Order under Section 4B (6) read with Section 4B (7) of the Securities Contracts (Regulation) Act, 1956 in the matter of the Delhi Stock Exchange Association Limited (Demutualisation) Scheme, 2005. - S.O. No.1198(E) - SEBI/MRD/48107/2005 - SEBI

SECURITIES AND EXCHANGE BOARD OF INDIA NOTIFICATION Mumbai, the 29th August, 2005 S. O. 1198 (E). 1.0 The Delhi Stock Exchange Association Limited (hereinafter referred to as the DSE ), incorporated on June 25, 1947 as a Corporate body with limited liability for the purpose of promoting, regulating or controlling the business of buying, selling or dealing in securities, is a recognised stock exchange, having its Registered Office at DSE HOUSE, 3/1, ASAF ALI ROAD, NEW DELHI 110 002. It is required to be demutualised in accordance with the provisions of the Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as the SCRA ). 2.0 The DSE, vide its letter dated January 31, 2005, submitted a Scheme for its corporatisation and demutualisation for approval to the Securities and Exchange Board of India (hereinafter referred to as the SEBI ) in terms of sub-section (1) of section 4B of the SCRA. SEBI, vide its letter dated May 25, 2005, advised DSE to submit a revised Scheme, after taking into account those provisions of the BSE (Corporatisation and Demutualisation) Scheme, 2005 that may be relevant to DSE. 3.0 Accordingly, DSE, vide its letter dated June 30, 2005, submitted a revised Scheme for its demutualisation (hereinafter referred to as the Scheme ). SEBI made enquiries and obtained further information from DSE through discussions with it. The Scheme was discussed in depth in a meeting with the DSE on July 8, 2005. 4.0 The Scheme, inter alia, provides for the segregation of ownership and management from the trading rights of the members, restriction on voting rights of shareholders who are also trading members, composition of the Governing Board, etc. in accordance with the provisions of Section 4B (6) of the SCRA, utilisation of assets and reserves and other matters required for the purpose of and in connection with the demutualisation of DSE. 5.0 SEBI, having considered the Scheme and on being satisfied that it would be in the interest of the trade and also in the public interest, hereby approves the Scheme with minor modifications. The approved Scheme is enclosed as Annexure - A. 6.0 DSE shall ensure compliance with the Scheme within the time as specified in the Scheme and shall not do anything contrary to the provisions of Scheme and submit compliance report to SEBI in the manner as may be specified by SEBI. 7.0 SEBI reserves the right to amend, alter or modify the Scheme in the interest of the trade and the public interest and in furtherance of the objectives of the demutualisation of the stock exchange. 8.0 The Scheme shall come into effect on the day of its publication in the Official Gazette. [F.No. SEBI/MRD/48107/2005] M. DAMODARAN, Chairman Encl: Annexure A The Delhi Stock Exchange Association Ltd. (Demutualisation) Scheme, 2005 1. Title and Commencement 1.1 This Scheme shall be called The Delhi Stock Exchange Association Ltd. (Demutualisation) Scheme, 2005 (hereinafter referred to as this Scheme ). 1.2 This Scheme shall have effect on its publication under sub-section (4) of Section 4B of the Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as the SCRA ). 1.3 The Delhi Stock Exchange Association Ltd. (hereinafter referred to as DSE ) shall be demutualised in accordance with this Scheme on and from the Appointed Date as may be notified by the Securities and Exchange Board of India (hereinafter referred to as SEBI ) in respect of DSE under Section 4A of the SCRA: Provided that the activities specified in the respective clauses of this Scheme shall be implemented as per the time schedule specified in those clauses. 2. Definitions In this Scheme, unless the context otherwise requires, - 2.1 Due Date means the date, as may be determined by the Governing Board, which shall not be later than 3 months from the date of publication of the Order under sub-section (7) of Section 4B of the SCRA. 2.2 Governing Board means the Board of Directors of DSE. 2.3 Member means a person who is a member of DSE on the day preceding the Due Date as per the Register of Members maintained by it. 2.4 Shareholder means a person who holds any equity share(s) of DSE on or after the Due Date. 2.5 The Delhi Stock Exchange Association Limited (DSE) means the Company incorporated on June 25, 1947 as a Corporate body with limited liability for the purpose of promoting, regulating or controlling the business of buying, selling or dealing in securities as a recognised stock exchange. 2.6 Trading Member means a stock broker of DSE and registered with SEBI as such under the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992. 2.7 Words and expressions used and not defined in this Scheme but defined in the SEBI Act, 1992, the Depositories Act, 1996, the SCRA, the Companies Act, 1956, the rules and regulations made under these Acts, the Memorandum and Articles of Association and bye-laws of DSE, shall have the same meaning respectively assigned to them in the above mentioned Acts, rules and regulations, memorandum and articles of association and bye-laws. 3. Governing Board 3.1 On and from the Due Date, the Governing Board shall be constituted in accordance with the provisions of the Articles of Association of DSE in force from time to time: Provided that - (i) the representation of Trading Members does not exceed one-fourth of the total strength of the Governing Board, and the remaining directors are appointed in the manner as may be specified by SEBI from time to time, and (ii) the Chief Executive, by whatever name called, is an ex-officio director. 3.2 Notwithstanding anything contained in clause 3.1, SEBI may nominate directors on the Governing Board as and when deemed fit. 4. Listing of Shares DSE may at any time list its securities on any recognised stock exchange. 5. Demutualisation 5.1 A Trading Member may or may not be a Shareholder. 5.2 A Shareholder may or may not be a Trading Member. 6. Trading Rights 6.1 A Member, who is registered as a stock broker on the day preceding the Due Date, shall become a Trading Member on the Due Date. 6.2 A Member, who is not registered as a stock broker on the day preceding the Due Date, shall become a Trading Member on being registered as a stock brokers under the SEBI (Stock Brokers and Sub-brokers) Regulations, 1992: Provided that his application for registration is submitted to SEBI within 3 months from the Due Date. 6.3 After the Due Date, a person desirous of becoming a Trading Member shall be admitted if he complies with the requirements and brings in fees and deposits as specified in the articles of association and bye-laws of DSE. 6.4 DSE shall, for the purpose of admitting any person as a Trading Member, follow uniform standards in terms of capital adequacy, deposits, fees, etc. irrespective of mode of acquisition of trading right by that person: Provided that different standards may be followed for admission of a person as a Trading Member who has acquired trading right by way of transmission. 6.5 A Trading Member may surrender his membership to DSE in the manner specified in the articles of association and bye-laws of DSE. 6.6 Irrespective of the date or mode of acquisition of trading right, the Trading Members shall have uniform rights and privileges: Provided that DSE may, with the prior approval of SEBI, grant additional privileges to those Trading Members who were Members on the day preceding the Due Date. 6.7 Trading Members on the Due Date shall continue to have the same rights and privileges in respect of their clients and constituents and other members arising out of or under any act, omission or contract or law, notification, order, direction, etc. as had accrued to them while being Members on or before the Due Date. 6.8 Trading Members shall be bound by all obligations and liabilities towards their clients and constituents, SEBI, DSE and other authorities or other persons arising out of or under any act, omission or contract or law, notification, order, direction, etc. while being Members on or before the Due Date. 7. Shareholding Rights 7.1 A Member shall become a shareholder on the Due Date. 7.2 DSE shall ensure that at least 51% of its equity shares are held by public other than shareholders having trading rights in the manner and within the period prescribed in sub-section (8) of Section 4B of the SCRA. 7.3 On and from the Appointed Date, DSE shall ensure that public other than shareholders having trading rights continuously holds at least 51% of its equity shares. 7.4 On and from the Due Date, no Shareholder, who is a Trading Member, shall have voting rights (taken together with voting rights held by him and by persons acting in concert with him) exceeding 5% of the voting rights in DSE. 8. Memorandum and Articles of Association, etc. 8.1 DSE shall incorporate the provisions of this Scheme appropriately in its Memorandum and Articles of Association and its Bye-Laws on or before the Due Date. 8.2 The Memorandum and Articles of Association and Bye-Laws of DSE may be amended after the Due Date in accordance with the applicable laws, provided that no such amendment is inconsistent with any provision of this Scheme. 9. Transfer of Clearing and Settlement Functions 9.1 DSE shall, within two years of the Due Date, subject to the prior approval of SEBI, transfer the duties and functions of the clearing house of the Exchange to a Clearing Corporation, recognized under the SCRA. 9.2 Until the duties and functions of the clearing house are transferred as provided in clause 9.1, the clearing and settlement functions in relation to trading on DSE, shall be carried out by the clearing and settlement mechanism as used by DSE at present or in such other manner as the Governing Board may determine. 10. Utilisation of Assets and Reserves 10.1 DSE shall not do anything contrary to the provisions of Section 4B (3) of the SCRA. 10.2 Without prejudice to the generality of the provisions of clause 10.1, DSE shall not use its assets and reserves as on the date of publication of this Scheme or the proceeds from disposal of such assets or the proceeds from disposal of successive species of assets acquired from the proceeds of disposal of such assets for any purpose other than discharging the current liabilities outstanding as on the date of publication of this Scheme or the business operations of the stock exchange. 11. Compliance with this Scheme 11.1 DSE shall ensure compliance with the provisions of this Scheme at all times and shall not do anything contrary to the provisions of this Scheme. 11.2 Without prejudice to the generality of the provisions in 11.1, DSE shall continuously comply with the provisions in Clauses 3.1, 3.2, 5, 6.3, 6.4, 6.5, 6.6, 7.3, 7.4, 8.2 and 10. 11.3 DSE shall report compliance with the provisions of this Scheme in such manner as may be required by SEBI from time to time. 12. Removal of difficulties If any difficulty arises in giving effect to the provisions of this Scheme, SEBI may, at the written request of DSE, relax any of the provisions of this Scheme.