Bombay High Court seeks Central government's response to Kotak Securities plea challenging NSE circular

The Bombay High Court on December 18 sought the response of the Central government to the petition filed by Kotak Securities Limitedchallenging an order of the National Stock Exchange (NSE) which directed the disinvestment of KSL's investment amounting to ₹624.66 crores from four entities [Kotak Securities Limited v. National Stock Exchange of India Ltd & Ors.].Kotak Securities, owned by Kotak Mahindra Bank, moved the Court against the circular issued by NSE which clarified Rules 8(1)(f) and 8(3)(f) of the Securities Contracts (Regulation) Rules (SCR Rules) of the Securities Exchange Board of India (SEBI). The rules restrict members of a stock exchange from engaging as a principal or employee in any business other than that of securities except as broker or agent not involving financial liability.KSL claimed that the circular by NSE brought in additional restrictions on such activities which went beyond the plain language of the SCR Rules. NSE does not have authority in law to issue such circular as it amounts to amending or modifying statutory rules of the Central government, the petition filed through AZB & Partners stated. .The petition was first heard on December 11 when a division bench of Justices GS Kulkarni and Jitendra Jain deduced that since the Central government rules were challenged, it would be appropriate to include it as a respondent party.Accordingly, the government was added as a party and the matter was heard again on December 18 when the Court directed the government to file its stand on record by January 15, 2024. .The petition by KSL also challenged an order passed by NSE on October 23, 2023 directing KSL to submit a disinvestment plan within 45 days. These investments are in the form of equity and debentures acquired by Kotak Securities between 2007 and 2017 in four group entities - Kotak Mahindra Prime Ltd, Kotak Mahindra Financial Services Ltd, Kotak Mahindra Investments Ltd and Kotak Infrastructure Debt Fund Ltd.NSE extended the time granted to KSL to comply with its order under challenge till January 30..The petition will be heard next on January 16..Senior advocate Darius Khambata along with advocates Sharan Jagitani, Rohaan Cama, Vidhi Shah, Ashwath Rau, Anshika Misra, Akilesh Menezes and Devavrat Nimbalkar briefed by AZB & Partners appeared for KSL. Senior advocate Venkatesh Dhond along with advocates Shruti Rajan, Anubhav Ghosh, Joran Diwan, Anurang Gupta and Rebecca Cardoso briefed by Trilegal appeared for NSE. Senior advocate Rafique Dada and advocates Nishit Dhruva, Niyati Merchant, Yash Dhruva, Harsh Sheth, Darshit Rupda briefed by MDP & Partners appeared for SEBI.Advocates Ashish Mehta and Shawn Fernandes briefed by Ethos Legal Alliance appeared for Union of India. [Read Order]