The founder of the Multi Commodity Exchange
(MCX), Jignesh Shah
, may be down but he's certainly not out. Shah resigned from the board of the country's top commodities bourse last fortnight amidst a continuing probe into a settlement crisis at the National Spot Exchange Ltd (NSEL). But some experts say he will still control the exchange because his company, Financial Technologies India (FTIL), holds a 26 per cent stake in it. "He is being realistic. Though he will be out of operational function, nothing much changes as he continues to have power as the largest shareholder. Stepping down is in the long-term interest of Shah and his group," says P.H. Ravikumar, former CEO and Managing Director of the National Commodity and Derivatives Exchange (NCDEX).
Sources say Shah could not have gone down without a fight. He has been under a cloud since the Rs 5,500-crore settlement crisis surfaced at NSEL three months ago when it was discovered that some NSEL brokers' clients had taken positions on longer-term forward contracts though the exchange was only permitted spot contracts in commodities. His resignation comes nearly a month after commodity markets regulator Forward Market Commission (FMC) issued a notice to FTIL, the promoters of the MCX, Shah and a few other MCX directors to prove their ability to manage the exchange. Shah and the others have sent a detailed response to the regulator. FTIL has argued that a forensic audit of NSEL has not blamed the company for the crisis. Sources say lawyers were confident they could have challenged the FMC in court if the regulator had gone against the company and Shah in the "fit and proper" case.
But industry officials say Shah had been painted into a corner. "Shah had no other option but to resign. It's a good move by Shah. There was a high probability that the FMC could have ordered Shah and his people as unfit to be on the board and run the MCX and before the FMC could order he himself has stepped down," says C.J. George, Managing Director of Geojit BNP Paribas Financial Services.
Shah has denied any wrongdoing. He said he resigned from the board to avoid any harm to shareholder interests. "I don't want any event or anything to undermine their (MCX's) reputation and want to ensure that the shareholder and investor interests are not harmed by the mud-slinging that has been done towards the entire range of institutions that have been created by the group," he said in a statement.
Some industry experts say he will be back on the board once the crisis has been resolved. Already, a few NSEL defaulters have begun paying up following action by the Economic Offences Wing and Enforcement Directorate. But others are not convinced. "He is out for good. Unlike earlier were his employees saw a god-figure in him today no one would trust him," said Geojit's George.