NMCE ends promoter's voting rights

Neptune Overseas holds 30.18% stake in the exchange

Ahmedabad-based National Multi Commodities Exchange (NMCE) is to extinguish the voting rights on the shareholding of its promoter, Neptune Overseas.

The latter holds 30.18 per cent stake in the exchange. All these 5.77 million shares will now not have voting rights; other benefits will also be withheld by the exchange till the shares are sold.

The case is a few years old , before both the Supreme Court (SC) and Company Law Board (CLB). The exchange spokesperson declined to comment. Voting rights on 15 per cent shareholding of the promoters was extinguished by the Forward Markets Commission (FMC) a few years earlier. This was after it was found the promoters had raised the holding in the exchange by purchasing shares from the exchange’s money. Now, voting rights on the entire lot have been removed.

NMCE was promoted by Kailash Gupta in 2003 and was operationalised the same year. Later, when FMC made the charge of siphoning of funds from the exchange to purchase its shares, the promoters were declared ‘not fit and proper’ to run a commodity exchange.

This was challenged in the Gujarat high court, which squashed FMC’s order. However, the SC had restored the order. Later, the enforcement directorate had attached the promoters’ shares; this was challenged in court.  Meantime, NMCE approached the CLB, which is hearing the case but no significant progress has taken place.

If the courts rule in favour of the exchange, the promoters’ stake  alleged to have been purchased with the exchange’s money will be issued back to the shareholders proportionately or cancelled.

NMCE is likely to call a meeting of its board of directors next month to give effect to FMC’s new directions on ownership patterns. As with all other commodity exchanges, it would have to revise its bylaws and articles of association. Central Warehousing Corporation (29.7 per cent stake), Bajaj Holdings and Investment (12.82 per cent), Reliance Capital (8.72 per cent) and Gujarat Agro (5.47 per cent) will all have to bring down their stake in the exchange to five per cent each, over the next five years.

NMCE is the third largest exchange but its market share is much lower. The exchange is known for trading in plantation crops, chiefly rubber.