Exit Order in respect of Bombay Commodity Exchange Limited.

1. Bombay Commodity Exchange Limited (hereinafter referred to as “BCEL” and formerly known as “The Seed Traders Association Limited”, “Bombay Oilseeds Exchange Limited” and “Bombay Oilseeds and Oils Exchange Limited”), was granted recognition on a permanent basis in respect of forward contracts in all varieties of castor seed, as a commodity derivatives exchange by the Government of India under Section 6 of the Forward Contracts (Regulation) Act, 1952 on May 23, 1956, vide notification no. 5/9/56-I.P. The volume of the trade during 2013-14 was 0.14 lakh tonnes in castor seed, which was the only commodity being traded. However, there was no trading on the platform of BCEL since December 13, 2013. Further, although more than one year had elapsed from the date of suspension of trade but erstwhile Forward Markets Commission (hereinafter referred to as “FMC”) did not have any information as to whether BCEL had any plan for revival of trading and if so, whether any credible revival plan has been formulated to resume trading in immediate future.

2. The erstwhile FMC vide its Circular No. 9/1/2014-MKT-I (Vol-II), dated May 19, 2015, had directed commodity derivatives exchanges, who have suspended their trading operations, to refund clients margin money, resolve client disputes, refund members’ deposits and in case any exchange fails to revive their trading operations within 12 months from the date of suspension of trading, FMC had specified the steps that shall be initiated to cancel their registration and lead to withdrawal of recognition of such exchanges.

3. The erstwhile FMC vide its letter dated June 30, 2015 issued a show cause notice to BCEL wherein the Exchange was called upon to explain as to why registration granted to the Exchange by the Commission should not be cancelled and why the Commission should not recommend to the Central Government for withdrawal of recognition granted under Section 6 of FCRA. However no satisfactory explanation was received from BCEL. Subsequently,

Exit Order in respect of Bombay Commodity Exchange Limited the erstwhile FMC vide its letter dated July 29, 2015 recommended to the Ministry of Finance that the permanent recognition granted to Bombay Commodity Exchange Limited, Mumbai may be withdrawn as per provision laid down under Section 7 of Forward Contracts (Regulation) Act, 1952.

4. Consequent to the Gazette Notification No. SO 2630 (E) dated September 24, 2015, delegating various powers including the power to withdraw recognition of a recognised association under the Forward Contracts (Regulation) Act, 1952 (hereinafter referred to as ‘FCRA’) to Securities and Exchange Board of India (hereinafter referred to as SEBI), the aforesaid circular dated May 19, 2015 was reviewed and modified vide SEBI Circular No. CIR/CDMRD/DEA/01/2016 dated January 11, 2016 (hereinafter referred to as ‘Exit Circular, 2016’). In terms of clause 4 of the Exit Circular, 2016, if there is no trading operation on the platform of any commodity derivatives exchanges for more than twelve months, then such exchange shall be liable to exit, as stated therein. Further, in terms of the above circular, the Regional Commodity Exchanges shall ensure that they have at least 5% of the nation-wide market share of the commodity, which is principally traded on their platform and in case of failure of meet the said criteria for 2 consecutive years, such exchange shall be liable to exit.

5. As per Section 28A(1) of the Finance Act, 2015, pursuant to the merger of FMC with SEBI, all recognised associations under FCRA are deemed to be recognised stock exchanges under the Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as ‘SCRA’) and hence BCEL is deemed to be a recognised stock exchange under the SCRA.

6. SEBI, vide letter dated February 12, 2016 informed BCEL that as there was no trading operation on the platform of BCEL, it shall be liable to exit in terms of paragraph 4 of the Exit Circular. Further, BCEL was inter-alia directed to comply with the provisions for valuation of assets and to provide detailed list of its assets and liabilities as on January 31, 2016. BCEL vide letter dated March 4, 2016 replied to SEBI that in its Board meeting held on March 4, 2016 it was decided to drop the word “Exchange” from its name and adopt to a suitably altered name. Vide letter dated August 18, 2016, BCEL has conveyed its decision to voluntarily surrender the recognition granted to BCEL as a deemed recognised stock exchange.

7. Accordingly, I proceed to deal with the exit request of the BCEL in terms of clause 7 of the Exit Circular, 2016. I note that as per the Exit Circular, 2016, inter alia, the following conditions are required to be complied with by the de-recognised/non-operational commodity derivatives exchanges for seeking exit: (a) Permission to distribute its assets subject to certain conditions as laid down in the Exit Circular, 2016 as well as the other guidelines that may be issued by SEBI, Government or any other statutory body from time to time.

(b) For the purpose of valuation of the assets of the commodity derivative exchange, a valuation agency appointed by SEBI shall submit its report. All the valuation charges shall be paid by the exchange.

(c) The quantum of assets for distribution will be available after payment of the following by the exchange: (i) Statutory dues including Income Tax; (ii) Transfer of Investor Protection Fund, or any such fund available with the exchange to SEBI Investor Protection and Education Fund (hereinafter referred to as the 'IPEF'); (iii) The concerned exchange shall pay the following dues to SEBI:- • Dues outstanding to SEBI and the annual regulatory fee; • The outstanding registration fees of brokers/trading members of such de-recognised exchanges as specified in the SEBI (Stock Brokers and Sub Brokers) Regulations, 1992, till the date of such de-recognition; • In case of any shortfall in collection of dues of the brokers to SEBI, the exchange will make good the shortfall; (iv) Refund of deposit (refundable) to the stock brokers including their initial contribution/deposit to Settlement Guarantee Fund/Trade Guarantee Fund (SGF/TGF).

(d) Contribution of up to 20% of its assets (after tax) towards IPEF taking into account, inter alia, the governance standards of the exchange and estimation of future liabilities.

(e) The concerned commodity derivative exchange shall set aside sufficient funds in order to provide for settlement of any claims, pertaining to pending arbitration cases, arbitration awards, not implemented, if any, liabilities/claims of contingent nature, if any, and unresolved investor complaints/grievances lying with it.

8. I have considered all relevant documents available on record for the purpose of considering the case of exit of BCEL.

9. In terms of condition mentioned in paragraph 6(b) above, SEBI in consultation with BCEL on April 28, 2016 appointed M/s. Jain Tripathi & Co., as the valuation agency for verification and valuation of assets and liabilities of BCEL. The valuation agency submitted its final report to SEBI on June 14, 2016.

10. With respect to condition mentioned in para 6 (c)(iv) above and as observed by valuation agency, BCEL has mentioned that Prime Commodities Clearing Corporation of India Ltd (hereinafter referred to as ‘PCCCI’) is acting as a clearing house for the BCEL and in which BCEL holds 43.40% equity shares. An amount of `15,05,000 is lying with the PCCCI as deposits received from trading members of Exchange. This deposit by the PCCCI is repayable, if demanded, on de-recognition of the Exchange.

11. With respect to the compliance by BCEL of conditions specified in the Exit Circular, 2016 and settlement of its liabilities observed by the valuation agency, it is important to note the following: (a) With respect to condition mentioned in para 6(c)(ii) above, BCEL did not have the Investor Protection Fund or any such fund.

(b) With respect to para 6(c)(iii) above, BCEL has paid the outstanding annual regulatory fees amounting to `50,000 for the financial year 2016-17, respectively, vide cheque no. 391888, dated July 12, 2016, drawn on Central Bank of India, Mandvi Branch, Mumbai. Further, there is no outstanding registration fees dues of brokers/sub-brokers.

(c) With respect to condition mentioned in para 6(c)(iv) above, BCEL has given an undertaking dated August 18, 2016 (hereinafter referred to as the "undertaking") that they will not distribute any assets before clearing the liabilities in that regard.

(d) With respect to condition mentioned in para 6(d) above, BCEL has contributed an amount of `25,00,000 vide Real Time Gross Settlement (RTGS) dated August 20, 2016.

(e) With respect to condition mentioned in para 6(e) above, BCEL has submitted in its undertaking that there are no arbitration disputes/investor complaints pending and that it will clear all the liabilities before distribution of assets of the exchange.

(f) With respect to its other liabilities as pointed out by the valuation agency, BCEL in its undertaking has stated the extent of discharge of liabilities and has further undertaken to clear the said liabilities before the distribution of its assets. It has also undertaken to clear any additional amount that may become liable to be paid on account of liabilities stated in the undertaking.

(g) BCEL in its undertaking has stated that there are no cases lodged against it/ pending before various legal fora.

(h) With respect to para 9 above and vide its undertaking, BCEL has undertaken to ensure refund of all deposits of trading members lying with PCCCI and has undertaken to clear any additional amount that may become liable to be paid on account of PCCCI.

12. From the valuation report and undertaking of BCEL, it is observed that all the known liabilities have been brought out and that there is no other future liability that is known as on date. I note that BCEL has substantially complied with the conditions contained in the Exit Circular, 2016 subject to its undertakings. Therefore, I am of the view that it is a fit case to allow exit to BCEL in terms of clause 7 of the Exit Circular, 2016.

13. I, therefore, in exercise of the powers conferred upon me by virtue of Section 19 read with provisions of Section 11(1), Section 11(2) (j) of the Securities and Exchange Board of India Act, 1992 and Sections 4, 5 and 12A of the Securities Contracts (Regulation) Act, 1956 allow the exit of Bombay Commodity Exchange Limited as a stock exchange and hereby direct it to:- (a) comply with its tax obligations under Income Tax Act, 1961; (b) comply with the undertakings given by it to the Securities and Exchange Board of India; (c) comply with other consequential conditions of Exit Circular, 2016; and (d) change its name and not to use the expression “Exchange” or any variant of this expression in its name and to avoid any representation of present or past affiliation with the stock exchange, in all media.

14. The order shall come into force with immediate effect. A copy of this order shall also be forwarded to the Income Tax Authorities, the Ministry of Corporate Affairs and the State Government of Maharashtra intimating the exit of Bombay Commodity Exchange Limited and for appropriate action at their end as per applicable laws.

Sd/- DATE: October 28th, 2016 RAJEEV KUMAR AGARWAL PLACE: MUMBAI WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA