In an unprecedented development, the Central Electricity Regulatory Commission (CERC) has come out of its jurisdiction and directed Indian Energy Exchange (IEX) to put shares of Financial Technologies (India) Ltd (FTIL) into an escrow account. As per the recent CERC order, FTIL has been directed to transfer its entire shareholding in the Trust Demat Account of IEX by
July 2, 2015.
According to legal experts, the CERC does not have any jurisdiction and authority to pass an order on the expropriation of FTIL property and its shares. Sources close to the company described the CERC direction as ‘shocking and draconian’ and said it is based on an order which has declared FTIL ‘as not fit and proper’ to hold shares in IEX. Interestingly, this order is the subject matter of challenge before the Supreme Court of India where FTIL’s challenge has been admitted and notice for the same has been issued to the CERC.
The challenge is on various grounds, the most important one being that the CERC being a regulator for power does not have any authority and mandate to declare FTIL not fit and proper and it also lacked jurisdiction to direct FTIL from divesting its shares from IEX. “There is no verdict by any court of law in the country regarding FTIL as ‘not fit and proper’. In view of this, such unprecedented order for the forceful sale of FTIL’s holding in IEX will adversely affect more than 63,000 shareholders of the company,’’ the sources added.
Pending such appeal and in any event, FTIL, without prejudice to its rights and contentions, is ready and willing to divest its shares in IEX, albeit on the best commercial terms available. FTIL has already signed a Share Purchase Agreement with certain entities to <g data-gr-id="33">off-load</g> 16.6 per cent shares in IEX, a fact that was known to the CERC at the time of passing the order on June 26, 2015. “The ability of FTIL to derive the best commercial terms would be seriously jeopardized in the event FTIL’s shares in IEX are forcefully transferred, as directed by CERC. This would adversely affect FTIL and the interests of its shareholders, particularly when the very authority of CERC to issue such directions is under challenge before the Supreme Court of India,’’ the sources added.
As per a recent regulatory filing, FTIL has entered into a new share purchase agreement with a clutch of entities, including DCB Power Ventures Ltd and Aditya Birla Private Equity, to sell a 16.6 <g data-gr-id="28">per cent</g> stake in IEX. The new agreement is for the sale of the stake for Rs 357.06 <g data-gr-id="29">cr</g>. FTIL holds a nearly 26 <g data-gr-id="30">per cent</g> stake in the energy exchange. The new agreement will be closed within 60 days, subject to certain technology-related conditions and regulatory approvals.