Delhi High Court declares NSE a public body under RTI Act | Today’s news

Mumbai: In a ruling that brings India’s largest stock exchange under the purview of the Right to Information (RTI) Act, the Delhi High Court on Wednesday held that the National Stock Exchange (NSE) is a “public authority” under the law.

After ending a 16-year-long legal battle, a division bench headed by Justice C. Hari Shankar and Justice Om Prakash Shukla upheld the 2010 judgment of a single judge of Sanjiv Khanna. The court in its judgment said: “The reasoning given by the learned Single Judge… is eloquent and reasoned and we see no reason to disturb the findings.

The court decided that the NSE meets the definition of a public authority according to § 2 letter h) Act on VZT. The regulation states that “not only the central government but also the statutory body exercises deep and pervasive control over the stock exchange”.

The NSE claimed that it was a private entity that was neither owned nor controlled by the government. It stated that regulatory oversight by the Stock Exchange Board of India (Sebi) does not constitute an NSE covered by the RTI Act.

While the NSE was registered as a private company, the court observed that it could not function as a stock exchange without recognition under Section 4 of the Securities Contracts (Regulation) Act, 1956. This recognition was granted by Sebi under powers delegated by the Central Government.

The court rejected the NSE’s arguments that it was neither owned nor funded by the government and held that ownership and funding were not the only tests under the law. The court relied on an earlier decision in KC Sharma vs Delhi Stock Exchange, which held that stock exchanges operate under extensive supervision by the central government and Sebi.

Lawyers said the ruling does not mean the courts will interfere with exchanges’ business or policy decisions. For example, in the case of negative MCX oil prices, the Bombay HC recently refused to grant relief to several traders who had sought cancellation of trades on June 24.

There, the court held that it would not interfere with the pricing mechanism adopted by the exchange to arrive at a negative settlement rate, which was an established practice under its bylaws and that traders could not be oblivious to that fact.

According to senior securities lawyer Chirag Shah, the NSE and other stock and commodity derivatives exchanges come under Article 12 of the Constitution for jurisdiction.

This means that a person can file a suit against the NSE or BSE, unlike in the case of a private company, where a person can file a suit against the regulatory authority that granted permission to the private company to operate within its purview.

Shah added that while the NSE will now come under the ambit of RTI under the latest judgment, “there will be no material impact on the NSE”.

“The decision is likely to improve transparency in governance and regulatory functioning, boost investor confidence and could trigger similar RTI scrutiny of other market institutions that qualify as public bodies under the Act,” said Raheel Patel, partner at Gandhi Law Associates.

The decision comes as the NSE awaits regulatory approval for what could be India’s largest initial public offering. The exchange has submitted its draft red herring prospectus with the market regulator, according to which the exchange The IPO will offer existing institutional shareholders up to 149 million shares for sale.