Order in respect of Representation filed by Mr. Jaswinder Singh Kapoor

In respect of Representation filed by Mr. Jaswinder Singh Kapoor 1.1 Mr. Jaswinder Singh Kapoor (“JaswinderKapoor”), the proprietor of M/s D.S. Kapoor & Co., a registered sub-broker ofM/s LSC Securities Ltd. (earlier known as M/s L.S.E. Securities Ltd.)(LSCSL) filed a Writ Petition before the Hon’ble High Court of Punjab and Haryana, in which he inter alia requested the Hon’bleHigh Court: “to issue writ of mandamus directing SEBI to consider the grievance already raised by the Petitioner [JaswinderKapoor] by way of self-contained representation dated October 30, 2015 and to decide the same at an early date by passing an appropriate Order”.

1.2 The Hon’ble High Court vide Order dated November 15, 2016, which was modified by Order dated January 20, 2017 directed SEBI to consider the grievance raised by JaswinderKapoor(regarding his suspension of his trading rights by LSCSL and M/s Ludhiana Stock and Capital Limited(LSACL), in his representation by passing an appropriate Order thereon strictly in accordance with law, within a period of three months from the date of the Order.

Brief Background-

2.1 Jaswinder Kapoor, Proprietor of M/s D.S. Kapoor & Co. is a sub broker affiliated to the Broker, LSCSL.LSCSL is a subsidiary of M/s Ludhiana Stock and Capital Ltd. (erstwhile Ludhiana Stock Exchange Ltd.). Ludhiana Stock Exchange Ltd.was de-recognized by SEBI vide exit order dated December 30, 2014. Thereafter, the said stock exchange rechristened itself as a holding companyviz., M/s Ludhiana Stock and Capital Limited(“LSACL”). In terms of SEBI Exit Circular dated May 30, 2012, (which facilitates exit of de-recognized/non-operational stock exchanges where annual turnover is less than Rs.1000 crores), the exiting exchange (Ludhiana Stock Exchange), now known as LSACLdeclared LSCSLasits functional subsidiary,which sought corporate membership of the National Stock Exchange of India Limited (“NSE”) and the BSE Limited (“BSE”) to provide trading facilities to all members of the Ludhiana Stock Exchange Ltd. Accordingly, the members of erstwhile Ludhiana Stock Exchange Ltd. (now LSACL) including Jaswinder Kapoor (M/s D.S. Kapoor & Co.) are now their sub brokers and registered with SEBI for trading on NSE/ BSE platforms.

2.2 Securities and Exchange Board of India (“SEBI”),Northern Regional Office (“NRO”) received complaint dated October 30, 2015 (addressed to NSE), and complaint dated November 03, 2015 filed by Jaswinder Kapoor wherein the following are stated:

• “I filed a complaint against Mr. Jaspal Singh, who is presently Chairman of LSCSL and Vice Chairman of M/s Ludhiana Stock Exchange Ltd. (Now known as LSACL)for illegally casting vote, as a proxy of a dead person. By way of proxy Mr. Jaspal Singh had got all the members of Board of Directors, as per his choice including the Public Representatives, who does not have any say at the Board, • Since I did not buzz to his illegal activities & tactics, he misused his official position for pressurizing the undersigned to withdraw the case by fabricating a false Complaint against me shown to have been signed by different Members /Sub brokers. In fact, this complaint was entirely made by forging the signatures in order to pressurize the undersigned to withdraw the case filled by in Criminal Court, as stated above, • That vide my letter dated 31.8.2015, I asked for the copy of letter duly signed by the Members. That in response to the same M/s. Ludhiana Stock Exchange Ltd ( now LSACL) vide its letter (LSACL/580) dated 3.9.2015 refused to provide the copy of complaint duly singed by the so-called Sub Brokers, as the signatures were forged, • That Mr. Jaspal Singh is not providing me the names of the complainants and original copy of complaint, which speaks well itself about the conspiracy hatched by him.

I suspect most of the signatures of the complainant members are either non-members or have been forged by Mr. Jaspal Singh who is habitual in doing so for a long period, • That the complaint is totally illegal & has no meaning, as there is no specific complaint attached, which has been sent by anybody to take the undersigned to any Authority. But, in fact, the Sub Brokers of M/s. Ludhiana Stock Exchange Ltd, ( now LSACL) in its building through self & through unauthorized persons are dealing in illegal activities including Dabba Trading, Profit giving & bogus billing. The fact has been brought to the notice of general public by the press, as on some business premises, surveys were conducted, this fact was reported in the Press and not confronted by the Stock exchange that there was long term profit, which is surrendered by them, • LSACLhas illegally suspended my trading rights and my trading terminal was deactivated by the stock broker - LSCSL, • That M/s. Ludhiana Stock Exchange Limited (now LSACL) has no right to suspend my trading rights, as it is not a Stock Exchange, therefore letter is totally illegal, biased & un-enforceable under the law.

Moreover, the Stock Exchange building belong to the Members of the Company, as there is lessor & lessee relationship between the Company & the persons sitting in the rooms. Moreover, I am a shareholder of the Company. My entry cannot be barred in the registered office of the Company, as shareholder & Investor and a Sub Broker. I have full right to enter into any Chamber & the action is totally illegal, • That my suspension of trading for a period of six months and suspension of Trading Terminal with immediate effect by LSCSLis also illegal, violation of fundamental rights, enshrined under Constitution of India, as they have snatched my bread & butter and forced me not to do the profession, as per my own choice and this company has no right to suspend any person from trading, • In light of the above, it is humbly submitted that your kind intervention is required in the matter to save the undersigned from the harassment by Mr. Jaspal Singh, restore the trading rights and lift ban on entry to the premises of the company so that my clients and myself are saved from further suffering, • Further, I urge upon you to refer the matter to CBI and suspend LSCSLfrom Brokership of National Stock Exchange of India (NSEIL), so that in future the Board is not hijacked by a single person, • LSCSLhas been misrepresenting its name by mentioning the same as M/s LSE Securities Ltd. as against M/s L.S.E Securities Ltd. mentioned in the certificate of incorporation issued by ROC”.

2.3 Pursuant to the above, SEBI vide letter dated November 24, 2015 sought comments from LSCSL.Vide letter dated December 07, 2015, LSCSLsubmitted their reply. The key submissions are summarized below:

i. “A complaint against Jaswinder Kapoor was received by LSCSLand its Holding Company – LSACL from certain Members, ii. The said complaint was considered by the Board of Directors of LSACL(Holding Company) and LSCSL in their meetings held on 7.10.2015 and 12.10.2015, respectively. It was decided in the said meeting to suspend the trading rights and to deactivate his trading terminals for a period of 6 months, iii. The act of suspension of trading right of Jaswinder Kapoor by the Board of Directors of LSCSL was legal, valid and binding on him since it was within the rights of LSCSL whether to continue business with any Broker/ Authorised Person or not, iv. Before taking the decision with regard to suspension of Trading and deactivation of Trading terminals of Jaswinder Kapoor, he was provided opportunities by LSCSL vide its letters dated 29.09.2015 and 01.10.2015 for making submissions, if any. However, Jaswinder Kapoor did not appear before the Board, v. Jaswinder Kapoor had filed a similar complaint with NSE in response to which reply was submitted by LSCSL vide letter dated 17.11.2015 subsequent to which the complaint had been closed by NSE on 01.12.2015, vi. With respect to misrepresentation by LSCSL, the Corporate Identification Number (CIN) allotted by MCA to LSCSL[erstwhile L.S.E. Securities Ltd.] is U67120CH2000PLC023244 against the company number – 16-23244. The said CIN is being used by LSCSLand hence there is no misrepresentation”.

2.4 Thereafter, SEBI vide letter dated February 17, 2016 sought the following documents/information from LSCSL:

i. Copy of the agreement with the sub-broker (Jaswinder Kapoor), ii. Copy of the complaint received from certain members bearing the signatures of the said members along with their names and other relevant details, iii. Reasons and rationale for suspension of the sub broker, iv. Copy of the signed minutes of the meetings of the Board of Directors of LSCSLand its Holding Company (LSACL) and v. Copies of communication to the exchange(s) with respect to the suspension of trading of the sub broker (Jaswinder Kapoor).

2.5 In response, LSCSL vide letter dated February 24, 2016 submitted as under:

a. Jaswinder Kapoor had been filing false complaints with various Govt. Departments against LSCSL and itsmembers regarding illegal DabbaTrading and Hawala Transactions, b. Surprise inspections of 14 sub brokers of LSCSL were conducted by NSE and BSE. But we have not received any communication from these Exchanges with regard to any abnormality observed by them during inspection.

2.5.1 Vide the aforesaid letter, LSCSL also furnished the copies of following documents:

i. Agreement entered into between LSCSL and Jaswinder Kapoor, ii. Complaint received from the Members, iii. Letters dated September 29, 2015 and October 01, 2015 sent to Jaswinder Kapoor granting him the opportunity to make submissions, iv. Certified extracts of Minutes of meetings of the Board of Directors of LSCSL, v. Correspondence with NSE.

2.6 Thereafter, SEBI vide separate letters dated March 02, 2016 advised NSE and BSE to look into the matter and submit their comments. NSE vide letter dated March 14, 2016 informed the following:

i. “On receipt of complaint from Jaswinder Kapoor, the matter was taken up with LSCSL, ii. Subsequently, post receipt of comments from LSCSL vide letter dated 1.12.2015, the complainant was informed that the complaint raised by Jaswinder Kapoor pertains to dealings between him and the Broker (LSCSL) and the matter may be sorted out between them.Accordinlgy, the complaint was treated as closed, iii. With respect to misrepresentation of name, it was submitted by LSCSL [erstwhileL.S.E Securities Ltd.] that pursuant to rectification in the master data of their company, name with MCA on its website has been changed to M/s L.S.E. Securities Ltd. [earlier name] from M/s LSE Securities Ltd.” iv. Additionally, in the certificate issued by SEBI to the Broker in the F&O and CD segments, the name appears as M/s LSE Securities Ltd. The Broker has applied for name change on SEBI certificates in F&O and CD segments also”.

2.7 BSE vide letter dated April 01, 2016 informed that Jaswinder Kapoor is not a sub broker affiliated to LSCSL, as trading member of BSE. Hence, the complaint cannot be entertained by BSE.

2.8 Thereafter, SEBI vide letter dated April 06, 2016 advised NSE to inform Jaswinder Kapoor regarding the recourse of arbitration available to him, in terms of Point no.7 of the SEBI prescribed model agreement. Accordingly, NSE vide letter dated April 12, 2016 advised Jaswinder Kapoor to avail the arbitration process available to him.

2.9 Subsequently, Jaswinder Kapoor, without availing the arbitration, filed a Writ Petition before the Hon’ble High Court of Punjab and Haryana requesting the Hon’ble Court to direct SEBI to look into his complaints against LSCSL and LSACL. The Hon’ble Court vide exparte Order dated November 15, 2016 inter alia directed: “..without expressing any opinion on the merits of the case, lest it should prejudice the rights of the parties, present writ petition is disposed of with a direction to the Chairman, Securities and Exchange Board of India, to look into the matter, consider grievance raised by the petitioner in his representation dated October 10, 2015 and decide the same at an early date, by passing an appropriate Order thereon strictly in accordance with law, but in any case within a period of three months from the date of receipt of certified copy of this Order.” 2.10 Thereafter, SEBI filed an Application before the Hon’ble Court inter-alia, requesting: “the order dated 15.11.2016 may kindly be modified to the limited extent that SEBI shall consider the grievances raised by the Petitioner and pass appropriate order thereon in accordance with lawand to extend the time period of compliance of the order dated 15.11.2016 by four weeks”. The Hon'ble High Court vide Order dated January 20, 2017 allowed modification of application to the extent that “instead of word Chairman, Whole Time Member may be recorded” and also granted further extension of 3 months to pass order in the matter from the date January 20, 2017.

2.11 In the meanwhile, SEBI vide letter dated January 19, 2017advised JaswinderKapoor and other parties viz.,LSCSL, LSACL and NSE to file their submissions along with supporting documents with respect to the issues/allegations raised by JaswinderKapoor.

2.12 Pursuant to this, Jaswinder Kapoor (through his counsel vide letter dated January 30, 2017), LSCSL (vide letter dated February 06, 2017), LSACL (vide letter dated February 06, 2017) and NSE (vide letter dated January 27, 2017) filed their replies.

2.13 Thereafter, an opportunity of personal hearing was granted by me to all the four person/entities (Jaswinder Kapoor, LSCSL, LSACL and NSE) on April 06, 2017. Subsequent to this, JaswinderKapoor vide e-mail dated March 30, 2017 requested for hearing to be held in New Delhi as he was not in a position to travel to Mumbai. Considering his request, the hearing was scheduled in New Delhi at SEBI-NRO Office on April 03, 2017. All the four entities appeared before me on the said date in SEBI-NRO Office at New Delhi and made their respective submissions. During the course of the hearing, LSCSL furnished copies ofthe complaints dated August 20, 2015 and September 11, 2015 (signed by more than 70 members) stated to have been filed by the members of LSCSL against Jaswinder Kapoor.

2.13.1 The details of the replies (both written and oral) filed by the entities are as under:

A. Jaswinder Kapoorvide letter dated January 30, 2017inter alia submitted as under:

i. “I became a sub broker of LSCSLon April 22, 2000. The trading rights were suspended by LSCSL andLSACL vide order dated October 14, 2015 and subsequently the sub brokership was terminated vide order dated April 18, 2016, ii. I was registered with SEBI vide registration No.INS231317111/23-10870 dated 22.04.2004 and the said certificate contained the condition that it shall be valid till it is suspended or cancelled in accordance with the Regulations, iii. As per practice, it was incumbent uponLSACLto issue a certificate of trading rights, though I was exercising the trading rights still my suspension, iv. Reasons behind action against me was personal vengeance since (25.01.2013) I filed a private criminal complaint against Shri JaspalSingh (the present chairman of LSCSLwho is also the Vice President of LSACL), about use of fake proxy of a dead person. The said complaint is pending in the court of ACJM, Ludhiana. The office of both the Companies did not take any action so far in the matter, v. That in the meantime, the undersigned had filed criminal cases in the Court of Sh. Ashish Thathai, JMIC, Ludhiana regarding fake proxy u/s 420, 465, 467, 468, 471, 120-B Indian Penal Code (IPC) against Mr. Jaspal Singh, Ex-Director, LSACL(erstwhile Ludhiana Stock Exchange Limited) and Mr. SatishNagpal, Director, LSACL(erstwhile Ludhiana Stock Exchange Limited), vi.

Jaspal Singh is manipulating LSCSLand LSACL to take steps against me for personal vengeance, vii. Since I did not succumb to unlawful pressure to withdraw the complaint, a complaint purportedly made by some members of LSCSLand LSACL was used to suspend the trading rights. My trading rights are suspended on the basis of the unsigned complaint, viii. The complaint contains nonspecific allegations and verbatim and signed copy of the complaint was not provided for inspection to me. That the aforesaid illegal actions were taken on a false Complaint, which is not provided with signatures till date, neither to me nor filed with Registrar of Companies meaning thereby that the persons probably signed were either not authorised to sign the Complaint or were not Authorised Representative/Members. ix. The Board of Directors of LSCSLdid not ban my entry in the company building, but LSACL exceeded the decision of the Board by banning entry to the building of LSCSL, x. NSE treated the complaint as closed since the complaint pertains to dealings between sub broker and the member. As per Article 173 of the Articles of Association of LSCSL, any dispute between member and LSCSLis arbitrable, and hence, the proper course was to invoke arbitration for dispute resolution, xi.

LSCSLand LSACLdo not have power to suspend my trading rights.”

B. Subsequently, Jaswinder Kapoor vide letter dated April 10, 2017 (subsequent to the personal hearing) additionally submitted as under:

i. Mr.Jaspal Singh used proxy of dead person during the elections of the Governing body (the AGM of LSCSLheld on September 15, 2012). It is pertinent to mention that Mr. Jaspal Singh hold 40 proxies out of 241 proxies of LSCSL(now M/s LSC Securities Limited) and hold 37 proxies out of 443 proxies ofLSACL (erstwhile Ludhiana Stock Exchange Limited).Jaspal Singh forged the proxy of one Mr. Chand KishanHazari, who died on May 01, 2012. That I had filed a complaint to LSCSL about use of fake proxy of a dead person by Mr. Jaspal Singh, but the office of company did not take any action, ii. That in the meantime I filed criminal cases in the Court of Sh. Ashish Thathai, JMIC, Ludhiana regarding fake proxy under sections 420, 465, 467, 468, 471 and 120-B of IPC against Mr. Jaspal Singh, Ex-Director, LSACL and Mr. SatishNagpal, Director LSACL., iii. That it is pertinent to mention that Hon’bleSh. Ashish Thathai, JMIC, Ludhiana had passed the Order in favour of the undersigned. After that LSCSLfiled an Appeal before Hon’bleSh. Dinesh Kumar, Additional District & Session Judge, Ludhiana, which was also dismissed and thereafter LSCSLfiled an Appeal before Hon’ble Punjab & Haryana High Court, Chandigarh.

It is pertinent to mention that case was against Mr. Jaspal Singh, whereas LSCSLfiled Appeal before Sh. Dinesh Kumar, Additional District & Session Judge, Ludhiana and Hon’ble Punjab & Haryana High Court, Chandigarh, iv. That it is pertinent to mention that LSCSL has been hijacked by Mr. Jaspal Singh, who vide its Board Resolution dated 27.08.2014, which was passed on the same date, in the Board Meeting, when the Order by Hon’bleSh. Dinesh Kumar, Additional District & Session Judge, Ludhiana was passed, which is impossible. The Board has favoured Mr. Jaspal Singh by filing Appeals, meaning thereby Mr. Jaspal Singh has used fake proxy of dead person where all expenses are borne by LSCSLas litigation cost meaning thereby using his position to the detrimental to the Members of the Company, v. That Mr. Ashok Makkar, another Complainant like me for fake proxy has been tortured and his family life is disturbed due to various Complaints filed in Income Tax department and his wife is also mentally disturbed because of everyday torture to her. …. vi. …..Regarding banning of my entry in Stock exchange Building and initial suspension of trading first for six months and deactivation of my terminal with immediate effect by LSCSL and LSACL vide its letters both dated 14.10.2015 and thereafter the termination of Sub-brokership, as Authorized Person by LSCSL vide letter dated 18.4.2016, but suspension of trading rights was kept in abeyance by LSACL vide its letter dated 04.04.2016, but continuation of suspension of trading rights and banning of my entry in the Stock Exchange building was continued, vii.

That it is worth mentioning that Rooms in Stock Exchange Building are on lease for 99 Years in favour of Members, therefore, banning of my entry in the respective building is totally illegal & uncalled for. Moreover, no person can stop my earning of bread & butter, which is against Constitution of India by banning my entry as well as deactivation of my terminal within a day i.e. I did trading on 14.10.2015 and in the evening of the same day, they took all the aforesaid illegal actions, viii. That they have indulged into criminal actions by defaming me by publishing illegal notice in Newspaper and on the same day e-mailed to my clients about the termination of my trading w.e.f. 14.10.2015. I have no source of income. ix. That the illegal action were taken on a false complaint, which is not provided with signatures till date, neither to me nor filed with Registrar of Companies meaning thereby that the persons probably signed were either not authorized to sign the complaint or were not Authorised Representative /Members, x. That when I filed the Writ Petition before Hon’ble Punjab and Haryana High Court, Chandigarh for directionsto SEBI, there has been many feelers from Mr. Jaspal Singh that I should withdraw the Complaint of fake proxy.

It has been given to understand, if I withdraw the complaint, Mr. Jaspal Singh & Board of Directors will restore my trading rights and compensate meaning thereby the actions they have taken are false, illegal, malafide& uncalled for, xi. That you are requested to please check the list of Brokers/members, who signed the complaints whether signatures are genuine or not, particularly signatures of M/s Sandeep Aggarwal & Company on the Complaint against me, who is not doing trading in LSCSLAll the actions of both the Companies are false & illegal and also against equity & justice and Constitution of India, more particularly violative of SEBI Rules & Regulations, xii. You are humbly requested to give instructions to LSCSLand LSACL (formerly M/s Ludhiana Stock Exchange Limited) to restore my trading rights and restore banning of my entry in Stock Exchange building with immediate effect and pay me heavy compensation for the losses suffered by me financially, mentally, physically, morally and defamation.

C. LSCSLin their reply vide letters dated February 06, 2017 and April 03, 2017 inter alia submitted that:

i. “Relation between a stock broker and a sub-broker/authorized person is purely a business relationship and as per the rules and regulations of SEBI/Exchanges, a Trading member is fully responsible for all acts and omissions, ii. Trading member and the Sub/Authorized person is entitled to terminate the Agreement signed between them without giving any reasons to the other party, iii. Shri Jaswinder Singh Kapoor filed compliant against Shri Jaspal Singh and some Directors/Members on 25.01.2013 and in spite of the same, the Company did not take action against Shri Kapoor till 11.10.2015 and he was allowed to trade freely through the Company like other Sub-brokers/AP of the Company, iv. Surprise inspections of 5 Sub-brokers of the Company were conducted by NSE and BSE in the month of September 2015 and 12 Sub-brokers in the month of December 2015. However, no adverse observations arose out of this inspection as per the copy of NSE and BSE report. It is evident that complaints were filed by Shri Jaswinder Singh Kapoor with the intention to harass the Company. Shri Jaswinder Singh Kapoor has been seeking [SEBI and NSE] suspension of the company [LSCSL] from brokership.

It was not in the overall interest of the company to continue business relationship with Shri Kapoor, v. The complaints filed by Jaswinder Singh Kapoor against our members and the company with the various departments /Authorities were false /frivolous and were filed only with the intention to harass the company and to tarnish the image of the company in the public, vi. Client/investors introduced by Shri Jaswinder Singh Kapoor has not filed any complaint against LSCSLwith respect to the services that LSCSLis providing to the clients of Shri Kapoor, vii. In all the complaints filed by Shri Jaswinder Singh Kapoor with SEBI, RoC, and Exchanges, Shri Jaswinder Singh Kapoor was seeking suspension of the Company from brokership and criminal action against the Board members and officers of the Company, viii. A complaint was received by LSCSL. andLSACL from certain members against Shri Jaswinder Singh Kapoor. The complaint was considered by the Board of Directors of LSACL in their meeting held on 07.10.2015, ix. Shri Jaswinder Singh Kapoor was provided opportunities by LSCSL. vide letters dated 29.09.2015 and 01.10.2015 for making submissions, but Shri Jaswinder Singh Kapoor did not appear before the Board, x. As such, the Board of Directors, keeping in view the overall interest of the company and its Members, in their meeting held on 13.4.2016 decided to terminate Mr. Jaswinder Singh Kapoor as Sub Broker and Authorized person of the company.

The decision of the Board was communicated to Mr. Jaswinder Singh Kapoor, NSE and SEBI vide letters dated 18.4.2016, xi. It is also important to mention here that after the suspension /termination of Mr. Jaswinder Singh Kapoor as the sub –broker /Authorized Person of the company, he was fully free to become the Sub Broker /Authorised Person of any other Stock Broker as the company had never restricted him from doing so. As such, the question of suffering irreparable loss and agony by losing the right to livelihood does not arise, xii. Under the circumstances explained above, we are of the firm view that no stock broker shall continue business relationship with a sub-broker /Authorised Person who is more interested in harming the interest of its own stock broker rather than to continue business relationship with the Stock broker and as such, the action taken by the company against Jaswinder Singh Kapoor is as per law and rules and regulations laid down by SEBI /NSE/BSE and the company has every right to safeguard its business interests.”

D. LSACLvide letters dated February 06, 2017 and April 04, 2017 inter alia submitted as under:

i. “Ours is a Public Limited Company and after de-recognition we are no more a Stock Exchange and neither are we dealing in stock market. The Company shares are not listed on any Stock Exchange. SEBI Board has no control and jurisdiction to interfere in the management of our Company which is an independent corporate entity covered under the Companies Act. ii. Jaswinder Kapoor is a Sub broker in LSCSL. where it was reported that he was indulging in malpractices and complaints were also received against him from other members. Copies of the complaints (signed) dated 20.08.2015 and 11.09.2015 filed by other members against Jaswinder Kapoor are enclosed, iii. The alleged wrongdoings in the complaint filed by Jaswinder Kapoor against LSCSL are to target, victimize, threaten and blackmailing thereby spoiling the entire working environment…”, hence there is every apprehension that revelation of the identities of the members (who have filed complaint against Jaswinder Kapoor) might complicate the situation. iv. LSCSL sought reply from Jaswinder Kapoor regarding the complaints filed by the members.

However, he did not reply. When no proper reply to the allegations was received from the Jaswinder Kapoor, the matter was placed before the Board of Directors, v. The Board had called upon Jaswinder Kapoor to place his facts and explain his position, but the complainant chose not to appear before the Board, inspite of sufficient opportunities granted. vi. The Board of Directors in its Meeting held on 07.10.2015 took disciplinary action against Jaswinder Kapoor by suspending his trading right, vii. All the earlier trading rights issued by the erstwhile Ludhiana Stock Exchange to SEBI registered Trading Member became redundant on de-recognition of Ludhiana Stock Exchange, viii. The certificate to become a Sub-broker was allotted in the meeting of Board of Directors held on 15.04.2015 and the allotment was subject to certain terms and conditions one of which being that Board of Directors being authorized to even cancel the rights in case of unsatisfactory conduct of the Member, ix. It is the sole discretion of the Principal broker, LSCSL. to allow him as a sub-broker or not and neither LSACL nor SEBI has anything to interfere in the matter, x. The complainant has also challenged the decision of Board of Directors in the Civil Court and court is seized of the matter.

Any decision of the Court shall be binding on all concerned including SEBI.”

E. NSE vide letter dated January 27, 2017 provided the details of all correspondence exchanged between them and others. During the hearing held on April 03, 2017, they inter alia submitted as under:

i. “The dispute between Jaswinder Kapoor and LSCSL is only a private dispute, ii. Thesame is not a commercial dispute in respect of any transactions between them (arose as part of their sub broker and broker relation), iii. Vide letter dated December 01, 2015, we had informed Jaswinder Kapoor that the complaint raised by him pertains to dealings between him and the member, and he may contact the trading member to sort out the details, iv. Further, vide another letter dated April 12, 2016 we also informed Jaswinder Kapoor that if the complaint is still not resolved, the petitioner may opt for arbitration against the Trading member, v. Jaswinder Kapoor has not availed the arbitration mechanism provided by the exchange.”

3.1 I have carefully examined the complaints filed by Jaswinder Kapoor, replies filed by LSCSL, LSACLand NSE, correspondence exchanged amongst the said persons/entities in connection with the allegations made by Jaswinder Kapoor along with the documents submitted therewith, submissions made before me by all the entities (oral and written)and all other relevant material available on record. In the light of the same, I shall now proceed to deal with the issues for consideration in the matter.

3.2 From the complaints filed by Jaswinder Kapoor against LSCSL and LSACL, I note that the main grievance of Jaswinder Kapoor against LSCSL and LSACL is the suspension of his trading rights and subsequent termination of his sub-brokershipby LSCSL and LSACL. In this regard, it is observed that:

i. The relation between Jaswinder Kapoor and LSCSL is that of a broker and sub broker. LSACL is the holding company of LSCSL ii. In terms of Regulation 15 (1) (c) of SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 (“Broker Regulations”), a sub-broker shall enter into an agreement with the stock broker for specifying the scope of his authority and responsibilities. In the instant case, Jaswinder Kapoor (sub-broker) has entered into an agreement with LSCSL on December 13, 2000.

iii. As perClause 17 of the said agreement dated December 13, 2000:“If any dispute arises between the stock broker and the sub-broker, the same shall as far as possible be settled with the help of the officials of the said exchange and if no such settlement is possible the parties hereby agree to refer such dispute to arbitration in accordance with the Rules, Bye-laws and Regulations of the said exchange. The stock broker and the sub-broker hereby agree that they shall cooperate with the said exchange officials and provide all relevant documents in their possession so as to expedite the settlement through arbitration process……”

iv. Further, as per Chapter XI Clause 1A of the Bye-Laws of NSE, “All claims, differences or disputes between the Trading Members and Sub-brokers and between Sub-brokers and Clients of Sub-brokers arising out of or in relation to dealings, contracts and transactions made subject to the Byelaws, Rules and Regulations of the Exchange or with reference to anything incidental thereto or in pursuance thereof or relating to their validity, construction, interpretation, fulfilment or the rights, obligations and liabilities of the parties thereto and including any question of whether such dealings, transactions and contracts have been entered into shall be submitted to arbitration in accordance with the provisions of these Byelaws and Regulations”

v. It is therefore clear that any dispute between the broker and sub-broker has to be settled with help of the exchange and if no such settlement is possible the parties may refer such dispute to arbitration in accordance with the Rules, Bye-laws and Regulations of the said exchange.

vi. From the material available on record, it is observed that:

• Upon receipt of the complaint from Jaswinder Kapoor, SEBI vide letter dated March 02, 2016 asked NSE and BSE to look into the matter and submit a Report on the same.

• BSE vide letter dated April 01, 2016 informed that Jaswinder Kapoor is not a sub broker affiliated to LSCSL, as trading member of BSE Ltd. Hence, the complaint cannot be entertained by BSE. NSE vide letter dated March 14, 2016 informed SEBI that upon receipt of a complaint (dated October 30, 2015) from Jaswinder Kapoor, the matter was taken up with LSCSL. NSE also informed that the matter was closed as the complaint pertained to the dealings between the broker and sub broker.

• Thereafter, SEBI advised NSE vide letter dated April 06, 2016 to inform Jaswinder Singh of the recourse to arbitration available for settlement of dispute between him and broker.

• NSE vide letter dated April 12, 2016 informed Jaswinder Kapoor of the recourse to arbitration available to him.

• It is however noted that Jaswinder Kapoor has not availed the recourse to arbitration available to him.

vii. In respect of the suspension of trading rights and subsequent termination of his sub-brokership, I note that:

• The trading rights of Jaswinder Kapoor was suspended by LSCSL for a period of six months on October 14, 2015 and subsequently the sub-brokership has been terminated by LSCSL vide Order dated April 18, 2016.

• LSCSL in their reply vide letter datedFebruary 06, 2017 stated: “Shri Jaswinder Singh Kapoor filed complaints against Shri Jaspal Singh and some Directors/Members on 25.01.2013. Surprise inspections of 5 Sub-brokers of the Company were conducted by NSE and BSE in the month of September 2015 and 12 Sub-brokers in the month of December 2015. However, no adverse observations arose out of this inspection as per the copy of NSE and BSE report. It is evident that complaints were filed by Shri Jaswinder Singh Kapoor with the intention to harass the Company. Shri Jaswinder Singh Kapoor has been seeking [SEBI and NSE] suspension of the company [LSCSL] from brokership. It was not in the overall interest of the company to continue business relationship with Shri Jaswinder Singh Kapoor ….andno stock broker shall continue business relationship with a sub-broker /Authorised Person who is more interested in harming the interest of its own stock broker rather than to continue business relationship with the Stock broker and as such, the action taken by the company against Jaswinder Singh Kapoor is as per law and rules and regulations laid down by SEBI /NSE/BSE and the company has every right to safeguard its business interests”

• Further, Clause 18 of the agreement dated December 13, 2000 entered into by JaswinderKapoor and LSCSLstates:“Either party shall be entitled to terminate this agreement at will and without giving any reasons to the other party after giving notice in writing of not less than six months at their respective address mentioned above. The above shall also be intimated to stock exchange and SEBI”

• Before suspending the trading rights and deactivation of the trading terminals of Jaswinder Singh, the Board of Directors of LSACL (Holding Company of LSCSL) in their meeting held on October 07, 2015 and Board of Directors of LSCSL in their meeting held on October 12, 2015 deliberated the complaints received against Jaswinder Kapoor. LSCSLhave stated that they have provided opportunities to Jaswinder Kapoor vide letters dated September 29, 2015 and October 01, 2015, for making submissions. However, he did not avail the opportunities.

• During the hearing held before me, Jaswinder Kapoor submitted that he did not avail the opportunities as he felt that he would not get justice by attending the said hearing opportunities given by LSCSL

• In respect of the complaints received against Jaswinder Kapoor from other members (on the basis of which Jaswinder Kapoor was suspended), it is observed that Jaswinder Kapoor in his complaints against LSCSL categorically stated that he was not provided with the signed copies of the said complaints despite his repeated request for signed copies. During the hearing before me, LSACL was asked to provide the signed copy of complaints filed by the members against Jaswinder Kapoor. LSACL vide letter dated April 04, 2017 furnished the signed copies of the said complaints dated August 20, 2015 and September 11, 2015 to SEBI.

• Furthermore, in terms of Clause 18 of the agreement dated December 13, 2000 either party shall be entitled to terminate this agreement at will and without giving any reasons to the other party after giving notice in writing of not less than six months and the above shall also be intimated to the stock exchange and SEBI.

viii. In respect of the allegation of using a proxy of deceased persons/members by Mr. Jaspal Singh for illegally casting votes in the election of Governing Body held during the Annual Meeting of LSCSL on September 15,2012, it is observed that:

• Jaswinder Kapoor has already filed a private criminal complaint against LSCSL, Mr. Jaspal Singh and others in the Court of JMIC (Judicial Magistrate First Class) Ludhiana on January 25, 2013 under Sections of Indian Penal Code (IPC) (viz. Sections420, 465, 171-F, 467, 468, 471, 120B, etc.).

• It is seen from the documents such as copy of the Order dated September 13, 2013 passed by the Court of JMIC, Ludhiana (forwarded by Jaswinder Kapoor to SEBI vide letter dated April 10, 2017) that an application filed by Mr. Jaspal Singh and others (wherein they claimed privilege in respect of the records such as the record of proxies as well as regulations of the companies and total list of voters, etc. summoned by the Court of JMIC, Ludhiana from LSACL (erstwhile Ludhiana Stock Exchange) was dismissed by the Court of JMIC, Ludhiana (vide said Order dated September 13, 2013). It is further seen from a copy of Order dated August 27, 2014 passed by Additional District & Sessions Judge Ludhiana that the Revision Application filed by Jaspal Singh & others against aforesaid Order dated September 13, 2013 of the Court of JMIC was also dismissed by the Additional District & Sessions Judge Ludhiana.

• It is understood from the submissions made by Jaswinder Kapoor (vide letter dated April 10, 2017) that LSCSL, Mr. Jaspal Singh and others have filed an appeal before the Hon’ble High Court of Punjab and Haryana against the aforesaid Order dated August 27, 2014 passed by the Additional District & Sessions Judge Ludhiana.

• The matter pertains to offences committed under IPC, i.e. forgery, cheating, criminal intimidation, etc. which has to be investigated thoroughly by police.Thedocuments (such as the copies of aforementioned Orders passed by JMIC, Ludhiana and Additional District & Sessions Judge Ludhiana) forwarded by Jaswinder Kapoor indicate that the said matter is under consideration of JMIC, Ludhiana.

ix. In respect of the allegation of misrepresentation of name as M/s LSE Securities Ltd. by LSCSL, it is observed that:

• Upon receipt of the complaint from Jaswinder Kapoor in respect of the misrepresentation of the name by LSCSL (erstwhile M/s L.S.E. Securities Ltd.) as M/s LSE Securities Ltd., SEBI vide e-mail dated December 01, 2015 sought comments from LSCSL In response, LSCSL vide letter dated December 07, 2015 stated that a company is being identified by its number i.e. Corporate Identification Number (CIN) which is unique for every company and as per website of MCA the Company’s name is mentioned as “L S E Securities” and it is using the same, and as such there has not been any misrepresentation of the same.

• Thereafter, SEBI vide letter dated March 11, 2016 issued an administrative warning against LSCSL and advised them to be careful in future and improve their compliance standards to avoid recurrence of such instance, failing which action may be initiated.

• LSCSLthereafter took up the matter with MCA and modified the records and recorded its name as M/s L.S.E. Securities Ltd. (earlier name).

3.3 All things considered, I am of the view that the dispute between LSCSL(broker) and Jaswinder Kapoor(sub-broker) regarding the termination of the sub-brokership by the broker does not pertain to any transactions executed on the exchange. The said action of suspension of trading rights and subsequent termination of sub-brokership of Jaswinder Kapoor by LSCSLwas by invoking the relevant clauses of the agreement dated December 13, 2000 signed betweenLSCSL andJaswinder Kapoor. Furthermore, the exchanges provide recourse to arbitration for settlement of disputes between the broker and sub broker. In view of this alternative remedy being available to the parties under law,it is not for SEBI to adjudicate on the merits of the rival contentions between them in the instant case. It is however not out of place to mention that immediately upon receipt of the complaint from Jaswinder Kapoor, SEBI had advised NSE to take up the matter with the parties as the same arose out of a dispute between the broker and the sub-broker. NSE also informed SEBI that it had taken all necessary steps to resolve the dispute between Jaswinder Kapoor and LSCSL.NSE also informed Jaswinder Kapoor regarding the recourse of arbitration available to him. In respect of the allegation against LSCSL regarding the misrepresentation of its name (in contract notes, etc.) as M/s LSE Securities Ltd. instead of M/s L.S.E. Securities Ltd., SEBI hadalready issued an administrative warning to LSCSLon March 11, 2016 and advised them to be cautious in future. In respect of the allegation of forging proxy of dead persons for casting votes for the election of Governing Body of LSCSL, Jaswinder Kapoor has already filed a criminal complaint before JMIC, Ludhiana against LSCSL, Jaspal Singh and others. The matter is presently under the consideration of JMIC, Ludhiana.

4. Considering all the facts as detailed above, it is not proper on the part of SEBI to intervene in the instant dispute between the broker and its sub-broker as arbitration mechanism to resolve such a dispute isalready provided by the Stock Exchange under its Bye-laws/Regulations.

5. In view of the forgoing, I, in exercise of the powers conferred upon me by virtue of Section 19 of the SEBI Act, 1992dispose of the complaint filed by Jaswinder Singh Kapoor without any directions.

Place: Mumbai S. RAMAN Date: April 19, 2017 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA