FMC gets jolt in Kailash Gupta case as Gujarat HC sets aside order

In a major blow to the Forward Markets Commission (FMC), the Gujarat High Court has set aside the commodity markets regulator's order against Kailash Gupta, the promoter of Ahmedabad–based National Multi Commodity Exchange (NMCE).

The bench of the Gujarat High Court, including Justices V N Sahai and A J Desai, set aside the order on Friday.

“I had faith in the Indian judiciary. Finally, justice has prevailed,” said a relieved Gupta.

On October 20 2011, the court had stayed a part of FMC’s order quashing the short span of three months given to reduce the stake of Neptune Overseas Ltd (NOL), the promoter of NMCE, to two per cent from the existing 30.2 per cent.

 

“We have not seen the judgment and hence cannot comment on it,” said Rajiv Agarwal of the department of consumer affairs.

FMC in its order dated July 23, held Gupta guilty of abusing his executive fiduciary position, as managing director and later as executive vice-chairman of NMCE, for causing illegal monetary benefit to the companies controlled by him and his close relatives at the expense of the exchange. The regulator had declared him “not fit and proper” to hold any position in the management and the board.

It was further ordered that no company controlled by him, directly or indirectly, including NOL, shall hold shares in the exchange in excess of two per cent of the total capital issued on the exchange. NOL shall, therefore, bring down its holding in NMCE to two per cent or less within a period of three months, the order said.

FMC, at its discretion or at the request of NOL can extend this period by a maximum of another three months, provided there are sufficient reasons behind NOL's inability to divest the excess shareholding within this time. the order added.

Gupta challenged FMC’s powers to issue such an order against any individual or entity, in the Ahmedabad High Court, which was heard on several occasions in the past. On Friday, however, the court did not observe any strong support in FMC’s claim and set aside the order.