Commodities market regulator Forward Markets Commission (FMC) has ruled that Jignesh Shah, Joseph Massey and Shreekant Javalgekar, all former directors of the troubled National Spot Exchange Ltd (NSEL), are not ‘fit and proper’ to hold any position in the management and board of any recognised commodity exchange.

In its 80-page order issued on Wednesday, the regulator said that Financial Technologies (India) Ltd (FTIL), the holding company of Shah’s business group, which runs several exchanges, is also not fit and proper to continue as a shareholder of two per cent or more of the paid-up capital of Multi Commodity Exchange (MCX).

FTIL currently holds 26 per cent stake in MCX.

The order further said that neither FTIL, nor any company controlled by it, shall hold any shares in any association or exchange registered with the regulator in excess of the threshold limit prescribed under the commodity exchange guidelines. Reacting to the development, an FTIL spokesperson said its lawyers are looking into the order passed by the regulator and exploring the future course of action. However, sources said the company would move the High Court against the ruling.

Incidentally, the regulator allowed Blackstone GPV Capital Partners (Mauritius) to increase its stake in MCX to 4.99 per cent from 2 per cent through secondary market transactions.

Setback for Shah

The order would have far-reaching implications on Shah and FTIL than on Massey and Javalgekar, as both have already resigned from the board of all the exchanges promoted by the group. Capital market regulator SEBI will now take a call if FTIL is fit to own a stake in MCX Stock Exchange.

Holding Shah as the biggest beneficiary of the fraud perpetrated by NSEL, the regulator said that it was because of the huge profit of Rs 125 crore earned by NSEL in 2012-13 fiscal that the value of shares held by Shah in FTIL shot up manifold. This made him the beneficiary of a spectacular rise in market capitalisation of his investments in FTIL, running into thousands of crores.

Shah, as the promoter of FTIL and NSEL, the order said, misused his position to create confidence in the minds of the participants regarding the legitimacy of the business and its operations in the exchange platform of the NSEL.


In a late evening development, MCX interim Chairman R.M. Premkumar resigned from the exchange, sources said. His resignation will be considered at the next board meeting.

(This article was published on December 18, 2013)
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