SEBI order on Coimbatore Stock Exchange upheld

A Securities and Exchange Board of India (SEBI) order restraining the Coimbatore Stock Exchange (CSX) from transferring or alienating any of its movable or immovable property and the appointment of a committee to oversee its functioning has been upheld by the Madras High Court. Justice V. Dhanapalan, reasoning that the order was passed by the SEBI to safeguard the interests of investors and ensure orderly development of the securities market, said the CSX had indulged in a series of actions to "wriggle out of the statutory obligations" under the Securities Contracts Regulation Act (SCRA) and the SEBI Act. Citing dwindling transactions and subscriptions by members, an extraordinary general body meeting of the CSX resolved to surrender the SEBI recognition and convert its status. However, maintaining that nominated directors of CSX were removed and the decision to surrender trading licence was taken only to wriggle out of statutory obligations, the SEBI passed the impugned order after issuing show-cause notice and affording personal hearing to CSX authorities. Mr. Justice Dhanapalan, concurring with the submissions made on behalf of the SEBI, said it was of the view that the "conduct of the elected Member-Directors of CSX was highly unbecoming, contumacious and self-serving, besides an obdurate defiance of not only the regulator but also the statutory requirements. In addition, the conduct reeks of a pre-meditation to seize control over the exchange and its assets in a planned manner and such deliberateness demonstrates a sordid intention to dismantle the exchange, which is a public institution, in exchange for a private arrangement to serve collateral purposes which are not in public interest." In his 80-page order, the judge ruled that the petitions filed by CSX Director Ashok Lunia and one S. Anantharaman of Coimbatore were not maintainable and added that the SEBI had acted within its jurisdiction. Mr. Justice Dhanapalan also held that there was no question of a stock exchange ceasing to do its business as such by unilateral withdrawal of their licence. There were attempts to change the name of the company, and the Memorandum of Understanding and Articles of Association were re-written, the judge pointed out, adding that there was a change in the method of operation of bank accounts and removal of consultant as well. The SEBI has appointed a three-member committee comprising V. Selvaraj, C.A. Venkaresan and K.R. Raman to conduct day-to-day functioning of CSX, and has authorised them to operate bank accounts of the CSX.