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More hurdles are ahead for Jignesh Shah, promoter of Financial Technologies (FTIL), languishing in a Mumbai jail since the past two months in connection with the ₹5,600-crore scam at the National Spot Exchange (NSEL). To add to his recent woes, the Securities Appellate Tribunal has dismissed a plea filed by FTIL against an order by market regulator Securities and Exchange Board of India.
Dismissing FTIL’s plea, SAT presiding officer Justice JP Devadhar said as the Forward Markets Commission (FMC) had passed a similar order on December 17, SEBI’s impugned decision cannot be faulted adding trades carried out in both commodities and securities markets are of similar nature.
“The order passed by FMC will have to be applied ipso facto by (the) other regulator,” Justice Devdhar said. Meanwhile, the quasi-judicial body, that hears matters related to the market regulator, has extended the deadline for FTIL to divest its stakes by four weeks.
SEBI, under the Securities Contracts (Regulation) Act, had on March 19, passed an order that FTIL is not a “fit and proper person” to acquire or hold any equity share in any recognised stock exchange or clearing corporation, directly or indirectly. It had further said the company should have to divest the equity shares held by it, directly or indirectly, in MCX-SX, MCX-SX CCL, DSE, VSE and NSEL within 90 days from the date of the order. FTIL owns about 99 per cent in NSEL, 26 per cent in MCX and 70 per cent stake in MCX-SX and MCX-SX CCL.
At the time of SEBI’s order, FTIL and MCX held just under 5 per cent stake in MCX-SX.
Meanwhile, legal experts said the SAT order raises an interesting legal issue on whether a regulator’s decision can be the sole basis for another regulator to take action against a market participant.
Ramesh Vaidyanathan, Managing Partner, Advaya Legal, said, “This issue will, hopefully be decided by the Bombay High Court, where this matter will now head. The appeal against the FMC order is already pending with the High Court. I believe that the market regulators should derive their own conclusions rather than be entirely persuaded by the verdict of another regulator.” Meanwhile, SAT member AS Lamba contradicted the other members and has termed the SEBI order as “unprofessional.”
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