FMC order declared FTIL “not fit and proper person” to hold more than 2% shares of a recognised commodities exchange
Financial Technologies (India) (FTIL) on Friday moved the Supreme Court against a Forward Markets Commission’s (FMC) order that declared it unfit to run exchanges and had asked it to divest its shareholding in the Multi Commodity Exchange of India (MCX).
A bench headed by Justice Vikramjit Sen posted the matter for hearing on Friday along with its another appeal against market regulator Sebi.
FTIL has also challenged the Securities Appellate Tribunal’s order that endorsed Sebi’s decision asking it to divest its shares in bourses, including MCX-SX. Sebi’s March last year’s order had followed a similar directive by FMC.
Challenging the Bombay High Court’s order that refused to stay the FMC’s order of December 17, 2013, FTIL said that the commission had acted as the complainant, prosecutor, decision maker, etc, on its own complaint and had passed the impugned order without “any authority and jurisdiction and in an arbitrary and discriminatory manner.”
The FMC’s order declaring FTIL “not fit and proper person” to hold more than 2% shares of a recognised commodities exchange had come in the wake of a Rs 5,574.34 crore payment scandal at National Spot Exchange Ltd (NSEL). In its order, the commodity futures market regulator said FTIL and Jignesh Shah, the then chairman of FTIL, were unfit to run an exchange and barred Shah from holding a management position in any recognised exchange in India. Subsequently, FTIL divested its entire 26.30% stake in the MCX at a loss of Rs 223 crore. It sold a 15% stake in MCX for Rs 459 crore to Kotak Mahindra Bank and the remaining 11% in the open market. Besides, it said that it sold its 25,3% shareholding in Indian Energy Exchange at a loss of Rs 200 crore.
FTIL further said that while FMC’s order was under challenge before the HC, it was directed by other regulatory authorities like SEBI and the central Electricity Regulatory Commission to divest its holding in other exchanges.
According to FTIL, FMC’s “unilateral declaration” has become the basis for subsequent regulatory orders and forced divestment by FTIL in its exchange ventures. “… the petitioner has faced enormous civil and commercial consequences which are penal in nature, on fronts other than the ones regulated by the FMC,” the petition stated, adding that FMC does not regulate FTIL’s business and the Commission had passed the order against FTIL as the parent company of NSEL. FTIL holds 99.9% stake in NSEL.