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In successive orders in the last two days, Justice G S Patel said the MSEI (earlier MCX-SX) should neither cancel the warrants held by the MCX nor should it deal with the deposit of amount equivalent to warrants, i.e Rs 41.6 crore, till the final order. The court also criticised the way MSEI had handled the issue.
According to Securities and Exchange Board of India (Sebi) norms, the MCX in line with Financial Technologies (FTIL) was supposed to sell the warrants by June 19. However, due to conduct of MSEI, the commodity bourse could not sell those warrants.
According to the order, the MCX, through its merchant banker, received offers to sell warrants at Rs 1.50 per warrant against its cost of Rs 1 per warrant, which the MCX accepted on May 29, 2015.
However, the MSEL informed the MCX of launching a rights issue on June 4 but later it was found the rights were opened on May 29 the day MCX accepted the offer to sell warrants but the price of rights issue was kept at Rs 1, below the offer price MCX received.
Besides, the HC issued an order restraining MSEL on July 9, while on the same day MSEL communicated to MCX that warrants were extinguished by its board on June 27 meeting.
Justice Patel, on July 10, in response to another affidavit filed by the MCX, observed: “One would imagine that the very least that …..the board that is said to be comprised of eminent persons nominated by Sebi, should have done was to communicate its so-called decision immediately and without delay to the holder of the warrants." The court ruled that the defendant cannot be permitted to completely alter the situation in a manner that renders the suit entirely futile."
Now, the situation is that the Sebi had not extended the deadline of selling warrants on MCX beyond June 19. HC didn't allow MSEI to extinguish warrants and transfer deposits to its reserves account as it attempted to do. By selling rights at a price of Rs.1, the MSEI has already impacted market price of warrants.
The MCX has said in its filing on the BSE: “MSEI has made a statement in the HC that the deposit and rights of MSEI and MCX in respect of warrants shall be subject to further outcome of the notice of motion.”
An MSEI spokesperson said, "The deadline as set by Sebi for divestment of warrants held by MCX was June 19.”
