Order under Section 4b (6) read with Section 4b (7) of the Securities Contracts (Regulation) Act, 1956 in the matter of the Ludhiana Stock Exchange Association Limited (Demutualisation) Scheme, 2005. - S.O. No.1317(E) - SEBI/MRD/49403/2005 - SEBI

SECURITIES AND EXCHANGE BOARD OF INDIA NOTIFICATION Mumbai, the 15th September, 2005 SECURITIES AND EXCHANGE BOARD OF INDIA, MUMBAI S. O. 1317(E). 1.0 The Ludhiana Stock Exchange Association Limited (hereinafter referred to as the LSE ), registered under the Companies Act, 1956 as a company limited by shares, is a recognised stock exchange having its Registered Office at Feroze Gandhi Market, Ludhiana. 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 LSE, vide its letter dated January 17, 2005, submitted a Scheme for its 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 LSE to submit a revised Scheme, after taking into account the provisions of the BSE (Corporatisation and Demutualisation) Scheme, 2005, which may be relevant and applicable to LSE. 3.0 Accordingly, LSE, vide its letter dated June 21, 2005, submitted a revised Scheme for its demutualisation, after taking into account the provisions of the BSE (Corporatisation and Demutualisation) Scheme. SEBI made enquiries and obtained further information from LSE through discussions with it. The Scheme was discussed in a meeting with the LSE on July 8, 2005. Based on the discussions during the said meeting, LSE desired to submit a further revised Scheme. Accordingly, LSE, vide its letter dated August 30, 2005, submitted a further revised Scheme for its demutualisation (hereinafter referred to as the Scheme ), for approval to SEBI. 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 LSE. 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 LSE 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/49403/2005] M. DAMODARAN, Chairman Encl: Annexure A Annexure - A THE LUDHIANA STOCK EXCHANGE ASSOCIATION LIMITED (DEMUTUALISATION) SCHEME, 2005 1. Title and Commencement.-- 1.1 This Scheme shall be called The Ludhiana Stock Exchange Association Limited (Demutualisation) Scheme, 2005 (hereinafter referred to as this Scheme ) and 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 ). 1.2 The Ludhiana Stock Exchange Association Limited (hereinafter referred to as LSE ) 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 LSE 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 LSE. 2.3 Member means a person who is a member of LSE 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 LSE on or after the Due Date. 2.5 The Ludhiana Stock Exchange Association Limited (LSE) means the Company limited by shares, registered under the Companies Act, 1956 vide registration no 16-4696, having its Registered Office at Feroze Gandhi Market, Ludhiana, which has been recognised as a stock exchange under the SCRA. 2.6 Trading Member means a stock broker of LSE 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 LSE, shall have the same meaning respectively assigned to them in the above mentioned Acts, memorandum and articles, rules, bye-laws and regulations. 3. Memorandum and Articles of Association, etc.-- 3.1 LSE shall incorporate the provisions of this Scheme appropriately in its memorandum and articles of association and the rules, bye-laws and regulations on or before the Due Date. 3.2 The memorandum and articles of association and the rules, bye-laws and regulations of LSE 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. 4. Governing Board.-- 4.1 On and from the Due Date, the Governing Board shall be constituted in accordance with the provisions of the Articles of Association of LSE 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. 4.2 Notwithstanding anything contained in clause 4.1, SEBI may nominate directors on the Governing Board as and when deemed fit. 5. Listing of Shares.-- The LSE may at any time, list its securities on any recognised Stock Exchange. 6. Demutualisation.-- 6.1 A Trading Member may or may not be a Shareholder. 6.2 A Shareholder may or may not be a Trading Member. 7. Trading Rights.-- 7.1 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. 7.2 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 SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 within 3 months from the Due Date. 7.3 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 rules, bye-laws and regulations of LSE. 7.4 LSE 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. 7.5 A Trading Member may surrender his membership to LSE in the manner specified in the rules, bye-laws and regulation of LSE. 7.6 Irrespective of the date or mode of acquisition of trading right, the Trading Members shall have uniform rights and privileges. 7.7 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. 7.8 Trading Members shall be bound by all obligations and liabilities towards their clients and constituents, SEBI, LSE 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. 8. Shareholding Rights.-- 8.1 A Member shall become a shareholder on the Due Date: Provided that the shares in respect of a defaulter member, vested with the defaults committee of LSE, shall be dealt with as forfeited shares under the Companies Act, 1956. 8.2 LSE 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 subsection (8) of Section 4B of the SCRA. 8.3 On and from the Appointed Date, LSE shall ensure that public other than shareholders having trading rights continuously holds at least 51 % of equity shares. 8.4 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 LSE. 9. Transfer of Clearing and Settlement Functions.-- 9.1 LSE 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 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 LSE, shall be carried out by the clearing and settlement mechanism as used by LSE at present or in such other manner as the Governing Board may determine. 10. Utilisation of Assets and Reserves.-- 10.1 LSE 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, LSE 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 stock exchange. 11. Compliance with this Scheme.-- 11.1 LSE 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 clause 11.1, LSE shall continuously comply with the provisions in clauses 3.2, 4.1, 6, 7.3, 7.4, 7.5, 7.6, 8.3, 8.4 and 10. 11.3 LSE 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 LSE, relax any of the provisions of this Scheme.