HC to hear FTIL's plea against 'fit and proper' order on Feb 7

FTIL seeks early dates to avoid further regulatory actions

The Bombay High Court has shifted hearing of the Financial Technologies (FTIL) case to the main bench from a supplementary board earlier. Pending before the court of Justice A S Oka, the case is scheduled for hearing on February 7. FTIL, however, is looking to advance the hearing amid fear of further regulatory action.

Confirming the attempt, an FTIL counsel said that he would seek early hearing of the case.

The case challenging the order of the commodity derivatives market regulator Forward Markets Commission (FMC) declaring FTIL not “fit and proper” to run any exchange, was first filed on December 21 in the court of the chief justice of the Bombay High Court Justice Mohit Shah pledging “stay” on the FMC order. By its order on December 17, the FMC declared Financial Technologies and its promoter Jignesh Shah and two trusted colleagues Joseph Massey and Shreekant Javalgekar not “fit and proper” – a mandatory requirement to hold the highest post in an FMC recognized exchange.

Justice Shah after taking the issue on January 6 transferred the case to Justice Oka’s court with direction to club all public interest litigations (PILs) filed by investors in the Rs 5600 crore scam at FTIL’s subsidiary National Spot Exchange Ltd (NSEL).

There are over half a dozen cases filed by parties and counterparties of NSEL in the Bombay High Court in the last four-five months. Hearing in a number of cases, however, is yet to begin. During this period, NSEL related cases have moved from one court to another.

Meanwhile, the biggest fear for FTIL is the stake sale as ordered by the FMC. Pursuant to that, the capital markets regulator the Securities and Exchange Board of India (Sebi) has also served a show cause notice (SCN) to FTIL.

Sebi is scheduled to hear FTIL’s “fit and proper” case on January 13. Earlier, Sebi postponed the hearing in anticipation of the Bombay High Court order as per earlier previous schedule on January 8.

When FTIL counsel, Janak Dwarkadas apprised the court about Sebi’s schedule hearing, Justice Oka said, “You tell them (Sebi) that the matter is pending before the (Bombay) High Court.”

As per the FMC order, FTIL will have to reduce its stake to 2 per cent of the paid up equity capital from the existing 26 per cent in Multi Commodity Exchange (MCX), promoted by it. Similarly, unless the High Court “stays” FMC’s order, FTIL will have to reduce its stake in MCX.

Interestingly, MCX board has decided to ask FTIL to reduce its stake in MCX as per FMC order by January 25. It would be interesting to see, what Sebi and MCX board decide due to the pendency of the case.

An FTIL official said that stake sale within such a short span is impossible given the negative market sentiment. Hence, extension in time is the only option.