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The high court on Wednesday adjourned the hearing of the case by Financial Technologies (India) Limited (FTIL) asking for a stay on the ‘fit and proper’ order of the Forward Markets Commission (FMC). FMC, the commodity derivatives markets regulator, had last month held FTIL, promoter and anchor investor with 26 per cent stake in India's largest commodity exchange Multi Commodity Exchange (MCX), not ‘fit and proper’ to run an exchange. As a result, FTIL has to reduce its stake in MCX to two per cent of the paid-up equity capital from 26 per cent. A bench headed by Chief Justice Mohit Shah decided to transfer the case to the court of Abhay Oak, clubbing all public interest suits by investors and others in the Rs 5,500-crore scam at the National Spot Exchange Limited (NSEL). The hearing will be on Thursday.
Though the FMC did not set a deadline for reducing the stake, yet the board of MCX passed a resolution offering one month for FTIL. Meanwhile, the Securities and Exchange Board of India (Sebi) has also issued a show cause notice to FTIL for which the next appearing is on Monday.
This means if the FMC's order is not stayed by Friday, Sebi may come up with a similar order while granting extension in trading licence to the FTIL promoted stock exchange, MCX-SX.
The effect of the Sebi order: FTIL would have to reduce its stake in MCX-SX to two per cent from five per cent.
FTIL counsel Janak Dwarkadas argued in the court, "The stake sale is irreversible. In case the FTIL is found innocent, the stake sold cannot be taken back. Therefore, the order be stayed till investigation is over. FTIL has been targeted by the FMC."
The counsel also assured the court the FTIL will not block any board resolution as long as MCX assures it will not change its capital structure. Several criminal cases have been filed against NSEL and probes are still on. Also, FTIL's current holding of 26 per cent will not cause any prejudice to other MCX shareholders. Hence, the shareholding of FTIL be retained, he argued.
"As an MCX investor, FTIL has all the right to oppose such a resolution on the reduction of the shareholding pattern of the MCX, but it is ready to forgo this right till the matter is decided by the court," the counsel said.
He told the court that at the time of the FMC's order, all the three FTIL directors on MCX board had resigned and, now, FTIL does not have any director on MCX board. Iqbal Chhagla appeared for FMC said, "FMC deemed JIgnesh Shah guilty, only declared him not fit."
