Jignesh Shah, promoter of Financial Technologies India Ltd (FTIL), may have to sell his stake in Multi Commodity Exchange of India Ltd (MCX) if he loses the ?fit-and-proper? tag due to the settlement crisis at the National Spot Exchange (NSEL), according to official sources.
?The government is examining the fit-and-proper status of Shah and two other common directors of NSEL and MCX, and a decision will be taken very soon. FTIL has to dilute stake in MCX if the fit-and-proper tag of Shah is withdrawn,? said a senior government official, who didn?t want to be identified. FTIL has a 26% stake in MCX.
Apart from Shah, MCX-SX managing director Joseph Massey is still on the NSEL board while MCX managing director Shreekant Javalgekar last month resigned as a director of the spot exchange. Earlier this week, Shah said NSEL was committed to recovering dues from defaulters.
The decision came after a group of secretaries, headed by economic affairs secretary Arvind Mayaram, met for a second time on Friday to discuss the reports submitted by two working groups on the crisis at the NSEL. The first meeting was held on Wednesday, which was also attended by secretaries in the departments of corporate affairs, revenue and consumer affairs as well as the head of the ED, among others.
The Forward Markets Commission (FMC) had last month told the board members of the commodity spot exchange that ?non-settlement of outstanding trade on NSEL seriously reflects on your credibility and reputation which is a key ingredient in meeting the criteria for ?fit and proper? person. In the eventuality of you losing your status as a fit and proper person, you cannot continue to hold directorship or share holding in any of the recognized futures commodity exchange?. And the latest statement showed the government is actively considering stripping the promoter of the ?fit and proper? status even now.
After Friday?s meeting, Mayaram said he would submit a report with finance minister P Chidambaram very soon, without giving any time-frame. However, sources said the report, which will outline violations of various norms by the NSEL and the plan of action different official agencies need to take, may be submitted by Saturday.
The government last month formed a special team, chaired by Mayaram, to look into the NSEL settlement crisis. The special team is being supported by two working groups: the first one is chaired by the director of the enforcement directorate while the second one is headed by the deputy governor of the Reserve Bank Of India (RBI).
While the first working group was to examine the violations of any laws and regulations by NSEL/any associated companies/any of the participant of NSEL, the second group was to suggest measures that could be taken to ensure that ?there is no systemic impact of the NSEL development,? according to a finance ministry memorandum. NSEL is in the midst of a settlement crisis of around R5,600 crore, which is owed to 148 members/ brokers, representing 13,000 investors, after the exchange suspended trading in one-day forward contracts on July 31 following the government directive.
