G K Pillai quits as MCX-SX chairman as CBI probes Bhave, Abraham

Former home secretary G K Pillai who took over as chairman of MCX Stock Exchange a few months ago, resigned as head of the beleaguered bourse today amidst rising concerns among investors, trading members and other stakeholders about the bourse coming under CBI scanner.

Thomas Mathew T, former chairman of the Life Insurance Corporation of India (LIC) took over charge as new chairman of MCX following the resignation of Pillai hours before a scheduled board meeting of MCX-SX.

Pillai and some other 'public interest directors' of MCX-SX had expressed their desire to quit soon after the CBI registered a preliminary enquiry on Thursday over the grant of licence to the exchange way back in 2008 and the subsequent renewals.

The preliminary inquiry also targeted former chairman of the Securities and Exchange Borad of India C B Bhave and SEBI ex-member K M Abraham, besides MCX-SX promoters FTIL and MCX.

Surprisingly, Bhave and Abraham were opposed to the grant of licence until the exchange met strict guidelines set out by the regulator.

Both Bhave and Abraham are former IAS officers and served at various important positions. Bhave was SEBI chairman between 19 February 2008 and 17 February 2011, whereas Abraham had served as whole-time member of SEBI between 21 July 2008 and 20 July2011.

Abraham had in 2011 written to Prime Minister Manmohan Singh and alleged that certain corporates and finance ministry officials were exploiting the vulnerability of the market regulator, which was investigating crucial cases involving prominent business houses.

His charges were, however, rejected by the finance ministry.

Announcing his resignation, Pillai said MCX-SX is run by a professional management team and has an eminent board.

"I took charge of the exchange at a time when it had several challenges. However, in the last few months we have managed to appoint a new board and MD & CEO to take charge of the exchange. The ongoing rights issue is on track and we have received confirmation from several shareholders for participation," he said.

"We have also been successful in rationalising costs in a significant manner, which will improve our balance sheet in times to come. It was a wonderful experience to work with the team and I am stepping down due to personal reasons," he added.

MCX-SX in a statement said Thomas Mathew, formerly vice chairman of the board, has been elected as the new chairman, while public interest director Ashima Goyal would be the new vice chairperson.

Mathew said the board's immediate priority is to increase operational efficiency, market participation and volumes on the exchange.

"We are confident that the policy reforms for Currency Derivatives segment will give the desired boost to the volumes resulting in a turnaround in the balance sheet. In addition to this, launching new products will give the exchange the much needed differentiation," he added.

The board dismissed speculations over the likely resignation of other members of the MCX-SX board. CEO Saurabh Sarkar said the board planned to meet one month in advance and that things are moving as scheduled.

SEBI is looking at ways to assuage the concerns of investors, trading members and other stakeholders in MCX-SX, according to senior officials.

Meanwhile, finance minister P Chidambaram called upon directors of MCX-SX to act in public interest and to work out an orderly resolution of the crisis.

Pillai as well as the other three public interest directors were appointed to the MCX-SX board after SEBI ordered an overhaul of the board and governance structure of the bourse after its commodity arm got entangled in a major payment crisis putting a question mark on their 'fit and proper' status to run an exchange.

This has helped successfully ring-fence the bourse from the crisis and is now run by a professional management team, while FTIL and MCX have been shifted from the category of 'promoter shareholder' to 'public shareholder'.

There are also apprehensions that the licence of the exchange, which is already battling low business volumes due to problems at NSEL, could be cancelled if CBI finds something detrimental.

Meanwhile, the exchange's management today announced that the ongoing rights issue (in the ratio of 2:1) has received good response and the exchange has also received expression of interest from new investors.