sebi:WTM/RKA/MRD/14/2013

SEBI · SEBI · 2013-01-10 · Rajeev Kumar Agarwal, Whole Time Member

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Facts / Headnote

Compulsory exit of Saurashtra Kutch Stock Exchange Limited as a Stock Exchange ordered, with directions to comply with tax obligations, undertakings, other conditions of the 2012 Exit Circular, and to change its name.

Provisions invoked

• s. 19
• s. 11
• s. 45
• s. 4A
• s. 47
• s. 4B(6)

Parties

• Saurashtra Kutch Stock Exchange Limited (SKSEL)

Holding

SEBI ordered the compulsory exit of Saurashtra Kutch Stock Exchange Limited (SKSEL) as a stock exchange under clause 2.4 of the 2012 Exit Circular, directing SKSEL to comply with its tax obligations, undertakings, other conditions of the Exit Circular, and to change its name.

Full text

2 clause 2.4 of 2012 Exit Circular, the derecognized stock exchanges were given two months time to make the application for exit under the 2012 exit circular, failing which such derecognized stock exchanges would be subject to compulsory exit process. I note that SKSEL, a derecognized stock exchange failed to make an application within two months under the 2012 Exit Circular and therefore is subject to compulsory exit process as stipulated under clause 2.4 thereof.

3 e) Contingent liability of `10,52,73,604/- arising on account of the Special Leave Petitions filed by the Department of Income Tax before the Hon'ble Supreme Court of India pertaining to exemption claimed by SKSEL u/s. 11 of the Income Tax Act, 1961 for the Assessment Years 1994-95, 1995-96, 1996-97, 1997-98, 2000-01 & 2001-02. f) Contingent liability of `53,36,527/- arising on account of Show Cause Notice issued by Department of Service Tax raising demand for the period March 2006-March 2012, which is pending for adjudication before the Joint Commissioner of Service Tax : g) Contingent liability of `3,72,638/- arising on account of demands raised by the Employees' State Insurance) Department for the period 01.01.1993 - 31.03.2003. SKSEL has obtained stay against demand from the Hon'ble ESI Industrial Tribunal, Rajkot and in accordance with the directions in the order, the Exchange has provided bank guarantee to the extent of `1,75,000/-. Further proceedings are pending in the matter. h) Contingent liability of `69,63,064/- arising on account of Employee Termination liabilities towards Gratuity, Retrenchment Compensation & Notice Pay payable, assuming the Retrenchment Date of 31st December, as per the Certificate from Labour Law Consultant. i) Summary of the liabilities as per the books of SKSEL and the contingent liabilities of SKSEL is given below: Sr. No. Particulars as on 30.09.2012 Amount ` 1 Non-Current Liabilities including Long Term Liabilities & Other Deposits 2,94

4 9 Contingent liability for employee termination 69,63,064 TOTAL `. 16,34,33,864 6. I note that by 2012 Exit Circular , inter alia , following conditions are to be satisfied with by the de-recognised/non-operational stock exchanges for the purpose of their exit: a) Permission to distribute its assets would be subject to certain conditions as laid down in the circular as well as the other guidelines that may be issued by SEBI, Government or any other statutory body from time to time. b) The quantum of assets for distribution will be available after payment of the following : i. Statutory dues including Income Tax ; ii. Transfer of Investor Protection Fund(IPF) , Investor Services Fund, 1% security deposit available with the Exchange to SEBI Investor Protection and Education Fund ; iii. The exiting exchange shall pay the following dues to SEBI;  Dues outstanding to SEBI including 10% of the listing fee and the annual regulatory fee;  The outstanding registration fees of brokers/trading members of such de- recognised stock exchanges as specified in the SEBI (Stock Brokers and Sub Brokers) Regulations, 1992 till the date of such de-recognition;  In case of any shortfall in collection of dues of the brokers to SEBI, the exiting Stock Exchange will make good the shortfall; iv. Refund of deposit (refundable) to the stock brokers including their initial contribution/ deposit to Settlement Guarantee Fund / Trade Guarantee Fund (SGF/ TGF). c) Contribution of up to 20% of its assets

Source: SecMarx — sebi:WTM/RKA/MRD/14/2013. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.