In an interim order, the Bombay High Court has restrained Metropolitan Stock Exchange of India (MSEI) from cancelling or extinguishing warrants worth Rs. 41.60 crore held by the commodity bourse MCX.
The court also restrained MSEI, formerly known as MCX Stock Exchange, from appropriating or dealing with the deposits of MCX placed with it, until it disposes the case filed by the commodity bourse against the stock exchange, Justice Gautam Patel ruled in an order dated July 9. Transferable warrants entitle a holder to convert them into equity shares subject to the condition that no single holder of the warrants exceeds the five per cent shareholding cap clamped by the markets watchdog Sebi in a stock exchange.
Sebi had given MCX, which is a shareholder in the MSEI, three years until June 19, 2015 to dispose of warrants worth Rs. 61.71 crore, worth Re. 1 face value, which gave it a right to equity in MSEI well over the stipulated five per cent limit.
Both the exchanges were originally promoted by Jignesh Shah-led Financial Technologies Group, which went into a regulatory quagmire after the shutting down of another group company NSEL, a commodities spot exchange which was asked to shut down on July 30, 2013 following a Rs. 5,600-crore payment scam.
On May 25, the MCX had said that it had received offers from various investors to buy significant portions of warrants held by it in MSEI at a premium of 50 paise over the face value of Re. 1 each.
The case of MCX is that its sale of warrants — which it had undertaken to ensure compliance by the MSEI with statutory requirements — has been effectively undermined and sabotaged by the MSEI inter alia by opening a rights issue at the same time when MCX was attempting to sell the same warrants at a small premium.
“In my view, having regard to the past conduct of plaintiff MCX and the manner in which events have unfolded, the plaintiff has made out a sufficiently strong prima facie case,” Justice Patel said in his ruling.
“There is no doubt in my mind that the balance of convenience is in its favour and that if the urgent interim reliefs are not granted, irretrievable prejudice will be caused to the plaintiff,” he concluded.
