FTIL, which owns 26% stake in IEX, is required to divest the same undera May 2014 direction from the CERC
The Supreme Court on Thursday stayed the Central Electricity Regulatory Commission’s (CERC) order that asked Financial Technologies India Ltd (FTIL) to transfer its entire shareholding in India Energy Exchange (IEX) to a separate trust demat account created by the electricity bourse.
A bench headed by justice Ranjan Gogoi, while staying a June 26 order, also asked the commission to respond to FTIL’s application plea. The CERC had given FTIL time till July 2 to transfer its shares in IEX, which is the country’s leading power exchange with more than 95% of the market share, to an IEX-owned trust demat account and exit the exchange by July 20.
The CERC order was based on an earlier order by the Forward Markets Commission (FMC) that held that FTIL was not a fit and proper entity to run exchanges. FTIL, which owns 26% stake in IEX, is required to divest the same as per a May 2014 direction from the CERC after a R5,600 crore fraud surfaced at the National Spot Exchange Ltd (NSEL). FTIL holds 99.99% of NSEL. The 2013 fraud is being investigated by the economic offences wing (EOW) of the Mumbai Police.
FTIL, in its fresh plea on Thursday, sought to restrain IEX from dealing with or in any manner interfering with the ownership and possession of the equity shares held by it. Besides, it also wanted time till August 18 to complete the sale transactions.
FTIL had last month said that it had entered into share purchase agreements with four companies to sell a 16.6% stake in IEX for R357.06 crore. Challenging the CERC’s order, FTIL said that CERC has no jurisdiction to pass such an order and the forced transfer would not only affect the interests of its 60,000 shareholders but also affect the share valuation.
“The valuation will be rendered illusory. Moreover, the transfer of shares and their beneficial ownership is without the mandate of law and amounts to illegal expropriation of property… The Commission does not have the power to order such expropriation of property,” the application stated.
The tariff regulator on June 26 had directed HDFC Bank, the custodian for the depository service, to transfer the shares into the IEX trust account by July 3 if FTIL failed to comply with the order. CERC said the shares can be transferred to subsequent buyers only with its permission FTIL was also directed to complete the sale of its entire shareholdings in IEX by July 20, failing which IEX will take steps to sell the shares by August 5 in a fair and transparent manner.
It further submitted that any expropriation of property is subject to the mandate of Article 300A of the Constitution, which requires that no person shall be deprived of his property except by procedure established by law, and there is no provision under either the Electricity Act or the regulations framed by the commission permitting such unilateral and wilful transfer of shares owned by FTIL.