Bombay High Court rejects NSEL brokers' plea on de-registration from Sebi

Teams of brokers' counsels argued that the exchange has ceased conducting business and continuing with a defunct company makes no sense

The Bombay High Court on Thursday rejected a petition by NSEL (National Spot Exchange Ltd) brokers seeking their de-registration from the markets regulator, the Securities and Exchange Board of India (Sebi).

The two-judge bench, comprising Justice B R Gavai and Justice M S Karnik, observed that brokers had pled with a mala-fide intention in anticipation of stern action against them from Sebi. The regulator has already issued show cause notices (SCN) to all brokers named in the Rs 56-billion NSEL scam.

To avoid Sebi's action in the Rs 56-billion payment default at NSEL, leading broking firms named in various complaints and chargesheets have applied for de-registration of their companies. However, Sebi has rejected their application.

After the merger of Forward Markets Commission (FMC) with Sebi 3 years ago, the latter had issued SCN to leading broking firms including Motilal Oswal Commodities, Anand Rathi Commodities, India Infoline Commodities etc asking why they should not be declared ‘not fit and proper’ in the NSEL case.

These broking firms, however, challenged the SCN in Bombay High Court. They did not comment as the case is sub-judice.

While arguing in the Bombay High Court, the Sebi counsel said, “Application for de-registration could have been done within three months from the merger of the FMC with the Sebi effective 29 September 2015. De-registration cannot be allowed three years after the merger.”

Teams of brokers’ counsels, however, argued that the exchange has ceased conducting business and continuing with a defunct company makes no sense.