Order under Section 4b (6) read with Section 4b (7) of the Securities Contracts (Regulation) Act, 1956 in the matter of the Magadh Stock Exchange Association (Corporatisation and Demutualisation) Scheme, 2005. - S.O. No.1316(E) - SEBI/MRD/49401/2005 - SEBI

SECURITIES AND EXCHANGE BOARD OF INDIA NOTIFICATION Mumbai, the 15th September, 2005 S.O. 1316 (E). 1.0 The Magadh Stock Exchange Association (hereinafter referred to as the MSEA ), registered under the Companies Act, 1956 as a company limited by guarantee, is a recognised stock exchange having its registered office at 9th Floor, Ashiana Plaza, Budh Marg, Patna-800001. It is required to be corporatised and demutualised in accordance with the provisions of the Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as the SCRA ). 2.0 MSEA, vide its letter dated January 28, 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 letter dated May 25, 2005 advised MSEA to submit a revised scheme taking into account the provisions of the BSE (Corporatisation and Demutualisation) Scheme, 2005, which may be relevant and applicable to MSEA. 3.0 Thereafter, MSEA, vide its letter dated June 07, 2005 submitted a revised scheme after taking into account the provisions of the BSE scheme. SEBI made enquiries from MSEA through a meeting on June 30, 2005. Based on the discussions during the said meeting, MSEA desired to resubmit the scheme. Accordingly, MSEA, vide its letter dated August 10, 2005 submitted a further revised scheme (hereinafter referred to as the scheme ) for its corporatisation and demutualisation to SEBI for approval in accordance with the provisions of the SCRA. 4.0 The Scheme, inter alia, provides for the conversion/ re-registration of MSEA as a company limited by shares in the name and style of Magadh Stock Exchange Limited , segregation of ownership and management from the trading rights, 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 corporatisation and demutualisation of MSEA. 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 MSEA 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 rights to amend, alter or modify the Scheme in the interest of the trade and in the public interest and in furtherance of the objectives of the corporatisation and 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/49401/2005] M. DAMODARAN, Chairman Encl: Annexure A Annexure A THE MAGADH STOCK EXCHANGE ASSOCIATION (CORPORATISATION AND DEMUTUALISATION) SCHEME, 2005 1. Title and Commencement 1.1 This Scheme shall be called the Magadh Stock Exchange Association (Corporatisation and 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 SCRA ) 1.3 Magadh Stock Exchange Association (hereinafter referred to as MSEA ) shall be corporatised and 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 MSEA 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 of MSEA, 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 Magadh Stock Exchange Limited. 2.3 Magadh Stock Exchange Association (MSEA) means the company limited by guarantee registered under section 25 of the Companies Act, 1956, having its registered office at 9th Floor, Ashiana Plaza, Budh Marg, Patna-800001, and recognised as a stock exchange under the SCRA and which shall be converted/ re-registered as a company limited by shares in pursuance of clause 3 of this Scheme in the name and style of Magadh Stock Exchange Limited (hereinafter referred to as MSEL ). 2.4 Member means a person who is a member of MSEA on the day preceding the date of conversion/ re-registration as per the Register of Members maintained by it. 2.5 Shareholder means a person who holds any equity share(s) of MSEL. 2.6 Trading Member means a stock broker of MSEL 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 Securities and Exchange Board of India 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, Rules, Bye-Laws and Regulations of MSEA, shall have the same meanings respectively assigned to them in the above mentioned Acts, Memorandum and Articles of Association, Rules, Bye-laws and Regulations. 3. Conversion / Re-registration 3.1 MSEA shall convert / re-register itself, prior to Due Date, as a company limited by shares under section 12 of the Companies Act, 1956, in the name and style of Magadh Stock Exchange Limited . 3.2 The Members, as may be identified by the Governing Board of MSEA, shall each subscribe to and pay for 5,000 fully paid up equity shares of Re.1/- each for cash at par of MSEL, for the purpose of its conversion / re-registration. 4. Governing Board 4.1 The first Governing Board shall comprise of such of the Members of the Governing Board of MSEA on the date of conversion / re-registration as are named as first directors in the Articles of Association of MSEL, subject to the condition that the representatives of the Members do not exceed one-fourth of the total strength of the Governing Board. 4.2 The Governing Board, on and from Due Date, shall be constituted in accordance with the provisions of the Article of Association of MSEL 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. 4.3 Notwithstanding anything contained in clause 4.2, SEBI may nominate directors on the Governing Board as and when deemed fit. 5. Allotment of Shares 5.1 Every Member or his nominee, as the case may be (other than the Members who have subscribed to the equity shares of MSEL pursuant to clause 3.2 above) shall be entitled to 5,000 fully paid-up equity shares of the face value of Re.1/- each, for cash at par of MSEL. 5.2 MSEL shall allot the equity shares to the entitled Members or their nominees, as the case may be, as referred to in clause 5.1, by the Due Date: Provided that the allotment to a Member suspended by MSEA shall be held in abeyance till the suspension continues. 5.3 The invitation to subscribe to and the offer, issue and allotment of equity shares of MSEL pursuant to this clause shall not be considered as being an invitation, offer, issue or allotment to the public. 6. Listing of Shares MSEL may at any time list its securities on any recognised stock exchange. 7. Demutualisation 7.1 A Trading Member may or may not be a Shareholder. 7.2 A Shareholder may or may not be a Trading Member. 8. Trading Rights 8.1 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. 8.2 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 broker under the SEBI (Stock Broker and Sub- Brokers) Regulations, 1992, within 3 months from the Due Date. 8.3 After the Due Date, a person desirous of becoming a Trading Member shall be admitted if he complies with requirements and brings in specified fees and deposits as specified in the Rules, Bye-laws and Regulations of MSEL. 8.4 MSEL 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 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. 8.5 A Trading Member may surrender his membership to MSEL in the manner specified in the Rules, Bye-laws and Regulations of MSEL. 8.6 Irrespective of the date or mode of acquisition of trading right, the Trading Members shall have uniform rights and privileges: Provided that MSEL may, with the prior approval of SEBI, grant additional privileges to those Trading Members who were Members on the day preceding the date of conversion/ re-registration. 8.7 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 trading before the Due Date. 8.8 Trading Members shall be bound by all obligations and liabilities towards their clients and constituents, SEBI, MSEA and other authorities or other persons arising out of or under any act, omission or contract or law, notification, order, direction, etc. while trading before the Due Date. 9. Shareholding Rights 9.1 MSEL 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. 9.2 On and from the Appointed Date, MSEL shall ensure that public other than shareholders having trading rights continuously hold at least 51% of equity shares. 9.3 On and from 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 MSEL. 10. Memorandum and Articles of Association, etc. 10.1 The Memorandum and Articles of Association, Rules, Bye-Laws and Regulations of MSEA on the day preceding the Due Date shall, unless contrary to or inconsistent with or excluded by this Scheme, apply to it on and from the Due Date. 10.2 MSEL shall incorporate the provisions of this Scheme appropriately in its Memorandum and Articles of Association, Rules, Bye-Laws and Regulations on or before the Due Date. 10.3 The Memorandum and Articles of Association, Rules, Bye-Laws and Regulations of MSEL 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. 11. Transfer of Clearing and Settlement Functions 11.1 MSEL shall, within two years of the Due Date, subject to the prior approval of SEBI, transfer the duties and functions of its clearing house to a clearing corporation recognised under SCRA. 11.2 Until the duties and functions of the clearing house are transferred as provided in clause 11.1, the clearing and settlement functions in relation to trading on MSEL shall be carried out by the clearing and settlement mechanism as used by MSEA at present or in such other manner as the Governing Board may determine. 12. Utilisation of Assets and Reserves 12.1 MSEL shall not do anything contrary to the provisions of section 4B (3) of the SCRA. 12.2 Without prejudice to the generality of the provisions in clause 12.1, MSEL shall not use the assets and reserves of MSEA 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 for the business operations of stock exchange. 13. Compliance with this Scheme 13.1 MSEA and MSEL, as the case may be, shall ensure compliance with the provisions of this Scheme at all times and shall not do anything contrary to the provisions of this Scheme. 13.2 Without prejudice to the generality of the provisions in clause 13.1, MSEA and MSEL, as the case may be, shall continuously comply with the provisions in clauses 4.2, 7, 8.3, 8.4, 8.5, 8.6, 9.2, 9.3, 10.3 and 12. 13.3 MSEA and MSEL, as the case may be, shall report compliance with the provisions of this Scheme in such manner as may be required by SEBI from time to time. 14. Removal of Difficulties If any difficulty arises in giving effect to the provisions of this Scheme, SEBI may, at the written request of MSEA or MSEL, as the case may be, relax any of the provisions of this Scheme. *************