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Calcutta Stock Exchange board resigns

Rifat Jawaid in Calcutta

In an unprecedented development, the Calcutta Stock Exchange president Kamal Parekh tendered his resignation, along with all the nine elected members of the bourse's board of directors, on Friday.

The others who put in their papers include CSE vice-president K K Daga, directors J M Choudhury, Raj Karan Bachhawat, Ajit Khandelwal, Rajendra Kumar Agarwal and Bipin Kumar Dewra.

All the elected members of the Calcutta Stock Exchange board of directors have resigned, exchange president Kamal Parekh said on Friday.

The CSE has an 18-member board of which nine are elected by exchange members.

"We feel that the crisis at the exchange is over and do not want to obstruct the Securities and Exchange Board of India's next moves," he said.

The CSE has been under a cloud since three brokers defaulted on payment obligations, forcing the CSE to draw Rs 380 million from the Settlement Guarantee Fund.

Stock exchange sources said that president Kamal Parekh, vice-president K K Daga and six directors -- J M Choudhary, Girish Mehta, Karan Bachhawat, Ajit Khandelwal, Rajendra Kumar Agrawal and Bipin Kumar Dewra -- resigned in connection with the proposal of the demutualisation mooted by the Securities and Exchange Board of India for stock exchanges.

With the resignation of the nine elected members from the committee, now it would exist with the six public representatives, three Sebi nominees and the executive director.

In a press release, Parekh said that the mass resignation was merely to 'facilitating the proposals for demutualisation mooted by the Securities and Exchange Board of India for stock exchanges.'

He added, "With the resignation of nine elected directors, the committee of the CSE now consists of six public representatives, three Sebi nominees and the executive directors."

Of late, the CSE has been grappling with severe payment crisis involving millions of rupees. Only recently, the CSE had declared three of its brokers defaulters

"We are awaiting instructions from Sebi for the future course of action," a senior CSE official said immediately after the resignations, but Datta contended that the development was not at the behest of Sebi, but to demutualise stock markets as mooted by it.

Sebi chairman D R Mehta said in Bombay that the CSE would function without broker-directors' on its board for the time being.

As there was no elections pending at the exchange, he said, it would function with six nominees representing the regulator and three from the public, besides the ED, acting as the administrative head.

The chairman said as the stock exchange board was not suspended," the existing arrangement will continue till such time a decision is taken."

Asked whether Sebi would induct additional nominees on the CSE board, Mehta said there was no scope for it as the limit of having six representatives had already been reached.

Datta, on the other hand, claimed the resignations of the broker-directors would not throw the bourse into crisis and it would be able to manage with the truncated governing committee.

Meanwhile, stock exchanges throughout the country were plagued by another steep decline in prices on reports of certain investigations pointing to big bull Ketan Parekh towards the receiving end of a Rs 8-billion scam involving Madhavpura Mercantile Co-operative Bank.

Weak Nasdaq and developments at CSE also had some effect on sentiments.

Resignation not unexpected

The resignation of all the elected members on the governing board of the Calcutta Stock Exchange was 'not unexpected' and planned late last night, even as the bourse was looking at all possible options in the wake of the new development.

"Had they (the elected members) not resigned the Sebi would have superceded the governing board of the exchange," highly placed CSE sources said.

The sources said that the CSE elected members were expecting that the market regulator would take the line as it did in the case of BSE, where it did not recognise the newly elected members of the bourse, and supercede the board of Lyons Range.

Sebi had, however, praised the outgoing committee members for handling the payment shortfall.

The stage for Friday's development was set on Thursday when a section of CSE brokers came charging towards committee members accusing them of irregularities.

The agitated members reportedly entered the president's chamber and contacted Sebi chairman D R Mehta over telephone and offered him a number of suggestions bypassing the committee members.

They had claimed that their suggestions were acknowledged.

Meanwhile, sources close to outgoing elected committee members said they (the committee members) wanted to resign soon after the payment shortfall was detected, but later decided to continue till the crisis was solved. But as soon as yesterday's pay-in was announced, they decided to resign.

A meeting of the elected committee members was fixed for Friday. After the meeting all of them decided to tender their resignations to exchange secretary P K Roy, the sources said.

Though it was not clear whether the resignation was accepted or not, a member of the outgoing committee said, "It is understood to have been accepted. Now Sebi will decide who will be on the administration of the exchange."

CSE executive director Tapas Datta said, "We are looking into all issues to decide the future course of action. Datta is currently looking after the administration of the exchange.

He, however, did not give any time-frame for a final decision.

The sources, however, claimed that Sebi was in constant touch with Datta.

Meanwhile, the resignations evoked mixed reactions among exchange members. "I am not sure to whom they submitted their resignation. Ideally they should have submitted it to the members who have elected them," a senior member said.

Others said there would be no effect on the administration of the bourse following the resignations, as the executive director was in control of administration as well as surveillance.

"They should have resigned much earlier when the payment shortfall was reported, to keep their position intact, another member said.

Some said elected members were being made 'scapegoats' following the payment shortfall as they were not responsible for surveillance and supervision of the exchange.

Additional inputs: PTI & UNI

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