 "High court to hear FT plea against FMC order today")
FTIL has challenged the Forward Markets Commission’s (FMC) recent order in which the regulator declared it and its directors unfit to remain on the board or to be an anchor investor in any recognised exchange.
FTIL head Jignesh Shah and his trusted colleagues, Joseph Massey, ex-managing director of the MCX Stock Exchange, and Shreekant Javalgekar, former MD of MCX, are the petitioners. FMC had declared all of them to have failed the “fit and proper person” test. The petition will be heard by Chief Justice Mohit Shah on Saturday.
FTIL head Jignesh Shah and his trusted colleagues, Joseph Massey, ex-managing director of the MCX Stock Exchange, and Shreekant Javalgekar, former MD of MCX, are the petitioners. FMC had declared all of them to have failed the “fit and proper person” test. The petition will be heard by Chief Justice Mohit Shah on Saturday.
FMC’s order was challenged in the court of justice S J Vajifdar of the Bombay High Court on Friday – pledging stay - on the ground that the regulator pronounced the order based on wrong fact. The Court has scheduled to hear the case on December 21.
The FMC pronounced the order declaring FTIL, its promoter Jignesh Shah and ex-directors of FTIL’s beleaguered subsidiary National Spot Exchange Ltd (NSEL) Joseph Massey and Shrikant Javalgekar not “fit and proper person”, a mandatory clause to remain on the board of any recognized exchange. NSEL is facing Rs 5500 crore payment default of over 13,000 investors.
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The FMC in its order dated December 17 said, “It is also pertinent to mention here that Shah was practically the highest beneficiary of the fraud perpetrated at the NSEL exchange. It is because of the huge profit of Rs 125 crore (approx.) earned by NSEL during FY 2012-13 that the value of the shares of Shah in FTIL shot up manifold giving him the benefit of a spectacular market capitalization of his investment in FTIL running into thousands of crores of rupees. Shah, as the promoter of FTIL and NSEL has misused his position to create a confidence in the minds of the participants regarding the legitimacy of the business and its operations in the exchange platform of NSEL.”
The excerpts of the challenging petition filed by the FTIL in the Bombay HC said that Shah was not the largest beneficiary of the NSEL’s profit contribution to FTIL despite being the largest shareholder (18.08% directly and 26.76% through a company floated by him and his family). The petition argues that Shah neither bought / sold shares in the last five years nor NSEL has given any dividend or bonuses to shareholder. Hence, the question of benefiting from NSEL’s profit does not arise, the petition said.
On market capitalization, the petition pointed out that the same consistently nosedived from the level of Rs 8059 crore as on March 31, 2007 to Rs 650 crore as on September 9, 2013. Hence, the claim made by the FMC for increasing value of Shah’s share through spectacular increase in market capitalization does not hold any ground at all. Since, the NSEL came into existence in the last five years and alleged pared contracts were launched in the financial year 2010 in which NSEL incurred a loss of Rs 6.43 crore, there is no profit contribution to its parent company – FTIL.
Meanwhile, FTIL counsel said that the FMC has violated principals of natural justice through this order. Now, MCX board is controlled by the FMC nominees which the regulator did not consider before pronouncing the order. FTIL has just one nominee on the MCX board.
FTIL argued that investigations are pending with various authorities and hence, FMC’s order is premature.