Order in the matter of Jaipur Stock Exchange Limited

8/11/2019 Order in the matter of Jaipur Stock Exchange Limited

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WTM/PS/34/MRD/DSA/SEPT/2014

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIACORAM: PRASHANT SARAN, WHOLE TIME MEMBER

ORDERUnd! S"#$%n 11&2'&(' %) #* S"+!$#$ -nd E."*-n B%-!d %) Ind$- A"#, 12 !-d $#*

S"#$%n 12A %) #* S"+!$#$ C%n#!-"# &R+-#$%n' A"#, 1

In #* 5-##! %) 6-$7+! S#%"8 E."*-n L$5$#d

In !7"# %) #* 6-$7+! S#%"8 E."*-n L$5$#d, #* G%9!n$n B%-!d %) 6-$7+! S#%"8E."*-n, M! R-(nd! P!-*-d G+7#-, M ;n- G+7#-, M! A5$# G+7#-, M! R-(9G+7#-, M! P+n# 6-$n, M! C P M$##-, M! An$ G-d%d$-, M! M-n$* G-d%d$- -ndM M-n(+- 6-$n


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ha/e /ioated the pro/isions of 5eguation ##() of 8I89S 5eguations* 2he S34s further

aeged that JSE has faied to appoint an Executi/e irector since Septem!er $"". and 8r*

9uneet Jain, 3hairman of JSE is acting as chief executi/e for a practica purposes and

interfering in the da to da affairs of JSE* It has aso !een aeged that JSE amended the

'memorandum of association' and adopted ne 'artices of association' ithout appro/a

from SEBI, negigent handed the !oard meeting minutes, faied to maintain the Base

8inimum 3apita, etc*

2he S34 aso aeged that the acts of the noticees ere in /ioation of the pro/isions of

SEBI 3ircuar !earing no* S80SE0-6#606 dated +pri $", #66, SEBI 3ircuar !earing

no* 3I50850S+0SE0:0$"#" dated ecem!er #, $"#", SEBI 3ircuar !earing no*

SEBI0S80SE+03ir;$60$"" dated Ju ", $"", SEBI etter no*

850S+03uested for a the documents0 materias reied upon !

SEBI hich ha/e not !een pro/ided to them* SEBI /ide its etters dated &cto!er #$, $"#$,

repied to the noticees encosing the document s that ere not pro/ided earier and ad/ising

them to rep ithin a period of fifteen (#7) das from the date of receipt thereof* 2he

noticees /ide separate etters re>uested for extension of time for fiing of the rep*

2hereafter, the noticees /ide their respecti/e etters su!mitted the rep to the S34 and

re>uested for an opportunit of persona hearing* +ccording, an opportunit of persona

hearing as granted to the noticees on 1e!ruar $-, $"#* 2he same as reschedued to

1e!ruar $%, $"# due to the change of 3ompetent +uthorit and the same as

communicated to the noticees /ide etter dated 1e!ruar #%, $"#* 2he noticees name JSE,

and its directors name 8r* 9uneet Jain, 8r* +mit ?upta, 8r* 8s* @eena ?upta, 8r*

5aAendra 9rashad ?upta, 8r* +ni ?adodia, 8s* 8anAua Jain, 8r* 8anish ?adodia, 8r* 3*9*

8itta /ide respecti/e etters expressed their ina!iit to attend the persona hearing on the

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date fixed* 2he re>uest of the noticees ere considered and the hearing as postponed to

8arch "%, $"#* 2he noticees name JSE, 8r* 3*9* 8itta, 8r* 8anish ?adodia, 8r* +ni

?adodia and 8s* 8anAua Jain again re>uested for adAournment* +ccording, the hearing

as reschedued to +pri "7, $"#* &n the date fixed 8r* 4eeraA 8atta, +d/ocate and 8r*

Joe, +d/ocate appeared for JSE and the ?o/erning Board of JSE and made ora

su!missions* 3ertain detais ere asked from JSE during the persona hearing, for hich

three eeks' time as granted to it*

2he noticees 8r* +mit ?upta, 8r* 5aAee/ ?upta, 8r* 9uneet Jain, 8r* 3*9* 8itta, 8r* +ni

?adodia, 8r* 8anish ?adodia, 8s* 8anAua Jain appeared through ad/ocates name 8r*

+ttin Shankar 5astogi, 8r* Joe, 8r* 4eeraA 8atta and made su!missions* 2hree eeks time

as aso granted to these noticees for su!mitting the ritten su!missions*

2he noticee name 8r* 5aAendra 9rashad ?upta appeared for himsef and 8s* @eena ?upta

and made ora su!missions* 2hese noticees ere granted a period of fifteen (#7) das to

su!mit the detais as asked during the persona hearing*

+ noticees, except 8r* 5aAender 9rashad ?upta and 8s* @eena ?upta, fied the ritten

su!missions, hich ere taken on record*

4

2he su!missions of the noticees, in !rief are as under

-

6SE 9$d $# ##! d-#d N%95?! 2, 2012 -nd 6+n 1@, 2013 +?5$##d - +nd!:

2he had compied ith the pro/isions of 5eguation % and 6 of the 8I89S 5eguations*

2here is not a singe sharehoder ho hed more than 7C shares as per 8I89S

5eguation in JSE ithout seeking prior appro/a of SEBI* 2he had no means to

disco/er that the indi/idua sharehoders ere acting in concert except the sef certified

discosures made ! the indi/idua sharehoders* 2he agenc ith in/estigati/e poers

ike SEBI can on find out such facts*

JSE has pro/ided a se>uence of e/ents demonstrating that the had taken steps for the

appointment of Executi/e irector*

In the past, 8r* 9uneet Jain as the 3hairman of JSE on for a imited period from 8arch

#$, $"#" to &cto!er $%, $"#" (% months) and from ecem!er "-, $"## to 8arch #", $"#$

( months)* uring the tenure of 8r* 9uneet Jain, the affairs of the exchange ha/e !een

carried out transparent and in the !est interests of the exchange and its sharehoders*



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2he appointment of 8r* 3*9* 8itta as Dhoe 2ime irector as done as a need as fet to

strengthen the management* 2he introduction of 8r* 8itta came from a reia!e source

and his >uaifications0 experience aso met ith the re>uirements of the Exchange, hence,

his name as considered ! the Board* 9rior to his appointment, a ega opinion as aso

sought on the issue of appointment and remuneration of Dhoe 2ime irector*

&n this !onafide understanding of the SEBI circuar, the Board fet that there is no !ar on

the appointment of Dhoe 2ime irector and appointed 8r* 3*9* 8itta as Dhoe 2ime

irector from the >uota of sharehoder directors for hich there as no procedure aid

don ! SEBI* oe/er, ater, on !ecoming aare that the appointment of 8r* 3*9*

8itta re>uired prior appro/a from SEBI, 8r* 3*9* 8itta resigned from the post of

Dhoe 2ime irector of the exchange* uring his tenure he had exercised on

administrati/e poers* e had no poers to sign the che>ues a!o/e an amount of

`$7,""" that too Aoint ith the ?enera 8anager of JSE* e had no poers to sanction

an financias, the on poer he had as of appro/ing the proposas recei/ed from the

?enera 8anager* 2he ac>uisition of shares of JSE ! 8r* 3*9* 8itta, as his indi/idua

decision*

2he appro/a from SEBI and pu!ishing in officia gaFette is mandator on in the cases

here amendments in 8emorandum of +ssociation and +rtices of +ssociation ! stock

exchanges pertains to an of the items as set out in causes (a) to (d) of su!;section (#)* It

has aso !een said that the amendments ere forarded to SEBI /ide etter dated

4o/em!er "., $""% for appro/a*

2he minutes for !oard meeting hed from 1e!ruar $""% to Januar $"#" had remained

unsigned ! the then 3hairmen, 8r* 9urshoottam Bhaggeria and 8r* @iAa 8ehta* SEBI

aso had noted this in its inspection in the ear $""6 and asked 8r* @iAa 8ehta for signing

the minutes in the minutes !ook, hoe/er, the minutes remained unsigned* +fter the

annua genera meeting in 4o/em!er $"##, the issue of minutes not !eing signed from the

past period as raised and in order to ensure the compiance it as decided that 8r*

9uneet Jain in the capacit of 3hairman oud sign the minutes for the past period*

Before doing this, the Board decided to seek independent opinion* 9ost the opinion from

the practicing 3ompan Secretar and second opinion from +d/ocate igh 3ourt, ehi,

the Board comprising a the 9u!ic Interest irectors authorised 8r* 9uneet Jain to sign

the minutes to compete the ega re>uirement* 2he minutes of the Board meetings ere

certified as true and correct ! the to genera managers of JSE, ho ere present in a

those meetings hose minutes remained unsigned* 2he minutes ere signed in the



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presence of Justice (5etd*) 8r* 4*L* 2i!rea, 9u!ic Interest irector and ith his fu

participation*

+ the Board meetings ere hed reguar and ere attended ! the 9u!ic Interest

irectors* 2he agenda of a $ !oard meetings ere reguar sent to 8r* Gumar prior to

the Board meetings aong ith the minutes of the pre/ious !oard meetings for

confirmation* e had ne/er o!Aected to an of the decisions taken in the Board meetings

or express his disagreement* It has aso !een said that since 4o/em!er $"##, hen the

ne !oard as constituted not e/en a singe meeting as hed outside Jaipur* 2he

exchange officers reguar consuts 9u!ic Interest irectors !efore fixing the time and

/enue of the Board meetings and a the meetings ha/e !een attended ! a the 9u!ic

Interest irectors* 8r* S*9* Gumar's representation as put up !efore the go/erning

!oard's meeting and the matter as discussed, reso/ed and communicated to SEBI*

In the past, composition of statutor committees ere higher than $"C since the

committees comprised of three mem!ers each, out of hich one as a trading mem!er

director* oe/er, as there is no trading acti/it in JSE since the ear #66%, there as no

meeting hed of +r!itration0 iscipinar0 efauts committees during the period of

$""% to $"## except that of In/estor Ser/ice 3ommittee* 2he irreguarities ha/e !een

rectified ith the re;constitution of committees on June #, $"#$, composing 7 mem!ers

each in a the committees*

2he mem!ership seection committee coud not !e constituted earier as there as no

trading acti/it in JSE* 2he mem!ership strength has reduced as mem!ers ere

surrendering their trading rights* 1urther, JSE had no pan for ne mem!ership and

therefore, mem!ership seection committees as not constituted* It has re;constituted

these committees on June #, $"#$*

It as of the !onafide /ie that the inspection is to !e conducted of $"C of acti/e

su!;!rokers* oe/er, it has initiated steps and is in the process of conducting inspection

as per the SEBI norms*

It is maintaining a sma in/estors' ser/ice ce ith re>uired faciities* +s ad/ised ! SEBI, it

is in the process of esta!ishing a fu fedged in/estor ser/ice ce*

2he ha/e taken /arious steps for appointing 3E& of the su!sidiar of JSE*

2he S34 is /ague* It has not !een pro/ided ith the inspection report hich forms !asis

for the aegations* It has not !een specified as to ho and under hich pro/ision of a,

the noticees are persons acting in concert* It has !een rong aeged that he as Aoint

controing the affairs of JSE as no instances ha/e !een shon*



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?M! R-(nd! P!-*-d G+7#- -nd M ;n- G+7#- 9$d #*$! !7"#$9 ##! ?%#*

d-#d N%95?! 2>, 2012, +?5$##d - +nd!

2he cu!!ing of their sharehoding ith 8r* +mit ?upta, 8r* 5aAee/ ?upta and 8r*

9uneet Jain is erroneous and is ithout an !asis*

2he !oth had ac>uired 6.,7" shares each of JSE (ho ere acting in concert ith eachother) in Septem!er $"". after seeking appro/a from SEBI* 2he shares so purchased

ere independent and ere out of their on funds and their com!ined sharehoding in

JSE constituted on C of the tota sharehoding* Su!se>uent, the shares hed ! these

to ere sod to 8r* 3*9* 8itta in the ordinar course*

8r* 5aAender 9rashad ?upta as one of the directors on the !oard of JSE for a short

period of % months i*e* from 8arch $"#" to &cto!er $"#" aong ith #" other directors of

the !oard* 8s* @eena ?upta as on a sharehoder of JSE*

2he had no common o!Aecti/e0 purpose ith other persons to ac>uire shares0 /otingrights0 contro in JSE* 2here as no meeting of minds* 2he fact such as +mit ?upta,

5aAee/ ?upta and 9uneet Jain ere aso directors on the !oard of Internationa Securities

Limited (hereinafter referred to as 'ISL') cannot automatica resut in finding of their

!eing 'persons acting in concert' ith him* 8r* 5aAender 9rashad ?upta as a director of

ISL aong ith 8r* +mit ?upta and 8* 5aAee/ ?upta for a /er !rief period of Aust #7

das* e had ceased to !e a director of ISL since Septem!er "%, $""%*

8s* @eena ?upta as not a director of ISL since 4o/em!er "#, #66.*

8r* 9uneet Jain as not a sharehoder of JSE during the time he as a director of ISLtogether ith 8r* 5aAender 9rashad ?upta*

8r* 5aAender 9rashad ?upta had no reation ith 8r* 9uneet Jain, 8r* +mit ?upta and 8r*

5aAee/ ?upta sa/e and except !eing directors on the !oard of ISL*

"

M! A5$# G+7#- &9$d ##! d-#d N%95?! 2, 2012 -nd A7!$ 30, 2013' -nd R-(9

G+7#- &9$d ##! d-#d N%95?! 2, 2012 -nd A7!$ 30, 2013', +?5$##d - +nd!:

+mit ?upta and 5aAee/ ?upta, !oth had ac>uired 6.,7" shares of JSE, each in Septem!er

$""., constituting a!out #*7C of the tota sharehoding of JSE from their on funds after

seeking appro/a from SEBI*

In addition to the a!o/e, 5aAee/ ?upta further ac>uired -,""" shares of JSE in 8a $"##,

hich increased his tota sharehoding in JSE to #,-",7" shares (constituting $*:.C of

the tota sharehoding of JSE)* 2hese #,-",7" shares ere sod ! him on Januar "6,

$"#$ to one 8r* +ni ?adodia, after this he does not hod an shares in JSE*



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+mit ?upta aso sod the shares ac>uired in 1e!ruar $"#$, after this he does not hod an

shares in JSE*

Such ac>uisition of shares ! these to ere not guided ! an common o!Aecti/e or

meeting of minds ith others, for the purpose of ac>uiring su!stantia shares or contro

o/er JSE* 8r* 5aAender 9arshad ?upta, 8s* @eena ?upta and 8r* 9uneet Jain had no roe

to pa in such ac>uisition*

+t the time of ac>uisition of -,""" shares ! 5aAee/ ?upta, on 5aAee/ ?upta, +mit

?upta and 9uneet Jain ere the directors of ISL* + these persons had ne/er occupied

the post of director in ISL together at an point of time* +mit ?upta and 5aAee/ ?upta

!ecame the director of ISL on +ugust $$, $""% and ere directors together ith 5aAender

9arshad ?upta on for a period of #7 das* 1or the purposes of 5eguation $(e)($)(iii) of

the SEBI (Su!stantia +c>uisition of Shares and 2akeo/ers) 5eguations, #66.

(hereinafter referred to as 'S+S2 5eguations'), the had to !e directors of ISL at the same

point of time aong ith the others* Becoming directors of a compan much after the

ac>uisition of shares cannot !e a ground for retrospecti/e in/oking the deeming

pro/ision of the definition of 'persons acting in concert'*

1urther, ISL as ne/er a sharehoder of JSE* 2he common o!Aecti/e has not !een

highighted anhere in the S34* +t the time of ac>uisition of shares he as neither a

director of ISL nor as he connected to other noticees under an deeming categor of

Section $(e)($) of the S+S2 5eguations* 2he ac>uisition of shares ! him has preceded

the date on hich the 5eguation $(e)($)(iii) of the S+S2 5eguations !ecame appica!e*

2he common directorship in 'an' compan is not the pre;re>uisite for attracting the

deeming pro/ision* 2he common directorship has to !e of a compan hich fufis the

re>uirements of 5eguation $(e)(#) of the S+S2 5eguations and is there! co/ered !

5eguation $(e)($)(i) of the S+S2 5eguations*

8r* +mit ?upta as a director on the Board of JSE during the period of &cto!er $"#" to

Septem!er #%, $"#$*

2here as no 'meeting of minds' at the time of ac>uisition of shares in JSE, as on 8r*

5aAender 9arshad ?upta as the director of ISL in Septem!er, $"". hen the shares ere

ac>uired ! 8r* +mit ?upta* E/en if it is assumed that there as indeed a 'meeting of

minds' ! the reason of common directorship as has !een aeged in the S34, there has

not !een an ac>uisition of shares ! +mit ?upta after such 'meeting of minds'*



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d

M! An$ G-d%d$- &9$d ##! d-#d N%95?! 30, 2012 -nd M-= 13, 2013' -nd M!

M-n$* G-d%d$- &9$d ##! d-#d N%95?! 2, 2012 -nd M-= 13, 2013', +?5$##d

- +nd!:

It has !een said that +ni ?adodia and 8anish ?adodia are !rothers and resides at the same

address* +ni ?adodia had purchased $,"",7" shares of JSE constituting a!out *"%C of

the tota sharehoding during &cto!er $"## to 8a $"#$ from /arious unconnected

persons name 8s* 8anAua Jain, 8r* 5aAee/ ?upta, 8r* 8ohan Gumar hanuka, 8r*

5*3* ?oenka, 8r* Sata 4arain Beria in the ordinar course at different times and rates*

2he S34 has not mentioned his entire purchases* &n the other hand, 8anish ?adodia

had purchased #",""" shares of JSE constituting a!out "*#7C of the tota sharehoding on

&cto!er #-, $"## in the ordinar course from 8s* 8anAua Jain* 2he shares ere

purchased in indi/idua0 independent capacit on the !asis of their on opinion and

funds* +ni ?adodia and 8anish ?adodia ere ne/er on the !oard of ISL*

2he ere not acting in concert ith each other or the unreated entities name 8r* 3*9*

8itta, 8r* 9uneet Jain, 8s* 8anAua Jain and 8r* 5aAee/ ?upta* &ne of their

ac>uaintance, 8r* +Aa Jain had introduced them to 8s* 8anAua Jain*

+ni ?adodia as eected as a director of JSE on 4o/em!er $6, $"##, in the +nnua

?enera 8eeting* Su!se>uent, he as eected as 3hairman of the !oard of JSE on and

from 8arch "#, $"#$* 2he period prior to 4o/em!er $6, $"##, cannot !e attri!uted to

him in an manner* It has !een su!mitted ! him that as a mem!er of the !oard of

directors, he aas acted !onafide and in the !est interest of JSE and as per the

discussions and consent of other Board 8em!ers (incuding pu!ic interest directors) and

its sharehoders in accordance ith the appica!e rues and reguations*

It has !een su!mitted ! +ni ?adodia that he as not present during the meeting of !oard

of directors of JSE, in hich, 8r* 3*9* 8itta as appointed as a Dhoe 2ime irector*

2he decision to appoint 8r* 3*9* 8itta as a Dhoe 2ime irector as taken unanimous

! the !oard of JSE incuding 9Is on the reference of one 8r* ** 4agpa, the auditor

of JSE* 2he said decision as taken in good faith de horssinister0 o!i>ue moti/es and in

the o/era interest of JSE* 8r* 3*9* 8itta had no poers to sign an che>ue indi/idua

on !ehaf of JSE* e as authorised to act as Aoint signator on to the extent of `$7,"""*

uring his tenure of eight months, 8r* 3*9* 8itta had signed on one che>ue for an

amount !eo `$7,"""* 8r* 3*9* 8itta has resigned from the post of Dhoe 2ime

irector of the exchange after the Board of JSE had reaiFed that prior appro/a from

SEBI shoud ha/e taken for such appointment*



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Sae and purchase of shares does not imp a reationship of persons acting in concert*

8eeting of minds prior to the ac>uisition is a sine qua nonfor the persons said to !e acting

in concert*

M! P+n# 6-$n 9$d ##! d-#d N%95?! 1, 2012 -nd M-= 13, 2013, +?5$##d -

+nd!:

e as the 3hairman of JSE during 8arch $"#" to &cto!er $"#" and further during

4o/em!er $6, $"## to 1e!ruar $6, $"#$* e had ac>uired $,7"" shares of JSE on

&cto!er #-, $"##, constituting "*"C shares of JSE out of his on funds* 2he same ere

ater sod*

e as not acting in concert ith 8r* 5aAender 9rashad ?upta, 8s* @eena ?upta, 8r*

+mit ?upta and 8r* 5aAee/ ?upta* e is aso not person acting in concert ith 8r* 3*9*

8itta, +ni ?adodia, 8anish ?adodia and 8s* 8anAua Jain* e had no commercia0

!usiness transaction0 common economic interest0 fami reations ith the personsnamed* It has aso !een said that the association !eteen persons is one thing !ut their

acting in concert ith a common o!Aecti/e to ac>uire su!stantia num!er of shares in a

compan in pursuance of an understanding or an agreement !eteen them is atogether

different*

E/en if it is assumed that he and 8s* 8anAua Jain are 'persons acting in concert' then aso,

the com!ined sharehoding of these to persons ne/er crossed the threshod of 7C as

stipuated under 8I89S 5eguations*

e as a director on the !oard of ISL from 8a "#, $""% to 4o/em!er "#, $"##* 2he S34rong a!es him as the Dhoe 2ime irector of ISL during the period of ecem!er $";

$$, $"##* e had proposed to resign from the directorship of ISL /ide his etter dated

&cto!er ", $"##* 4SE /ide its etter dated &cto!er $%, $"##, had communicated the

acceptance of the proposed resignation and the same as recorded ! ISL on 4o/em!er

"#, $"##*

It has not !een expained as to ho he interfered in the da to da affairs of JSE* uring his

tenure at JSE he ne/er /isited JSE or e/en Jaipur except on occasions here there as

Board meeting or ?enera Bod meeting*2he S34 is /ague* e has not !een pro/ided ith the inspection report hich forms !asis

for the aegations* It has not !een specified as to ho and under hich pro/ision of a,

the noticee is a person acting in concert*

e as not connected ith +ni ?adodia in an manner*



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e had ne/er met 8r* 3*9* 8itta !efore his appointment to the Board of JSE* 8r* **

4agpa had !rought the resume of 8r* 3*9* 8itta to the Board of JSE for considering his

name for the post of the Dhoe 2ime irector* 2he proposa to appoint him as

unanimous appro/ed ! the Board of JSE* uring his tenure he had exercised on

administrati/e poers* e had no poers to sign the che>ue on !ehaf of JSE

indi/idua* e had no poers to sanction an financias, on poer he had as of

appro/ing the proposas recei/ed from the ?enera 8anager* 2he prior appro/a from

SEBI as inad/ertent and unintentiona missed due to officia o/ersight* Immediate

on !ecoming aare, 3*9* 8itta had resigned from the post of Dhoe 2ime irector of

JSE*

2he decision of 3*9* 8itta to ac>uire shares of JSE as his on*

2here as no negigence in handing the !oard meeting minutes* 2he minutes ere signed

in the presence of Justice (5etd*) 8r* 4*L* 2i!rea, 9I and ith his fu participation*

2he act of signing of the minutes of !oard meeting of JSE on ensured compiance ith

the pro/ision of Section #6 of the 3ompanies +ct, #67-*

+s regards the date of ega opinion it has !een said that it is nothing !ut further

corro!oration of opinion o!tained from the practicing 3ompan Secretar* 2herefore,

there as no negigence in handing the !oard minutes*

2he Board meetings ere hed reguar and ere attended ! the 9Is and the

participated in the Board meeting of JSE* +dmitted the agenda for the Board meetings

as reguar sent to 8r* S*9* Gumar prior to the !oard meetings aong ith the minutes

of the pre/ious !oard meetings for confirmation* 2herefore, a aong, he as aare of the

e/ents transpiring in the Board meetings and had ne/er o!Aected to an of the decisions

taken in the !oard meeting or express his disappro/a*

2he shares ere ac>uired ! him on &cto!er #-, $"##, hen he had aread proposed to

resign from ISL pending appro/a from 4SE*

2he resoution to appoint 8r* 3*9* 8itta as passed unanimous ! the mem!ers of the

Board hich consisted of peope from /arious aks of ife*

)

T* )%%$n -! $n#! -$- #* +?5$$%n %) M M-n(+- 6-$n 9$d !7= d-#dN%95?! 1, 2012 -nd M-= 13, 2013:

She ith the prior appro/a of SEBI had ac>uired the shares of JSE on Septem!er #$, $"".

out of her on funds* 2he manner of grouping her ith others (i*e* 8r* 9uneet Jain, 8r*



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3*9* 8itta, 8r* +ni ?adodia, 8r* 8anish ?adodia) and draing ad/erse inference is

erroneous*

She as not a person acting in concert ith the persons as aeged* 2he inference that she

had acted in concert ith 8r* 9uneet Jain, 8r* 3*9* 8itta, 8r* +ni ?adodia and 8r*

8anish ?adodia is !ased on the fact that she had sod the shares to them* 4o common

o!Aecti/e0purpose !ehind acting in concert to ac>uire the shares or /oting rights in JSE or

contro o/er it has !een pro/ided in the S34* It has !een said that hen she had ac>uired

the shares of JSE, 8r* 9uneet Jain, 8r* 3*9* 8itta, 8r* +ni ?adodia and 8r* 8anish

?adodia ere not the sharehoders of JSE*

2he impugned transactions of sae of shares ! her to certain persons on resuted in

diution of her sharehoding in JSE from ,#$,"" to $,%6,%"" shares* 2he act of her,

seing the shares to different indi/iduas cannot !e termed as a concerted action to

ac>uire contro*

E/en if, it is presumed that she as acting in concert ith the !uers of her shares, the

transaction of sae of shares from her to those !uers did not resut in an increase in the

num!er of shares coecti/e hed ! her and the su!se>uent !uers*

M! CP M$##- 9$d ##! d-#d N%95?! 30, 2012 -nd 6+n 1@, 2013, +?5$##d -

+nd!:

Before Aoining JSE, he as orking as Senior 8anager ith a nationaised !ank, ti 8arch

#, $"#", the da hen he retired* Sometime during 4o/em!er $"##, 8r* ** 4agpa,

partner, ** 4agpa < 3o*, statutor auditors of JSE informed him that JSE is ookingfor a person to !e appointed for genera administration* 2hen, he as introduced to JSE

in its Board meeting* uring his tenure at JSE, the poers exercised ! him ere in

ordinar course* e had not signed an che>ues indi/idua on !ehaf of JSE* e had

poers to issue che>ues upto an amount of `$7,""" Aoint ith the ?enera 8anager of

JSE* e had no poers to sanction an financias and as on appro/ing the proposas

recei/ed from the ?enera 8anager*

uring +ugust $"#$, he as informed ! JSE that his appointment as not in conformit

ith the appica!e pro/ision of a and he su!mitted his resignation on +ugust ##, $"#$*Being a rank outsider, he as not aare hether JSE has appointed him in consonance

ith the appica!e pro/isions of a* 2herefore, for his appointment as a director, he

cannot !e fauted in an manner* 2he saar paid ! JSE is compara!e to the ast saar he

dre in the !ank*



12/27

P- 12 %) 2>

9rior to his appointment, he as not aare of other persons0 reationship ith them as

aeged in the S34* uring his tenure, he had acted !onafide, ithin the confines of

poer ithout !eing under infuence or contro of an!od incuding 8r* 9uneet Jain and

8r* +ni ?adodia*

e as the director on the Board of JSE on from ecem!er #7, $"## to +ugust #", $"#$*

9rior to !eing appointed as a director, he as not in/o/ed in its management0 affairs in

an manner*

e had ac>uired #,6:,."" shares of JSE (i*e* 6.,7" shares from 8r* 5aAendra 9rashad

?upta and 6.,7" shares from 8s* @eena ?upta) on 8a ":, $"#$, constituting a!out

$*66C of the tota sharehoding in the norma course ithout acting in concert ith an

other person* e as not acting in concert ith 8r* +ni ?adodia, 8r* 9uneet Jain, 8s*

8anAua Jain and 8r* 8anish ?adodia* e had no common o!Aecti/e0 purpose ith

other persons*

e has not !een pro/ided ith the inspection report hich forms !asis for the aegations*

It has not !een specified as to ho and under hich pro/ision of a, he is a person acting

in concert*

I ha/e carefu considered the S34 issued to JSE and the other noticees and the respecti/e

repies0su!missions incuding those made during the persona hearing* 2he noticees ha/e

taken a common argument that the ha/e not !een pro/ided ith the copies of the /arious

documents incuding the copies of the inspection reports* In this regard, I note that the

ree/ant extract of the inspection reports ere part of the S34* 1urther, the document hichha/e not !een pro/ided to the noticees, are not !eing reied upon in the present proceedings*

Dhie proceeding further ith the matter, I note that certain charges are common in !oth the

S34s issued to the JSE, ?o/erning Board of JSE and that issued to its directors 8r*

5aAender 9rashad ?upta, 8s* @eena ?upta, 8r* +mit ?upta, 8r* 5aAee/ ?upta, 8r* 9uneet

Jain, 8r* 3* 9* 8itta, 8r* +ni ?adodia, 8r* 8anish ?adodia and 8s* 8anAua Jain*

3onsidering the a!o/e, )$!#= #* "%55%n "*-! !-$d $n ?%#* #* SCN -! ?$n

d-# ?% $n ,!$-#$5

A

S*-!*%d$n $n ." %) $n 9$%-#$%n %) MIMPS R+-#$%n

2he S34 has aeged that the sharehoder directors of JSE had hed the shares in excess of

the imit stipuated under 5eguation %(#) of the then appica!e Securities 3ontracts



13/27

Page 13 of 27

(5eguation) (8anner of Increasing and 8aintaining 9u!ic Sharehoding in recognised Stock

Exchanges) 5eguations, $""- (hereinafter referred to as '8I89S 5eguations')* 2he

5eguation %(#) of the 8I89S 5eguations read as under

H8.(1) No person resident in India shall at anytime, directly or indirectly, either individually or togetherwith persons acting in concert, hold more than five percent of the equity share capital in a recognised stockechange! ...H

8r* 5aAender 9rashad ?upta, 8s* @eena ?upta, 8r* +mit ?upta, 8r* 5aAee/ ?upta and 8r*

9uneet Jain (hereinafter coecti/e referred to as 'group #') are the sharehoder directors

ho are aeged 'to !e persons acting in concert and Aoint hed more than 7C shares' in

/ioation of the 5eguation %(#) of the 8I89S 5eguations* 3ertain connection has !een

aeged among 8r* 5aAender 9rashad ?upta, 8s* @eena ?upta, 8r* +mit ?upta, 8r* 5aAee/

?upta and 8r* 9uneet Jain, ! /irtue of their directorship in ISL (Internationa Securities

Limited)* ISL is one of the !roking entit registered ith 4SE*

+ further charge in the S34 is against 8r* +ni ?adodia, 8r* 8anish ?adodia, 8r* 9uneet

Jain, 8s* 8anAua Jain and 8r* 3*9* 8itta (hereinafter coecti/e referred to as 'group $')

that the ere aso persons acting in concert* 2he !asis of the charge as expained in the S34

as that a fe of the persons !eonging to group #, name, 8r* 5aAendra 9rasad ?upta, 8s*

@eena ?upta and 8r* 5aAee/ ?upta had transferred their entire hodings in JSE to 8r* +ni

?adodia and 8r* 3*9* 8itta !eonging to group $* 2he additiona facts shon as crucia for

this aegation are that

8r* +ni ?adodia and 8r* 8anish ?ododia are !rothers

8r* +ni ?adodia had purchased not on from 8r* 5aAee/ ?upta !ut aso from four other

persons incuding 8r* 8anAua Jain

8r* 3*9* 8itta as inducted in JSE ! 9uneet Jain and +ni ?ododia*

In this regard, the charge is aso e/eed against JSE, stating that JSE and its ?o/erning Board

ha/e faied to monitor the transfer of e>uit shares of JSE and ensure compiance ith

5eguation % of the 8I89S 5eguations in respect of the transfer0 issue of shares and su!mit

incorrect undertaking to SEBI confirming the compiance of pro/ision of 5eguation ##(#)

of the 8I89S 5eguations*

?roup # entities /ide their respecti/e repies ha/e argued that the are not 'persons acting in

concert' and the shares of JSE ere ac>uired ! them independent, out of their on funds*

2he noticees name 5aAender 9rashad ?upta, 8s* @eena ?upta, +mit ?upta and 5aAee/



14/27

P- 14 %) 2>

?upta and 9uneet Jain ha/e argued that cu!!ing of their sharehoding is erroneous and is

ithout an !asis* 2he ac>uisition of shares ! them as not guided ! an common

o!Aecti/e or meeting of minds ith others for the purpose of ac>uiring of su!stantia shares

or contro o/er JSE* 2he had no common o!Aecti/e0 purpose to ac>uire the shares0 /oting

rights0 contro in JSE*

?roup # entities ha/e their common directorship in ISL, hereas the charge is that ! /irtue

of their !eing directors in ISL, the !ecome persons acting in concert for the ac>uisition of

the shares of JSE* In order to decide upon the issue hether group # persons ere 'persons

acting in concert', I refer to the 5eguation $(e)($)(i) of the S+S2 5eguations* It is >uite cear

that the common directorship has to !e of #* "%57-n=co/ered under such pro/ision, in

order to consider them as persons acting in concert* nder this pro/ision of S+S2

5eguations, 'person acting in concert' is defined as under

"(1) persons who, for a common o#$ective or purpose of su#stantial acquisition of shares or votingrights or gaining control over the target company, pursuant to an agreement or understanding (formalor informal), directly or indirectly co%operate #y acquiring or agreeing to acquire shares or voting rightsin the target company or control over the target company.(&) without pre$udice to the generality of this definition, the following persons will #e deemed to #e

persons acting in concert with other persons in the same category, unless the contrary is esta#lished!(i) a company, its holding company, or su#sidiary of such company or company under the samemanagement either individually or together with each other'(ii) a company with any of its directors, or any person entrusted with the management of the fundsof the company'(iii) directors of companies referred to in su#%clause(i) of clause (&) and their associates'(iv) ... ...

... ..."

oe/er, it is no!od's case that ISL is either a hoding compan of JSE or its su!sidiar* It

is aso not shon that ISL and JSE are under the same management either indi/idua or

together ith each other* 2herefore, I am incined to gi/e a finding that group # entities0

persons are not 9+3s, as aeged in the S34*

+s regards the charge against group $ entities is concerned, the expanations gi/en ! these

noticees !eonging to group $ are that the shares ere purchased ! these in their indi/idua0

independent capacit on the !asis of their on opinion and funds* 8r* +ni ?adodia inaddition has su!mitted that he as not present during the meeting of the !oard of directors

hen the appointment of 8r* 3*9* 8itta as Dhoe 2ime irector of JSE, as discussed and

as unanimous decided ! the !oard of JSE* In this regard, I ha/e seen the minutes of the

meeting dated ecem!er #:, $"##, and from the same, I note that the decision to appoint



15/27

Page 15 of 27

8r* 3*9* 8itta as taken on this da and that 8r* +ni ?adodia as granted ea/e of a!sence

for this meeting*

4o other purpose0 o!Aecti/e has !een aeged in the S34 to sho that the group $ entities

ere acting in concert* 2he group $ persons ha/e argued that the ere not acting in concert

and the did not ha/e an common o!Aecti/e0 purpose ith others in the group to ac>uirethe shares or /oting rights in JSE* I note that mere sae and purchase does not imp a

reationship of 'persons acting in concert'* 2here shoud !e other supporting facts* 2herefore,

the charge of !eing persons acting in concert against ?roup $ aso does not sur/i/e*

In /ie of the a!o/e, the charge of /ioation of 5eguation %(#) of 8I89S 5eguations aso is

not made out as against the noticees name 8r* 5aAender 9rashad ?upta, 8s* @eena ?upta,

8r* +mit ?upta, 8r* 5aAee/ ?upta, 8r* +ni ?adodia, 8r* 8anish ?adodia, 8r* 9uneet

Jain, 8s* 8anAua Jain and 8r* 3*9* 8itta*

JSE and its ?o/erning Board in their rep has su!mitted that the had compied ith the

pro/isions of 5eguation % and 6 of the 8I89S 5eguations and there is not a singe

sharehoder ho hed more than 7C shares as per the 8I89S 5eguation in JSE* It has aso

!een said that !eond the sef certified discosures made ! the indi/idua sharehoders the

had no means to disco/er that the indi/idua sharehoders ere acting in concert* 1urther,

the had no occasion to suspect that the sharehoders ere acting in concert ith each other*

2herefore, JSE had confirmed the compiance of the pro/isions of 8I89S 5eguations to

SEBI from time to time* 2he persons ho are aeged to !e on the !oard of ISL are actua

not on the Board of JSE* In /ie of the discussion a!o/e and in the a!sence of materia to

pro/e, the aegation as e/eed in the S34 is not esta!ished as against the JSE and its

?o/erning Board*

B

I!!+-!$#$ $n #* "%57%$#$%n %) #* %9!n$n ?%-!d %) #* ."*-n

5egarding the composition of the go/erning !oard of the exchange, the S34 has aeged the

fooing;

-

that JSE has faied to appoint an Executi/e irector for the da to da administration of the

exchange since Septem!er $"". in terms of the SEBI 3ircuar no* S80SE0-6#606

dated +pri $", #66* Such appointment of Executi/e irector has !een aeged to !e

dei!erate deaed despite SEBI ad/ise and foo up*



16/27

P- 1 %) 2>

?

that in the a!sence of the Executi/e irector, 8r* 9uneet Jain, the thenC*-$!5-n %) 6SE

is aeged to !e acting as the chief executi/e and interfering in the da to da affairs of JSE*

It has !een aeged that the go/erning !oard is /ioating the 3ode of 3onduct and 3ode of

Ethics of directors as pro/ided in SEBI 3ircuar !earing no*

3I50850S+0SE0:0$"#" dated ecem!er #, $"#"*

"

that 8r* 3*9* 8itta as appointed as Dhoe 2ime irector of JSE ! 8r* 9uneet Jain and

8r* +ni ?adodia ithout fooing the appropriate procedure i*e* appointment of search

committee, issue of ad/ertisement, documenting terms and conditions of appointment,

consideration of experience, >uaifications and technica0 ega knoedge re>uired for the

post, etc* It has !een aeged that the terms and conditions of the said appointment

incuding the saar and perks ere decided ! 8r* 9uneet Jain* It has aso !een aeged that

the entire exercise of appointing 8r* 3*9* 8itta as Dhoe 2ime irector as undertaken !

8r* +mit ?upta, 8r* 5aAee/ ?upta and 8r* 9uneet Jain in order to ensure the da to da

contro o/er the affairs of JSE* 2herefore, it has !een aeged that the JSE and the

?o/erning Board has faied to pre/ent procedura irreguarities in the appointment of 8r*

3*9* 8itta as Dhoe 2ime irector in /ioation of the 3ode of 3onduct and 3ode of

Ethics of irectors as pro/ided in SEBI 3ircuar !earing no*

3I50850S+0SE0:0$"#" dated ecem!er #, $"#"*

In !7%n #% #* "*-! -# +? 7-!-!-7* - -?%9, JSE has denied that the

appointment of Executi/e irector as dei!erate deaed as it had taken a the

reasona!e efforts to appoint the Executi/e irector* JSE has pro/ided the se>uence ofe/ents to sho that the had taken the initiati/e to appoint the Executi/e irector* 2he

had issued the nespaper ad/ertisement on +pri "#, $""% and conducted the inter/ies

on Ju #, $""%* Before forarding the short isted names of the candidates ! the

committee constituted ! the ?o/erning Board of JSE to SEBI, the short isted

candidates had expressed their uniingness for the appointment to the post* 2herefore,

the names ere ithhed and the process as started afresh starting from the nespaper

ad/ertisement on ecem!er #$, $""6* 2he appications recei/ed in response to the

ad/ertisement ere scrutiniFed and shortisted* In the meantime, the date of +nnua?enera 8eeting (hereinafter referred to as '+?8') as fixed for &cto!er $%, $"#" and as

7"C of the directors on the Board of JSE ere a!out to retire, it as decided to conduct

the inter/ie for the post of Executi/e irector after the +?8* 9ursuant to the +?8,

the ne ?o/erning Board in its meeting hed on ecem!er $7, $"#", preferred to



17/27

Page 17 of 27

constitute the ne committee for appointment of the Executi/e irector and aso

authoriFed the committee to take ser/ices of outside agenc, if re>uired*2he meeting of

committee for appointment of Executi/e irector as hed on +pri $#, $"##, in hich

the 4o3 recei/ed from SEBI for the '4SE 2rading 9atform' to the mem!ers of JSE, as

aso taken up for the discussion* 2he committee mem!ers discussed the matter of

appointment and the etter of SEBI granting 4o3 for '4SE 2rading 9atform' and /ieed

that due to the 4o3 of SEBI, the o!Aecti/e for appointment of Executi/e irector had

changed from the date hen the appications ere in/ited* Earier the re>uirement as

main the administration of stock exchange, hoe/er, after the 4o3, the person ho is

appointed as Executi/e irector must aso ha/e in;depth knoedge of stock market

trading operations* +ccording, it as decided to in/ite fresh appication for the said

post* 2he minutes of the 3ommittee ere put up !efore the ?o/erning Board on June ",

$"## and it as decided to start the process afresh for the person ho ha/e in depth

knoedge of stock market trading operations* In such circumstances, JSE decided to

in/ite fresh appications* 2hereafter, another ad/ertisement as gi/en on Januar "6,

$"#$, for the appointment to the post of Executi/e irector ! JSE, the appications

recei/ed ere scrutiniFed and inter/ies ere conducted for shortisted candidates on

8arch #., $"#$, hoe/er, the committee did not find an candidate suita!e for the post*

It has !een said that during the dei!erations of the committee, the name of 8r* 9uneet

Jain, irector, ?o/erning Board cropped up and it as gi/en to understand that he as

a/aia!e for the post of Executi/e irector* 2he committee then considered his name

and found him suita!e for the post of Executi/e irector* Su!se>uent, the ?o/erning

Board appro/ed the name of 8r* 9uneet Jain on 8arch $$, $"#$ for the post of Executi/e

irector* 2he ?o/erning Board's recommendation as then forarded to SEBI for

appro/a and same is pending* It has aso !een su!mitted ! JSE that the dea in the

appointment of Executi/e irector cannot !e !randed as faiure on its part*

I ha/e considered the chronoog of the attempts spread o/er a ong period of four;fi/e

ears, said to !e made ! JSE for the appointment at the post of the Executi/e irector*

2he ?o/erning Board of JSE and the seection committee, inspite of such attempts isstated to ha/e !een una!e to find an appropriate person for the appointment as

Executi/e irector*+though the ha/e stated that the proposed name of 9uneet Jain as

an Executi/e irector is pending ith SEBI since 8arch $$, $"#$, I note that 9uneet Jain



18/27

P- 1@ %) 2>

as a Sharehoder irector of the ?o/erning Board of JSE from 8arch #$, $"#"* 9uneet

Jain as aso a director of ISL, a !roking entit from 8arch $""% ti 4o/em!er $"##*

2hese facts sho that 9uneet Jain as aread on the !oard of JSE and as acting as the

3hairman of JSE hen his name as considered ! the Exchange for Executi/e irector*

2he same suggests pro!a!iit of his infuence on the process of appointment of

Executi/e irector* In /ie of the a!o/e facts, JSE is found to ha/e deaed the

proceedings of appointment of Executi/e irector ithout an sufficient Austification and

has faied to act diigent there! /ioating the SEBI circuar !earing no*

S80SE0-6#606 dated +pri $", #66*

In % )-! - #* "*-! -# +? 7-!-!-7* ? a!o/eis concerned, JSE has repied that

8r* 9uneet Jain as the 3hairman of JSE on for a imited period from 8arch #$, $"#"

to &cto!er $%, $"#" (% months) and from ecem!er "-, $"## to 8arch #", $"#$ (months)* It has !een said that during his tenure, he rare /isited the stock exchange

premises and had ne/er interacted ith an empoee or mem!er of JSE except the

?enera 8anager for coordinating and communicating the Board's decisions* 2he affairs

of the exchange ha/e !een carried out !onafide, transparent and in the !est interests of

the exchange and its sharehoders* 4o specific instance or nature and manner of

interference in the da to da affairs has !een spet out in the S34*

8r* 9uneet Jain aso in his rep has su!mitted that the S34 rong a!es him as Dhoe

2ime irector of ISL during the period of ecem!er $"; $$, $"##* 1urther, the S34 has

not expained as to ho he interfered ith the da to da affairs of JSE* uring his tenure

at JSE, he had ne/er /isited JSE or e/en Jaipur except on the occasions hen there as a

Board meeting or ?enera Bod meeting* It has aso !een said that he had ne/er spoken or

met an empoee of the stock exchange direct, except the ?enera 8anager for

communicating and impementing the decisions of the Board* &n once, a group of

empoees (near $") representing the demands of empoees' union had met him in the

capacit as 3hairman* 1urther, in the audit reports of JSE aso, there is no indication of

an kind of financia irreguarities on his part*

a/ing seen the S34, I note that there is no specific instance pointed out therein,

shoing signs of interference ! 9uneet Jain in the da to da affairs of JSE* In the

a!sence of such detais, I am incined to gi/e !enefit of dou!t*



19/27

Page 19 of 27

W$#* !-!d #% #* "*-! -# +? 7-!-!-7* "a!o/e, the S34 has aeged that the

+rtices of +ssociation of JSE does not pro/ide for the appointment of Dhoe 2ime

irector* It has aso !een aeged that the functiona and financia poers of the 3hief

Executi/e such as che>ue signing authorit, etc* ere granted to the Dhoe 2ime irector

and no appro/a from SEBI and sharehoders ere sought, as re>uired for theappointment of 3hief Executi/e, as per the SEBI 3ircuar* JSE, 8r* 9uneet Jain, 8r* 3*9*

8itta, and 8r* +ni ?adodia ha/e repied separate to the aegations*

JSE in its rep has su!mitted that the appointment of 8r* 3*9* 8itta as Dhoe 2ime

irector as not done at the !ehest of 8r* 9uneet Jain or 8r* +ni ?adodia* It has !een

said that as JSE as considering tie up ith 4SE and had recei/ed the in;principe

appro/a of SEBI, it as fet that ! the exchange that 8s* sha Sharma, the ?enera

8anager of JSE shoud de/ote more time for setting up of sstems0 infrastructure andother faciities for the trading patform of 4SE* 2herefore, a need as fet ! the

Exchange for strengthening the management* In the meantime, 8r* ** 4agpa, partner

of ** 4agpa < 3o* (the auditors of JSE) had suggested the name of 8r* 3*9* 8itta to

the Board for the post of Dhoe 2ime irector* +s the introduction of 8r* 8itta as

coming from a reia!e source and aso his >uaifications and experience satisfied ith the

re>uirements of the Exchange, his name as considered ! the Board* It has !een said

that prior to his appointment for the post of Dhoe 2ime irector, a ega opinion as

aso sought on the issue of appointment and remuneration of Dhoe 2ime irector*2hereafter, the appointment as unanimous appro/ed ! the ?o/erning Board in its

meeting hed on ecem!er #:, $"##, hich as attended ! 8r* 9uneet Jain (Sharehoder

irector), 8r* 5aAendra Gumar ha (Sharehoder irector), Justice (5etd*) 8r* 4*L*

2i!rea (9u!ic Interest irector), 8r* B*L* Jaiman (9u!ic Interest irector) and 8r*

S*9* Gumar (9u!ic Interest irector)* It has !een aso !een said that the SEBI 3ircuar

!earing no* 850S+03


20/27

P- 20 %) 2>

to officia o/ersight and in order to comp ith the SEBI 5eguations, 8r* 3*9* 8itta has

resigned from the post of Dhoe 2ime irector of JSE* uring his tenure he had

exercised on administrati/e poers and had not made an appointments* e did not

ha/e financia poers as he had no poers to sign the che>ues a!o/e an amount of

`$7,"""* e had no poers to sanction an financias, on poer he had as of

appro/ing the proposas recei/ed from the ?enera 8anager*

Dith regard to the aegation in the S34 pertaining to the appointment of 8r* 8itta, 8r*

9uneet Jain in his rep has aso su!mitted that he had ne/er met 8r* 3*9* 8itta !efore his

appointment to the Board of JSE* e reiterated that 8r* ** 4agpa had !rought the

resume of 8r* 3*9* 8itta to the Board of JSE for considering his name for the post of the

Dhoe 2ime irector and the Board of JSE had unanimous appro/ed the appointment

of 8r* 3*9* 8itta* 9uneet Jain aso said that the amount of `.*$7 acs referred in the S34

as the saar and perks paid to 8r* 8itta ! JSE* e repied in the ines of rep from

JSE*

8r* 3*9* 8itta, repied to the S34 ! saing that !efore Aoining JSE, he as orking as

Senior 8anager ith a nationaised !ank* uring 4o/em!er $"##, 8r* ** 4agpa,

partner, ** 4agpa < 3o* (statutor auditors of JSE), ho as residing near his home

informed him that JSE is ooking for a person to !e appointed for the genera

administration* 2hen he as introduced to JSE in its Board meeting* 9ursuant to the

inter/ie and competion of other formaities, he as appointed as director ! the Boardof JSE* +s a director, he as assigned ith the duties of ?enera +dministration, 5

functions, etc* oe/er, during +ugust $"#$, he as informed ! JSE that his

appointment as not in conformit ith the appica!e pro/ision of a and according,

he su!mitted his resignation on +ugust ##, $"#$* It has !een su!mitted ! him that !eing

a rank outsider, he as not aare hether JSE has appointed him in consonance ith the

appica!e pro/isions of a and for the same he cannot !e fauted in an manner* +s

regards the saar paid ! JSE, it has !een said that the same is compara!e to the ast

saar he dre in the !ank* uring his tenure as Dhoe 2ime irector, he had acted ith!onafide, ithin the confines of poer, ithout !eing under the infuence or contro of

an!od incuding 8r* 9uneet Jain and 8r* +ni ?adodia* 2he poers exercised ! him

ere in the ordinar course* e had no poers to sign che>ues indi/idua on !ehaf of

JSE and on issued che>ues upto an amount of `$7,""" Aoint ith the ?enera 8anager



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Page 21 of 27

of JSE* e had no poers to sanction an financias and as on appro/ing the proposas

recei/ed from the ?enera 8anager*

2he noticee name 8r* +ni ?adodia aso in his su!missions has said that he as not

present during the meeting of !oard of directors of JSE, in hich, 8r* 3*9* 8itta as

appointed as Dhoe 2ime irector* oe/er, on the decision to appoint 8r* 3*9* 8ittaas Dhoe 2ime irector, his financia poers etc, he aso repied in the ines of the stand

taken ! JSE*

1rom the su!missions of the noticees, it is cear that JSE has not taken an prior appro/a

from SEBI for the appointment of 8r* 3*9* 8itta as a Dhoe 2ime irector and thus as

not in consonance ith the procedure aid don under SEBI 3ircuar !earing num!er

3I50850S+0SE0:0$"#" dated ecem!er #, $"#"* I note that ! asking 8r* 3*9*

8itta for resigning from the post of Dhoe 2ime irector, JSE has taken correcti/e

steps, hoe/er, the fact remains that he as appointed ithout prior appro/a* It is aso

seen that 8r* 3*9* 8itta as su!se>uent appointed as a 3hief ?enera 8anager ! JSE*

C

M$5-n-5n# -nd 7%%! "%!7%!-# %9!n-n" ?= G%9!n$n B%-!d %) #* 6SE

-2he S34 has aso aeged that the ?o/erning Board of JSE has amended 8emorandum of

+ssociation and adopted ne +rtices of +ssociation ithout getting appro/a from SEBI

and ithout pu!ishing the same in the officia ?aFette of 3entra ?o/ernment, as re>uired

! the Securities 3ontract (5eguation) +ct, #67-*

JSE in its rep has su!mitted that as per Section .+ of the Securities 3ontracts (5eguation)

+ct, #67-, the appro/a from 3entra ?o/ernment0 SEBI and pu!ishing in officia gaFette

is mandator on in cases here amendments ! the stock exchanges pertain to an of the

items as set out in causes (a) to (d) of the su!;section (#)* It has !een said that the

amendments made in the '8emorandum of +ssociation' did not pertain to an of the items

as set out in the said causes, therefore, the issue of appro/a and gaFette notification does

not arise* It has aso !een said that the amendments ere forarded to SEBI /ide etter

dated 4o/em!er "., $""%, for appro/a* 2hereafter, SEBI has sought carifications from

time to time* JSE aso fooed up the matter ith SEBI*

1rom the a!o/e, I note that JSE had forarded the amendments to SEBI, for appro/a*

Such forarding of amendments ! JSE is contrar to its earier su!mission that the



22/27

P- 22 %) 2>

appro/a from SEBI is mandator on in cases here the amendments ! the stock

exchanges pertains to the items as set out in Section .+(#)(a), (!), (c) and (d) of the

Securities 3ontracts (5eguation) +ct, #67-*

?

+nother aegation in the S34 that JSE has kept the Board minutes from 1e!ruar $%, $""%

to Januar "-, $"#", unsigned ti SEBI !rought it to the notice of the management of theexchange*

JSE in its rep has su!mitted that the minutes for !oard meeting hed from 1e!ruar $""%

to Januar $"#" had remained unsigned ! the then 3hairmen, 8r* 9urshoottam Bhaggeria

and 8r* @iAa 8ehta* SEBI has aso noted this in its inspection in the ear $""6 and asked

8r* @iAa 8ehta for signing the minutes in the minutes Book* oe/er, the minutes

remained unsigned due to the faiure on the part of 8r* @iAa 8ehta* +fter the annua

genera meeting in 4o/em!er $"##, the matter of minutes not !eing signed from the past

period as raised and in order to cure the apse and to ensure the compiance it as decided

that 8r* 9uneet Jain in the capacit of 3hairman, oud sign the minutes for the past

period, since earier one had eft ithout signing* Before doing this, the Board decided to

seek independent opinion* 9ost the opinion from the practicing 3ompan Secretar and

second opinion from +d/ocate igh 3ourt, ehi, the Board comprising a the 9u!ic

Interest irectors authorised him to sign the minutes to compete the ega re>uirement* It

has !een said that the ega opinion dated Januar "$, $"#$ as o!tained as a matter of

a!undant caution and corro!oration of opinion o!tained from the practicing compan

Secretar* JSE has aso said that the minutes of the Board meetings ere certified as true

and correct ! the to genera managers of JSE, ho ere present in a those meetings and

hose minutes remained unsigned* 2he minutes ere signed in presence of Justice (5etd*)

8r* 4*L* 2i!rea, 9u!ic Interest irector and ith his fu participation* 8r* 9uneet Jain

in his rep aso has reiterated the su!mission of JSE and su!mitted that the act of signing

of the minutes of !oard meeting of JSE on ensured compiance ith the pro/ision of

Section #6 of the 3ompanies +ct, #67-*

I note that the JSE and 8r* 9uneet Jain hie reing on a ega opinion said to ha/e !een

taken on Januar "$, $"#$, had signed the minutes of the meeting ! 8r* 9uneet Jain on

ecem!er #:, $"##* 2he argumenttaken ! JSE that the ega opinion as o!tained as a

matter of a!undant caution finds no merit* JSE has stated that the ega opinion as in

furtherance of the opinion o!tained from one 8r* eepak Bansa, the 9racticing 3ompan



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Page 23 of 27

Secretar ! emai ecem!er #:, $"## (fooed ! detaied ritten opinion dated

ecem!er #:, $"##)* I note that JSE has neither su!mitted the cop of this emai nor a cop

of the ritten opinion gi/en ! the said 8r* eepak Bansa* 2herefore, the fact remains that

the minutes of the !oard meeting ere kept unsigned ! JSE ti SEBI !rought it to the

notice of the Exchange during the inspection*

"

2he S34 has further aeged that the percentage of attendance of 8r* S*9* Gumar (5o3,

5aAasthan), 9u!ic Interest irector is !eo the reguator re>uirement of .7C hich is in

/ioation of SEBI 3ircuar !earing num!er SEBI0S80SE+03ir;$60$"" dated Ju

", $""* I note that 8r* Gumar had attended on six meetings out of a tota of $ meetings

of the go/erning !oard during the first in/estigation period* I note that 8r* Gumar /ide his

etter dated Septem!er $6, $"#", has informed that JSE has !een conducting its Board

8eeting at 4e ehi during orking das hich makes it impossi!e for him to attend the

Board 8eetings* Inspite of his specific re>uest to hod the meeting at Jaipur on an orkingda or at ehi on an other pace on Saturda 0 Sunda, JSE has continued to hod its

Board 8eeting in ehi* It has !een aeged that the Board 8eetings of JSE are intentiona

conducted at ehi on orking das in order to ensure that 9u!ic Interest irector oud

not !e a!e to participate in the !oard meeting and decisions oud !e taken ! sharehoder

directors free*

JSE in its rep has su!mitted that a the !oard meetings ere hed reguar and ere

attended ! the 9u!ic Interest irectors* JSE has pro/ided the detais of a the $ !oard

meetings* It has !een said that the to other 9u!ic Interest irectors had reguar

attended and participated in the !oard meetings of JSE and the agenda of a $ !oard

meetings ere reguar sent to 8r* S*9* Gumar prior to the !oard meetings aong ith the

minutes of the pre/ious !oard meetings for confirmation* 8r* Gumar had ne/er o!Aected

to an of the decisions taken in the !oard meetings or expressed his disagreement* It has

aso !een said that the !oard meetings are !eing hed in the !oard room of JSE at Jaipur and

in the past one ear not e/en a singe meeting as hed outside Jaipur since the ast +?8

hed in 4o/em!er, $"##, hen the ne !oard as constituted, further, the exchange

officers reguar consut 9u!ic Interest irectors !efore fixing the time and /enue of the

!oard meetings and a the meetings ha/e !een attended ! a the 9u!ic Interest irectors*

It has aso !een said that 8r* S*9* Gumar's representations as put up !efore the go/erning

!oard's meeting and the matter as discussed, reso/ed and communicated to SEBI*



24/27

P- 24 %) 2>

I ha/e considered the rep of JSE and 8r* 9uneet Jain (in his capacit as 3hairman of JSE

during the period of 8arch $"#" ; &cto!er $"#") vis%a%visthe aegations e/eed and note

that the representation of 8r* Gumar as put up !efore the go/erning !oard's meeting and

the matter has !een discussed, reso/ed and communicated to SEBI* I note that JSE hasnot

denied the aegation, hoe/er it has !een said that the agenda for the !oard meetings aong

ith the minutes of the pre/ious !oard meetings ere sent to 8r* S*9* Gumar for

confirmation* I note that JSE has taken certain correcti/e steps ! hoding meetings at

Jaipur and consut the 9u!ic Interest irectors !efore fixing the time and /enue of the

!oard meetings*

In -dd$#$%n #% #* -?%9 d$"+d "%55%n "*-! $n ?%#* #* SCN, #*! -! "!#-$n

%#*! "*-! *$"* -! ."+$9 #% 6SE, *$"* -! d$"+d *!+nd!:

D

2he S34 has aeged that the composition of certain statutor committees nameiscipinar +ction 3ommittee, the efauts 3ommittee, the +r!itration 3ommittee and

In/estors Ser/ices 3ommittee are not in compiance as the trading mem!er representation in

these committees constitute C against the SEBI prescri!ed imit of maximum $"C in

/ioation of the SEBI 3ircuar !earing num!er 850S+03


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Page 25 of 27

It is cear that the percentage of the trading mem!er directors as more than the prescri!ed

norms as stated in the SEBI 3ircuar !earing num!er 850S+03uirement of $"C as stipuated /ide the a!o/e said circuar* +t this

stage, I aso note the su!mission of JSE that it has initiated steps and is in the process of

conducting inspection as per SEBI norms*

G

It has aso !een aeged that ## mem!ers of the exchange ha/e not maintained the Base

8inimum 3apita of `# Lakh in /ioation of the SEBI 3ircuar

850&90SE03ir;".0$""7 dated 1e!ruar $, $""7 dated 1e!ruar $, $""7* JSE in its

rep has su!mitted that out of ee/en (##), to ($) mem!ers ha/e deposited the Base

8inimum 3apita and the remaining nine (6) mem!ers ha/e !een suspended and i !e

reinstated on after recei/ing the re>uisite amount0 capita* 2his shos that JSE has aread

taken certain correcti/e action in this regard*



26/27

P- 2 %) 2>

H

2he S34 has aso aeged that JSE has not maintained a proper In/estor Ser/ice 3entre in

compiance ith the SEBI 3ircuar !earing no* S809&LI3=03I5;$06. dated

ecem!er ", #66.* JSE in its rep has su!mitted that it maintains sma in/estor ser/ice ce

ith re>uired faciities* oe/er, on the ad/ice of SEBI for !ig In/estor Ser/ice 3entre

ha/ing sitting capacit of "" in/estors ith a the necessar infrastructure, it is in the

process of esta!ishing a fu;fedged in/estors' ser/ice ce* a/ing considered the a!o/e, I

am of the /ie that the In/estors' Ser/ice 3entre of JSE as not ha/ing the ade>uate

infrastructure in accordance ith the SEBI 3ircuar !earing no* S809&LI3=03I5;$06.

dated ecem!er ", #66. and it is in process of taking correcti/e steps to comp ith the

SEBI 3ircuar*

I

+s regards the aegation that JSE has faied to appoint a 3hief Executi/e &fficer of the

su!sidiar of JSE in /ioation of the SEBI circuar dated 1e!ruar ##, $""* JSE in its rep

has su!mitted that it had ad/ertised for the post in the nespaper on 8arch #%, $""%* Inresponse to hich it had recei/ed #$# appications out of hich thirteen (#) ere shortisted

and inter/ieed* &ut of these, three () candidates ere seected !ut as the terms of

appointment ere not accepta!e to them, the had refused the same* 2hereafter, a common

ad/ertisement as gi/en on ecem!er $$, $""6 for the post of 3hief Executi/e &fficer and

Executi/e irector and a tota of $ appications ere recei/ed incusi/e of Executi/e

irector's appication* +s per JSE, this time preference as gi/en for the appointment of

Executi/e irector and therefore 3hief Executi/e &fficer as not seected* JSE has aso

su!mitted that it is in the process of appointing 3hief Executi/e &fficer in the su!sidiar* Iha/e considered the su!mission of JSE and find that it has sti not compied ith the SEBI

circuar !earing no* S809&LI3=03I5;:0$"" dated 1e!ruar ##, $""*

>

a/ing considered the facts and circumstances descri!ed in the a!o/e paragraphs, athough I

note that JSE has taken certain correcti/e steps, the same are on pursuant to the

inter/ention of SEBI* In m opinion, a Stock Exchange is in charge of the trading patform

for a the market participants, has to function in an o!Aecti/e and Aust manner setting an

exampe for the intermediaries reated to its !usiness and aso promote heath de/eopment

of the securities market* 2hough the exchange ma attri!ute its ina!iit to ensure time

compiance ith SEBI circuars0 directi/es, to its imited resources, it on shos the ack of

its commitment to function as a stock exchange* a/ing considered the a!o/e, I am

con/inced that JSE as negigent in the discharge of its functions and duties*



27/27

Page 27 of 27

+s regards, the noticees name 8r* 5aAender 9rashad ?upta, 8s* @eena ?upta, 8r* +mit

?upta, 8r* 5aAee/ ?upta, 8r* 9uneet Jain, 8r* 3* 9* 8itta, 8r* +ni ?adodia, 8r* 8anish

?adodia and 8s* 8anAua Jain, I note that no independent /ioation of the circuar has !een

pro/ed against them*

@

a/ing regard to the a!o/e, I, in exercise of the poers conferred upon me in terms ofSection #6 of the Securities and Exchange Board of India +ct, #66$ and Sections ##($)(A)

thereof read ith Section #$+ of Securities 3ontracts (5eguation) +ct, #67-, here! arn

the Jaipur Stock Exchange Limited and ad/ise them to comp ith the appica!e securities

as that go/ern their functions, in etter and spirit in a time manner*

DATE : S7#5?! 11#*, 2014 PRASHANT SARAN

PLACE: MUMBAI WHOLE TIME MEMBER

SECURITIES AND EXCHANGE BOARD OF INDIA

Documents

Order in the matter of Jaipur Stock Exchange Limited