Board to meet this month to decide course of action

The Ahmedabad-based National Multi Commodity Exchange (NMCE), India’s first commodity derivatives trading platform, has decided to convene a meeting of its board of directors in the third week of this month on the fiduciary charge against its promoter, Kailash Gupta, by the regulator, the Forward Markets Commission (FMC).

FMC had asked NMCE to take action against Gupta and others for financial irregularities and misuse of exchange funds. FMC has also asked the exchange to file a criminal case against him. It has also told Gupta, chief promoter of the exchange, to reduce his stake, currently 30.18 per cent through a wholly-owned company, Neptune Overseas Ltd (NOL), to be reduced to a maximum two per cent within three months. The period can be extended by another three months, but not being able to get a price deemed to be reasonable by NOL shall not be accepted as sufficient reason for seeking an extension.

Gupta told Business Standard: "We have challenged FMC's order at the division bench of the Gujarat High Court and (so), I cannot comment any further."

FMC has also directed the NMCE board to take appropriate legal action against Gupta and recover wrongful and illegal overpayment of Rs 28.80 crore from Arrow Total Solution, a concern founded by Gupta's son in which his wife is a director. More such payments, declared illegal, have been asked to be recovered from companies promoted by the Gupta family.

About a month before, then FMC chairman B C Khatua had said that Gupta had been found guilty of reimbursing from the company many foreign tours of his family members and relatives. Besides, many payments made to his family-owned companies were found wrongful and illegal and have to be recovered.

FMC also directed the exchange board to initiate a legal proceeding against Gupta's daughter, Poonam Verma and son-in-law, Kaushik Gaurav Verma, apart from other employees, a public relations agency and others. NOL approached the Gujarat HC on a jurisdiction issue over a showcause notice issued on him by the FMC. It was rejected by a single-bench judge. The company has appeal to a higher bench and the hearing is scheduled for August 17.

FMC is preparing to reply on two main issues. First, being a regulator of the commodity derivatives market, it has the power to issue a showcause notice against all financial irregularities. Second, FMC has not made NOL a party to the case and hence, only Gupta, not NOL, can challenge the order.