BY: P VAIDYANATHAN IYER & SUNIL JAIN
Finanace Minister P Chidambaram Wednesday said the CBI did not have the entire facts when it registered a preliminary enquiry against C B Bhave, the former chairman of the Securities and Exchange Board of India, in connection with permissions granted to the MCX Stock Exchange.
“I have been briefed in the case. I don’t think the entire facts are yet before the CBI. The original licence granted to MCX-SX was only to deal in currency futures. It was not a licence to deal in equity. I think the distinction is important,” Chidambaram told The Indian Express in an interview.
The CBI Friday registered a PE against Bhave and former Sebi member K M Abraham for allowing MCX-SX to start trading in currency futures in 2008, and renewing it in 2009 and 2010 despite income tax raids against the Jignesh Shah-promoted Financial Technologies India Ltd and MCX, the commodities exchange promoted by FTIL, in June 2007.
The two entities are the promoters of MCX-SX.
According to sources close to Bhave, the permission to MCX-SX was granted at a time when the derivative market was completely dominated by the National Stock Exchange.
“The finance ministry did provide Sebi information on the tax raids. It needs to be mentioned here that MCX, at that point, was running a full-fledged commodity exchange. Subsequently, there was an update on the closure of the income tax case. Anyway, Sebi could not have denied them permission based merely on information that there were tax raids,” a source said.
The source also pointed out that Sebi, under M Damodaran, had allowed FTIL to pick up a marginal 5 per cent stake in Delhi Stock Exchange and Vadodara Stock Exchange in August 2007 and September 2007, respectively.
Finance ministry officials said the facts of the tax case against FTIL and MCX were sent to Sebi in October 2007 when FTIL wanted to buy a marginal stake in National Stock Exchange.
This was also to be treated as “relevant information” the capital market regulator may take note of while declaring FTIL and MCX “fit and proper” to set up a currency futures exchange.
“Sebi is an autonomous regulator. It is entitled to take a view,” Chidambaram said, when asked if the regulator was within its right to declare an entity “fit and proper”.
Sebi granted MCX-SX permission to trade in currency futures in September 2008 with a rider that it would have to dilute its promoter holding within a year.
“I am sure the Sebi records give reasons for why it gave them the licence for currency futures,” Chidambaram said. Satisfied with the reasons given by MCX-SX, the regulator granted it two one-year extensions in 2009 and 2010. After a two-year battle with Sebi, MCX-SX received the licence to trade in equities in July 2012.