Jignesh Shah Remanded To Police Custody Till Sept 26 In MCX-SX Case
Shah was arrested by the CBI on September 20.
Jignesh Shah, founder of 63 Moons Technologies Ltd. (formerly known as Financial Technologies Ltd.) was remanded to police custody till September 26 on Wednesday by a special CBI court. Shah was arrested by the Central Bureau of Investigation on September 20 in connection with the renewal of licence to MCX-SX by market regulator SEBI in 2010.
MCX-SX, the stock trading arm of 63 Moons Technologies, was given conditional approval by SEBI to trade in currency derivatives in 2008. The approval was subject to the two promoter shareholders – MCX and then Financial Technologies – divesting stake to less than 5 percent, according to SEBI norms. At the time, MCX held 51 percent stake in MCX-SX while Financial Technologies held 49 percent.
One of the methods by which the promoter shareholders divested stake was through a buyback agreement with Punjab National Bank and Infrastructure Leasing and Finance Corporation Ltd.
Special CBI public prosecutor Chetan Nandode told the court that Shah was allegedly involved in the suppression of information to the Securities and Exchange Board of India regarding that buyback agreement.
The CBI remand application, that BloombergQuint has accessed, said that “Jignesh Shah has not disclosed the true facts as to how he managed to secure renewal of recognition, whether he paid any illegal gratification to SEBI officials and what was the amount of wrongful gain he made out of the dishonest and fraudulent act.”
The special public prosecutor pointed out that searches conducted on Tuesday, September 20, by the CBI at the homes of four SEBI officials – one of whom is now retired – had revealed that they could have assets disproportionate to their known sources of income.
Legalities Of Buyback Agreement
In 2012, a division bench of the Bombay High Court, headed by Justice Chandrachud, had ruled that a buyback, in this particular case, was not a forward contract and hence not illegal. SEBI thereafter moved a special leave petition before the Supreme Court, which refused to intervene in the matter.
Citing these as precedents, Shah’s counsel AH Ponda told the special court that this absolves his client of any wrongdoing, and also pointed out that the application for renewal of licence was not made by Shah, but by the then managing director of MCX-SX Joseph Massey.
Ponda also said that seeking police custody on the grounds of a suspicion/surmise that his client had bribed SEBI officials, and without any substantiation, was in violation of principles laid down by the Supreme Court.
He cited several judgements which stated that police custody was to be granted only as a last resort where it was impossible for the investigation to proceed further without custodial interrogation.His client has been fully cooperative, Ponda added.
Ponda also pointed out before the court that Shah was the only one of the 18 directors of MCX-SX who had been arrested, and the officials who he allegedly bribed have neither been investigated nor arrested.
Allowed to address the court, Shah said he was willing to cooperate fully with the investigation.
The special court, however, accepted CBI’s remand application as it deemed custodial interrogation necessary.
Shah will be allowed home-cooked Jain food and soft bedding in view of his medical condition and on religious grounds. Following the court order, Shah’s lawyers moved a bail application which was taken on record.
Jignesh Shah was arrested by the Economic Offences Wing of the Mumbai Police in May 2014 and granted bail by the Bombay High Court three months later in connection with the Rs 5,600 crore National Spot Exchange Ltd. scam.
On July 12 this year, he was arrested by the Enforcement Directorate (ED) on charges of money laundering and for alleged not cooperating with their NSEL related investigations. He was granted bail a month later.
Also Read: CBI Arrests Jignesh Shah In Connection With Grant Of Licence To MCX-SX