SAT gives ICEX another chance, quashes withdrawal of permanent recognition

Tribunal says 'the ship may be sinking but the leakages can be plugged', pulls up Sebi for concluding exit of top officials would necessarily lead to closure of the exchange

The Securities Appellate Tribunal (SAT) on Thursday quashed an order passed by market regulator Securities and Exchange Board of India (Sebi) withdrawing permanent recognition to the Indian Commodity Exchange (ICEX). The tribunal held that the exchange should be given another chance to revive.

SAT pulled up Sebi over its conclusion that exit of top officials like the managing director, chief executive and public interest directors would necessarily lead to closure of the exchange.

“Merely because the MD, CEO and PIDs have left the company it does not mean that the exchange cannot revive itself. The ship may be sinking, but the leaks could be plugged,” said SAT in an order.

“The rats leave a sinking ship; MDs, CEOs and PIDs see their own interest and leave for greener pasture, but this does not deter a company and its shareholders from making continuous efforts to revive,” it added.

Among the ICEX's 226 shareholders are Central Warehousing Corporation, MMTC, Indian Potash and Bajaj Holding and Investment.

SAT held that Sebi’s approach in cancelling the ICEX’s licence was “harsh and arbitrary.”

“The request of the appellant should have been considered sympathetically and not brushed aside with a one-line observation that the appellant is only seeking concessions, not complying with the other requirements,” the tribunal said.

In May 2022, Sebi had passed an order withdrawing the recognition accorded to the ICEX after it fell short of the Rs 100-crore minimum networth criterion for exchanges. Sebi had also pointed out that the exchange did not address various infrastructure issues. The ICEX had requested some concessions from Sebi on the ground that it was operating on thin budgets, so it did not have the financial power to address some of the key issues pointed out.

SAT has given the ICEX one year to bring in the required funds and meet the Sebi norms. However, until the networth criterion is met, the ICEX has been asked to keep its trading operations, which it voluntarily discontinued in March 2022, closed.

SAT added that if the ICEX managed to find the capital before the end of the one-year deadline, it would make an application with Sebi for resuming its trading operations, and asked Sebi to duly consider the request and pass appropriate orders.