Financial Technologies (India) on Thursday sought a stay on the commodity markets regulator, Forward Markets Commission (FMC) order of mid-December last year, declaring it not fit and proper to hold shares in the Multi Commodity Exchange (MCX) or any other.
The petition was heard on Thursday at the high court here, before judge S J Vazifdar. It will also be heard on Friday.
FTIL counsel Abhishek Manu Singhvi said the Securities and Exchange Board of India and the Central Electricity Regulatory Commission had implemented the FMC order and forced them to go for a distress sale of stakes in Indian Energy Exchange, MCX and MCX Stock Exchange. He said the forced exit had an impact on these companies' valuation and FTIL had to bear a loss of a little over Rs 1,000 crore.
FTIL argues it sold its stake in MCX at a loss of Rs 291 crore, in IEX for one of Rs 250 crore and in MCX-SX of Rs 280 crore. And, losses of Rs 11 crore from stake in Bourse Africa and Bahrain Financial Exchange. Singhvi said the FMC order was also being used by the government to forcibly merge the crisis-struck National Spot Exchange (NSEL) with FTIL. FMC’s order was sequel to the scam in NSEL, a subsidiary of FTIL, of a payments default of Rs 5,600 crore.
FTIL also argued the fit and proper order did not specify the penalty for FTIL. This came six months later, forcing them to exit MCX at a loss.
FMC lawyer Iqbal Chagla replied that said the fit and proper order did not ask FTIL to divest stake. It had only ruled that FTIL was not fit and proper to play an anchor investor's role and under the norms, such shareholders had to reduce stake to below two per cent.
Modern India has asked to intervene in this case and got the judge's permission to do so at Friday's hearing. Modern India had invested in NSEL products and lost money. It had filed a suit, on which the court had appointed a committee on recovery of money from defaulting members of the exchange.