Vide order no. WTM/PS/45/MRD/DSA/NOV/2014 dated 19th November 2014 passed  Under Section 12A of the Securities Contracts (Regulation) Act, 1956 read with Section 11 of the Securities and Exchange Board of India Act, 1992 in the matter of Delhi Stock Exchange Limited SEBI has withdraws  recognition granted to Delhi Stock Exchange  ‎on account of irregularities and for non completion of demutualisation process. In His Order Mr. Prashant Saran, Whole Time member of SEBI has held as follows :-

Serious irregularities have been found in the functioning of DSE at the time when DSE was taking steps for demutualization. It is seen that for completing the demutualization process the erstwhile board of DSE had overlooked the due transfer of shares in the demat accounts and receipt of the funds by the ‘appointed date’. As admitted by the present Governing Board of DSE, a false certificate of completion of demutualization process has been submitted by the erstwhile management of DSE. From the same, it can be concluded that DSE had failed to complete the demutualization process before the ‘appointed date’. Therefore, the recognition granted to DSE needs to be withdrawn in terms of the Section 5(2) of the SCRA.

On examination of the facts and issues as described in the paragraphs above, I am convinced that DSE had not acted fairly during its demutualization process. Further, the particular instances of creation of new membership rights, releasing the funds to the Merchant Banker without receipt of the application money, allotment of shares to media company and in turn awarding them media contract, etc. without any corresponding utili2ation of media space shows that the functions of DSE were highly irregular.

I note that a stock exchange acts as first level regulator and is expected to set example with its acts and functions. However, DSE in the present case, had done everything contrary to what it is expected from a Stock Exchange. As noted above, the activities of DSE were carried out in a manner contrary to the interest of the investors. It is seen that the present management, even after getting to know about the irregularities committed by the erstwhile management, has not initiated any action.

Having regard to the above, I, in exercise of the powers conferred upon me in terms of Sections 11(2) (j) and Section 19 of the Securities and Exchange Board of India Act, 1992 read with Section 5(2) and 12A of the Securities Contracts (Regulation) Act, 1956 hereby withdraw the recognition granted to Delhi Stock Exchange Limited. Securities and Exchange Board of India shall take all necessary steps consequential to the derecognition.

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 limited.

The order shall come into force with immediate effect.

(Author – CS Divesh Goyal, ACS is a Company Secretary in Practice from Delhi and can be contacted at

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October 2020