The Calcutta High Court vacated an interim stay order on a contract termination notice issued by the National Stock Exchange (NSE) to Calcutta Stock Exchange (CSE).

The Calcutta Stock Exchange (CSE) had filed a writ petition to challenge the NSE’s termination of an agreement under the Securities Contracts (Regulation) Act. The Single Bench of the High Court stayed the notice of termination. In appeal, the Division Bench held that the interim order was contrary to the Act. The Calcutta Stock Exchange's apprehension that if the interim order was vacated the appeal filed by them would be rendered virtually infructuous was unfounded, the Bench added.

The Bench headed by Chief Justice T.S. Sivagnanam and comprising Justice Hiranmay Bhattacharyya observed, “Furthermore, the learned Single Bench opined that SEBI has acquiesced to the acts of the NSE as well as the writ petitioners, treating the agreement to be a continuing one, for quite a long period, at least for about two years after the year 2021 when it last expired, without taking any action in that regard. In view of such, the concept of acquiescence cannot be brought in, more particularly, when there is a clear statutory mandate that prior approval of SEBI is required for carrying on such agreement”.

Senior Advocate Abhrajit Mitra instructed by Nyaayam Associates appeared for the NSE (Appellant), Advocate Deepan Kumar Sarkar appeared for the CSE, and Senior Advocate Tilak Bose appeared for the Securities and Exchange Board of India (SEBI).

The NSE filed an intra-court appeal against an order granted in a writ petition filed by the CSE. The CSE had filed the writ petition challenging a communication from NSE dated July 18, 2023, in which CSE was notified of its withdrawal from an arrangement made under Section 13 of the Securities Contracts (Regulation) Act, 1956 (Act). The Court had granted a stay of the notice. Aggrieved, the NSE approached the High Court challenging the order.

The Cout noted that the National and Calcutta Stock Exchanges agreed on September 28, 2011, allowing CSE members to trade on NSE's platform. The agreement was subject to SEBI's approval and was automatically renewed for five-year periods. The agreement expired in October 2021 and was not renewed.

The issue, in this case, was whether an interim order could be granted that would have the effect of nullifying the statutory provisions of Section 13 of the Act. The Court noted that the Act provides that contracts in securities can only be entered into between members of a recognized stock exchange or through or with such members.

The Court noted that the CSE and the NSE had agreed to allow contracts in securities to trade on the NSE platform in securities listed and permitted on the NSE and to provide nationwide access to CSE-listed securities. However, the agreement had not been renewed after October 2021.

Accordingly, the Court allowed the Appeal and set aside the impugned order.

Cause Title: National Stock Exchange of India Limited & Anr. v The Calcutta Stock Exchange Limited & Ors.

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