The Cotton Association of India (CAI) has sent a formal request for de-recognition from the Forward Markets Commission (FMC), the commodity derivatives market regulator, due to discontent among the board of directors over voting rights among its non-cotton members.
Raising apprehensions about induction of a couple of non-cotton members as directors on the board, a few months ago FMC had asked CAI to engage only cotton traders in the decision-making process.
The Commission also inducted M B Lal, the former chief managing director of Cotton Corporation of India (CCI) and managing director of a Mumbai-based cotton trader and exporter Shail Exports and industry veteran Vinod Patodia as its nominees on the board.
The objective is to monitor daily operations of CAI, which is largely dominated by a few members, and protect the interests of its 400-odd members.
“The Commission has asked CAI to withdraw voting rights from its non-cotton members. Those who do not have interest in cotton business should be kept away from the decision-making processes, including voting rights, to bring discipline in its daily operation. Since, the CAI was functioning against its own bylaws, bringing discipline for its smooth operations was necessary,” said Lal. Its top brass did not like it and applied to the regulator for de-recognition, which was turned down.
The regulator also asked CAI to get the nod of its board members by passing a resolution in an extra-ordinary general meeting.
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CAI called a meeting of its members about two weeks ago and all its members were asked to use their franchise.
The decision went in its favour and the resolution for CAI’s de-recognition was passed. CAI sent a formal request along with a copy of the resolution to the FMC last Friday.
The FMC is likely to announce CAI’s derecognition soon.
While Dhiren Seth, president, CAI, preferred not to reply to Business Standard's query, the FMC’s member M Mathisekaran, said, “CAI itself wanted to come out of FMC’s ambit.”
The FMC is likely to announce CAI’s derecognition soon.
The evolution of the organised futures market in India started in 1875 with the setting up of the Bombay Cotton Trade Association Ltd (BCTAL). The name of BCTAL was changed to the East India Cotton Association in 1921 to start organised futures trading in cotton with a membership base all across the country. Following the widespread discontent among leading cotton mill owners and merchants over the functioning of the BCTAL, a separate association, Bombay Cotton Exchange Ltd (BCEL) was constituted in 1983 which was later registered as CAI under the Companies Act and granted permission to execute futures trading in cotton.
Unfortunately, the exchange failed to attract trade despite its repeated efforts due to differences among its members.
While CAI would not make any attempt to attract futures trading in cotton post-de-recognition, the Association would continue to remain in existence and represent cotton traders in India.
“Now, CAI will have complete freedom. It will be a misfortune for the entire cotton trade in India,” said a veteran trader.
The FMC had last de-recognised Jaipur – based The Bullion Association in 2008.