DSE appeals to Sebi for exit under normal route

Bourse's legal adviser says latter's derecognition order 'not of significant consequence', shareholders told

The Delhi Stock Exchange (DSE) is making a fresh appeal to the Securities and Exchange Board of India (Sebi) to allow it to avail of the exit policy announced by the regulator.

This policy for derecognised and non-operational regional stock exchanges was described in a circular dated May 30, 2012. The bourse had applied for voluntary derecognition under this policy, after its several revival attempts had failed. However, Sebi withdrew recognition for lapses in the exchange's divestment process, completed in 2007.

The move to write to the regulator comes on the advice of the bourse’s legal counsel, according to its chairman, MN Verma. In his speech at the company’s annual general meeting (AGM) last week, Verma said U K Chaudhary, the bourse’s legal advisor, opined “the Sebi order is not of significant consequences as DSE has already applied for voluntary derecognition” and that "DSE may write to Sebi to proceed in terms of the exit procedure" prescribed in its 2012 circular.

“The DSE board considered this order in its meeting of November 21 and decided to obtain a legal opinion...U K Chaudhary,” Verma said in his speech to the shareholders.

Business Standard has reviewed a copy of the speech. The AGM was also adjourned to December 23, after some shareholders complained they'd not received the annual reports. In the speech, Verma recalled how DSE’s board had decided to exit the business and the decision was approved by shareholders in an extraordinary general meeting on May 23. The decision was duly communicated to Sebi, after which, the regulator appointed a valuation agency on the exchange's assets and liabilities.

DSE had provided all the necessary documents to SARC and Associates, the said agency. However, no valuation report had yet been received, the speech said.

Verma did not answer calls made to his mobile phone. Some DSE shareholders note that the Sebi order is not clear on the course of action. “What was the motive of this order when DSE had anyway applied for derecognition? Does Sebi want to punish the shareholders? The big shareholders are not bothered. The small shareholders are scattered. Once you are derecognised, there is no public interest involved. Then,  what is the locus of public interest directors? Everything is in a limbo,” said a DSE shareholder.

Another said, “If they (DSE) want to challenge the Sebi order, they have to move SAT (Securities Appellate Tribunal) or court. I cannot understand what is the use of writing letters.”

In the November 19 order, Sebi wholetime member Prashant Saran said: “I, in exercise of the powers conferred upon me in terms of Sections 11(2)(j) and Section 19 of the (Sebi Act), read with Section 5(2) and 12A of the Securities Contracts (Regulation) Act, hereby withdraw the recognition...Sebi shall take all necessary steps consequential to the derecognition.” It did not elaborate what these steps would be.

The order added that, “the above directions are without prejudice to the right of Sebi to take any other appropriate action for the violations found in this case or to initiate any action in case of failure to comply with the above directions by Delhi Stock Exchange Ltd.”