The Bombay High Court has ordered the capital market regulator to file its response by June 11 to a petition filed by MCX Stock Exchange (MCX-SX) challenging the denial of permission to launch products on its trading platform.

MCX-SX in November filed a petition in the Bombay High Court challenging the SEBI order. A division bench of the High Court, which took up the case on Tuesday, has scheduled the next hearing on June 27.

The Bombay High Court will remain closed between May 7 and June 3 for summer vacation.

MCX-SX had filed a petition in the Bombay High Court against the SEBI order to reject its application to launch products in equity, futures and options.

SEBI had rejected MCX-SX application for launching products on its platform in September last year citing irregularities in the process of complying with Manner of Increasing and Maintaining Public Shareholding (MIMPS) regulation.

In order to adhere to the MIMPS guidelines, MCX-SX promoters – MCX and Financial Technologies – had brought down their holdings to 5 per cent each from 51 and 49 per cent, respectively. IFCI picked up 13.23 per cent and Union Bank bought 11.50 per cent, while 30 per cent was diluted to a group of domestic banks and financial institutions.

SEBI had raised objection to a buyback agreement MCX-SX entered into with the shareholders. MCX-SX contended that there was no buyback agreement, though a comfort letter that was not legally tenable had been given to two investors. The letter was given during the initial stage of equity dilution, it added.

However even this stood nullified, as in the process of complying with MIMPS, the exchange had gone for a capital reduction scheme with the consent of all shareholders and Board approval. The scheme had also been approved by the High Court.

With the Court giving its approval, the letter of comfort — which was in any case non-binding — stood negated, the exchange had said.

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