MCX Clearing Corporation (MCXCC), the clearing arm of Multi Commodity Exchange (MCX), has decided to seek the guidance of the Securities and Exchange Board of India (SEBI) in the matter relating to the appointment of the company's Managing Director (MD) and Chief Executive Officer (CEO) Narendra Alhawat. SEBI, in its inspection report, had flagged Alhawat’s appointment as a violation of the Companies Act.

An extra ordinary general meeting was called by the MCXCC on to ratify the appointment on December 24, 2019. However, the exchange, in an announcement post the meeting, said it had withdrawn the resolution without giving any reasons. According to the sources close to matter, MCXCC has decided to take the matter back to SEBI instead of ratifying the error by itself and find out the way forward.

A legal expert, whom BusinessLine had spoken to, said that SEBI may ask the company to seek clearance from the Registrar of Companies (ROC) as the matter pertains to the violation of the Companies Act.

An email was sent to MCX group corporate communication and SEBI. But there were no responses.

Alhawat has been the MD and CEO of MCXCC, since April 2018 and his three year term ends on 2021. Companies Act requires that a such appoints be ratified in the immediate next EGM or annual general meeting (AGM) scheduled in the line.

“The Extra Ordinary General meeting (EGM) on May 09, 2018 was held at a ‘shorter notice’ and was for a specific purpose due to exigency of matter and hence the approval of shareholders for appointment as a Managing Director of the Company (of Allhawat) could not be taken up in the Extra Ordinary general meeting held on May 09, 2018 and was taken up at the AGM held on August 16, 2018,” MCXCC has said in its clarification note.

An MCXCC notice further said that Ahllawat’s appointment was approved by SEBI and by the shareholders at the AGM held in August 2018. But the company had called an EGM to ratify the same as SEBI inspection report flagged it off.

“It is a violation of Companies Act and the company,” said J N Guprta, founder, SES, a proxy advisory firm.

As per Section 196 of Companies Act, 2013, “Subject to the provisions of section 197 and Schedule V, terms and conditions of appointment and remuneration payable of a MD, whole-time director or manager should be approved by the Board of Directors at a meeting which is subject to approval by a resolution at the next general meeting of the company and by the central government in case such appointment is at variance to the conditions.”

MCX CC said that SEBI in its inspection report had advised the governing board of the company to take action to ensure necessary compliance with regard to Companies Act at all times.

“Accordingly, the ratification of appointment of Mr Narendra Kumar Ahlawat as MD has been recommended by the Board for the approval of the Members by a Special Resolution set forth in item no. 1 of the notice. None of the Directors, Key Managerial Personnel, and their relatives other than Mr. Narendra Kumar Ahlawat are, in any way, concerned or interested financially or otherwise in the proposed resolution,” MCXCC said.

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