TaxTMI 
TaxTMI 
Order under Section 11 of the Securities Contracts (Regulation) Act, 1956 superseding the Council of Management of Bhubaneshwar Stock Exchange.
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....er dated September 28, 2001, conducted inquiry as per the provisions of Rule 16 of the Securities Contracts (Regulation) Rules ,1957 (hereinafter referred to as "SCRR") and submitted his report to SEBI on October 22, 2001. The Inquiry Officer in his said report dated October 22, 2001 has inter alia found that:- 1) BhSE did not intimate SEBI regarding setting up the MWT and did not obtain permission from SEBI to set up the same. 2) Out of the total loan amount of Rs,95,83,782/- disbursed to members by BhSE from the MWT, Rs. 94,13,782 i.e. around 98%, are outstanding and payable by members of BhSE who were either office bearers of BhSE or Trustees of the MWT. 95% of the loan amounts were granted to meet the pay-in liabilities of members. The total amount owed by Shri Babulal Sharma constitutes 92.5% of the total loan amount. The following table describes the outstanding position of the loans: Sl. No. Name of member Position in BhSE Position in MWT Principal loan amount Interest Amount Total 1. Aran Kumar Girdhar President Sep. 1994 to Sep 1995 1,12,843 3,43,639 4,56,482 2. Anjani Kumar Singh Treasurer Sep 1999 to Sep 200....
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....o submit the findings so as to take action against him. 2. To immediately change the constitution of MWT and to ensure that the majority trustees should be non-elected directors. The MWT should stop grant of loan till the trust is reconstituted. 3. To ensure that members having outstanding loans from the Member's Welfare Trust Fund including Shri Babulal Sharma, Shri Anjani Kumar Singh and Shri Manoj Thacker) should not act as office bearers of the exchange or in any other segment where Bhubhaneshwar Stock Exchange is acting as a broker or as trustees of the Members Welfare . Trust. 4. To take immediate legal steps for recovering the outstanding loan including interest. The Exchange and the Members Welfare Trust should also consider initiating criminal proceedings against the members having the outstanding loans. 5. To ensure that no member having outstanding loans is allowed to trade in Bhubhaneshwar Stock Exchange and in other segments where the subsidiary of Bhubhaneshwar Stock Exchange is acting as a broker. 6. To get back outstanding loans from members and to ensure that no member having outstanding loans should be allowed to withdraw any BMC, Cash/security ....
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....the members should be granted a personal hearing. The stock exchange was also advised that in the light of the personal hearing, if they are of the opinion that the directive of SEBI needs to be modified, they may take up the matter with SEBI. No reply was forthcoming from BhSE to the letters dated January 29, 2002 and April 30, 2002 and therefore, vide letter dated August 5, 2002 addressed to the Executive Director and Council of Management, SEBI directed them to comply with the directions mentioned in the said letters and submit their report within 2 weeks from date of receipt of the letter. They were also directed to submit the report of the committee constituted to enquire into complaints against the Executive Director within 2 weeks from date of receipt of the letter. The stock exchange vide its letter dated August 22, 2002 informed that a meeting of the council of management will be held on August 28, 2002 to take up matters relating to compliance of directions given in the letters dated January 29, 2002 and April 30, 2002. 4.0 While the above matter was pending, SEBI received complaints from Shri Kedar Swamy Patra, member of BhSE and Shri M. N Ray, public representativ....
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....cials are not devoting sufficient time and efforts towards the day to day functions of the exchange. In this regard, as an instance of the conflict of interest, it was noted during the inspection that the council of management in its meeting on July 17, 2002 asked the public representative Shri M.N Ray to prepare draft charges against the Executive Director and Secretary for their poor performance, professional misconduct, dereliction of duties and misappropriation of funds of the stock exchange. However, Shri Ray instead of submitting the draft charges to the council of management issued a show cause notice to the Executive Director and Secretary wherein, he described himself as Chairman of the exchange. (v) The Committee constituted to enquire into the charges against the Executive Director was constituted on March 26, 2002 and later 2 more members were added on July 17, 2002. Although, the committee has met 3 times, they have failed to submit their report within 6 months as directed by SEBI. Till date, the committee has not submitted their report to SEBI. (vi) With regard ,to irregularities in the disbursal of loans from the MWT, it was observed that the MWT had delivered ....
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....nstruct a new building for the exchange. The land has already been acquired and the exchange has constituted a building committee to co-ordinate and oversee the construction. The said committee in its meeting dated June 11, 2002 proposed to the council of management to approve expenditure of Rs. 60 lacs towards the new building. The substantial investment in a new building may adversely affect the cash and bank balances with the exchange and thereby, considerably reduce the interest earnings on which the exchange now survives. 5.0 In view of the failure of BhSE to carry out the directives of SEBI and in the light of the observations made by the inspecting team, it appeared that the Council of Management of the exchange has failed to effectively discharge its duties and therefore, SEBI issued a show cause notice dated September 24, 2002 advising them to show cause why appropriate action including supersession should not be taken against them. 5.1 The Council of Management of BhSE submitted their reply vide letter dated October 8, 2002. In their reply they have stated as follows :- (i) The committee formed to enquire into complaints against the Executive Director has submitt....
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.... general meeting to be held on November 9, 2002. Subsequent to the adoption of the accounts of the exchange for the year 2000-01, the accounts for the years 2001-02 will be placed to the council for approval. (x) The conflict between the functionaries of the exchange was as a result of siphoning / abetting siphoning of funds of the exchange by office bearers and officers of the exchange. As a result of the Executive Director and Secretary being arrested and thereafter suspended, this conflict has come to nought. (xi) With respect to the sale of securities in favour of IFGL, the council is initiating both civil and criminal action. (xii) With regard to the housing loan, Shri Sanjay Mahapatra, Secretary (under suspension) has repaid his housing loan and the exchange is considering legal steps for recovery of housing loan availed by Shri Jay Sadany, Executive Director (under suspension). 5.2 In view of the above, the Council of Management requested SEBI not to take any action including supersession of the council of management. As per the request of the Council of Management of the Stock Exchange, an opportunity to be heard before the Chairman was granted to them on Novemb....
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....at the Hon'ble High Court of Orissa has passed severe strictures against Shri M N Ray. Therefore, it cannot be said that cordial relation among the functionaries of the stock exchange and credibility of the members of the Council of Management has been restored. 7.2 I find that the stock exchange has failed to adopt the accounts for the years 2000-01 and 2001-02. The failure to adopt the accounts indicates financial mis-management. The explanation submitted by the exchange in this regard that the accounts shall be adopted at the Annual General Meeting to be held on November 9, 2002 has not been substantiated by action since no statements in this regard has been forwarded to SEBI. Further, accounts for the year 2001-02 are yet to be adopted. 7.3 I find that no effective steps have been taken by the Council of Management with regard to the irregularities in payments made to M/s Indian Finance Guarantee Ltd. The explanation of the council that the matter has been taken up with IFGL for making good the shortfall and that the council is initiating both civil and criminal action, is not satisfactory. The irregularities were noticed in the year 1999 and were also mentioned in th....