Home / Market / Stock-market-news /  CBI arrests Jignesh Shah in connection with MCX-SX licence

Mumbai: The Central Bureau of Investigation (CBI) on Tuesday arrested Financial Technologies India Ltd’s founder Jignesh Shah in a case relating to the grant of recognition for MCX Stock Exchange (MCX-SX) in 2008, said a statement from the investigating agency.

Earlier on Tuesday, CBI had conducted searches at nine places in Mumbai, including Shah’s office and residence, the headquarters of FTIL and the Multi Commodity Exchange of India Ltd (MCX), and homes of four officials with the Securities and Exchange Board of India (Sebi).

“Shah was taken into custody after the investigative agency conducted searches at his residence on Tuesday morning," said a CBI spokesperson.

“Incriminating documents, including transfer of shares by private companies, purchase of assets, etc., recovered during searches are being scrutinized for further investigation," the statement added.

This is the third time that Shah has been arrested by enforcement agencies. He was arrested by the Economic Offences Wing of the Mumbai police in May 2014 and granted bail by Bombay high court three months later in connection with the Rs5,574-crore National Spot Exchange Ltd (NSEL) payments scam.

On 12 July, he was arrested by the Enforcement Directorate (ED) on charges of money laundering and for allegedly not cooperating with their NSEL-related investigations. He was granted bail a month later.

This time around, CBI has alleged irregularities in granting a licence to MCX-SX, now known as Metropolitan Stock Exchange of India Ltd.

MCX-SX, set up by FTIL, and its commodity exchange arm MCX, started operations in 2008 with just currency derivatives trading and became a full-fledged exchange in 2013 after a prolonged battle with Sebi.

The capital market regulator had initially refused to grant a licence for equity trading citing high promoter shareholding in the exchange. The promoters reduced their direct holding by issuing warrants to themselves—a mechanism Sebi frowned upon.

Later, MCX-SX took Sebi to court and the Supreme Court asked the regulator to take a “fresh look" at MCX-SX’s application. Sebi finally granted a conditional licence in 2012.

CBI had registered a preliminary inquiry in March 2014 in this issue and filed a first information report, or FIR, five months later.

The FIR named Shah, FTIL and four Sebi officials who were involved in the licensing process.

In registering the enquiry, the CBI cited “alleged irregularities in according recognition to MCX-SX by Sebi in 2008 and further renewing the recognition in 2009 and 2010".

An e-mail sent to a Sebi spokesperson for comment was not answered.

FTIL, now named 63 Moons Technologies Ltd, and MCX sent a notice to the stock exchanges confirming CBI searches at their premises.

Sebi employees protest

The Sebi Employee Association (SEA) on Tuesday protested against the searches conducted on Sebi officials.

In a letter to Sebi chairman, U.K. Sinha, the association has termed the CBI action as demoralizing.

“The development of selective searches today is shocking and disturbing because the matter involved decision-making at the highest level at Sebi," said the association in the letter.

Authorities and higher-ups who were associated with the decision-making have been excluded from these searches, the letter said.

The association, which represents the 700-odd workforce of Sebi, has asked Sinha to have an institutional mechanism in place to avoid selective action and scrutiny of officers acting in their official capacity.

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