Jignesh Shah lives to fight another day

Board accepts his request to hang on, waits for FMC to decide on his 'fit and proper status'

Financial Technologies India Ltd (FTIL) promoter Jignesh Shah, whose ‘fit-and-proper’ status to run an exchange has been under regulatory scrutiny following the Rs 5,600-crore payment fraud at NSEL, on Tuesday decided to continue as a director of group firm Multi Commodity Exchange (MCX).

The request of Shah, who represents anchor investor FTIL on the MCX board, to continue on the board was accepted, pending the decision of the Forward Markets Commission (FMC) on his ‘fit-and-proper’ status.

According to observers, Shah, true to his reputation, might not be ready to give in easily. A fortnight ago, Shah and MD Joseph Massey had been forced to opt out from the board of MCX-SX, the stock exchange arm of FTIL. However, at Tuesday’s MCX board meeting, things went on smoothly so far as Shah’s continuation on the board was concerned. It is learnt that the board asked several questions on other issues.

With the latest reconstitution, the MCX board has become more powerful in terms of corporate governance.

The resignation of MCX MD Shreekant Javalgekar, made last week, was accepted by the board with immediate effect and Deputy MD Praveen Kumar Singhal was asked to oversee day-to-day operations of the exchange till a new MD was appointed.

Apart from the FTIL nominees, three new shareholder directors — Union Bank of India’s K N Raghunathan, Corporation Bank’s P Paramasivam and Bank of Baroda’s Sanjay Agarwal — were also inducted on the MCX board. Besides, two new independent directors — G Anantharaman, who had earlier worked with Sebi, and Pravir Vora, chief technology officer of ICICI — were also included.

On the board meeting, a senior FMC official said: “There were two main developments. One, the board approved the proposal to amend the articles of  association to get rid of the provision for permanent directors. An approval of shareholders would be sought through postal ballot, in line with law. Two, G Anantharaman was appointed the audit committee chief. He will lead the clean-up job.” He added Shah’s ‘fit-and-proper’ status would be decided in due course.

The question on Shah continuing had arisen after FMC’s recent directive that no shareholder director on the commodity exchange’s board could continue to occupy a seat as a permanent director. Shah had been a permanent director on the MCX board since 2006. Also, the directive had mentioned that the article of the association of the exchange be amended to ensure no shareholder director was made a permanent director.

The earlier FMC norms required restructuring of the board so that half the board members were independent directors. Also, anchor investors of an exchange should get board seats in sync with the equity held by them. Since FTIL holds 26 per cent equity in MCX, it can have only one seat on a 14-member board. But with today’s inductions, the strength of the board is now 12, without an MD. FTIL can have two representatives only if the board strength is increased to 18.

Paras Ajmera, another FTIL representative on the MCX board, did not attend the meeting on Tuesday. However, it is learnt he is withdrawing his nomination as a board member so that the regulations can be complied with.

The board also appointed a five-member committee of board members, headed by Pravir Vora, to oversee operations of the exchange. FMC had last week asked its board to do so. Two more independent directors, including an FMC nominee, are also expected to be inducted soon.