In High Court, Regulator may question the petition's maintainability

The Securities and Exchange Board of India (Sebi) wants its legal battle with the MCX Stock Exchange (MCX-SX) to be settled at the Securities Appellate Tribunal (SAT).

Sebi, in its reply to the MCX-SXs appeal in the Bombay High Court, is expected to question the petitions maintainability, according to sources. The regulator will ask the court to dismiss the appeal and tell the exchange to move the tribunal.

MCX-SX has filed a writ petition in the Bombay High Court challenging a Sebi order barring it from launching trading in equity, equity derivatives and interest rate futures, apart from introducing a separate segment for small and medium enterprises. Only currency futures are available on MCX-SX.

It is likely that Sebi will ask the high court to dismiss the appeal and direct it (MCX-SX) to go to the tribunal, said an independent legal expert and a former Sebi executive director (legal). SAT, as a quasi-judicial body, has all the powers to examine the applicability of law in Sebi orders, he said. The writ petition was filed during vacation and it could not be independently verified whether the appeal has been admitted as yet.

The Sebi order was passed under Section 4 of the Securities Contracts (Regulation) Act (SCRA), 1956, to be read with Sections 11(1) and 19 of the Securities and Exchange Board of India Act, 1992.

The forum (for appeal) depends on where the appellant finds it more assuring, a corporate lawyer said on condition of anonymity. While orders under Section 4 of SCRA can be challenged in the high court, it is not that such orders cannot be appealed before SAT, he added.

While Sebi may argue that the appeal move to SAT, MCX-SX is expected to oppose it vehemently. This is the second time that MCX-SX, promoted by Financial Technologies India Ltd and the Multi Commodity Exchange, has moved the Bombay High Court against the capital market regulator.

MCX-SX had filed a writ petition in the Bombay High Court in July against the delay in the regulatory approval for launching new segments and operating as a full-fledged stock exchange. It had alleged that the market regulator was not giving the final nod, even though MCX-SX had complied with the shareholding norms. The high court had given Sebi time until September 30 to decide.

Thereafter, Sebi whole-time member Dr K M Abraham passed a 68-page order on September 23 rejecting the application.

Having made necessary enquiry on the application filed by MCX-SX, Sebi, prima facie, was not satisfied that it would be in the interest of trade and also in public interest to allow the application, said Abraham.