No HC relief on NMCE promoter issue

The high court at Ahmedabad has declined to agree to a plea of the National Multi Commodity Exchange (NMCE) to simply allow it to treat as forfeited the entire shareholding of its promoter, Kailash Gupta.

Gupta owns 30.18 per cent in NMCE through a company of his, Neptune Overseas Ltd (NOL). He was ordered by the Forward Markets Commission (FMC) on July 23 to reduce this to two per cent or less of NMCE’s total shares within three months. For, it said, Gupta had abused his position as the managing director, and later as NMCE’s executive vice-chairman, causing illegal monetary benefit to companies controlled by him or his close relatives, at the expense of the exchange. The regulator, therefore, declared him not “fit and proper” to hold any position in the management or board of NMCE. And, that no company controlled by him, directly or indirectly, should hold shares in the exchange in excess of two per cent of its total issued capital.

Gupta has challenged the order and the matter is pending in court. Meanwhile, NMCE suggested his shareholding be simply declared as forfeited. If this was done, it is possible that a plea would be taken that various other stipulations made by FMC on the exchange in this regard need not be gone through.

However, the court said any relief could only be granted after the final verdict on Gupta’s legal challenge to the FMC. “The matter is sub judice. Hence, the board cannot be allowed to forfeit the shareholding of NOL,” it said. The next hearing of this case is scheduled early next week.

In the FMC order, the three-month period given for reducing NOL’s holding in NMCE to the stipulated level could be extended by a maximum of three more months, if it was satisfied that there were sufficient reasons for not being able to divest the excess shareholding within the period. Not being able to get a price deemed reasonable by NOL shall not be accepted as sufficient reason for seeking a three-month extension, the order clarified.

NOL had petitioned the HC on the FMC’s authority to issue any showcause notice to him, something rejected by a single-bench judge. That decision has been challenged, too. FMC says it is the regulator of the commodity derivatives market and can issue a showcause notice for any charge of financial irregularity. It also notes NOL was not a party to the case.

FMC has also directed the NMCE board to take appropriate legal action against Gupta and recover what it said was illegal over-payment of Rs 28.8 crore from Arrow Total Solution, a concern founded by Gupta’s son, in which his wife is a director. Other such payments are also in line for recovery. Then FMC chairman B C Khatua had said Gupta was guilty of reimbursing from the company many foreign tours of his kin, apart from payments to family-owned companies, all of which had to be recovered.

FMC also directed the exchange board to initiate legal proceedings against Gupta’s daughter, Poonam, and son-in-law, Kaushik Gaurav Verma, apart from other employees, public relations agency Tarmac Affairs and some others.