CSE brokers plan to sue exchange

Lyons Range members are planning to take legal recourse against Calcutta Stock Exchange (CSE) following the decision of CSE authorities to deduct the cash component of their contribution towards the settlement guarantee fund (SGF).

CSE on Friday decided to deduct cash portion of the members' SGF by Rs 2.5 lakh for old members and Rs 7.5 lakh for new ones. This was done to adjust the payment shortfall of Rs 25 crore that occurred in 2001.

Agitated members said the decision to deduct the amount three years after the crisis rocked CSE was without basis. They also criticised the "discrepancy" in the amount being deducted.

When contacted, T K Das, officer-on-special duty, said the members had passed a resolution pertaining to adjustment of funds with SGF at a general meeting in December 2001.

"The accounts of CSE showed the withdrawal of funds from SGF. The logical extension of the fact is that the amount should be deducted from individual members," he said.

CSE officials said the new members had to pay Rs 5 lakh more than old ones because the cash component lying with their SGFs was more. The new members deposited Rs 5 lakh for business development for which they agreed to sacrifice interest.

New members said they would take legal recourse against the exchange on the plea that any deduction from kitty meant for business development was in violation of by-laws of the exchange.

However, the members were likely to move the Calcutta High Court individually as the mutual trust among them was low.

A section of the members admitted the possibility of receiving a favourable verdict from the court was bleak. "The broking community has earned such a bad name that no court in the country has been listening to them," said a veteran CSE member.

The reduction in SGF meant decline in exposure. Theoretically, members should chip in with more funds to keep the exposure level unchanged. CSE was yet to come out with a circular asking members to put in fresh funds.

Das indicated the members were not utilising their existing exposure limit to the full extent and , therefore, the issue did not merit discussion.