabad. He is on the Board of 

NMCE since March, 2003. 

Dr. Sinha is an expert on commodity futures and was member of the expert committee under 

Chairmanship of Professor Abhijit Sen to study the Impact of Futures Trading on Agriculture 

Commodity Prices, appointed by Government of India. 

st 

Dr. Sidharth Sinha does not hold any shares in the Company as on 31 March, 2011 

Shri G.N. Nair 

Shri G.N. Nair, who is a Fellow Member of the Institute of Chartered Accountants of India and L.LB. 

from Kerala University, is having around 31 years of Industry experience. He is presently Director 

(Finance) of Central Warehousing Corporation (CWC). 

He was also CEO for sometime of Hindustan Latex Family Planning Promotion Trust (a non 

Government Organization) doing social services all over India. He had worked in several 

organizations. Some of the important organizations are Hindustan Latex Ltd., Keltron, Trivandrum 

Rubber Works and Kerala State Detergents & Chemicals. He has had the experience of managing 

Public Procurement and Human Resource Management in Companies. He had training in 

e procurement and Procurement Management in Public Sector from International Training Centre 

of International Labour Organisation, Turin, Italy. He is a faculty member of Institute of Chartered 

Accountants of India, Institute of Management in Govt. of Kerala and M/s. Suliaman Associates, 

Kochi. He is past Chairman of Trivandrum Chapter of ICAI, past Secretary of Rotary Club of 

Trivandrum Central, Member of Trivandrum Management Association, Member of Trivandrum 

Chapter of NIPM and Member of Central Chinmaya Mission, Trivandrum, Delhi and Noida. He has 

visited France, Bangaladesh and Dubai also. 

He was adjudged Best CFO for the year 2009 amongst Public Sector Undertakings by ICAI. He is 

on the Board of Punjab State Warehousing Corporation, Maharastra State Warehousing 

Corporation and Kerala State Warehousing Corporation. He is Managing Director of Central 

Railside Warehouse Company Limited. 

st 

Shri G.N. Nair does not hold any shares in the Company as on 31 March 2011. 

20 1


Dr. Joy Cheenath, IAS (Retired) 

Dr. Joy Cheenath joined the IAS in 1979. He did his Bachelor's and Master's Degrees in Economics 

from Loyola College, Chennai. During 1995-2000, he was at the University of Southern California, 

USA as a Joint Japan-World Bank Research Scholar and was awarded a Master's Degree in 

Political Economy and Public Policy and a Ph.D in Political Economy and Public Policy. He has a 

PG Diploma in Economic and Social Development from University of Manchester, U.K. 

He worked in senior positions in the Government of India and the State Government of Gujarat for 

over 30 years in sectors such as Food, Agriculture, Industry, Agro-industry, Power and Health. He 

was Managing Director of Gujarat Agro Industries Corporation, Managing Director of Gujarat 

Power Corporation Ltd., CMD of Uttar Gujarat Vij Company Ltd. and was Director on Boards of 

several other Companies. 

st 

Dr. Joy Cheenath does not hold any shares in the Company as on 31 March, 2011. 

Shri Kevin D'sa 

Shri Kevin D'Sa is a Commerce Graduate, a Chartered Accountant and a Cost Accountant. He 

began his career with Bajaj Auto Ltd. in September 1978 and is presently its President (Finance) & 

CFO. 

He is also the CFO and President (Business Development) of Bajaj Finserv Limited and CFO of 

Bajaj Holdings & Investment Limited. 

He is also serving on the Boards of some of the Bajaj Group companies, which includes Bajaj Auto 

Holdings Limited, Bajaj Financial Solutions Limited, PT. Bajaj Auto Indonesia and Bajaj Financial 

Securities Limited. 

st 

Shri Kevin D'sa does not hold any shares in the Company as on 31 March, 2011. 

Shri Rajinder Mahajan 

Shri Rajinder Mahajan is General Manager (Credit) at Head Office of Punjab National Bank. He is 

M.Com. Gold Medalist and also CAIIB. He has 33 years of banking experience in various important 

capacities at centres like Delhi, Amritsar, Patiala, Ludhiana, Mumbai and also have international 

work experience of Shanghai (China). 

st 

Shri Rajinder Mahajan does not hold any shares in the Company as on 31 March, 2011. 

Shri Premnath Tiwari 

Shri Premnath Tiwari, a Nominee Director of Forward Markets Commission on the Board of the 

Company, was appointed on August 20, 2011. Shri Premnath Tiwari belongs to the 1991 batch of 

21


the Indian Revenue Services (Customs & Central Excise). He has done B.Tech (Electronics ) from 

IT BHU Varanasi and MBA from Punjab University. He has extensive experience of over 20 years 

in indirect taxation (Customs, Central Excise, Service Tax) and has handled assessment, audit, 

investigation, systems and administration. 

Shri Premnath Tiwari is working as Director, Forward Markets Commission, since May 2010 and 

handling administration, Market Surveillance, Audit, Enforcement and Investigation, 

implementation of various Plan Schemes - Price Dissemination Project, Awareness and Capacity 

Building Programs. 

st 

Shri Premnath Tiwari does not hold any shares in the Company as on 31 March, 2011. 

Shri Anil Kumar Mishra – Managing Director 

Shri Anil Kumar Mishra, has about 31 years of commodity trading supply chain management 

experience both in National and International Markets and has worked towards strengthening 

NMCE's relationships and brand image with customers, regulators, key investors and other 

business partners. 

Prior to joining NMCE he started and led the Indian Operations of Swiss MNC Ecom Agro Industrial 

Corporation's Ecom Gill Coffee Trading Pvt. Ltd. as the Country Manager. He was also Country 

Head for Cargill Coffee (a Coffee division of American MNC Cargill Inc). He was in-charge of Agri 

Exports in Grasim Industries Ltd. In National Market, he worked for Indo Gulf Fertilizers and 

Shriram Fertilizers (DCM Group). He was also a recipient of Bhartiya Udyog Ratna award in 2003 

and Best Coffee Exporter Award in the year 2006. 

st 

Shri Anil Kumar Mishra does not hold any shares in the Company as on 31 March 2011. 

4. Board Committees 

( I) 

Audit and Finance Committee of Directors: 

The following are the terms of reference: 

1) To create an open avenue for communication between the Board of Directors, internal auditors 

and the statutory auditors. 

2) To recommend the appointment and removal of statutory and internal auditors, fix audit fees 

and approve payment for other services. 

3) To provide directions and oversee the operation of the total audit function in the Company 

(internal as well as external). 

4) To monitor the adequacy of the internal control environment including computerized 

information control system, security and management information system. 

5) To interact with the external auditors before finalizing the annual or half yearly/ quarterly 

financial statements. 

6) To review the annual financial statements and analysis of the performance of the Company. 

7) To scrutinize the reasons for default, if any, in payments. 

8) To review functioning of the whistle blower mechanism, if the same is existing. 

22


9) To review all related party transactions. 

10) To investigate the terms with complete access to all records, information and personnel of the 

Company, and 

11) To recommend appointment of Merchant Bankers, Lead Merchant Bankers, Book Running 

Lead Manager, Syndicate members, Underwriter to the Issue, Bankers to the Issue, etc. for 

raising of Resources of the Company. 

The composition of the Audit and Finance Committee is as under: 

Name of the Director Category Remarks 

Dr. Sidharth Sinha Independent Director Chairman 

Shri Shyamal Ghosh (IAS Retd.) Independent Director Member 

Shri G. N. Nair Director Member 

Shri Kevin D'sa, Director and Shri Anil Kumar Mishra, Managing Director and CEO, are special invitees. 

During the year, five meetings of the Committee were held as per the following details: 

Date of the 

meeting 

Meetings attended by 

Dr. Sidharth Shri Shyamal Shri G. N. Nair 

Sinha 

Ghosh 

May 26, 2010 Yes NA Yes 

September 7, 2010 Yes Yes Yes 

November 19, 2010 Yes Yes Yes 

January 19, 2011 Yes Yes Yes 

March 12, 2011 Yes Yes Yes 

(ii) 

Business Development Committee of Directors 

th 

The Committee was constituted by the Board of Directors of the Company at its 48 meeting held 

on November 19, 2010 at Kochi. 


1. To review detailed Business Plan along with Budget. 

2. To approve the detailed Business Plan and the Budget 

The detailed business plan to include: 

(a) Review Market Development such as product designing and delivery related 

issues 

(b) Change in Contract Specification 

(c) Margin Related Issues 

(d) Enrollment of new members 

(e) Transaction Charges 

(f) Review of New Membership enrolment 

(g) Screening for admission of Members 

(h) Discussions concerning operation plans and budgets for income and 

expenditure. 

23


At present, the composition of the Business Development Committee of Directors is as under: 


Shri Shyamal Ghosh (IAS Retd.) Independent Director Chairman 

Shri K. R. Nair (IAS Retd.) Independent Director Member 

Dr. Sidharth Sinha Independent Director Member 

Shri G.N. Nair Director Member 

Shri Rajinder Mahajan Director Member 

Shri Kevin D'sa Director Member 

During the year, two meetings of the Committee were held as per the following details: 

Date of the 

meeting 

Shri 

Shyamal 

Ghosh 

Shri 

Kailash 

Gupta 


Dr. 

Sidharth 

Sinha 

Shri 

K. R. 

Nair 

Shri 

G. N. 

Nair 

Shri 

Rajinder 

Mahajan 

Shri 

Kevin 

D'sa 

December11, 2010 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

NA 

March 12, 2011 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

th 

Shri Kevin D’sa was inducted as member of the committee at 50 Board meeting held on 

February 26,2011. Shri Kailash R. Gupta ceased to be a Director with effect from August 

20,2011. 

(iii) 

Remuneration and Human Resources Committee of Directors 

th 

The Board of Directors in its 46 meeting held on May 26, 2010 re–constituted the Committee. 


To recommend a suitable remuneration package for Managing Director, Chief Financial Officer, 

Chief Executive Officer, Chief Operating Officer and other executives of the Company. 

To recommend on Employee Stock Option Plan entitlement 

To recommend on payment of remuneration to the persons holding office or place of profit in the 

Company under section 314 of the Companies Act, 1956 

To review and recommend on HR policies relating to recruitment, selection, placement, training, 

appraisal, promotions, leaves, remuneration grades, leave encashment, retirement, resignations, 

dismissals of employees of the Company. 

24


The composition of the Committee is as under 


Shri K. R. Nair (IAS Retd.) Independent Director Chairman 

Shri Shyamal Ghosh (IAS Retd.) Independent Director Member 

Dr. Sidharth Sinha Independent Director Member 

Shri Krishna Mohan Sahni (IAS Retd.) Independent Director Member 

Shri Krishan Mohan Sahni, (IAS Retd.) was inducted as member of the Committee with effect 

from August 20, 2011 

During the year, two meetings of the Committee were held as per the following details: 

Date of the 

meeting 

Jan 19, 2011 

Feb 26, 2011 


Shri K. R. Nair Shri Shyamal Ghosh Dr. Sidharth Sinha 

Yes Yes Yes 

Yes Yes Yes 

In addition to the above, the Exchange also has three other Committees of Directors, namely; 

(a) 

(b) 

(c) 

Disciplinary Committee of Directors 

Due Date Rates Committee 

New Products Committee 

5. The Shareholding Pattern of the Company: 

The Shareholding Pattern of the Company as on March 31, 2011 was as under: 

Name of Share Holders No. of Equity % Holding 

Shares held 

Neptune Overseas Limited (*) 57,68,464 30.18 

Central Warehousing Corporation 56,78,347 29.70 

Bajaj Holdings and Investment Limited 24,50,000 12.82 

Reliance Capital Limited 16,66,667 8.72 

Punjab National Bank 15,52,265 8.12 

Gujarat Agro Industries Corporation Ltd. 10,45,100 5.47 

National Agriculture Co-operative 

Marketing Federation of India Limited 

7,50,000 3.92 

Shri Anil Singhania 1,66,667 0.87 

Shri Kailash. R. Gupta 38,807 0.20 

Shri Shankarlal Guru 150 0.00 

Gujarat State Agricultural Marketing Board 100 0.00 

National Institute of Agriculture Marketing 100 0.00 

Total 1,91,16,667 100.00 

25


(*) Pursuant to the letter reference no.FMC/LAD-ENF/VI/2011-12/02/2572 dated June 24, 2011 of 

the Forward Markets Commission, 29,32,680 Equity Shares held by Neptune Overseas Limited do 

not have Voting Rights, which constitutes 15.34% of paid up equity capital of the Company. 

6. Share Capital history of the Company: 

th 

The History of allotment of equity share capital since the incorporation (i.e. 20 February, 2002) of 

the Company to March 31, 2011 is as under: 

Sr Date of Reason of Allotment No. of Shares 

No. Allotment (Allloted) 

1 20-Feb-02 Subscription to MoA 51,600 

2 10-Apr-02 Allotment for cash 4,99,900 

3 23-May-02 Allotment for cash 2,50,000 

4 29-Mar-03 Allotment for cash 2,50,000 

5 17-Jul-03 Allotment for cash 25,74,000 

6 19-Jan-04 Allotment for cash 19,74,900 


8 21-Jan-06 Allotment for cash 10,45,000 


10 14-Oct-06 Rights issue for cash 44,77,350 

11 30-Dec-06 Rights issue (placement) 5,22,650 

12 20-Dec-08 Reliance Money Infrastructure Limited (*) 16,66,667 

13 30-Oct-10 Bajaj Holdings and Investment Limited (*) 24,50,000 

(*) preferential allotment 

7. General Body Meetings 

TOTAL 1,91,16,667 

The time and venue of the last three Annual General Meetings are as under: 

AGM Date Time Venue No. of 

special 

resolutions 

approved 

th 

6 September 27, 2008 12:00 noon Registered Office Nil 

th 

7 September 26, 2009 04.00 p.m. Registered Office Nil 

th 

8 September 30, 2010 12:00 noon Registered Office 1 

26


Details of Extra Ordinary General Meetings (EGM) held during the financial year are as under: 

Date Time Venue No. of 

special resolutions 

approved 

October 30, 2010 12:00 noon Registered Office 1 

December 27, 2010 12:00 noon Registered Office 1 

8. Dividend declared for the past three years 

Sr. Financial Year Dividend Declaration Date Dividend 

No per Share (In `) 

1 2008-09 27/03/2009 0.50 

2 2009-10 31/03/2010 1.25 

3 2010-11 -- -- 

9. Share Transfer system 

The Company has appointed M/s. Sharepro Services (India) Private Limited as Registrar and Transfer 

Agent for physical and de-mat shares of the Company. The address of the same is as under: 

Sharepro Services (India) Private Limited 

Unit: National Multi- Commodity Exchange of India Limited. 

th 

416, 4 Floor, Dev Nandan Mall 

Opp. Sanyas Ashram, Ellisbridge 

Ahmedabad - 380 006 

Ph. 079-26582381-84 

In view of the above, the complete work for transfer of securities is now being carried out at 

the above address. The Company has entered into an agreement with National Securities Depository 

Limited (NSDL) whereby the shareholders have an option to dematerialize their shares with the 

depository. 

ISIN Number for NSDL is INE988H01013. 

10. Address for Correspondence 

National Multi-Commodity Exchange of India Limited 

th 

Office No.4, 4 Floor, H.K. House, 

Ashram Road, Ahmedabad – 380009. 

Tel : +91 79 4008 6039/6040 

Fax: +91 79 4008 6041 

E-mail : legal@nmce.com 

Website : www.nmce.com 

27


OVERVIEW 

Management Discussion and Analysis 

GDP growth: 

GDP growth figures for Q4, 2010-11, highlight an unmistakable downward trend. While in Q1, 2010-11, 

GDP grew by 9.3 percent, in Q4, 2010-11, GDP growth came down to 7.8 percent. Sectors like 

manufacturing and mining & quarrying have seen considerable erosion of growth momentum over the 

last one year. While consumption demand is still holding, a sharp decline in growth of investments is 

seen. Growth in Gross Fixed Capital Formation [GFCF] has dipped from 17.4 percent in Q1, 2010-11 to 

0.4 percent in Q4, 2010-11. Given the evolving situation, growth in 2011-12 is likely to be close to the 8 

percent mark. 

Inflation: 

The inflation situation in the economy continues to be a cause for concern. Despite large scale 

tightening of the monetary policy by the RBI and other steps taken by the government, inflation 

continues to remain close to the double digit mark. In May 2011, WPI based headline inflation stood at 

9.1 percent. This is higher than 8.7 percent inflation recorded in April 2011. Core inflation too has 

moved up from 8 percent in April 2011 to 8.6 percent in May 2011. Near term outlook for inflation is not 

too encouraging and there are chances that we may see inflation jump to the double digit territory on a 

few occasions. High international oil prices, likely decontrol of diesel prices, high global food prices 

and hike in Minimum Support Prices for the upcoming agriculture season are some of the factors that 

constitute the upside risks to inflation. 

There is always lurking fear among the stakeholders that Commodity futures market might 

unnecessarily be targeted and bans might be imposed in few commodities in case of high inflation. 

Rising commodity prices also put financial strain on the ability of participants to actively participate and 

they need more funds to pay for the margin money and MTM to retain their position. 

Agriculture: 

In case of the agriculture and allied activities sector, we find that the revised estimates have pegged 

growth in 2010-11 at 6.6 percent, which is much higher compared to the advance estimates that had 

put growth at 5.4 percent. 

In this context it is important to note that the third advance estimates of crop production released by the 

Ministry of Agriculture have shown a significant upward revision as compared to second advance 

estimates in the production of wheat [84.27 million tonnes from 81.47 million tonnes], pulses [17.29 

million tonnes from 16.51 million tonnes], oilseeds [302.51 lakh tonnes from 278.48 lakh tonnes] and 

sugarcane [340.54 million tonnes from 336.70 million tonnes]. These revisions are responsible for 

lifting the GDP growth rate for agriculture and allied activities sector. 

Foreign Trade: 

Financial year 2010-11 was exceptionally good for Indian exporters. With overall exports amounting to 

US$ 245.5 billion, the sector registered a growth of 37.7 percent in 2010-11 over the previous year. And 

this was a record growth witnessed in exports since independence. We see that growth in exports has 

been particularly strong since November 2010. While during the period April to October 2010, exports 

grew at an average rate of 26.8 percent, overall growth was much higher in the remaining part of the 

year. In fact, during November 2010 and March 2011, India's exports grew at a whopping 44.3 percent 

on average. 

28


Opportunities : 

There is still very small participation by the stakeholders in the commodities futures market, but it is 

progressively on rise. While many new amateur participants have burnt their fingers in the futures 

market out of ignorance many real players have experienced the benefit of price discovery and price 

risk management. Their increased participation would enhance and stabilise the commodity futures 

market. 

New reforms like GST would give very good opportunity for growth. 

Whenever participation by domestic institutions is allowed it would add to the liquidity in the commodity 

exchanges and help this market reach to tier 2-3 cities. They may also function as aggregators. This 

would bring big corporates to the exchange for hedging. 

Warehouse receipt funding linked to forward sales on commodity futures has just started. Once it gains 

popularity huge fund flow would come in commodities and would increase wide participation. 

FCRA amendment would open more opportunities for commodity exchanges because new 

instruments could be introduced, FMC as a regulator would be in better position to curb illegal trading 

and better regulate the market. 

Threat : 

Due to increased competition there is tendency among exchanges of reducing the transaction charges 

to corner the business which would hit the profitability of the exchanges. This would also hinder their 

ability to invest in the areas of technology, training, hiring more skilled manpower and development of 

marketing infrastructure, because they would not generate enough income to plough back in these 

areas. 

Since many players are not fully aware of the functioning of the exchange and are guided by the 

hearsay that futures market is controlled by the speculators, they are averse to participate in futures 

market and many policy makers also find scapegoat in futures market in case of inflation. Hence there 

is threat of ban particularly in case of Agri commodity. 

There are multiple controllers of commodities and they don't understand futures market, thus it's 

players get bruised between the regulators , tax officials and controllers. 

Challenges: 

In the light of increased competition the challenges are to retain the existing client and member base. 

Liquidity in the commodity exchanges is very sticky; therefore it is a big challenge to migrate clients 

from very liquid exchange. Additional service is needed to isolate the clients who are looking at 

deliveries more important than only liquidity. There is also huge challenge from Illegal Dabba traders 

who operate without margin money and have no regulatory compliance to follow. On one hand 

exchanges are becoming very tough in penalizing the members for violation on the other Dabba 

traders are flourishing. 

Another major challenge that the Exchange faces today is to activate its inactive members and add 

new members. Regular members meet one to one interaction with members explaining those new 

opportunities and other measures to gain and retain the confidence of members have been initiated 

and pursued towards this end. 

Focusing on newer areas and spreading the reach of the Exchange to virgin territories would be 

another strategy to meet this challenge. 

29


AUDITORS’ REPORT 

To 

The Members of National Multi-Commodity Exchange of India Limited 

1. We have audited the attached Balance Sheet of National Multi-Commodity Exchange of India 

Limited (‘the Company’) as at March 31, 2011 and also the Profit and Loss account for the year 

ended on that date annexed thereto. These financial statements are the responsibility of the 

Company’s management. Our responsibility is to express an opinion on these financial statements 

based on our audit. 

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those 

Standards require that we plan and perform the audit to obtain reasonable assurance about 

whether the financial statements are free of material misstatement. An audit includes examining, 

on a test basis, evidence supporting the amounts and disclosures in the financial statements. An 

audit also includes assessing the accounting principles used and significant estimates made by 

management, as well as evaluating the overall financial statement presentation. We believe that 

our audit provides a reasonable basis for our opinion. 

3. As required by the Companies (Auditor’s Report) Order, 2003, (as amended), issued by the 

Central Government of India in terms of sub-section (4A) of Section 227 of ‘The Companies Act, 

1956’ of India (the ‘Act’), we give in the Annexure a statement on the matters specified in 

paragraphs 4 and 5 of the said Order. 

4. (A) As stated in note no. 4 of the Schedule ‘L’ to the notes forming part of accounts, on July 23, 2011 

Forward Markets Commission has passed an order on various allegations against the then 

Managing Director(MD) and later Executive Vice Chairman of the Company. After considering 

these allegations, the Commission has passed the order directing the Company:- 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

To cancel allotment of 2,932,680 shares irregularly allotted to one of the company 

controlled by the then MD after obtaining necessary approvals/ permissions form 

appropriate authority. 

To recover wrongful and illegal over payment of ` 28.80 crores paid to a company 

controlled by the then MD and his relatives. 

To recover wrongful and illegal payment of ` 2.47 crores made by the Company to 

an entity controlled by the relative of the then MD. 

To recover an amount of ` 3.53 crores paid by the Company to 56 consultants 

without proper authorization. 

To recover an amount of ` 20.93 lakhs on account of misappropriation of funds of the 

Company by the then MD towards purchase of vehicles. 

To recover an unascertained amount of expenditure incurred by the Company and 

depreciation allowance charged by the Company on vehicles used by the relatives of 

the then MD. 

30


(g) 

To recover an unascertained amount of personal expenses including travelling 

expenses incurred by the Company for the relatives of the then MD. 

The management is of the view that since matters relating to above irregularities are sub 

judice, any further adjustments/disclosures to the financial statements, if required, would 

be made in the financial statements of the Company as and when the outcome of the above 

uncertainties is known and the consequential adjustments/disclosures are identified. 

(B) As stated in note no. 9 of the Schedule L to the notes forming part of the accounts regarding 

not measuring and providing for impairment loss, if any, on intangible assets amounting to 

` 21,30,82,918 in accordance with AS 28 on Impairment of Assets, the management has 

decided to provide for the same in the financial statements after obtaining opinion from expert 

as per the prescribed methods and procedures. 

In view of the above, we are unable to comment on the adjustments/disclosures which may 

become necessary as a result of further findings in the consequential impact, if any, on these 

financial statements. 

5. Attention is invited to the following matters; 

(a) Confirmations could not be obtained in case of 15 parties amounting to ` 79.75 lakhs, which 

relates to various expenses debited during the year but now reversed and shown as advances 

in respect to various parties mentioned in the order of Forward Markets Commission as stated 

above. 

(b) Identification of related parties as required under AS 18 – Related Party Disclosures as stated 

in note no.19 of the Schedule L to the notes forming part of the accounts has been done by 

the management based on available information. 

We are unable to comment on the completeness/correctness of the above referred 

details in the absence of all the required information. 

( c) The Company is carrying a total amount of ` 3.60 crores as at March 31, 2011 towards 

provision for taxation which was made primarily on the basis of past financial statements. 

Considering the effects of financial irregularities and the consequent uncertainties regarding 

outcome of these matters and significant uncertainties in determining the Tax liability, the 

management is of the view that it is not appropriate to make adjustments to the outstanding 

balance of tax provisions as at March 31, 2011. 

In view of the above we are unable to comment on the adequacy or the otherwise of the 

provisions for the taxation carried in the financial statements. 

6. Further to our comments in the paragraph 3 above, we report that; 

i. We have obtained all the information and explanations, which to the best of our knowledge and 

belief were necessary for the purposes of our audit; 

31


ii. 

iii. 

iv. 

In our opinion, proper books of accounts as required by law have been kept by the Company 

so far as appears from our examination of those books; 

The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with 

the books of account; 

In our opinion, the Balance Sheet and Profit and Loss Account dealt with by this report comply 

with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies 

Act, 1956. 

v. On the basis of the written representations received from the directors, as on March 31, 2011, 

and taken on record by the Board of Directors, we report that none of the directors is 

disqualified as on March 31, 2011 from being appointed as a director in terms of clause (g) of 

sub-section (1) of Section 274 of the Companies Act, 1956. 

vi. 

Subject to our comments in paragraph 4 and 5 above and the consequential effects thereof 

which are not quantifiable and note no. 6 of Schedule ‘L’ to the notes forming part of the 

accounts, In our opinion and to the best of our information and according to the explanations 

given to us, the said accounts give the information required by the Companies Act, 1956, in the 

manner so required and give a true and fair view in conformity with the accounting principles 

generally accepted in India; 

a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2011; 

and 

b) in the case of the Profit and Loss Account, of the Profit for the year ended on that date. 

For Haribhakti & Co. 

Chartered Accountants 

Firm Registration No.103523W 

Prashant Maharishi 

Partner 

Membership No.41452 


Date: September 07, 2011 

32


ANNEXURE TO AUDITORS’ REPORT 

[Referred to in paragraph 3 of the Auditors’ Report of even date to the members of National Multi- 

Commodity Exchange of India Limited on the financial statements for the year ended March 31, 2011] 

(I) (a) The Company has maintained proper records showing full particulars, including quantitative 

details and situation of fixed assets. 

(b) The fixed assets have not been physically verified by the management during the year 

therefore we are not in a position to state whether there is any material discrepancies between 

Fixed Asset register and physical existence of such assets. Therefore question of whether 

such material discrepancies are dealt with in the books of account does not arise. 

( c) In our opinion and according to the information and explanations given to us, a substantial part 

of fixed assets has not been disposed of by the company during the year. 

(ii) 

Company’s nature of operations does not require it to hold inventories. Accordingly, clause 4(ii) 

of the Companies (Auditors’ Report) Order, 2003 is not applicable. 

(iii) (a) (i) In our opinion and according to the information and explanations given to us, the Company 

has debited unsecured advances in the nature of loans to the companies and other parties 

covered in the register maintained under Section 301 of the Companies Act, 1956 amounting 

to ` 331.43 Lacs in case of 17 parties which are covered under the provisions of 

Section 299 & Section 297 and are not mentioned in the register under Section 301 of the Act. 

(ii) As the Company has debited unauthorized use of money by such parties to their respective 

accounts as advance there are no stipulations of interest and any other terms and conditions of 

such loans. Therefore we are not in a position to opine whether such loans are prima facie 

prejudicial to the interest of the Company. 

(iii) The Company has not recovered any sum out of these advances. 

(iv) Where the overdue amount is more than Rs. 1 lac the Company is in process of obtaining 

legal advice for recovery of the above sum. 

(b) As informed, the Company has not taken any loans, secured or unsecured from companies, 

firms or other parties covered in the register maintained under section 301 of the Companies 

Act, 1956. Accordingly, the provisions stated in paragraph 4 (iii) (f) and (g) of the order are not 

applicable. 

(iv) 

In our opinion and according to the information and explanations given to us, there did not exist 

an adequate internal control system commensurate with the size of the Company and the 

nature of its business with regard to purchase of fixed assets and with regard to the sale of 

services for some period during the year. However there is no continuing failure to correct 

major weaknesses in internal control. 

(v) (a) According to the information and explanations given to us, the particulars of contracts or 

arrangements referred to in Section 301 of the Companies Act, 1956 have not been entered in 

the register required to be maintained under Section 301 of the Act. 

33


(vi) 

(b) In our opinion and according to the information and explanations given to us, the transactions 

made in pursuance of such contracts or arrangements exceeding value of Rupees five lakhs 

during the financial year are not entered in to the register u/s 301 of the Act, and in absence of 

information regarding reasonableness of the transactions, we are not in a position to opine 

whether they are at the prevailing market price at the relevant time or not. 

In our opinion and according to the information and explanations given to us, the Company has 

not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the 

Act and the rules framed there under. 

(vii) 

(viii) 

(ix) 

In our opinion, the Company has an internal audit system which needs to be strengthened to 

commensurate with the size and nature of its business. 

As the Company is engaged in service industry the provisions of Section 209(1)(d) of the 

Companies Act, 1956 do not apply. 

(a) The Company is generally regular in depositing with appropriate authorities undisputed 

statutory dues including provident fund, investor education and protection fund, employees’ 

state insurance, income-tax, service tax, cess and other material statutory dues applicable to 

it. Further, since the Central Government has till date not prescribed the amount of cess 

payable under Section 441A of the Companies Act,1956, we are not in a position to comment 

upon the regularity or otherwise of the company in depositing the same. 

(b) According to the information and explanation given to us, there are no dues of income tax, 

sales-tax, service tax, and cess which have not been deposited on account of any dispute. 

(x) 

(xi) 

(xii) 

(xiii) 

(xiv) 

(xv) 

The Company has no accumulated losses at the end of the financial year and it has not 

incurred cash losses in the current and immediately preceding financial year. 

In our opinion and according to the information and explanations given to us, the Company 

has not defaulted in repayment of dues to a financial institution, bank or debenture holders. 

According to the information and explanations given to us and based on the documents and 

records produced to us, the Company has not granted loans & advances on the basis of 

security by way of pledge of shares, debentures and other securities. 

In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society. 

Therefore, the provisions of clause 4(xiii) of the Companies (Auditor’s Report) Order, 2003 (as 

amended) are not applicable to the Company. 

In our opinion, the Company is not dealing in or trading in shares, securities, debentures and 

other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor’s 

Report) Order, 2003 (as amended) are not applicable to the Company. 

In our opinion and according to the information and explanations given to us, the Company 

has not given any guarantee for loans taken by others from banks or financial institutions 

during the year. 

34


(xvi) 

(xvii) 

(xviii) 

(xix) 

(xx) 

(xxi) 

The Company has not obtained any term loans. 

According to the information and explanations given to us and on an overall examination of the 

Balance Sheet of the Company, we report that no funds raised on short-term basis have been 

used for long-term investment. 

According to the information and explanation given to us, the Company has not made any 

preferential allotment of shares to parties and companies covered in the Register maintained 

under Section 301 of the Companies Act, 1956. 

According to the information and explanations given to us, no debentures have been issued 

by the Company during the year. 

The Company has not raised money by way of public issue during the year. 

We report that a fraud on the Company has been noticed and reported during the course of our 

audit. The Forward Markets Commission (the Commission) in order 

No.FMC/Comp/VI/2010/12/14 dated July 23, 2011 has found fraud amounting to ` 28.80 

crore paid for acquisition of software, ` 3.53 crores paid in aggregate to 56 Consultants, 

` 20.93 Lacs for purchases of vehicles not registered in the name of Company, an 

unascertained amount of expenditure and depreciation incurred on the vehicles provided to 

the unauthorized persons and unascertained amount of monies reimbursed to the 

unauthorized persons for their personal expenses including travel expenses. The Company 

is in process to take appropriate legal action against such persons/parties to recover wrongful 

and unauthorized payments made to them. 

For Haribhakti & Co. 

Chartered Accountants 

Firm Registration No.103523W 

Prashant Maharishi 

Partner 

Membership No.41452 


Date: September 07, 2011 

35


(Amount in `) 

36


(Amount in `) 

` 

` 

` 

37


(Amount in `) 

` 

` 

` 

` 

` 

` 

` 

(Amount in `) 

` 

(Amount in `) 

` 

` 

38


39



(Amount in `) 

` 

` 

` 

` 

` 

` 

` 

` 

` 

` 

` 

40



Units Purchased/redeemed during the year 

` 

` 

41



` 

` , 

` 

42



43


` 

` 

44


NATIONAL MULTI-COMMODITY EXCHANGE OF INDIA LTD 

st 

Schedules forming part of Financial Statements for the year ended March 31 2011 

SCHEDULE `K’: SIGNIFICANT ACCOUNTING POLICIES 

Company Profile: 

National Multi-Commodity Exchange of India Limited (NMCE) is first and pioneer in the field and 

recognized as the first National Commodity Exchange. The standards set by NMCE in terms of 

technology, market practices, contract designs and products have become benchmarks for the 

industry. NMCE promises to provide a highly transparent way of operations to serve two vital economic 

functions of Price Discovery and Price Risk Management in commodities trading as provided by the 

best Commodity Exchanges existing around the world. 

NMCE provides a screen based trading platform for futures trading with VSAT and lease line 

connectivity throughout India which is very convenient to trade at NMCE Platform. 

(a) Basis of Accounting 

These financial statements have been prepared on an accrual basis and under historical 

cost convention and in compliance in all material aspects with the applicable accounting 

principles in India the applicable accounting standards notified under Section 211(3C) and the 

relevant provisions of the Companies Act, 1956. The significant accounting policies adopted by 

the Company are detailed below. 

(b) Use of Estimates 

The preparation of financial statements in conformity with generally accepted accounting 

principles requires management to make estimates and assumptions that affect the reported 

amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial 

statements and the results of operations during the reporting period. Although these estimates 

are based upon management's best knowledge of current events and actions, actual results 

could differ from these estimates. Differences between actual results and estimates are 

recognized in the period in which the results are known materialized. 

Fixed Assets & Depreciation 

I 

I. 

ii. 

iii. 

Tangible Assets: 

Fixed Assets are stated at their original cost including incidental expenses related to 

acquisition and installation, less accumulated depreciation. Cost comprises of the purchase 

price and any other directly attributable cost of bringing the assets to its working condition for 

its intended use. 

Depreciation on Fixed Assets is provided on Straight Line Method at rates and in manner 

prescribed in Schedule XIV of the Companies Act, 1956. 

Depreciation on additions/deletion is provided on pro rata basis. Fixed Assets individually 

costing ` 5000/- or less are fully depreciated in the period of purchase / installation. 

45


II 

I. 

ii. 

Intangible Assets: 

Cost relating to acquisition and development of computer software is capitalised and 

depreciated on Straight Line Method at rates and in manner prescribed in Schedule XIV of the 

Companies Act, 1956. 

Technical knowhow for obtaining various technical contracts, technical knowhow for 

development and implementation of the Exchange are considered as intangible assets in 

accordance with AS 26 “Intangible Assets” issued by The Institute of Chartered Accountants 

of India and are amortized on a Straight Line Basis for a period of five years, which is 

management’s estimate of its useful life. 

(d) Impairment of Fixed Assets:- 

I. 

ii. 

iii. 

The carrying amounts of assets are reviewed at each balance sheet date, if there is any 

indication of impairment based on internal/external factors. An impairment loss is recognized 

wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable 

amount is the greater of the asset’s net selling price and value in use. In assessing value in use, 

the estimated future cash flows are discounted to their present value at the weighted average 

cost of capital. 

After impairment, depreciation is provided on the revised carrying amount of the asset over its 

remaining useful life. 

A previously recognised impairment loss is increased or reversed depending on changes in 

circumstances. However the carrying value after reversal is not increased beyond the carrying 

value that would have prevailed by charging usual depreciation if there was no impairment. 

(e) Investments 

Investments are classified into long-term investments and current investments. Current 

investments are carried at lower of the cost and fair value. Any reduction in the carrying amount 

and any reversals of such reductions are charged or credited to the profit and loss accounts. 

Long-term investments are carried at cost and provision is made to recognize any decline 

other than temporary, in the value of such investments. 

(f) Revenue Recognition 

I. 

ii. 

iii. 

iv. 

Revenue is being recognised as and when there is reasonable certainty as to ultimate 

collection. 

Annual Subscription Fees is accounted for on pro rata basis from the date of activation of 

membership. 

Admission fees are recognised as income in the year of receipt. 

Forfeiture of Initial Margin is recognised as income in the year of forfeiture. 

46


v. 

vi. 

vii. 

viii. 

ix. 

VSAT usage charges are recognised as revenue and recovered by adjusting VSAT deposits, 

collected from the members, at the predetermined rates from the date of activation of VSAT to 

the date of VSAT surrender / deactivation. 

Income from Mutual Funds is accounted for as and when it is realised after redemption/sale of 

the respective investments. 

Interest income is recognised on accrual basis. 

Net Income earned on the Trade Guarantee Fund after proportionate provision of tax is 

credited in the same account and not used for any other purpose. 

All penalties levied and collected during the year are treated separately and amount 

transferred to Investors Protection Fund Account. 

(g) Employee Benefits 

I. 

Defined Contribution Plan: 

Company’s contribution paid / payable during the period to Provident Fund or Employee’s 

State Insurance Corporation are recognized in the profit and loss account. 

ii. 

Defined Benefit Plan: 

Gratuity: 

Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial 

valuation on projected unit credit method made at the end of each financial year. The liability 

so provided is represented by creation of separate fund managed by the Company and is used 

to meet the liability as and when it accrues for payment in future. Actuarial gains / losses are 

immediately taken to profit and loss account. 

iii. 

Long/Short Term Leave Encashment: 

(h) Taxation 

Liability for Leave encashment is provided in the books of accounts on the basis of leave 

credited in the account of employees and provision is made accordingly. 

I. 

ii. 

Income-tax expense comprises current tax and deferred tax charge or credit. Provision for 

current tax is made on the basis of the assessable income at the tax rate applicable to the 

relevant assessment year. 

Deferred tax asset and deferred tax liability are calculated by applying tax rate and tax laws 

that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax 

assets on account of timing differences are recognized, only to the extent there is a reasonable 

certainty of its realization. Deferred tax assets are reviewed at each Balance Sheet date to 

reassure realization. 

47


( I) Earning per Share 

The Company reports basic and diluted Earnings Per Share in accordance with Accounting 

Standard 20 on 'Earnings Per Share'. Basic earnings per share are computed by dividing the 

net profit or loss for the period by the weighted average number of equity shares outstanding 

during the period. Diluted earnings per share is computed by dividing the net profit or loss 

for the period by the weighted average number of equity shares outstanding during the period 

adjusted for the effects of all diluted potential equity shares except where the results are 

anti-dilutive. 

(j) Provisions, Contingent Liabilities and Contingent Assets 

A provision is recognized when an enterprise has a present obligation as a result of past event 

and it is probable that an outflow of resources will be required to settle the obligation, in respect 

of which a reliable estimate can be made. Provisions are not discounted to its present value 

and are determined based on management estimate required to settle the obligation at the 

balance sheet date and adjusted to reflect the current management estimates. 

No provision is recognized for – 

I. 

Any possible obligation that arises from past events and the existence of which will be 

confirmed only by the occurrence or non-occurrence of one or more uncertain future events 

not wholly within the control of the Company; or 

ii. Any present obligation that arises from past events but is not recognized because it is not 

probable that an outflow of resources embodying economic benefits will be required to 

settle the obligation; or a reliable estimate of the amount of obligation cannot be made. 

iii. Such obligations are recorded as contingent liabilities. These are assessed continually and 

only that part of the obligation for which an outflow of resources embodying economic 

benefits is probable, is provided for, except in the extremely rare circumstances where no 

reliable estimate can be made. 

iv. Contingent assets are not recognized in the financial statements since this may result in the 

recognition of income that may never be realized. 

(k) Miscellaneous Expenditure: 

Expenses incurred for increasing the authorised share capital are debited under the head 

Miscellaneous Expenditure and are written off in five years. 

(l) Share Issue Expenses: 

Share Issue Expenses are written off against Securities Premium Account. 

48


(m) Foreign Currency: 

Foreign Currency Transactions 

I. 

Initial Recognition 

Transaction in foreign currency entered during the year is recorded at the exchange 

rates prevailing on the date of the transaction. 

ii. 

Conversion 

Monetary assets and liabilities denominated in foreign currency are translated in to rupees at 

exchange rate prevailing on the date of Balance Sheet. 

iii. 

Exchange Differences 

All exchange differences are dealt with in the Profit & Loss Account except those relating to 

fixed assets acquired from outside India, which are adjusted in the cost of the relevant 

fixed assets. 

(n) Trade Guarantee Fund 

Amount collected from the members is transferred to a separate bank account and invested 

independently, whereas income earned thereon after proportionate provision of tax is credited 

to the said account. 

(o) Investors Protection Fund 

During 2006-07, the Company received Guidelines for Investors Protection Fund (IPF) from 

the Forward Markets Commission (FMC) which directed the Company to create the Investors 

Protection Fund and keep all the penalties imposed and collected by the Company for noncompliance, 

in a separate bank account. 

49


NATIONAL MULTI-COMMODITY EXCHANGE OF INDIA LTD 

st 

Schedules forming part of Financial Statements for the year ended March 31 2011 

SCHEDULE `L’: NOTES FORMING PART OF THE ACCOUNTS 

1. Contingent Liability: 

a) In case of CMC Ltd, Arbitration Award of ` 32.85 Lacs together with running interest on the 

principal amount of ` 30.75 Lacs at the rate of 12% p.a. has been given against the Company 

against which the Company has filed an appeal. 

b) M/s.Internet Sales Promotion Group, Kochi had filed a case against the Company in the year 

2009 and on September 23, 2009 an ex-parte decision was given by the Sub-Court, 

Ernakulam. The Company has now received Execution Petition No.66/2011 in 

O.S.No.565/2009. On July 26, 2011, the Hon’able Judge had directed the Company to deposit 

an amount of ` 1 57 215/- which has been deposited with the Court. The Company has filed a 

petition to set aside the ex-parte decree in the original O.S.No.565/2009. 

2. Capital Commitments: 

Estimated amount of contracts remaining to be executed on capital account and not provided 

for amounts to ` 25 Lacs plus service tax. 

3. The Company has entered into a De-risking Agreement with Financial Technologies (India) 

Ltd. (FTIL) for integration of National Multi Commodity Exchange of India Ltd (NMCE) segment 

in ODIN, under which the Company has given a deposit of ` 75 Lacs to FTIL, which will be 

adjusted as per the Agreement. 

4. Forward Markets Commission (the Commission) in accordance with sub clause (b) of 

sub- section (2) of Section 8 of the Forward Contracts (Regulation) Act, 1952 and sub-section 

(4) of Section 8 of the said Act read with Government of India Notification S.O.No. 1162 dated 

May 4, 1960, had appointed officers of the Commission to conduct an inquiry in relation to 

affairs of the Exchange and to carry out the inspection of the books of accounts and records of 

the Exchange. 

Subsequent to the inquiry, the Commission vide Final Order No.FMC/Comp/VI/2010/12/14 

dated July 23, 2011 has directed the Company to take appropriate legal actions against 

various persons/parties to recover wrongful and unauthorised payments made to them. Such 

directions are:- 

(a) 

(b) 

© 

(d) 

To recover wrongful and illegal over payment of ` 28.80 crore paid to a company 

controlled by the then Managing Director and his relatives. 

To recover wrongful and illegal payment of ` 2.47 crore made by the Company 

to an entity controlled by the relative of the then Managing Director. 

To recover an amount of ` 3.53 crore paid by the Company to 56 consultants without 

proper authorization. 

To recover an amount of ` 20.93 lacs on account of misappropriation of funds of the 

Company by the then Managing Director towards purchase of vehicles. 

50


(e) 

(f) 

To recover an unascertained amount of expenditure incurred by the Company and 

depreciation allowance charged by the Company on vehicles used by the relatives of 

the then Managing Director. 

To recover an unascertained amount of personal expenses including travelling 

expenses incurred by the Company for the relatives of the then Managing Director. 

In addition to the above, the Commission has also directed the Company to refer the matter to 

the appropriate authorities under the Companies Act, 1956 for cancellation of the irregular 

allotment of 29 32 680 shares to Neptune Overseas Limited and any other actions as provided 

under the Companies Act, 1956. Pending cancellation, the impugned 29 32 680 shares of the 

Company presently held by Neptune Overseas Limited will not have voting rights. 

Neptune Overseas Limited has challenged the Final Order of the Commission before the 

Hon’ble Gujarat High Court. 

The management is of the view that since matters relating to above irregularities are sub 

judice, any further adjustments/disclosures to the financial statements, if required, would be 

made in the financial statements of the Company as and when the outcome of the above 

uncertainties is known and the consequential adjustments/disclosures are identified. In 

respect of the current year, Legal & Professional fees ` 45, 47, 848/- paid towards services 

not received by the Company, Promotional Expenses of ` 18, 89, 300/- paid towards 

research reports and personal expenses incurred on Directors and others amounting to 

` 15, 38, 001/- have been debited to the respective beneficiaries, disclosed under “Loans and 

Advances”. The Management is of the view that it will recover the full amount of these 

accounts.” 

5. Confirmations could not be obtained in case of 15 parties amounting to ` 79.75 Lacs, which 

relates to various expenses debited during the year but now reversed and shown as advances 

to be recovered from various parties as mentioned in the Final Order of Forward Markets 

Commission as stated above. 

6. Equity Structure : 

Forward Markets Commission vide its letter no.F.No.4/3/2009/MD-I dated August 4, 2009 

has forwarded to the Company the Guidelines dated July 29, 2009 on Equity Structure of the 

Nationwide Multi Commodity Exchanges after five years of operation and required that the 

Company should have a paid up capital of at least ` 50 Crore and Net worth of at least 

` 100 Crore on a going and continuous basis. The Guidelines also provide for aligning various 

shareholdings of the differen classes of shareholders. The Company was required to comply 

with the Guidelines by September 30, 2010. The Government of India / Forward Markets 

Commission has granted extension to the Company to comply with the Guidelines by 

September 30, 2011. 

The Company has made an application to the Forward Markets Commission to grant further 

extension of time to comply with these Guidelines up to March 31, 2012, which is under active 

onsideration of the Commission. In anticipation of approva from Forward Markets 

Commission, the accounts have been prepared on going concern basis. 

51


7. The Company is carrying a total amount of ` 3.60 crores as at March 31, 2011 towards 

provision for taxation which was made primarily on the basis of past financial statements. 

Considering the effects of financial irregularities and the consequent uncertainties regarding 

outcome of these matters and significant uncertainties in determining the Tax liability, the 

management is of the view that it is not appropriate to make adjustments to the outstanding 

balance of tax provisions as at March 31, 2011. 

8. Fixed Assets: 

The addition in computer software amounting to ` 3, 50, 000/- and Price Ticker Boards 

amounting to ` 31, 15, 956/- representing the contribution of the Company is jointly owned 

with Forward Markets Commission under the Price Dissemination Projects 

9. Impairment of Assets: 

Looking to the nature of intangible assets and in view of the Final Order of the Commission, the 

management has decided to apply the provisions of AS 28 for impairment of intangible assets 

amounting to ` 21, 30, 82, 918/- after obtaining opinion of expert as per the prescribed 

methods and procedures for identifying impairment of these assets. Therefore no provision 

has been made in the accounts for impairment loss, if any, of such assets for the year. 

10. Prior Period Adjustments: 

Depreciation on Fixed Assets amounting to ` 25, 64, 505/- was excess charged in the earlier 

years which has been reversed in current year. 

In the earlier years, the expenses amounting to ` 1, 53, 12, 347/- were deferred under 

Resource Mobilisation Expenses which have been written off in the current Year. 

The Company has developed the Central and Remote Site Software internally for Price 

Dissemination Project and an amount of ` 20, 00, 000/- against these softwares has been 

credited to Salary Account. 

11. Disputed tax/Demand pending on appeal: 

An appeal in respect of excess depreciation amounting to ` 34 27 800/- claimed in the 

Financial Year 2003-04 is pending before the Commissioner of Income Tax (Appeal). 

12. There were no dues to Micro, Small and Medium Scale Industrial units which were outstanding 

for more than thirty days as on date of Balance Sheet. 

13. In the opinion of the Directors, Current Assets, Loans and Advances have a value on 

realisation in the ordinary course of business equal to the amount at which they are stated in 

the Balance Sheet. 

14. Balances of debtors, creditors, loans and advances are subject to confirmation/reconciliation 

and adjustments. 

15. Foreign Currency Transactions: 

During the year, the Company has incurred the expenses amounting to ` 4, 54, 989/- on 

Foreign Travelling. 

52


16. Particulars of Earning Per Share: 

(Amount in `) 

Particulars 2010-11 2009-10 

Net Profit for the year 20, 42, 361 8, 31, 28, 588 

Weighted Average Number of Equity Shares 1, 76, 93, 653 1, 66, 66, 667 

Nominal Value of the Share 10 10 

Earning Per Share 0.12 4.99 

The Company does not have any dilutive potential equity shares consequently the Basic 

and Diluted Earnings Per Share of the Company remains the same. 

17. Auditors’ Remuneration is made up of: 

(Amount in `) 


Statutory Audit Fees (Including Tax Audit Fees) 3, 00, 000 1, 65, 450 

Total : 3, 00, 000 1, 65, 450 

18. Managerial Remuneration paid/ payable to Directors: 


Managing / Whole time Directors 

( I) Salary 52, 72, 003 6, 70, 856 

(ii) Contribution to Provident fund 6, 41, 143 72, 000 

Non Executive Directors 

(Amount in `) 

59, 13, 146 7, 42, 856 

( I) Sitting Fees 11, 00, 000 7, 35, 000 

Grand Total 70, 13, 146 14, 77, 856 

Shri Anil kumar Mishra was appointed as Whole Time Director and CEO with effect from February 9, 

2010. Thereafter, with effect from May 26, 2010 , he was elevated as Managing Director and CEO of 

the Company. In view of the inadequate profits, the Company has obtained necessary approval of the 

Central Government under Section 269, 168(4)/ 309(3) of the Companies Act, 1956 vide Central 

Government Approval NoA- 72510738-CL-VIIdated February11, 2010 for payment of his 

remuneration. 

19. Related Party Disclosure 

As per Accounting Standard – As18, as prescribed under the Companies (Accounting 

Standard) Rules, 2006, the Company’s related parties and transactions are disclosed as 

below:- 

i. Key Managerial Personnel :- 

Mr Anil Mishra (Managing Director & CEO) 

Mr. Kailash R. Gupta 

Ms. Poonam Gupta nee Verma 

Mr. Joy Cheenath 

Mr. B. B. Pattanaik 

53


The Company has entered into certain transactions with related parties during the year under 

consideration. The details of such transactions are as under: 

Nature of 

Transaction 

Name of the Related Party (Amount in `) 

Salary Mr. Anil Mishra 59 13 146 

Salary Ms. Poonam Gupta nee Verma 19 83 764 

Sitting Fees Mr. Kailash R. Gupta 2 80 000 

Sitting Fees Mr. Joy Cheenath 70 000 

Expenses Incurred 

ii. Enterprises over which above persons have control : 

National Agriculture Produce Marketing Co. of India Ltd. 

Neptune Overseas Ltd. 

Arrow Total Solution LLC 

Neptune World Trade Finance and Investment Pvt. Ltd. 

Central Warehousing Corporation 

National Agriculture Produce Marketing 

Co. of India Ltd 

2 88 181 

Expenses Incurred Mr. Joy Cheenath** 2 43 534 

Expenses Incurred Mr. Kailash R. Gupta** 11 44 047 

Expenses Incurred Mr. Anil Mishra ** 2 06 043 

Expenses Incurred Ms. Poonam Gupta nee Verma** 1 50 421 

Warehouse Charges Central Warehousing Corporation 5 33 847 

Necessary approvals from the Central Government have been obtained by the Company in 

respect of salary paid to Mr.Anil Mishra and Ms.Poonam Gupta nee Verma. 

** Expenses Incurred for the Directors and Other related parties have been shown as 

amount recoverable under the head Loans & Advances. 

Outstanding balances as on March 31, 2011 in the Accounts of the above Related Parties 

are shown as under: 

Account Head Name (Amount in `) 

Loans & Advances Mr. Kailash R. Gupta 11 44 047 

Loans & Advances Mr. Anil Mishra 2 06 043 

Loans & Advances Ms. Poonam Gupta nee Verma 1 50 421 

Loans & Advances Mr. Joy Cheenath 2 43 534 

Loans & Advances Arrow Total Solution LLC 1 17 110 

Sundry Creditors Central Warehousing Corpoation 540 

As required under AS 18 - Related Party Disclosures’, as stated above, have been done 

by the management based on the available information. 

54


20. Deferred Tax Liabilities / Assets: 

The break - up of net Deferred Tax Liability / Asset is as under: 

` 

` 

` 

Deferred Tax Liabilities on account of 

timing difference in 

(a) Depreciation / Impairment loss 1 73 26 618 3 37 72 143 5 10 98 761 

Total (A) 1 73 26 618 3 37 72 143 5 10 98 761 

Deferred Tax Assets on account of 

timing difference in 

(a) Depreciation / Impairment loss 3 98 977 3 74 144 7 73 121 

(b) Expenses allowable on Payment 

basis 

© 

2 85 139 5 87 134 8 72 273 

Unabsorbed Depreciation 13 93 371 13 93 371 - 

(d) Provision of Doubtful Debts and 

advances 

- 50 18 278 50 18 278 

Total (B) 20 77 487 45 86 185 66 63 672 

Deferred Tax Liabilities/(Assets) 

(Net) (A)-(B) 

1 52 49 131 2 91 85 958 4 44 35 089 

21. Employee Benefit Plans 

The following table sets out the status of the gratuity plan/leave encashment as required under 

AS 15: 

Sr. Particulars Gratuity Leave Encashment 

No. 

` 

31/03/2011 31/03/2010 31/03/2011 31/03/2010 

( I) Discount Rate 8.25% 8% 8.25% - 

Current 

(ii) Rate of Increase in 6% 6% 6% - 

Compensation Levels 

(iii) Withdrawal Rates 3% at 1% at all 3% at - 

younger ages ages younger ages 

tapering to 

tapering to 

1% at older 1% at older 

ages 

ages 

(iv) Rate of Return on N.A. N.A. N.A. N.A. 

Plan Assets 

(v) Retirement age 60 65 60 - 

` 

55


` 

` 

` 

` 

` 

` 

56


` 

` 

` 

` 

` 

` 

57


` 

` 

22. Additional information pursuant to provisions of para 3, 4C and 4D of Part-II of Schedule-VI 

of the Companies Act, 1956 are either Nil or not applicable to the Company. 

23. Previous year’s figures have been regrouped /rearranged wherever considered necessary to 

conform with current year’s classification. Further, financial statements of the previous year 

were audited by a firm of Chartered Accountants other than M/s. Haribhakti & Co. 

For and on behalf of the Board of Directors 

B. B. Pattanaik Anil Mishra 

Chairman 

Managing Director & C.E.O 


Director 

Place: New Delhi S.S.Vyas Anil Maloo 

Date: September 07, 2011 Chief Financial Officer AVP (Legal) & Company Secretary 

58


National Multi Commodity Exchange of India Limited 

Balance Sheet Abstracts and Company’s General Business Profile: 

I. Registration Details: 

Registration No. 40281 State Code 04 

st 

Balance Sheet Date 31 March 2011 

II. Capital Raised during the Period (Amount in ` Two Crore Forty Five Lacs) 

Public Issue: – Right Issue: – 

Bonus Issue: – Private Placement: 2 45 00 000 

III. Position of Mobilisation and Deployment of Funds (Amount in ` Thousand) 

Total Liabilities 6 45 159 Total Assets 6 45 159 

Sources of Funds: 

Application of Funds 

Paid-up Capital 1 91 167 Net Fixed Assets 2 38 574 

Reserves and Surplus 4 05 666 Investments 6 82 290 

Secured Loan 3 891 Net Current Assets (2 76 905) 

Unsecured Loan – Deferred Tax Assets – 

Deposits (Unsecured) – Miscellaneous 1 200 

Expenditure 

Deferred Tax Liability 44 435 – 

IV. 

Performance of Company (Amount in ` Thousand) 

Turnover and Other Income 2 00 116 Total Expenditure 1 45 201 

(+) Profit/(Loss) before tax 54 916 (+) Profit/(Loss) after tax 2 042 

Earning per share ` 0.12 Interim Dividend Rate - 

V. Generic names of three principal products services of company 

(as per monetary terms) 

Product/Service Description 

Facilitating Online Trading in Commodity Futures 

Item code No. 


59


th 

Office No.4, 4 Floor, H. K. House, Ashram Road, Ahmedabad, Gujarat, 380 009 INDIA 

Phone No: +91 79 4008 6000 Fax No: +91 79 4008 6041 

E-mail:contact@nmce.com URL: www.nmce.com

9 ANNUAL REPORT 2010-11 - Nmce.com

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?