Nod to MCX-SX: CBI files PE against ex-Sebi chief Bhave

Questions Sebi move to grant permit to the bourse in 2008.

The Central Bureau of Investigation has registered a preliminary enquiry against former Sebi chairman CB Bhave and former full-time member KM Abraham, for alleged irregularities in granting sanction to the MCX Stock Exchange (MCX-SX) in 2008 and for renewing the recognition in 2009 and 2010.

The enquiry registered against Bhave and others will probe as to how MCX-SX was granted permission despite opposition by the Sebi when Bhave was the head of the regulatory authority. MCX-SX was set up by Jignesh Shah-led Financial Technologies India Ltd (FTIL) and its commodity exchange arm MCX and began functioning as a full-fledged stock exchange last year after a prolonged battle with the Sebi.

Significantly, under Bhave, the Sebi had opposed FTIL from getting a licence to run a stock exchange to trade in equities. Till he left office, the group could only trade in currencies and in commodity markets as it failed the ‘fit and proper’ criteria. In fact, after Bhave left, Abraham had accused the government of soft pedalling the demand made on the currency exchange to reduce its promoter holdings to just 5 per cent.

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The CBI enquiry also mentions that this should have been done, but then names the former Sebi chief as an accused for failing to execute it. Bhave served as the Sebi chairman from February 2008 to February 2011. Abraham’s term as a whole-time member of Sebi also ended in 2011. Bhave has recently been a member of the Bimal Jalan panel to shortlist applicants for bank licences.

In another case, the agency has expanded its probe into the multi-crore scam involving National Spot Exchange Limited (NSEL). The CBI on Thursday carried out searches at multiple locations, including the premises of NSEL promoter Jignesh Shah. The agency swung into action after it registered a case of alleged cheating against Shah and others in the investments of state-run Project and Equipment Corporation (PEC), causing a loss of Rs 120 crore to the exchequer.

In its FIR, the agency has named Shah, NSEL, former CEO of NSEL Anjani Sinha, officials of PEC, including chief general manager Rajiv Chaturvedi, and a number of other companies as accused in the case of alleged cheating, forgery and corruption. CBI director Ranjit Sinha said that while the focus of Mumbai Economic Wing probe is to look into investors’ complaint, the agency is looking into the loss caused to PEC as a result of the conspiracy.

The agency alleged that the accused persons, during 2007 to 2013, were party to a conspiracy to cheat PEC “…in the matter of floating accommodative and fraudulent paired contracts for trading of agro commodities on the platform of Mumbai-based company without actually undertaking any genuine trade,” said a CBI spokesperson.

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After registering the case, a CBI team carried out searches at 15 locations including the residential premises of Shah and Sinha and officials of PEC and NSEL.