FT, La Fin must give MMTC 3-week notice for asset sale, says HC

The court rejects injunction to MMTC for recovery from SMX sale proceeds

The high court here has rejected the plea of MMTC, the government-owned commodities trader, for an injunction to restrain Financial Technologies from using proceeds of the sale of its Singapore Mercantile Exchange (SMX).

In a case filed for the recovery of Rs 228 crore invested by it in the beleaguered National Spot Exchange Ltd (NSEL, promoted by FT), MMTC sought this injunction about a fortnight earlier. To get back its dues, MMTC sought attachment of the SMX sale proceeds which FT sold to Intercontinental Exchange of the United States for $150 million in November.

After hearing arguments from all parties, including the counsels of MMTC, FT (along with promoter Jignesh Shah) and NSEL, the court instructed FT to give a three-week notice to MMTC if it decided to sell its headquarters space (FT Towers) in this city. Subsequently, MMTC would have the right to challenge the sale of this immovable property by approaching the HC, the interim order said.

MMTC had also sought attachment of all FT's and Shah's assets. It said it was seeking security for amounts far greater than its own exposure as a failure to meet the claims of other investors would result in the latter seeking a proportional allotment of assets securing the MMTC exposure.

The court dismissed these arguments, maintaining MMTC would be secured to only the extent of its exposure.

Meanwhile, FT had planned to utilise the SMX sale proceeds for settling external commercial borrowing dues. Shah has been directed to inform MMTC once the attached properties are released. Also, the court ordered La Fin, a holding company for FT, to give a three-week notice to MMTC if it decided to dispose of its equity in FT. La Fin's shareholding here has been attached by the economic offences wing (EOW) of the city police.

In an associated development, MMTC could soon face heat from investigating agencies. Sources within EOW confirmed the scope of its NSEL investigation is to widen to include MMTC's investments into the exchange. Senior EOW officials confirmed they'd write to the Central Bureau of Investigation to investigate compliance with due-diligence norms prior to MMTC's investments into NSEL. And, the role of the regulator, the Forward Markets Commission (FMC), in the Rs 5,574 crore NSEL payment crisis. Since it was yet to register a First Information Report, investigation into the role of MMTC and FMC was beyond its jurisdiction, said an EOW official.