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Informist, Friday, Dec. 6, 2024

 

NEW DELHI – The Supreme Court Friday upheld the Calcutta High Court's August order granting Calcutta Stock Exchange Ltd. six more months to comply with the Securities and Exchange Board of India's 2012 exit circular and Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012. The apex court also rejected the market regulator's plea to not give even "one more day" to Calcutta Stock Exchange for compliance.

 

The bench of Justices Abhay S. Oka and George Masish said that since the extension would end in February, "no case for interference" was made out at this stage. The court listed the matter for Mar. 7, 2025, to review the compliance of regulations by Calcutta Stock Exchange.  

 

Calcutta Stock Exchange was granted permanent recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956, in 1980 to operate with its two limbs – the trading platform, and the inbuilt clearing house. Thereafter, in 2004, certain amendments were made to the 1956 Act, which made it mandatory for the stock exchanges to be corporatised and demutualised. In its compliance, Calcutta Stock Exchange submitted a demutualisation scheme to SEBI which was approved. SEBI then exempted the Calcutta Stock Exchange from transferring the clearing and settlement duties to a separate clearing agent and the exchange continued to function with a yearly turnover of over INR 90 billion.

 

In 2012, SEBI introduced the exit circular with provisions towards voluntary surrender of recognition of stock exchanges having an annual turnover of less than INR 10 billion, and on the failure to meet the said criterion, SEBI would compulsorily exit and derecognise such stock exchanges. Thereafter, the 2012 regulations were enforced which provided that stock exchanges would no longer be permitted to continue with their inbuilt clearing houses beyond three months from the date of issuance of the regulations, and that within that period the exchanges would have to set up a separate clearing house and seek recognition. No stock exchange would be permitted to operate its in-built clearing house, said the regulation.

 

In 2013, SEBI suspended Calcutta Stock Exchange's trading platform on the grounds of non-compliance with the 2012 regulations and as a result, there was an immediate drop in the trading turnover of the exchange. In 2014, SEBI in a letter called upon Calcutta Stock Exchange to apply for voluntary exit. Challenging SEBI's 2014 letter and steps taken by the market regulator under the exit circular, Calcutta Stock Exchange moved the Calcutta High Court.

 

In February, the high court upheld the validity of SEBI's exit circular and 2012 regulations. The high court had said that the Calcutta Stock Exchange was obligated to comply with the 2012 regulations and set up a separate clearing corporation. However, noting the unique circumstances of the case and the longstanding presence of the Calcutta Stock Exchange in the market, the high court had directed it to establish a clearing corporation within six months to achieve the prescribed net worth. Failure to do so would allow SEBI to take steps necessitated by law, the high court had said. The court in August granted another extension of six months to the Calcutta Stock Exchange to comply with the said regulations.  End 

 

Reported by Surya Tripathi

Edited by Tanima Banerjee

 

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