Bourses are state bodies, rules SC

In a landmark judgment confirming the Securities and Exchange Board of India's role as the supreme regulator of the stock exchanges, the Supreme Court has held that stock exchanges are state bodies and not corporate entities or associations of persons.

This means stock exchanges are not autonomous bodies and their governance has to be regulated by Sebi.

The apex court, in its judgment in a case (civil appeal no 7055 of 2002) of KC Sharma vs Delhi Stock Exchange passed a fortnight back, stated that stock exchange is a state within the meaning of Article 12 of the Indian Constitution.

Even as the case related to various other matters pertaining to the discontinuation of the employment of K C Sharma, an employee of the Delhi Stock Exchange, one of the major areas covered under the judgment was whether stock exchanges are amenable to writ petitions.

Sharma had challenged the termination of his service by the Delhi Stock Exchange by a writ petition under Article 226 of the constitution before the Delhi High court.

"Sebi will have a legal right to intervene in any operations of stock exchanges including putting its own directors from time to time and monitoring," said a legal consultant explaining the nuances of the judgement.

Till now, there have been controversies over the status of the stock exchanges leading to litigations over various actions of Sebi on governance issues. The legal status of the exchanges has been ambiguous as in some cases it was treated as an autonomous body while in others, they have been treated as association of persons.