The full bench of SAT headed by presiding officer J P Devdhar said the deadline extension for divesting stake in MCX, MCX-SX and NSEL will continue to be operational till the final order is passed. Date for pronouncement of final order was not given.
The Securities and Exchange Board of India (Sebi) had passed an order on March 19 stating that FTIL was not "fit and proper" to hold any stakes in any of these exchanges. The Sebi order followed a similar order on December 17, 2013 by commodities watchdog FMC against the company and its promoter Jignesh Shah and key officials like Joseph Massey.
The Sebi mostly based its order on the FMC's contentions to declare FTIL and its promoters as ineligible.
Both the orders followed the Rs 5,500 crore payment crisis and scam at the National Spot Exchange (NSEL), which is fully owned by FTIL.
FTIL has also challenged the disqualification by FMC in the Bombay High Court.
The Sebi order also said that FTIL's voting rights in the exchanges should be frozen.
The market regulator granted FTIL a 90-day window to divest its stake. It said FTIL could not be allowed to continue as a stakeholder in the securities market either, having been declared unfit by FMC.
"A person who is not 'fit & proper' to hold shares in a commodity futures exchange cannot be fit & proper to hold shares in recognised stock bourses and clearing corporations. He poses the same danger to the interest of securities market as he does to the commodity futures market, as both require the same standard of integrity.
"So, there is no doubt that declaration of FTIL as not `fit & proper' by the FMC has a direct bearing on the securities market," the Sebi order said.
While FTIL owns 26 per cent in commodities bourse MCX, it has 70 per cent stake in MCX-SX and MCX-SX Clearing Corporation. Its MCX-SX ownership is 5 per cent through equity and the rest through convertible warrants. At the time of the Sebi order FTIL and MCX held just under 5 per cent stake in the stock exchange MCX-SX.
The troubled company also has stakes in the Delhi Stock Exchange and Vadodara Stock Exchange in addition to a small holding in the NSE.
While advocate Shiraz Rustomjee represented Sebi in the matter, senior counsel Janak Dwarkadas represented FTIL.
Dwarkadas argued that Sebi has not independently applied its mind on whether FTIL is fit & proper but has merely relied on the FMC order to pass its own directions. He also said that Sebi has no reason to verify the holdings of his client, which was strongly objected to by the Sebi counsel.
SAT too said Sebi could not base its order on the FMC order and that it has to make its own case as to how FTIL is not fit to own any stake in any exchange.
However, Rustomjee said in the light of the similar mechanisms for settlement and trading in commodities and securities market, it follows naturally that an entity which is not fit and proper in one cannot be fit and proper in the other.