Former Sebi chief C B Bhave has hit back at the CBI for working with a "crazy logic" and ignoring facts while registering a Preliminary Enquiry against him and another former Sebi official for granting a licence to MCX Stock Exchange, which first started operations in 2008 with its currency derivatives segment.
Bhave said the CBI move is based on permission given by him as Sebi Chairman to Jignesh Shah to start a currency exchange when there was a proceeding by the income-tax department against him.
"CBI chose to ignore the fact that IT department found no merit in its probe against Shah. And yet chose to file a criminal PE against me... All that we heard from media reports that by giving Jignesh Shah the licensee we gave him undue benefit. While this is silly because any licence can result in a benefit, they should find out if MCX-SX has made any profits," he said.
It's a completely crazy logic that CBI has. As regulators, we found that there was a need to create and encourage competition. NSE was the dominant player in the currency derivatives market and BSE was unable to compete with NSE. So by licensing a third party, in this case Shah's MCX-SX we helped create competition. Is that a crime?" Bhave added.
The former bureaucrat said the CBI must probe him if it has any evidence, but the investigative agency would have to "publicly apologise" to him for tarnishing his reputation if they find no substance.
When asked whether actions taken by Sebi against Sahara and other corporate entities during his tenure could be linked to the present case, Bhave said, "I have no idea and there is no way of knowing the same unless they (CBI) share something with us.
"Whatever I know is from newspaper reports. They have not shared anything with us and have not contacted us yet."
Bhave has been credited with several path-breaking orders and decisions taken by the capital markets regulator and the CBI move against him has evoked sharp reactions from many former bureaucrats including ex-CAG Vinod Rai as also by Union Minister Jairam Ramesh.
Bhave, Sebi's former whole-time member K M Abraham, Jignesh Shah-led FTIL and MCX have been named in the PE.
MCX-SX, which was set up by FTIL and MCX, was initially given licence to operate in a limited segment of currency derivatives in 2008, but Sebi refused permission to allow it to act as a full-fledged bourse for years as it was not found to be in compliance with existing regulations for the same.
Incidentally, it was Abaraham's order in September 2010 that rejected MCX-SX application for a full-fledged exchange, saying it was not in compliance with shareholding regulations and it was not a 'fit and proper' entity for such a business.
MCX-SX could launch services as a full-fledged bourse only last year after it met all the necessary regulations and conditions imposed by Sebi.
Rejecting CBI's assertion that it was prima facie a criminal act on his part, Bhave said, "The argument makes no sense. According to CBI, I have committed a further a criminal act by giving Shah extra time to comply with the regulations.
The CBI is looking into this matter five years after the permission was granted.
"The logic seems to be that the people like Shah against whom there is any enquiry by a governmental agency should not be given any permission. If such permissions are given, the criminality of the acts of permission-givers will be investigated by the CBI," he said.
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