{ "metadata": { "analysis_of_arguments": "The regulator alleged that MCX and MCXCCL\u2019s reliance on 63 Moons and delay in transitioning to TCS contravened outsourcing guidelines and governance norms, requiring timely implementation of the Outsourcing Circular and full disclosure of material developments. The Noticees maintained that confusion over whether the Outsourcing Circular extended to commodity derivative exchanges contributed to any delay, emphasizing that they took steps to ensure continuity of operations and adopted an outsourcing policy once applicability was clarified. They argued that cost overruns and contract extensions were prompted by unanticipated vendor delays and pandemic-related constraints, and that omissions in disclosure were inadvertent. Both sides disputed whether the board was sufficiently informed, whether management pursued adequate negotiations or legal remedies, and whether privity of regulatory circulars was correctly interpreted. Certain disclosure lapses were ultimately deemed violations, while allegations concerning outsourcing policy breaches or imprudent vendor selection were not upheld against the co-noticees.", "bench": [], "case_number": [], "cases_referred": [], "chunkwise_data": { "chunk_1": { "analysis_of_arguments": "The regulator contends that the existing software arrangement and associated non-compete provisions undercut proper governance and risk control standards. The Noticees maintain that they followed legitimate contractual obligations and assert that negotiations and arrangements with 63 Moons were in line with prevailing commercial and regulatory requirements.", "cases_referred": [], "facts": "MCX commenced operations in 2003 using specialized trading software licensed from 63 Moons (formerly FTIL). Over time, MCX\u2019s ownership by 63 Moons was reduced to zero by 2014, yet MCX continued to rely on software and support services from 63 Moons under various agreements. The last such service agreement was set to expire in September 2022, prompting MCX to consider alternative technologies. After FMC\u2019s merger with SEBI, MCX came under SEBI\u2019s regulatory framework and formed MCXCCL for clearing and settlement, recognized by SEBI from July 2018. Following a special purpose examination, SEBI issued a show cause notice alleging regulatory violations.", "final_status": "No conclusive final status is evident from the provided text.", "formatted_summary": "This section outlines SEBI\u2019s special purpose examination into MCX\u2019s and MCXCCL\u2019s contractual dealings with 63 Moons for trading software services. It highlights the long-term license and service arrangements, the shift in regulatory oversight from FMC to SEBI, the formation of MCXCCL, and the questions around compliance with outsourcing and governance norms. The provided text does not include a final decision.", "held": "The excerpt does not disclose the ultimate holding or directions issued by SEBI in the final order.", "latin_principles": {}, "legal_issues": "Whether MCX and MCXCCL breached outsourcing guidelines, failed to exercise adequate control over core trading technology, and violated the SECC Regulations, 2018 and other applicable norms.", "statutes": { "Securities Contracts (Regulation ) Act, 1956": "FINAL ORDER Under Section 11B (2) of the Securities and Exchange Board of India Act, 1992 and Section 12A (2) of the Securities Contracts (Regulation ) Act, 1956 In respect of: Noticee No. Name of the Noticee PAN 1. Multi Commodity Exchange of India Ltd. (MCX) AADCM8239K 2. Multi Commodity Exchange Clearing Corporation Ltd. (MCXCCL) AAFCM9108B 3. Padala Subbi Reddy AAEPP1891N 4. Narendra Kumar Ahlawat ABZPA1574H 5. Sanjay Golecha AAFPG7183F 6. Himanshu Ashar AANPA6741R 7. Manav Jain AIUPJ4118Q (The aforesaid entities are hereinafter individually referred to by their respective names / Noticee no. and collectively as \u201cNoticees\u201d, unless the context specifies otherwise) In the matter of Trading Software contract of MCX and MCXCCL with 63 Moons (erstwhile FTIL) and TCS", "Securities Contracts (Regulation)(Stock Exchanges and Clearing Corporations) Regulations, 2018": "1. Pursuant to a special purpose examination of Multi Commodity Exchange of India Ltd. (\u201cMCX\u201d) and Multi Commodity Exchange Clearing Corporation Ltd. (\u201cMCXCCL\u201d), the Securities and Exchange Board of India (hereinafter referred to as \u201cSEBI\u201d) issued a show cause notice dated October 16, 2023 (\u201cSCN\u201d) to the Noticees for certain alleged violations of the provisions of Securities Contracts (Regulation)(Stock Exchanges and Clearing Corporations) Regulations, 2018 (\u201cSECC Regulations, 2018\u201d), SEBI Act, 1992, Securities Contracts Regulation Act, 1956 (\u201cSCRA, 1956\u201d) and various other Rules/ Regulations / directions / Circulars issued thereunder.", "Securities and Exchange Board of India Act, 1992": "FINAL ORDER Under Section 11B (2) of the Securities and Exchange Board of India Act, 1992 and Section 12A (2) of the Securities Contracts (Regulation ) Act, 1956 In respect of: Noticee No. Name of the Noticee PAN 1. Multi Commodity Exchange of India Ltd. (MCX) AADCM8239K 2. Multi Commodity Exchange Clearing Corporation Ltd. (MCXCCL) AAFCM9108B 3. Padala Subbi Reddy AAEPP1891N 4. Narendra Kumar Ahlawat ABZPA1574H 5. Sanjay Golecha AAFPG7183F 6. Himanshu Ashar AANPA6741R 7. Manav Jain AIUPJ4118Q (The aforesaid entities are hereinafter individually referred to by their respective names / Noticee no. and collectively as \u201cNoticees\u201d, unless the context specifies otherwise) In the matter of Trading Software contract of MCX and MCXCCL with 63 Moons (erstwhile FTIL) and TCS" } }, "chunk_2": { "analysis_of_arguments": "The regulator alleges that MCX, MCXCCL, and their officials acted in a manner that risked interruption of core operations and did not provide accurate or timely information about the transition. The Noticees appear to maintain that they pursued a suitable vendor replacement strategy in good faith and took steps they believed were necessary to ensure continuity of the trading platform.", "cases_referred": [], "facts": "MCX and its clearing entity, MCXCCL, originally relied on software from 63 Moons and planned to transition to a new Commodity Derivative Platform (CDP). Multiple board meetings took place between July 2020 and June 2023 to consider proposals from 63 Moons, float a Request for Proposal (RFP), negotiate with different vendors, and ultimately engage TCS to develop the new CDP. TCS experienced delays, causing MCX to repeatedly extend its agreement with 63 Moons at significant cost. The Securities and Exchange Board of India (SEBI) thereafter issued a show cause notice (SCN) alleging inadequate disclosures and procedural lapses.", "final_status": "The matter remains pending with no final disposition indicated in the document.", "formatted_summary": "MCX initiated a plan to replace its trading software from 63 Moons with a new platform developed by TCS. Despite securing TCS\u2019s services, repeated delays caused MCX to extend 63 Moons\u2019 contract at significant cost to ensure uninterrupted operations. The SCN alleges that MCX, MCXCCL, and their officials did not meet disclosure standards, risked business continuity, and submitted incorrect timelines to the regulator.", "held": "No final determination or ruling has been provided within this section of the document.", "latin_principles": {}, "legal_issues": "Whether MCX, MCXCCL, and their key officials failed to comply with regulatory requirements regarding timely disclosures, proper vendor selection, and the code of conduct. Whether the extensions granted to 63 Moons and the contract awarded to TCS contravened prescribed guidelines and regulations.", "statutes": { "LODR Regulations, 2015": "25. In view of the above , the Noticees were alleged to have violated the following provisions of law: \u2026 iv. Regulation 4(1)(c), 4(1)(d), 4(1)(e) and 4(1)(i) and 30(12) of LODR Regulations, 2015, read-with Regulation 33(1) of SECC Regulations, 2018 \u2026", "SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017": "25. In view of the above , the Noticees were alleged to have violated the following provisions of law: i. SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017 \u2026 Clause 3 of SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 \u2026 and Clause 2, 3, 4, 5, 6, 8.1 and 8.3 of Annexure I to SEBI circular dated September 13, 2017 \u2026", "Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012": "25. In view of the above , the Noticees were alleged to have violated the following provisions of law: \u2026 read-with amendment to SECC Regulations, 2012 dated April 2, 2018 and SECC Regulations, 2018 and its amendment w.e.f. October 3, 2018 \u2026", "Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018": "25. In view of the above , the Noticees were alleged to have violated the following provisions of law: \u2026 iii. Regulation 7(2)(f) and 7(3)(a,b \u0026 j) of SECC Regulations, 2018 read-with 12(5) of SECC Regulations, 2018. \u2026 Clause 1(b), 3(a), 3(b) \u2026 read-with Regulation 26(1) of SECC Regulations, 2018 \u2026 read with regulation 33(1) of SECC Regulations, 2018 \u2026", "Securities Contracts (Regulation) Act, 1956": "25. In view of the above , the Noticees were alleged to have violated the following provisions of law: \u2026 (iv) Regulation 4(1)(c), 4(1)(d), 4(1)(e) and 4(1)(i) and 30(12) of LODR Regulations, 2015, read-with Regulation 33(1) of SECC Regulations, 2018. \u2026 Regulation 23A(a), 23GA and 23H of SCRA, 1956 and 15A(b) \u0026 15HB of SEBI Act, 1992 read with 12A (2) of SCRA and 11B (2) of SEBI Act \u2026", "Securities and Exchange Board of India Act, 1992": "25. In view of the above , the Noticees were alleged to have violated the following provisions of law: \u2026 Regulation 23A(a), 23GA and 23H of SCRA, 1956 and 15A(b) \u0026 15HB of SEBI Act, 1992 read with 12A (2) of SCRA and 11B (2) of SEBI Act \u2026" } }, "chunk_3": { "analysis_of_arguments": "The regulator contends that the circular\u2019s provisions were mandatory for all stock and commodity exchanges and clearing corporations, allegedly rendering MCX and MCXCCL\u2019s delayed adoption non-compliant. The Noticees argue they have either complied or taken steps toward compliance and that the imposition of the circular\u2019s requirements on them may not have been entirely clear at the time. They also maintain that they acted in good faith and within existing operational frameworks.", "cases_referred": [], "facts": "This matter arises from allegations that Multi Commodity Exchange of India Limited (MCX) and MCXCCL did not implement the outsourcing policy required under a SEBI circular within the prescribed timeframe. Several individuals holding key positions at MCX and MCXCCL (the Noticees) were each issued a show cause notice (SCN). The SCN was served on them, and while they initially filed settlement applications, these were later withdrawn. They then filed individual replies contesting the allegations, and personal hearings took place on June 03, 2024 and March 27, 2025. No final decision on the merits of the allegations has been documented in the excerpt provided.", "final_status": "No final decision is indicated in this excerpt.", "formatted_summary": "This excerpt addresses a show cause notice issued to MCX, MCXCCL, and various key functionaries for allegedly failing to implement a SEBI outsourcing policy within the required timeframe. The Noticees initially sought to settle but later withdrew their applications and presented their replies at personal hearings. The document does not provide the final outcome.", "held": "No conclusive holding or ruling has been stated in this excerpt.", "latin_principles": {}, "legal_issues": "Whether the SEBI circular on outsourcing applies to commodity exchanges and clearing corporations, whether MCX and MCXCCL failed to implement the outsourcing policy in a timely and compliant manner, and whether the Noticees\u2019 actions or omissions constituted violations under the relevant regulations.", "statutes": { "SCRA, 1956": "2 Noticee 2 (MCXCCL) i. SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017 ii. Regulation 7(2)(f) and 7(4) (a, b \u0026 g) read -with 12(5) of SECC Regulations, 2018 iii. Clause 3 of SEBI circular dated September 13, 2017 iv. Clause 2, 3, 4, 5, 6, 8.1 and 8.3 of Annexure I to SEBI circular dated September 13, 2017. 15HB of SEBI Act, 1992 and section 23GA and 23H of SCRA 1956 read with 12A (2) of SCRA and 11B (2) of SEBI Act", "SEBI (Settlement Proceedings) Regulations, 2018": "28. The SCN was duly served on the Noticees. The Noticees subsequently filed Settlement applications in terms of the provisions of SEBI (Settlement Proceedings) Regulations, 2018. Later, the said applications were withdrawn by the Noticees. The Noticees have filed their individual replies in respect of the allegations against them mentioned in the SCN. The details are as under: Noticee Number Date of first reply Date of additional reply\u2026", "SEBI Act, 1992": "2 Noticee 2 (MCXCCL) i. SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017 ii. Regulation 7(2)(f) and 7(4) (a, b \u0026 g) read -with 12(5) of SECC Regulations, 2018 iii. Clause 3 of SEBI circular dated September 13, 2017 iv. Clause 2, 3, 4, 5, 6, 8.1 and 8.3 of Annexure I to SEBI circular dated September 13, 2017. 15HB of SEBI Act, 1992 and section 23GA and 23H of SCRA 1956 read with 12A (2) of SCRA and 11B (2) of SEBI Act", "SECC Regulations, 2018": "2 Noticee 2 (MCXCCL) i. SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017 ii. Regulation 7(2)(f) and 7(4) (a, b \u0026 g) read -with 12(5) of SECC Regulations, 2018 iii. Clause 3 of SEBI circular dated September 13, 2017 iv. Clause 2, 3, 4, 5, 6, 8.1 and 8.3 of Annexure I to SEBI circular dated September 13, 2017. 15HB of SEBI Act, 1992 and section 23GA and 23H of SCRA 1956 read with 12A (2) of SCRA and 11B (2) of SEBI Act" } }, "chunk_4": { "analysis_of_arguments": "The Noticees assert that the Outsourcing Circular was not intended to govern commodity derivative segments and point to various SEBI circulars distinguishing CDEs from equity Stock Exchanges to support their position. They also highlight their own proactive measures in formulating an outsourcing policy. The regulator contends that MCX and MCXCCL, as recognized Stock Exchange and Clearing Corporation, fall under the circular\u2019s ambit, particularly after the distinction between CDEs and other exchanges was removed.", "cases_referred": [], "facts": "In 2015, the Forward Markets Commission (FMC) was subsumed within SEBI, maintaining separate oversight for Commodity Derivatives Exchanges (CDEs) while equity Stock Exchanges were regulated by another department. In 2017, SEBI issued an Outsourcing Circular addressed to recognized Stock Exchanges and Clearing Corporations. MCX and MCXCCL, operating in the commodity space, had trading software contracts with 63 Moons (erstwhile FTIL) and TCS. SEBI alleged that MCX and MCXCCL violated the Outsourcing Circular. However, the Noticees contended that the circular did not extend to CDEs and claimed ambiguity in its applicability. The case progressed to the present stage following the issuance of a show cause notice and further inquiry into the alleged violations.", "final_status": "No final decision is indicated in the excerpt.", "formatted_summary": "This excerpt addresses alleged violations by MCX and MCXCCL concerning a trading software contract with 63 Moons and TCS under SEBI\u2019s Outsourcing Circular. The main contention is whether that circular applies to commodity derivative exchanges operating under recognized Stock Exchanges and Clearing Corporations. MCX and MCXCCL argue that they were not bound by it, citing regulatory distinctions before 2018. SEBI maintains that, after the merger of FMC into SEBI and the removal of the separate category for commodity derivative exchanges, these entities fell within the scope of the circular. The matter remains unresolved in the text provided.", "held": "No conclusive holding is provided in the excerpt.", "latin_principles": { "expressio unius est exclusio alterius": "(d) This non -applicability of Outsourcing Circular was further reinforced by non-inclusion of the Outsourcing C ircular in the Master Circulars issued by SEBI for Commodity Derivatives Market dated September 7, 2018, July 10, 2020, July 1, 2021, May 17, 2022 and August 4, 2023, which sought to put all infor mation mentioned in various circulars in a single place. However, the Outsourcing Circular finds mention only in the Master Circulars issued for Stock Exchanges and Clearing Corporations. Applying the legal maxim - expressio unius est exclusio alterius , it is clear the Outsourcing Circular did not apply to CDEs and their CCs. Moreover, inclusion of certain common circulars (such as SEBI Circular dated January 10, 2019 bearing circular No. SEBI/HO/MRD/DOP2DSA2/CIR/P/2019/13) in both the Master Circulars for CDEs and for Stock Exchanges and Cl earing Corporations, lends further credence to this view." }, "legal_issues": "Whether the Outsourcing Circular applies to commodity derivative exchanges operating through recognized Stock Exchanges and Clearing Corporations, and if MCX and MCXCCL violated its provisions and the SECC Regulations.", "statutes": { "Outsourcing Circular": "35. I note that there are other allegations of violati ons of the provisions of the provisions of SECC Regulations, 2012 and SECC Regulations, 2018 against the Noticees, as mentioned in the Table under Para 25 above, which primarily emanate from the abovementioned allegation s pertaining to violation of the provisions of Outsourcing Circular by MCX and MCXCCL. Holding the Noticees guilty of such violations mainly hinges on the issue as to whether the allegation of violation of the provisions of Outsourcing Circular by MCX and MCXCCL is established or not.", "SECC Regulations, 2012": "35. I note that there are other allegations of violati ons of the provisions of the provisions of SECC Regulations, 2012 and SECC Regulations, 2018 against the Noticees, as mentioned in the Table under Para 25 above, which primarily emanate from the abovementioned allegation s pertaining to violation of the provisions of Outsourcing Circular by MCX and MCXCCL. Holding the Noticees guilty of such violations mainly hinges on the issue as to whether the allegation of violation of the provisions of Outsourcing Circular by MCX and MCXCCL is established or not.", "SECC Regulations, 2018": "35. I note that there are other allegations of violati ons of the provisions of the provisions of SECC Regulations, 2012 and SECC Regulations, 2018 against the Noticees, as mentioned in the Table under Para 25 above, which primarily emanate from the abovementioned allegation s pertaining to violation of the provisions of Outsourcing Circular by MCX and MCXCCL. Holding the Noticees guilty of such violations mainly hinges on the issue as to whether the allegation of violation of the provisions of Outsourcing Circular by MCX and MCXCCL is established or not." } }, "chunk_5": { "analysis_of_arguments": "The regulator contends MCX and MCXCCL failed to act with due care, resulting in delayed implementation of the circular and higher costs linked to maintaining software services. The allegations also focus on the management\u2019s late negotiations with 63 Moons and the decision-making process around the TCS contract. MCX and MCXCCL respond that there was ambiguity on the circular\u2019s applicability, that legal opinions did not guarantee favorable interim relief, and that they explored negotiation options but faced restrictive terms from 63 Moons. They emphasize having eventually developed an Outsourcing Policy and taken steps to address any perceived lapses.", "cases_referred": [], "facts": "MCX and MCXCCL, functioning as recognized Stock Exchange and Clearing Corporation, became embroiled in a dispute regarding the applicability of a SEBI Outsourcing Circular to their operations in the Commodity Derivatives Segment. Questions arose about whether they had delayed implementing the circular and whether that amounted to a regulatory violation. Additionally, MCX had contractual arrangements with 63 Moons (formerly FTIL) for trading software while seeking an alternative platform from TCS. Prior efforts included negotiations for service extensions and consideration of a Request for Proposal, culminating in concerns over timelines, costs, and management decisions. These events led to the current proceedings.", "final_status": "The allegations do not sustain and are disposed of accordingly.", "formatted_summary": "This portion of the order addresses whether MCX and MCXCCL were bound by the SEBI Outsourcing Circular when operating as a recognized Stock Exchange and Clearing Corporation for commodity derivatives. The authority observes that there was ambiguity about whether earlier circulars for all stock exchanges were applicable to commodity derivatives segments. The document details the timeline of negotiations between MCX, 63 Moons, and TCS, and examines alleged lapses by MCX\u2019s management in extending support contracts and implementing alternative software. Ultimately, the authority finds that the core allegation of violating the Outsourcing Circular cannot be sustained, rendering related regulatory accusations inapplicable.", "held": "The adjudicating authority concluded that MCX and MCXCCL are not liable for violating the Outsourcing Circular, noting they took remedial measures once the applicability question was clarified. Consequently, related allegations under the relevant regulations also fail, providing future guidance that regulated entities should diligently clarify and implement circulars where ambiguity exists.", "latin_principles": {}, "legal_issues": "Whether the Outsourcing Circular applied to MCX and MCXCCL\u2019s Commodity Derivatives Segment, whether the delay in implementing its requirements constituted a violation, and whether the management\u2019s negotiation and decision-making with respect to contracts and alternative software platforms contravened governing regulations.", "statutes": { "Master Circular": "43. It is further noted that subsequently, SEBI issued Master Circulars from time to time which either applied to Stock Exchanges or to Commodity Derivative Segments of the Stock Exchanges. When the contents of the Master Circulars issued by SEBI from time to time for the Commodity Derivatives Segment are compared with the Master Circulars issued for Stock Exchanges and Clearing Corporations, wherein, I note that the Outsourcing Circular finds mention in the Master Circulars issued for Stock Exchanges and Clearing Corporations, whereas it is conspicuously absent from the Master Circulars issued for the Commodity Derivatives Segment. Further, while certain Circulars, such as SEBI Circular dated January 10, 2019 on \u201cCommittees at Market Infrastructure Institutions\u201d, are mentioned in both the Master Circulars issued for Stock Exchanges and Clearing Corporations as well as for Commodity Derivatives Segment, the Outsourcing Circular is not one such Circular.", "Outsourcing Circular (SEBI Circular dated September 13, 2017)": "42. In this regard, it is noted that SEBI, prior to the issuance of SEBI Circular dated September 28, 2018 which abolished the concept of CDEs, issued a number of circulars which were either addressed to \u2018All recognised stock exchanges\u2019, or to \u2018All National Commodity Derivatives Exchanges\u2019. The Outsourcing Circular dated September 13, 2017 was one such Circular, which was addressed to All Stock Exchanges. While SEBI Circular dated September 28, 2018 provided that all the norms issued for Commodity Derivatives Exchanges till date shall be applicable to Commodity Derivatives Segments of Recognised Stock Exchanges / Recognised Clearing Corporations to the extent applicable , there was no clarity on whether earlier Circulars issued for All Stock Exchanges prior to 2018 Circular, were applicable to Commodity Derivatives Segment of recognised Stock Exchanges / Clearing Corporations , or not.", "SEBI Circular dated January 10, 2019": "43. It is further noted that subsequently, SEBI issued Master Circulars from time to time which either applied to Stock Exchanges or to Commodity Derivative Segments of the Stock Exchanges. When the contents of the Master Circulars issued by SEBI from time to time for the Commodity Derivatives Segment are compared with the Master Circulars issued for Stock Exchanges and Clearing Corporations, wherein, I note that the Outsourcing Circular finds mention in the Master Circulars issued for Stock Exchanges and Clearing Corporations, whereas it is conspicuously absent from the Master Circulars issued for the Commodity Derivatives Segment. Further, while certain Circulars, such as SEBI Circular dated January 10, 2019 on \u201cCommittees at Market Infrastructure Institutions\u201d, are mentioned in both the Master Circulars issued for Stock Exchanges and Clearing Corporations as well as for Commodity Derivatives Segment, the Outsourcing Circular is not one such Circular.", "SEBI Circular dated September 28, 2018": "42. In this regard, it is noted that SEBI, prior to the issuance of SEBI Circular dated September 28, 2018 which abolished the concept of CDEs, issued a number of circulars which were either addressed to \u2018All recognised stock exchanges\u2019, or to \u2018All National Commodity Derivatives Exchanges\u2019. The Outsourcing Circular dated September 13, 2017 was one such Circular, which was addressed to All Stock Exchanges. While SEBI Circular dated September 28, 2018 provided that all the norms issued for Commodity Derivatives Exchanges till date shall be applicable to Commodity Derivatives Segments of Recognised Stock Exchanges / Recognised Clearing Corporations to the extent applicable , there was no clarity on whether earlier Circulars issued for All Stock Exchanges prior to 2018 Circular, were applicable to Commodity Derivatives Segment of recognised Stock Exchanges / Clearing Corporations , or not.", "SECC Regulations, 2012": "45. I note that various provisions of SECC Regulations, 2012 and SECC Regulations, 2018 have been invoked against the Noticees for issues which are directly linked to alleged non-implementation of the Outsourcing Circular by MCX and MCXCCL. As the allegations of violation of Outsourcing Circular against MCX and MCXCCL does not sustain, the related allegations pertaining to violation of the provisions of SECC Regulations, 2012 and SECC Regulations, 2018 against the Noticees do not stand.", "SECC Regulations, 2018": "45. I note that various provisions of SECC Regulations, 2012 and SECC Regulations, 2018 have been invoked against the Noticees for issues which are directly linked to alleged non-implementation of the Outsourcing Circular by MCX and MCXCCL. As the allegations of violation of Outsourcing Circular against MCX and MCXCCL does not sustain, the related allegations pertaining to violation of the provisions of SECC Regulations, 2012 and SECC Regulations, 2018 against the Noticees do not stand." } }, "chunk_6": { "analysis_of_arguments": "The SCN contended that MCX and MCXCCL failed to protect their interests by not negotiating favorable terms, not seeking legal recourse, and delaying key decisions. MCX responded that business conditions, vendor availability, and COVID-19 restrictions influenced negotiations and timelines, and that decisions were taken after careful deliberation with legal opinions. Both parties disputed whether the management\u2019s actions were adequately thorough and timely.", "cases_referred": [], "facts": "MCX and MCXCCL had an agreement with 63 Moons for software support services, which was nearing expiry while MCX explored developing a new trading platform (CDP) with TCS. A Show Cause Notice was issued, alleging management lapses in negotiating contract extensions with 63 Moons and in timely planning for an alternative software solution. The SCN further claimed that MCX did not adequately pursue legal remedies and had not apprised its Board of delays and associated costs. Multiple Board meetings and replies to the SCN followed, culminating in this order addressing those allegations.", "final_status": "Disposed", "formatted_summary": "This portion of the order addresses the Show Cause Notice, which questioned the management\u2019s handling of software service extensions with 63 Moons and the subsequent contract with TCS. The adjudicating authority examined each allegation\u2014regarding negotiation strategies, timeliness of decisions, exploration of legal solutions, and oversight by MCX\u2019s Board\u2014and found that the decisions were made in good faith and did not rise to actionable lapses. The order concludes by rejecting the allegations.", "held": "The authority found that MCX and MCXCCL\u2019s decisions were business judgments made in good faith, and the allegations regarding inadequate negotiation and failure to take legal recourse were not sustained. No adverse findings were made, and no negative inference was drawn against the management.", "latin_principles": { "bonafide": "Paragraph 60: \u201c\u2026there was a bonafide and well-informed impression that the development of CDP could be concluded within the two years\u2019 timeline\u2026\u201d" }, "legal_issues": "Whether MCX and MCXCCL management acted prudently in negotiating service extensions with 63 Moons, whether the decision to engage TCS for a new software platform was timely and reasonable, and whether any failure to explore legal remedies or inform the Board constituted a lapse in duty.", "statutes": {} }, "chunk_7": { "analysis_of_arguments": "The regulator contended that MCX and its management failed to disclose the substantial extension fees paid to 63 Moons and did not adequately address project delays. MCX maintained that shifts in the go-live date were caused by pandemic hurdles and TCS\u2019s staffing constraints, arguing that the extension fees were unavoidable to ensure uninterrupted trading operations. MCX also submitted that it eventually disclosed all necessary information after clarifying the total financial outlay. Both sides disputed whether the board had been improperly reassured on project timelines and risk mitigation strategies.", "cases_referred": [], "facts": "The dispute arises from MCX and MCXCCL\u2019s transition from the existing trading software supplied by 63 Moons to a new CDP Project developed by TCS. The CDP Project experienced repeated delays, which were partly attributed to pandemic-related constraints and coordination issues with TCS. Concerns arose regarding inadequate penalty clauses in the TCS contract and the management\u2019s optimistic assurances to the MCX Board. During the delay, MCX was compelled to extend its contract with 63 Moons at significantly higher costs. A show cause notice was subsequently issued over alleged nondisclosure of these costs and the resulting financial impact. The platform ultimately went live around the time the notice was issued.", "final_status": "The matter was disposed of with the finding that certain allegations of regulatory violations were not established.", "formatted_summary": "This section addresses allegations that delays in implementing a new software platform for MCX led to significant extension fees being paid to 63 Moons without prompt public disclosure. MCX explained the delays occurred due to COVID-19 and contractual arrangements with TCS. The regulator questioned the absence of penalty clauses in the TCS agreement, the repeated postponement of the go-live date, and whether MCX management kept its board fully informed. Ultimately, the authority found that MCX\u2019s actions did not establish violations of SECC Regulations and that the project\u2019s completion resolved the continuity concerns, though disclosure obligations were emphasized.", "held": "It was concluded that MCX\u2019s explanations for the project delays and contractual decisions were acceptable. The authority found that the risk of operational disruption justified extending the service arrangement, although MCX was reminded of its continuing disclosure obligations to ensure transparency in future dealings.", "latin_principles": {}, "legal_issues": "Whether MCX and MCXCCL fulfilled their obligations to disclose material financial information regarding the extension contract with 63 Moons, and whether the delays, board assurances, and contractual terms complied with applicable regulations and governance norms.", "statutes": { "Regulation 33(1) of SECC Regulations, 2018": "82. As per Regulation 33 (1) of SECC Regulations, 2018, \u201cThe disclosure requirements and corporate governance norms as specified for listed companies shall mutatis mutandis apply to a recognised stock exchange and a recognised clearing corporation.\u201d", "Regulations 4(1)(d), 4(1)(e), 4(1)(i) and 30(12) of LODR Regulations, 2015": "84. It is alleged in the SCN that MCX, by failing to make appropriate disclosures as stated above, MCX violated the provisions of Regulation 4(1)(d), 4(1)(e), 4(1)(i) and 30(12) of LODR Regulations, 2015, read-with Regulation 33(1) of SECC Regulations, 2018.", "SEBI Circular dated March 22, 2021": "70. As regards appointment of CTO, MCXCCL has submitted that a CISO was appointed w.e.f. March 05, 2019 and the responsibilities of CTO and CISO overlapped significantly. The CISO made significant contributions to CDP Project. Further, first reference of having a CTO for a CC was made in SEBI Circular dated March 22, 2021. A CTO was appointed by MCXCCL on July 23, 2021.", "SECC Regulations, 2012 and SECC Regulations, 2018": "78. For the above stated observations, findings and reasons, I find that the allegation of violations of the provisions of SECC Regulations, 2012 and SECC Regulations, 2018 levelled against the Noticee in respect of the abovementioned assertions in the SCN are not established." } }, "chunk_8": { "analysis_of_arguments": "The SCN alleged that MCX violated its disclosure obligations by failing to inform the public about material payments. MCX admitted the oversight, emphasizing it was unintentional. The allegation regarding incorrect managed services disclosure was dropped based on MCX\u2019s explanation. TCS-related timelines were found acceptable, and no fault was attributed to Noticee 3.", "cases_referred": [], "facts": "MCX entered into a Trading Software contract with 63 Moons (earlier FTIL) and TCS. During the relevant period, MCX made significant quarterly payments to 63 Moons that exceeded its previous year\u2019s profit. These payments were not disclosed promptly, leading to a show cause notice alleging non-disclosure. MCX later acknowledged this lapse, attributing it to inadvertence. The matter proceeded before SEBI, with certain allegations against MCX upheld, resulting in a monetary penalty, while allegations against Noticees 2 to 7 were dropped.", "final_status": "Disposed of with a monetary penalty imposed on MCX (Noticee 1).", "formatted_summary": "In this order related to the Trading Software contract between MCX, MCXCCL, 63 Moons, and TCS, SEBI concluded that MCX failed to make timely disclosures of significant quarterly payments to 63 Moons, exceeding its earlier annual profit. MCX admitted the lapse, attributing it to inadvertence. A monetary penalty was imposed on MCX under the relevant regulations, while allegations against other Noticees were dismissed. The decision underlines the obligation of listed entities to provide accurate and timely information on material financial matters.", "held": "MCX was held responsible for violating disclosure norms and was ordered to pay a monetary penalty. Allegations against the other Noticees were dropped. The decision reinforces the requirement for timely disclosures of material financial information by listed entities.", "latin_principles": {}, "legal_issues": "Whether MCX\u2019s omission to disclose large quarterly payments to 63 Moons and related disclosures about managed services and project timelines violated applicable disclosure regulations.", "statutes": { "LODR Regulations, 2015": "84. It is alleged in the SCN that MCX, by failing to make appropriate disclosures as stated above, MCX violated the provisions of Regulation 4(1)(d), 4(1)(e), 4(1)(i) and 30(12) of LODR Regulations, 2015, read -with Regulation 33(1) of SECC Regulations, 2018.\n \n85. The provisions of Regulations 4(1)(d) and 4(1)(e) of LODR Regulations, 2015 mandate disclosure of accurate, adequate, explicit and timely i nformation. Similarly, Regulation 4(1)(i) mandates that filings, reports, statements, documents and information which are event based, or are filed periodically, shall contain relevant information. Further, Regulation 30(12) of LODR Regulations, 2015, inter alia , provides that any event or information which is not mentioned in Para A or B of Part A of Schedule III but which may have a material effect on the listed entity is required to be adequately disclosed.\n \n86. I note that the quarterly payments made by MCX to 63 Moons for 3 quarter between Oct. 2022 \u2013 June 2023 , which totalled Rs. 222 Crore, was much larger than the annual profit of MCX for previous FY 2021 -22, which stood at Rs. 118 Crore . This information was a material information, since the said quarterly payments exceeded the quarterly payments made earlier to 63 Moons by many times. The increased quarterly payments can be said to have huge bearing on the profitability of MCX. Accordingly, such information has to be treated as material informatio n which ought to have been disclosed by MCX to public , in terms of the provisions of Regulation 30( 12) read with Regulations 4(1)(d), 4(1)(e) and 4(1)(i) of the LODR Regulations, 2015 . MCX has admitted that it \n \nOrder in the matter of Trading Software contract of MCX and MCXCCL with 63 Moons \n(erstwhile FTIL) and TCS \n Page 30 of 32 \n failed to disclose the same to public. However , it has submitted that the same was an inadvertent mistake. As MCX has admitted the lapse, I find that the allegation of violations of the abovementioned provisions of LODR Regulations, 2015 and SECC Regulations, 2018 by MCX stand s established. Accordingl y, MCX is liable for a monetary penalty under Section 15HB of the SEBI Act, 1992 for the abovementioned provisions of LODR Regulations, 2015 and SECC Regulations, 2018 .", "SCRA, 1956": "90. In view of the reasons recorded in detail in this Order , I, in the exercise of the powers conferred upon me under Section 11B(2) of the SEBI Act, 1992 and Section 12A(2) of SCRA, 1956 read with Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995 ; Rule 5 of Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties) Rules, 2005 and Section 19 of SEBI Act, 1992 , hereby order as follows: \n \n(a) MCX (Noticee 1 ), is hereby imposed with a monetary penalty , as provided hereunder: \n \nNoticee Provisions of law violated Penalty Imposed \nunder Section Penalty \nImposed \nMCX \n(Noticee 1 ) 4(1)(d), 4(1)(e), 4(1)(i) \nand 30(12) of LODR \nRegulations, 2015, read \nwith Regulation 33(1) of \nSECC Regulations, 2018 Section 15HB of \nthe SEBI Act, \n1992 Rs. Twenty -Five \nLakh \n(Rs. 25,00,000 /-) \n \n(b) MCX shall remit / pay the amount of penalty mentioned above, within 45 \ndays of receipt of this order by using the undermentioned pathway: \nwww.sebi.gov.in/Enforcement \u2192 Orders \u2192 Orders of Chairperson/ \nMembers \u2192 Click on PAY NOW or by using the web link: \nhttps://siportal.sebi.gov.in/intermediary/AOPaymentGateway.html . MCX \nshall forward the d etails/confirmation of penalty so paid through e -\npayment to \u201cThe Division Chief, MRD -SEC-1, Securities and Exchange \nBoard of India, SEBI Bhavan, Plot No. C4 -A, \"G\" Block, Bandra Kurla \nComplex, Bandra (E), Mumbai -400051\u201d and also to e -mail id: \ntad@sebi.gov.in in the format given in the table below: \n \nCASE NAME \nNAME OF PAYEE \nDATE OF PAYMENT \nAMOUNT PAID \nTRANSACTION NO. \nPAYMENT IS MADE FOR : (LIKE PENALTIES /DISGORGEMENT \n/RECOVERY /SETTLEMENT AMOUNT /LEGAL CHARGES ALONG WITH ORDER \nDETAILS )", "SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995": "90. In view of the reasons recorded in detail in this Order , I, in the exercise of the powers conferred upon me under Section 11B(2) of the SEBI Act, 1992 and Section 12A(2) of SCRA, 1956 read with Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995 ; Rule 5 of Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties) Rules, 2005 and Section 19 of SEBI Act, 1992 , hereby order as follows: \n \n(a) MCX (Noticee 1 ), is hereby imposed with a monetary penalty , as provided hereunder: \n \nNoticee Provisions of law violated Penalty Imposed \nunder Section Penalty \nImposed \nMCX \n(Noticee 1 ) 4(1)(d), 4(1)(e), 4(1)(i) \nand 30(12) of LODR \nRegulations, 2015, read \nwith Regulation 33(1) of \nSECC Regulations, 2018 Section 15HB of \nthe SEBI Act, \n1992 Rs. Twenty -Five \nLakh \n(Rs. 25,00,000 /-) \n \n(b) MCX shall remit / pay the amount of penalty mentioned above, within 45 \ndays of receipt of this order by using the undermentioned pathway: \nwww.sebi.gov.in/Enforcement \u2192 Orders \u2192 Orders of Chairperson/ \nMembers \u2192 Click on PAY NOW or by using the web link: \nhttps://siportal.sebi.gov.in/intermediary/AOPaymentGateway.html . MCX \nshall forward the d etails/confirmation of penalty so paid through e -\npayment to \u201cThe Division Chief, MRD -SEC-1, Securities and Exchange \nBoard of India, SEBI Bhavan, Plot No. C4 -A, \"G\" Block, Bandra Kurla \nComplex, Bandra (E), Mumbai -400051\u201d and also to e -mail id: \ntad@sebi.gov.in in the format given in the table below: \n \nCASE NAME \nNAME OF PAYEE \nDATE OF PAYMENT \nAMOUNT PAID \nTRANSACTION NO. \nPAYMENT IS MADE FOR : (LIKE PENALTIES /DISGORGEMENT \n/RECOVERY /SETTLEMENT AMOUNT /LEGAL CHARGES ALONG WITH ORDER \nDETAILS )", "SEBI Act, 1992": "86. I note that the quarterly payments made by MCX to 63 Moons for 3 quarter between Oct. 2022 \u2013 June 2023 , which totalled Rs. 222 Crore, was much larger than the annual profit of MCX for previous FY 2021 -22, which stood at Rs. 118 Crore . This information was a material information, since the said quarterly payments exceeded the quarterly payments made earlier to 63 Moons by many times. The increased quarterly payments can be said to have huge bearing on the profitability of MCX. Accordingly, such information has to be treated as material informatio n which ought to have been disclosed by MCX to public , in terms of the provisions of Regulation 30( 12) read with Regulations 4(1)(d), 4(1)(e) and 4(1)(i) of the LODR Regulations, 2015 . MCX has admitted that it \n \nOrder in the matter of Trading Software contract of MCX and MCXCCL with 63 Moons \n(erstwhile FTIL) and TCS \n Page 30 of 32 \n failed to disclose the same to public. However , it has submitted that the same was an inadvertent mistake. As MCX has admitted the lapse, I find that the allegation of violations of the abovementioned provisions of LODR Regulations, 2015 and SECC Regulations, 2018 by MCX stand s established. Accordingl y, MCX is liable for a monetary penalty under Section 15HB of the SEBI Act, 1992 for the abovementioned provisions of LODR Regulations, 2015 and SECC Regulations, 2018 .\n \n89. While imposing the monetary penalty, I have considered the factors , as mentioned under Section 15 J of the SEBI Act, 1992.\n \n90. In view of the reasons recorded in detail in this Order , I, in the exercise of the powers conferred upon me under Section 11B(2) of the SEBI Act, 1992 and Section 12A(2) of SCRA, 1956 read with Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995 ; Rule 5 of Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties) Rules, 2005 and Section 19 of SEBI Act, 1992 , hereby order as follows: \n \n(a) MCX (Noticee 1 ), is hereby imposed with a monetary penalty , as provided hereunder: \n \nNoticee Provisions of law violated Penalty Imposed \nunder Section Penalty \nImposed \nMCX \n(Noticee 1 ) 4(1)(d), 4(1)(e), 4(1)(i) \nand 30(12) of LODR \nRegulations, 2015, read \nwith Regulation 33(1) of \nSECC Regulations, 2018 Section 15HB of \nthe SEBI Act, \n1992 Rs. Twenty -Five \nLakh \n(Rs. 25,00,000 /-) \n \n(b) MCX shall remit / pay the amount of penalty mentioned above, within 45 \ndays of receipt of this order by using the undermentioned pathway: \nwww.sebi.gov.in/Enforcement \u2192 Orders \u2192 Orders of Chairperson/ \nMembers \u2192 Click on PAY NOW or by using the web link: \nhttps://siportal.sebi.gov.in/intermediary/AOPaymentGateway.html . MCX \nshall forward the d etails/confirmation of penalty so paid through e -\npayment to \u201cThe Division Chief, MRD -SEC-1, Securities and Exchange \nBoard of India, SEBI Bhavan, Plot No. C4 -A, \"G\" Block, Bandra Kurla \nComplex, Bandra (E), Mumbai -400051\u201d and also to e -mail id: \ntad@sebi.gov.in in the format given in the table below: \n \nCASE NAME \nNAME OF PAYEE \nDATE OF PAYMENT \nAMOUNT PAID \nTRANSACTION NO. \nPAYMENT IS MADE FOR : (LIKE PENALTIES /DISGORGEMENT \n/RECOVERY /SETTLEMENT AMOUNT /LEGAL CHARGES ALONG WITH ORDER \nDETAILS )", "SECC Regulations, 2018": "84. It is alleged in the SCN that MCX, by failing to make appropriate disclosures as stated above, MCX violated the provisions of Regulation 4(1)(d), 4(1)(e), 4(1)(i) and 30(12) of LODR Regulations, 2015, read -with Regulation 33(1) of SECC Regulations, 2018.\n \n85. The provisions of Regulations 4(1)(d) and 4(1)(e) of LODR Regulations, 2015 mandate disclosure of accurate, adequate, explicit and timely i nformation. Similarly, Regulation 4(1)(i) mandates that filings, reports, statements, documents and information which are event based, or are filed periodically, shall contain relevant information. Further, Regulation 30(12) of LODR Regulations, 2015, inter alia , provides that any event or information which is not mentioned in Para A or B of Part A of Schedule III but which may have a material effect on the listed entity is required to be adequately disclosed.\n \n86. I note that the quarterly payments made by MCX to 63 Moons for 3 quarter between Oct. 2022 \u2013 June 2023 , which totalled Rs. 222 Crore, was much larger than the annual profit of MCX for previous FY 2021 -22, which stood at Rs. 118 Crore . This information was a material information, since the said quarterly payments exceeded the quarterly payments made earlier to 63 Moons by many times. The increased quarterly payments can be said to have huge bearing on the profitability of MCX. Accordingly, such information has to be treated as material informatio n which ought to have been disclosed by MCX to public , in terms of the provisions of Regulation 30( 12) read with Regulations 4(1)(d), 4(1)(e) and 4(1)(i) of the LODR Regulations, 2015 . MCX has admitted that it \n \nOrder in the matter of Trading Software contract of MCX and MCXCCL with 63 Moons \n(erstwhile FTIL) and TCS \n Page 30 of 32 \n failed to disclose the same to public. However , it has submitted that the same was an inadvertent mistake. As MCX has admitted the lapse, I find that the allegation of violations of the abovementioned provisions of LODR Regulations, 2015 and SECC Regulations, 2018 by MCX stand s established. Accordingl y, MCX is liable for a monetary penalty under Section 15HB of the SEBI Act, 1992 for the abovementioned provisions of LODR Regulations, 2015 and SECC Regulations, 2018 .", "Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties) Rules, 2005": "90. In view of the reasons recorded in detail in this Order , I, in the exercise of the powers conferred upon me under Section 11B(2) of the SEBI Act, 1992 and Section 12A(2) of SCRA, 1956 read with Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995 ; Rule 5 of Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties) Rules, 2005 and Section 19 of SEBI Act, 1992 , hereby order as follows: \n \n(a) MCX (Noticee 1 ), is hereby imposed with a monetary penalty , as provided hereunder: \n \nNoticee Provisions of law violated Penalty Imposed \nunder Section Penalty \nImposed \nMCX \n(Noticee 1 ) 4(1)(d), 4(1)(e), 4(1)(i) \nand 30(12) of LODR \nRegulations, 2015, read \nwith Regulation 33(1) of \nSECC Regulations, 2018 Section 15HB of \nthe SEBI Act, \n1992 Rs. Twenty -Five \nLakh \n(Rs. 25,00,000 /-) \n \n(b) MCX shall remit / pay the amount of penalty mentioned above, within 45 \ndays of receipt of this order by using the undermentioned pathway: \nwww.sebi.gov.in/Enforcement \u2192 Orders \u2192 Orders of Chairperson/ \nMembers \u2192 Click on PAY NOW or by using the web link: \nhttps://siportal.sebi.gov.in/intermediary/AOPaymentGateway.html . MCX \nshall forward the d etails/confirmation of penalty so paid through e -\npayment to \u201cThe Division Chief, MRD -SEC-1, Securities and Exchange \nBoard of India, SEBI Bhavan, Plot No. C4 -A, \"G\" Block, Bandra Kurla \nComplex, Bandra (E), Mumbai -400051\u201d and also to e -mail id: \ntad@sebi.gov.in in the format given in the table below: \n \nCASE NAME \nNAME OF PAYEE \nDATE OF PAYMENT \nAMOUNT PAID \nTRANSACTION NO. \nPAYMENT IS MADE FOR : (LIKE PENALTIES /DISGORGEMENT \n/RECOVERY /SETTLEMENT AMOUNT /LEGAL CHARGES ALONG WITH ORDER \nDETAILS )" } } }, "counsels": [], "delivered_date": null, "facts": "MCX commenced operations in 2003 using specialized trading software licensed from 63 Moons (formerly FTIL). Over time, 63 Moons\u2019s ownership in MCX was reduced to zero by 2014, though MCX continued to rely on it for software support under successive agreements. Following the merger of the Forward Markets Commission into SEBI in 2015, MCX formed MCXCCL as its clearing corporation under SEBI oversight. In 2017, SEBI issued an Outsourcing Circular for recognized Stock Exchanges and Clearing Corporations, raising questions about its applicability to commodity derivative exchanges. Between 2020 and 2023, MCX considered a new Commodity Derivative Platform (CDP) from TCS, but the project experienced delays, requiring extensions of the 63 Moons contract at significant cost. SEBI issued show cause notices alleging inadequate disclosures, timeliness issues in implementing outsourcing requirements, and procedural lapses in vendor selection and management decisions. Multiple replies, board discussions, and hearings ensued. Ultimately, an order imposed a monetary penalty on MCX for failing to disclose substantial quarterly payments to 63 Moons, while allegations against other noticees were largely dismissed.", "final_status": "Disposed with a monetary penalty on MCX.", "first_party": [ "1. Securities and Exchange Board of India" ], "grouped_statutes": { "LODR Regulations, 2015": [ "25. In view of the above , the Noticees were alleged to have violated the following provisions of law: \u2026 (iv) Regulation 4(1)(c), 4(1)(d), 4(1)(e) and 4(1)(i) and 30(12) of LODR Regulations, 2015, read-with Regulation 33(1) of SECC Regulations, 2018 \u2026", "25. In view of the above , the Noticees were alleged to have violated the following provisions of law: \u2026 iv. Regulation 4(1)(c), 4(1)(d), 4(1)(e) and 4(1)(i) and 30(12) of LODR Regulations, 2015, read-with Regulation 33(1) of SECC Regulations, 2018 \u2026", "84. It is alleged in the SCN that MCX, by failing to make appropriate disclosures as stated above, MCX violated the provisions of Regulation 4(1)(d), 4(1)(e), 4(1)(i) and 30(12) of LODR Regulations, 2015, read -with Regulation 33(1) of SECC Regulations, 2018.\n \n85. The provisions of Regulations 4(1)(d) and 4(1)(e) of LODR Regulations, 2015 mandate disclosure of accurate, adequate, explicit and timely information. Similarly, Regulation 4(1)(i) mandates that filings, reports, statements, documents and information which are event based, or are filed periodically, shall contain relevant information. Further, Regulation 30(12) of LODR Regulations, 2015, inter alia , provides that any event or information which is not mentioned in Para A or B of Part A of Schedule III but which may have a material effect on the listed entity is required to be adequately disclosed.\n \n86. I note that the quarterly payments made by MCX to 63 Moons for 3 quarter between Oct. 2022 \u2013 June 2023 , which totalled Rs. 222 Crore, was much larger than the annual profit of MCX for previous FY 2021 -22, which stood at Rs. 118 Crore . This information was a material information, since the said quarterly payments exceeded the quarterly payments made earlier to 63 Moons by many times. The increased quarterly payments can be said to have huge bearing on the profitability of MCX. Accordingly, such information has to be treated as material information which ought to have been disclosed by MCX to public , in terms of the provisions of Regulation 30(12) read with Regulations 4(1)(d), 4(1)(e) and 4(1)(i) of the LODR Regulations, 2015 . MCX has admitted that it \n \nOrder in the matter of Trading Software contract of MCX and MCXCCL with 63 Moons \n(erstwhile FTIL) and TCS \n Page 30 of 32 \n failed to disclose the same to public. However , it has submitted that the same was an inadvertent mistake. As MCX has admitted the lapse, I find that the allegation of violations of the abovementioned provisions of LODR Regulations, 2015 and SECC Regulations, 2018 by MCX stands established. Accordingly, MCX is liable for a monetary penalty under Section 15HB of the SEBI Act, 1992 for the abovementioned provisions of LODR Regulations, 2015 and SECC Regulations, 2018 ." ], "Master Circular": [ "43. It is further noted that subsequently, SEBI issued Master Circulars from time to time which either applied to Stock Exchanges or to Commodity Derivative Segments of the Stock Exchanges. When the contents of the Master Circulars issued by SEBI from time to time for the Commodity Derivatives Segment are compared with the Master Circulars issued for Stock Exchanges and Clearing Corporations, wherein, I note that the Outsourcing Circular finds mention in the Master Circulars issued for Stock Exchanges and Clearing Corporations, whereas it is conspicuously absent from the Master Circulars issued for the Commodity Derivatives Segment. Further, while certain Circulars, such as SEBI Circular dated January 10, 2019 on \u201cCommittees at Market Infrastructure Institutions\u201d, are mentioned in both the Master Circulars issued for Stock Exchanges and Clearing Corporations as well as for Commodity Derivatives Segment, the Outsourcing Circular is not one such Circular." ], "SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995": [ "90. In view of the reasons recorded in detail in this Order , I, in the exercise of the powers conferred upon me under Section 11B(2) of the SEBI Act, 1992 and Section 12A(2) of SCRA, 1956 read with Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995 ; Rule 5 of Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties) Rules, 2005 and Section 19 of SEBI Act, 1992 , hereby order as follows: \n \n(a) MCX (Noticee 1 ), is hereby imposed with a monetary penalty , as provided hereunder: \n \nNoticee Provisions of law violated Penalty Imposed \nunder Section Penalty \nImposed \nMCX \n(Noticee 1 ) 4(1)(d), 4(1)(e), 4(1)(i) \nand 30(12) of LODR \nRegulations, 2015, read \nwith Regulation 33(1) of \nSECC Regulations, 2018 Section 15HB of \nthe SEBI Act, \n1992 Rs. Twenty -Five \nLakh \n(Rs. 25,00,000 /-) \n \n(b) MCX shall remit / pay the amount of penalty mentioned above, within 45 \ndays of receipt of this order by using the undermentioned pathway: \nwww.sebi.gov.in/Enforcement \u2192 Orders \u2192 Orders of Chairperson/ \nMembers \u2192 Click on PAY NOW or by using the web link: \nhttps://siportal.sebi.gov.in/intermediary/AOPaymentGateway.html . MCX \nshall forward the details/confirmation of penalty so paid through e-\npayment to \u201cThe Division Chief, MRD-SEC-1, Securities and Exchange \nBoard of India, SEBI Bhavan, Plot No. C4-A, \"G\" Block, Bandra Kurla \nComplex, Bandra (E), Mumbai-400051\u201d and also to e-mail id: \ntad@sebi.gov.in in the format given in the table below: \n \nCASE NAME \nNAME OF PAYEE \nDATE OF PAYMENT \nAMOUNT PAID \nTRANSACTION NO. \nPAYMENT IS MADE FOR : (LIKE PENALTIES /DISGORGEMENT \n/RECOVERY /SETTLEMENT AMOUNT /LEGAL CHARGES ALONG WITH ORDER \nDETAILS )" ], "SEBI (Settlement Proceedings) Regulations, 2018": [ "28. The SCN was duly served on the Noticees. The Noticees subsequently filed Settlement applications in terms of the provisions of SEBI (Settlement Proceedings) Regulations, 2018. Later, the said applications were withdrawn by the Noticees. The Noticees have filed their individual replies in respect of the allegations against them mentioned in the SCN. The details are as under: Noticee Number Date of first reply Date of additional reply\u2026" ], "SEBI Circular dated January 10, 2019": [ "43. It is further noted that subsequently, SEBI issued Master Circulars from time to time which either applied to Stock Exchanges or to Commodity Derivative Segments of the Stock Exchanges. When the contents of the Master Circulars issued by SEBI from time to time for the Commodity Derivatives Segment are compared with the Master Circulars issued for Stock Exchanges and Clearing Corporations, wherein, I note that the Outsourcing Circular finds mention in the Master Circulars issued for Stock Exchanges and Clearing Corporations, whereas it is conspicuously absent from the Master Circulars issued for the Commodity Derivatives Segment. Further, while certain Circulars, such as SEBI Circular dated January 10, 2019 on \u201cCommittees at Market Infrastructure Institutions\u201d, are mentioned in both the Master Circulars issued for Stock Exchanges and Clearing Corporations as well as for Commodity Derivatives Segment, the Outsourcing Circular is not one such Circular." ], "SEBI Circular dated March 22, 2021": [ "70. As regards appointment of CTO, MCXCCL has submitted that a CISO was appointed w.e.f. March 05, 2019 and the responsibilities of CTO and CISO overlapped significantly. The CISO made significant contributions to CDP Project. Further, first reference of having a CTO for a CC was made in SEBI Circular dated March 22, 2021. A CTO was appointed by MCXCCL on July 23, 2021." ], "SEBI Circular dated September 28, 2018": [ "42. In this regard, it is noted that SEBI, prior to the issuance of SEBI Circular dated September 28, 2018 which abolished the concept of CDEs, issued a number of circulars which were either addressed to \u2018All recognised stock exchanges\u2019, or to \u2018All National Commodity Derivatives Exchanges\u2019. The Outsourcing Circular dated September 13, 2017 was one such Circular, which was addressed to All Stock Exchanges. While SEBI Circular dated September 28, 2018 provided that all the norms issued for Commodity Derivatives Exchanges till date shall be applicable to Commodity Derivatives Segments of Recognised Stock Exchanges / Recognised Clearing Corporations to the extent applicable , there was no clarity on whether earlier Circulars issued for All Stock Exchanges prior to 2018 Circular, were applicable to Commodity Derivatives Segment of recognised Stock Exchanges / Clearing Corporations , or not." ], "SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017": [ "25. In view of the above , the Noticees were alleged to have violated the following provisions of law: i. SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017 \u2026 Clause 3 of SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 \u2026 and Clause 2, 3, 4, 5, 6, 8.1 and 8.3 of Annexure I to SEBI circular dated September 13, 2017 \u2026", "35. I note that there are other allegations of violations of the provisions of SECC Regulations, 2012 and SECC Regulations, 2018 against the Noticees, as mentioned in the Table under Para 25 above, which primarily emanate from the abovementioned allegations pertaining to violation of the provisions of Outsourcing Circular by MCX and MCXCCL. Holding the Noticees guilty of such violations mainly hinges on the issue as to whether the allegation of violation of the provisions of Outsourcing Circular by MCX and MCXCCL is established or not.", "42. In this regard, it is noted that SEBI, prior to the issuance of SEBI Circular dated September 28, 2018 which abolished the concept of CDEs, issued a number of circulars which were either addressed to \u2018All recognised stock exchanges\u2019, or to \u2018All National Commodity Derivatives Exchanges\u2019. The Outsourcing Circular dated September 13, 2017 was one such Circular, which was addressed to All Stock Exchanges. While SEBI Circular dated September 28, 2018 provided that all the norms issued for Commodity Derivatives Exchanges till date shall be applicable to Commodity Derivatives Segments of Recognised Stock Exchanges / Recognised Clearing Corporations to the extent applicable , there was no clarity on whether earlier Circulars issued for All Stock Exchanges prior to 2018 Circular, were applicable to Commodity Derivatives Segment of recognised Stock Exchanges / Clearing Corporations , or not." ], "Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties) Rules, 2005": [ "90. In view of the reasons recorded in detail in this Order , I, in the exercise of the powers conferred upon me under Section 11B(2) of the SEBI Act, 1992 and Section 12A(2) of SCRA, 1956 read with Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995 ; Rule 5 of Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties) Rules, 2005 and Section 19 of SEBI Act, 1992 , hereby order as follows: \n \n(a) MCX (Noticee 1 ), is hereby imposed with a monetary penalty , as provided hereunder: \n \nNoticee Provisions of law violated Penalty Imposed \nunder Section Penalty \nImposed \nMCX \n(Noticee 1 ) 4(1)(d), 4(1)(e), 4(1)(i) \nand 30(12) of LODR \nRegulations, 2015, read \nwith Regulation 33(1) of \nSECC Regulations, 2018 Section 15HB of \nthe SEBI Act, \n1992 Rs. Twenty -Five \nLakh \n(Rs. 25,00,000 /-) \n \n(b) MCX shall remit / pay the amount of penalty mentioned above, within 45 \ndays of receipt of this order by using the undermentioned pathway: \nwww.sebi.gov.in/Enforcement \u2192 Orders \u2192 Orders of Chairperson/ \nMembers \u2192 Click on PAY NOW or by using the web link: \nhttps://siportal.sebi.gov.in/intermediary/AOPaymentGateway.html . MCX \nshall forward the details/confirmation of penalty so paid through e-\npayment to \u201cThe Division Chief, MRD-SEC-1, Securities and Exchange \nBoard of India, SEBI Bhavan, Plot No. C4-A, \"G\" Block, Bandra Kurla \nComplex, Bandra (E), Mumbai-400051\u201d and also to e-mail id: \ntad@sebi.gov.in in the format given in the table below: \n \nCASE NAME \nNAME OF PAYEE \nDATE OF PAYMENT \nAMOUNT PAID \nTRANSACTION NO. \nPAYMENT IS MADE FOR : (LIKE PENALTIES /DISGORGEMENT \n/RECOVERY /SETTLEMENT AMOUNT /LEGAL CHARGES ALONG WITH ORDER \nDETAILS )" ], "Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012": [ "1. Pursuant to a special purpose examination of Multi Commodity Exchange of India Ltd. (\u201cMCX\u201d) and Multi Commodity Exchange Clearing Corporation Ltd. (\u201cMCXCCL\u201d), the Securities and Exchange Board of India (hereinafter referred to as \u201cSEBI\u201d) issued a show cause notice dated October 16, 2023 (\u201cSCN\u201d) to the Noticees for certain alleged violations of the provisions of Securities Contracts (Regulation)(Stock Exchanges and Clearing Corporations) Regulations, 2018 (\u201cSECC Regulations, 2018\u201d), SEBI Act, 1992, Securities Contracts Regulation Act, 1956 (\u201cSCRA, 1956\u201d) and various other Rules/ Regulations / directions / Circulars issued thereunder.", "35. I note that there are other allegations of violati ons of the provisions of the provisions of SECC Regulations, 2012 and SECC Regulations, 2018 against the Noticees, as mentioned in the Table under Para 25 above, which primarily emanate from the abovementioned allegation s pertaining to violation of the provisions of Outsourcing Circular by MCX and MCXCCL. Holding the Noticees guilty of such violations mainly hinges on the issue as to whether the allegation of violation of the provisions of Outsourcing Circular by MCX and MCXCCL is established or not.", "42. In this regard, it is noted that SEBI, prior to the issuance of SEBI Circular dated September 28, 2018 which abolished the concept of CDEs, issued a number of circulars which were either addressed to \u2018All recognised stock exchanges\u2019, or to \u2018All National Commodity Derivatives Exchanges\u2019. The Outsourcing Circular dated September 13, 2017 was one such Circular, which was addressed to All Stock Exchanges. While SEBI Circular dated September 28, 2018 provided that all the norms issued for Commodity Derivatives Exchanges till date shall be applicable to Commodity Derivatives Segments of Recognised Stock Exchanges / Recognised Clearing Corporations to the extent applicable , there was no clarity on whether earlier Circulars issued for All Stock Exchanges prior to 2018 Circular, were applicable to Commodity Derivatives Segment of recognised Stock Exchanges / Clearing Corporations , or not.", "78. For the above stated observations, findings and reasons, I find that the allegation of violations of the provisions of SECC Regulations, 2012 and SECC Regulations, 2018 levelled against the Noticee in respect of the abovementioned assertions in the SCN are not established." ], "Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018": [ "1. Pursuant to a special purpose examination of Multi Commodity Exchange of India Ltd. (\u201cMCX\u201d) and Multi Commodity Exchange Clearing Corporation Ltd. (\u201cMCXCCL\u201d), the Securities and Exchange Board of India (hereinafter referred to as \u201cSEBI\u201d) issued a show cause notice dated October 16, 2023 (\u201cSCN\u201d) to the Noticees for certain alleged violations of the provisions of Securities Contracts (Regulation)(Stock Exchanges and Clearing Corporations) Regulations, 2018 (\u201cSECC Regulations, 2018\u201d), SEBI Act, 1992, Securities Contracts Regulation Act, 1956 (\u201cSCRA, 1956\u201d) and various other Rules/ Regulations / directions / Circulars issued thereunder.", "25. In view of the above , the Noticees were alleged to have violated the following provisions of law: \u2026 (iv) Regulation 4(1)(c), 4(1)(d), 4(1)(e) and 4(1)(i) and 30(12) of LODR Regulations, 2015, read-with Regulation 33(1) of SECC Regulations, 2018. \u2026 Regulation 23A(a), 23GA and 23H of SCRA, 1956 and 15A(b) \u0026 15HB of SEBI Act, 1992 read with 12A (2) of SCRA and 11B (2) of SEBI Act \u2026 read-with amendment to SECC Regulations, 2012 dated April 2, 2018 and SECC Regulations, 2018 and its amendment w.e.f. October 3, 2018 \u2026 iii. Regulation 7(2)(f) and 7(3)(a,b \u0026 j) of SECC Regulations, 2018 read-with 12(5) of SECC Regulations, 2018. \u2026 Clause 1(b), 3(a), 3(b) \u2026 read-with Regulation 26(1) of SECC Regulations, 2018 \u2026 read with regulation 33(1) of SECC Regulations, 2018 \u2026", "2 Noticee 2 (MCXCCL) i. SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017 ii. Regulation 7(2)(f) and 7(4) (a, b \u0026 g) read -with 12(5) of SECC Regulations, 2018 iii. Clause 3 of SEBI circular dated September 13, 2017 iv. Clause 2, 3, 4, 5, 6, 8.1 and 8.3 of Annexure I to SEBI circular dated September 13, 2017. 15HB of SEBI Act, 1992 and section 23GA and 23H of SCRA 1956 read with 12A (2) of SCRA and 11B (2) of SEBI Act", "35. I note that there are other allegations of violati ons of the provisions of the provisions of SECC Regulations, 2012 and SECC Regulations, 2018 against the Noticees, as mentioned in the Table under Para 25 above, which primarily emanate from the abovementioned allegation s pertaining to violation of the provisions of Outsourcing Circular by MCX and MCXCCL. Holding the Noticees guilty of such violations mainly hinges on the issue as to whether the allegation of violation of the provisions of Outsourcing Circular by MCX and MCXCCL is established or not.", "42. In this regard, it is noted that SEBI, prior to the issuance of SEBI Circular dated September 28, 2018 which abolished the concept of CDEs, issued a number of circulars which were either addressed to \u2018All recognised stock exchanges\u2019, or to \u2018All National Commodity Derivatives Exchanges\u2019. The Outsourcing Circular dated September 13, 2017 was one such Circular, which was addressed to All Stock Exchanges. While SEBI Circular dated September 28, 2018 provided that all the norms issued for Commodity Derivatives Exchanges till date shall be applicable to Commodity Derivatives Segments of Recognised Stock Exchanges / Recognised Clearing Corporations to the extent applicable , there was no clarity on whether earlier Circulars issued for All Stock Exchanges prior to 2018 Circular, were applicable to Commodity Derivatives Segment of recognised Stock Exchanges / Clearing Corporations , or not.", "78. For the above stated observations, findings and reasons, I find that the allegation of violations of the provisions of SECC Regulations, 2012 and SECC Regulations, 2018 levelled against the Noticee in respect of the abovementioned assertions in the SCN are not established.", "Regulation 7(2)(f) and 7(4) (a, b \u0026 g) read -with 12(5) of SECC Regulations, 2018 \u2026 Clause 3 of SEBI circular dated September 13, 2017 \u2026 Clause 2, 3, 4, 5, 6, 8.1 and 8.3 of Annexure I to SEBI circular dated September 13, 2017 \u2026 15HB of SEBI Act, 1992 and section 23GA and 23H of SCRA 1956 read with 12A (2) of SCRA and 11B (2) of SEBI Act", "78. For the above stated observations, findings and reasons, I find that the allegation of violations of the provisions of SECC Regulations, 2012 and SECC Regulations, 2018 levelled against the Noticee in respect of the abovementioned assertions in the SCN are not established.", "82. As per Regulation 33 (1) of SECC Regulations, 2018, \u201cThe disclosure requirements and corporate governance norms as specified for listed companies shall mutatis mutandis apply to a recognised stock exchange and a recognised clearing corporation.\u201d", "84. It is alleged in the SCN that MCX, by failing to make appropriate disclosures as stated above, MCX violated the provisions of Regulation 4(1)(d), 4(1)(e), 4(1)(i) and 30(12) of LODR Regulations, 2015, read -with Regulation 33(1) of SECC Regulations, 2018.", "84. It is alleged in the SCN that MCX, by failing to make appropriate disclosures as stated above, MCX violated the provisions of Regulation 4(1)(d), 4(1)(e), 4(1)(i) and 30(12) of LODR Regulations, 2015, read -with Regulation 33(1) of SECC Regulations, 2018.\n \n85. The provisions of Regulations 4(1)(d) and 4(1)(e) of LODR Regulations, 2015 mandate disclosure of accurate, adequate, explicit and timely information. Similarly, Regulation 4(1)(i) mandates that filings, reports, statements, documents and information which are event based, or are filed periodically, shall contain relevant information. Further, Regulation 30(12) of LODR Regulations, 2015, inter alia, provides that any event or information which is not mentioned in Para A or B of Part A of Schedule III but which may have a material effect on the listed entity is required to be adequately disclosed.\n \n86. I note that the quarterly payments made by MCX to 63 Moons for 3 quarter between Oct. 2022 \u2013 June 2023 , which totalled Rs. 222 Crore, was much larger than the annual profit of MCX for previous FY 2021 -22, which stood at Rs. 118 Crore . This information was a material information, since the said quarterly payments exceeded the quarterly payments made earlier to 63 Moons by many times. The increased quarterly payments can be said to have huge bearing on the profitability of MCX. Accordingly, such information has to be treated as material information which ought to have been disclosed by MCX to public , in terms of the provisions of Regulation 30(12) read with Regulations 4(1)(d), 4(1)(e) and 4(1)(i) of the LODR Regulations, 2015 . MCX has admitted that it \n \nOrder in the matter of Trading Software contract of MCX and MCXCCL with 63 Moons \n(erstwhile FTIL) and TCS \n Page 30 of 32 \n failed to disclose the same to public. However , it has submitted that the same was an inadvertent mistake. As MCX has admitted the lapse, I find that the allegation of violations of the abovementioned provisions of LODR Regulations, 2015 and SECC Regulations, 2018 by MCX stands established. Accordingly, MCX is liable for a monetary penalty under Section 15HB of the SEBI Act, 1992 for the abovementioned provisions of LODR Regulations, 2015 and SECC Regulations, 2018 ." ], "Securities Contracts (Regulation) Act, 1956": [ "FINAL ORDER Under Section 11B (2) of the Securities and Exchange Board of India Act, 1992 and Section 12A (2) of the Securities Contracts (Regulation ) Act, 1956 In respect of: Noticee No. Name of the Noticee PAN 1. Multi Commodity Exchange of India Ltd. (MCX) AADCM8239K 2. Multi Commodity Exchange Clearing Corporation Ltd. (MCXCCL) AAFCM9108B 3. Padala Subbi Reddy AAEPP1891N 4. Narendra Kumar Ahlawat ABZPA1574H 5. Sanjay Golecha AAFPG7183F 6. Himanshu Ashar AANPA6741R 7. Manav Jain AIUPJ4118Q (The aforesaid entities are hereinafter individually referred to by their respective names / Noticee no. and collectively as \u201cNoticees\u201d, unless the context specifies otherwise) In the matter of Trading Software contract of MCX and MCXCCL with 63 Moons (erstwhile FTIL) and TCS", "25. In view of the above , the Noticees were alleged to have violated the following provisions of law: \u2026 (iv) Regulation 4(1)(c), 4(1)(d), 4(1)(e) and 4(1)(i) and 30(12) of LODR Regulations, 2015, read-with Regulation 33(1) of SECC Regulations, 2018. \u2026 Regulation 23A(a), 23GA and 23H of SCRA, 1956 and 15A(b) \u0026 15HB of SEBI Act, 1992 read with 12A (2) of SCRA and 11B (2) of SEBI Act \u2026", "25. In view of the above , the Noticees were alleged to have violated the following provisions of law: \u2026 Regulation 23A(a), 23GA and 23H of SCRA, 1956 and 15A(b) \u0026 15HB of SEBI Act, 1992 read with 12A (2) of SCRA and 11B (2) of SEBI Act \u2026", "90. In view of the reasons recorded in detail in this Order , I, in the exercise of the powers conferred upon me under Section 11B(2) of the SEBI Act, 1992 and Section 12A(2) of SCRA, 1956 read with Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995 ; Rule 5 of Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties) Rules, 2005 and Section 19 of SEBI Act, 1992 , hereby order as follows: \n \n(a) MCX (Noticee 1 ), is hereby imposed with a monetary penalty , as provided hereunder: \n \nNoticee Provisions of law violated Penalty Imposed \nunder Section Penalty \nImposed \nMCX \n(Noticee 1 ) 4(1)(d), 4(1)(e), 4(1)(i) \nand 30(12) of LODR \nRegulations, 2015, read \nwith Regulation 33(1) of \nSECC Regulations, 2018 Section 15HB of \nthe SEBI Act, \n1992 Rs. Twenty -Five \nLakh \n(Rs. 25,00,000 /-) \n \n(b) MCX shall remit / pay the amount of penalty mentioned above, within 45 \ndays of receipt of this order by using the undermentioned pathway: \nwww.sebi.gov.in/Enforcement \u2192 Orders \u2192 Orders of Chairperson/ \nMembers \u2192 Click on PAY NOW or by using the web link: \nhttps://siportal.sebi.gov.in/intermediary/AOPaymentGateway.html . MCX \nshall forward the details/confirmation of penalty so paid through e-\npayment to \u201cThe Division Chief, MRD-SEC-1, Securities and Exchange \nBoard of India, SEBI Bhavan, Plot No. C4-A, \"G\" Block, Bandra Kurla \nComplex, Bandra (E), Mumbai-400051\u201d and also to e-mail id: \ntad@sebi.gov.in in the format given in the table below: \n \nCASE NAME \nNAME OF PAYEE \nDATE OF PAYMENT \nAMOUNT PAID \nTRANSACTION NO. \nPAYMENT IS MADE FOR : (LIKE PENALTIES /DISGORGEMENT \n/RECOVERY /SETTLEMENT AMOUNT /LEGAL CHARGES ALONG WITH ORDER \nDETAILS )" ], "Securities and Exchange Board of India Act, 1992": [ "FINAL ORDER Under Section 11B (2) of the Securities and Exchange Board of India Act, 1992 and Section 12A (2) of the Securities Contracts (Regulation ) Act, 1956 In respect of: Noticee No. Name of the Noticee PAN 1. Multi Commodity Exchange of India Ltd. (MCX) AADCM8239K 2. Multi Commodity Exchange Clearing Corporation Ltd. (MCXCCL) AAFCM9108B 3. Padala Subbi Reddy AAEPP1891N 4. Narendra Kumar Ahlawat ABZPA1574H 5. Sanjay Golecha AAFPG7183F 6. Himanshu Ashar AANPA6741R 7. Manav Jain AIUPJ4118Q (The aforesaid entities are hereinafter individually referred to by their respective names / Noticee no. and collectively as \u201cNoticees\u201d, unless the context specifies otherwise) In the matter of Trading Software contract of MCX and MCXCCL with 63 Moons (erstwhile FTIL) and TCS", "25. In view of the above , the Noticees were alleged to have violated the following provisions of law: \u2026 Regulation 23A(a), 23GA and 23H of SCRA, 1956 and 15A(b) \u0026 15HB of SEBI Act, 1992 read with 12A (2) of SCRA and 11B (2) of SEBI Act \u2026", "2 Noticee 2 (MCXCCL) i. SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017 ii. Regulation 7(2)(f) and 7(4) (a, b \u0026 g) read -with 12(5) of SECC Regulations, 2018 iii. Clause 3 of SEBI circular dated September 13, 2017 iv. Clause 2, 3, 4, 5, 6, 8.1 and 8.3 of Annexure I to SEBI circular dated September 13, 2017. 15HB of SEBI Act, 1992 and section 23GA and 23H of SCRA 1956 read with 12A (2) of SCRA and 11B (2) of SEBI Act", "86. I note that the quarterly payments made by MCX to 63 Moons for 3 quarter between Oct. 2022 \u2013 June 2023 , which totalled Rs. 222 Crore, was much larger than the annual profit of MCX for previous FY 2021 -22, which stood at Rs. 118 Crore . This information was a material information, since the said quarterly payments exceeded the quarterly payments made earlier to 63 Moons by many times. The increased quarterly payments can be said to have huge bearing on the profitability of MCX. Accordingly, such information has to be treated as material information which ought to have been disclosed by MCX to public , in terms of the provisions of Regulation 30(12) read with Regulations 4(1)(d), 4(1)(e) and 4(1)(i) of the LODR Regulations, 2015 . MCX has admitted that it \n \nOrder in the matter of Trading Software contract of MCX and MCXCCL with 63 Moons \n(erstwhile FTIL) and TCS \n Page 30 of 32 \n failed to disclose the same to public. However , it has submitted that the same was an inadvertent mistake. As MCX has admitted the lapse, I find that the allegation of violations of the abovementioned provisions of LODR Regulations, 2015 and SECC Regulations, 2018 by MCX stands established. Accordingly, MCX is liable for a monetary penalty under Section 15HB of the SEBI Act, 1992 for the abovementioned provisions of LODR Regulations, 2015 and SECC Regulations, 2018 ." ] }, "held": "It was held that MCX did not violate the Outsourcing Circular provisions but was liable for failing to disclose substantial quarterly payments to 63 Moons, resulting in a monetary penalty. Allegations against other noticees were dismissed. The order underscored the need for clear disclosure practices and timely compliance with regulatory directives.", "latin_principles": { "bonafide": "Paragraph 60: \u201c\u2026there was a bonafide and well-informed impression that the development of CDP could be concluded within the two years\u2019 timeline\u2026\u201d", "expressio unius est exclusio alterius": "(d) This non-applicability of Outsourcing Circular was further reinforced by non-inclusion of the Outsourcing Circular in the Master Circulars issued by SEBI for Commodity Derivatives Market dated September 7, 2018, July 10, 2020, July 1, 2021, May 17, 2022 and August 4, 2023, which sought to put all information mentioned in various circulars in a single place. However, the Outsourcing Circular finds mention only in the Master Circulars issued for Stock Exchanges and Clearing Corporations. Applying the legal maxim expressio unius est exclusio alterius, it is clear the Outsourcing Circular did not apply to CDEs and their CCs. Moreover, inclusion of certain common circulars in both the Master Circulars for CDEs and for Stock Exchanges and Clearing Corporations lends further credence to this view." }, "legal_issues": [ "Whether MCX and MCXCCL breached outsourcing guidelines, including the Outsourcing Circular, under the SECC Regulations, 2018", "whether key officials failed to comply with timely disclosure requirements", "whether the Outsourcing Circular applied to commodity derivative exchanges", "whether management acted prudently in negotiating service extensions with 63 Moons and awarding a new platform contract to TCS", "and whether MCX\u2019s omission to disclose large quarterly payments violated disclosure norms." ], "location": null, "prayer": "", "reserved_date": null, "second_party": [ "1. Multi Commodity Exchange of India Ltd. (MCX)", "2. Multi Commodity Exchange Clearing Corporation Ltd. (MCXCCL)", "3. Padala Subbi Reddy", "4. Narendra Kumar Ahlawat", "5. Sanjay Golecha", "6. Himanshu Ashar", "7. Manav Jain" ], "statutes": { "LODR Regulations, 2015": "Dictionary 2 Reference:\n\n25. In view of the above, the Noticees were alleged to have violated the following provisions of law: \u2026 iv. Regulation 4(1)(c), 4(1)(d), 4(1)(e) and 4(1)(i) and 30(12) of LODR Regulations, 2015, read-with Regulation 33(1) of SECC Regulations, 2018\u2026\n\nDictionary 7 Reference (as \u201cRegulations 4(1)(d), 4(1)(e), 4(1)(i) and 30(12) of LODR Regulations, 2015\u201d):\n\n84. It is alleged in the SCN that MCX, by failing to make appropriate disclosures as stated above, MCX violated the provisions of Regulation 4(1)(d), 4(1)(e), 4(1)(i) and 30(12) of LODR Regulations, 2015, read-with Regulation 33(1) of SECC Regulations, 2018.\n\nDictionary 8 Reference:\n\n85. The provisions of Regulations 4(1)(d) and 4(1)(e) of LODR Regulations, 2015 mandate disclosure of accurate, adequate, explicit and timely information. Similarly, Regulation 4(1)(i) mandates that filings, reports, statements, documents and information which are event based, or are filed periodically, shall contain relevant information. Further, Regulation 30(12) of LODR Regulations, 2015 provides that any event or information which is not mentioned in Para A or B of Part A of Schedule III but which may have a material effect on the listed entity is required to be adequately disclosed. MCX has admitted that it failed to disclose such material information, leading to a finding of violation of these provisions.\n", "Master Circular": "Dictionary 5 Reference:\n\n43. It is further noted that subsequently, SEBI issued Master Circulars from time to time which either applied to Stock Exchanges or to Commodity Derivative Segments of the Stock Exchanges\u2026 I note that the Outsourcing Circular finds mention in the Master Circulars issued for Stock Exchanges and Clearing Corporations, whereas it is absent from the Master Circulars issued for the Commodity Derivatives Segment.\n", "Outsourcing Circular": "Dictionary 4 Reference:\n\n35. I note that there are other allegations of violations of the provisions of SECC Regulations, 2012 and SECC Regulations, 2018 against the Noticees, as mentioned in the Table under Para 25 above, which primarily emanate from the aforementioned allegations pertaining to violation of the provisions of Outsourcing Circular by MCX and MCXCCL.\n", "Outsourcing Circular (SEBI Circular dated September 13, 2017)": "Dictionary 5 Reference:\n\n42. In this regard, it is noted that SEBI, prior to the issuance of SEBI Circular dated September 28, 2018 which abolished the concept of CDEs, issued a number of circulars which were either addressed to \u2018All recognised stock exchanges\u2019, or to \u2018All National Commodity Derivatives Exchanges\u2019. The Outsourcing Circular dated September 13, 2017 was one such Circular, which was addressed to All Stock Exchanges. While SEBI Circular dated September 28, 2018 provided that all the norms issued for Commodity Derivatives Exchanges till date shall be applicable to Commodity Derivatives Segments of Recognised Stock Exchanges / Recognised Clearing Corporations to the extent applicable, there was no clarity on whether earlier Circulars issued for All Stock Exchanges prior to 2018 Circular were applicable to Commodity Derivatives Segment of recognised Stock Exchanges / Clearing Corporations, or not.\n", "SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995": "Dictionary 8 Reference:\n\n90. In view of the reasons recorded in detail in this Order, I, in the exercise of the powers conferred upon me under Section 11B(2) of the SEBI Act, 1992 and Section 12A(2) of SCRA, 1956 read with Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995; Rule 5 of Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties) Rules, 2005 and Section 19 of SEBI Act, 1992, hereby order as follows\u2026\n", "SEBI (Settlement Proceedings) Regulations, 2018": "Dictionary 3 Reference:\n\n28. The SCN was duly served on the Noticees. The Noticees subsequently filed Settlement applications in terms of the provisions of SEBI (Settlement Proceedings) Regulations, 2018. Later, the said applications were withdrawn by the Noticees. The Noticees have filed their individual replies in respect of the allegations against them mentioned in the SCN. The details are as under: Noticee Number Date of first reply Date of additional reply\u2026\n", "SEBI Circular dated January 10, 2019": "Dictionary 5 Reference:\n\n43. \u2026While certain Circulars, such as SEBI Circular dated January 10, 2019 on \u201cCommittees at Market Infrastructure Institutions\u201d, are mentioned in both the Master Circulars issued for Stock Exchanges and Clearing Corporations as well as for Commodity Derivatives Segment, the Outsourcing Circular is not one such Circular.\n", "SEBI Circular dated March 22, 2021": "Dictionary 7 Reference:\n\n70. As regards appointment of CTO, MCXCCL has submitted that a CISO was appointed w.e.f. March 05, 2019 and the responsibilities of CTO and CISO overlapped significantly. The CISO made significant contributions to CDP Project. Further, first reference of having a CTO for a CC was made in SEBI Circular dated March 22, 2021. A CTO was appointed by MCXCCL on July 23, 2021.\n", "SEBI Circular dated September 28, 2018": "Dictionary 5 Reference:\n\n42. In this regard, it is noted that SEBI, prior to the issuance of SEBI Circular dated September 28, 2018 which abolished the concept of CDEs\u2026 While SEBI Circular dated September 28, 2018 provided that all the norms issued for Commodity Derivatives Exchanges till date shall be applicable to Commodity Derivatives Segments of Recognised Stock Exchanges / Recognised Clearing Corporations to the extent applicable, there was no clarity on whether earlier Circulars\u2026were applicable.\n", "SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017": "Dictionary 2 Reference:\n\n25. In view of the above , the Noticees were alleged to have violated the following provisions of law: i. SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017 \u2026 Clause 3 of SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 \u2026 and Clause 2, 3, 4, 5, 6, 8.1 and 8.3 of Annexure I to SEBI circular dated September 13, 2017\u2026\n\nDictionary 3 Reference (referencing the same circular):\n\n2 Noticee 2 (MCXCCL) i. SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017 \u2026\n\n", "Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties) Rules, 2005": "Dictionary 8 Reference:\n\n90. In view of the reasons recorded in detail in this Order, I, in the exercise of the powers conferred upon me under Section 11B(2) of the SEBI Act, 1992 and Section 12A(2) of SCRA, 1956 read with Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995; Rule 5 of Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties) Rules, 2005 and Section 19 of SEBI Act, 1992, hereby order as follows\u2026\n", "Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012": "Dictionary 2 Reference:\n\n25. In view of the above, the Noticees were alleged to have violated the following provisions of law: \u2026 read-with amendment to SECC Regulations, 2012 dated April 2, 2018 and SECC Regulations, 2018 and its amendment w.e.f. October 3, 2018\u2026\n\nDictionary 4 Reference:\n\n35. I note that there are other allegations of violations of the provisions of SECC Regulations, 2012 and SECC Regulations, 2018 against the Noticees, as mentioned in the Table under Para 25 above, which primarily emanate from the aforementioned allegations pertaining to violation of the Outsourcing Circular by MCX and MCXCCL.\n\nDictionary 5 Reference:\n\n45. I note that various provisions of SECC Regulations, 2012 and SECC Regulations, 2018 have been invoked against the Noticees for issues which are directly linked to alleged non-implementation of the Outsourcing Circular by MCX and MCXCCL. As the allegations of violation of the Outsourcing Circular against MCX and MCXCCL do not sustain, the related allegations pertaining to violation of SECC Regulations, 2012 and SECC Regulations, 2018 against the Noticees do not stand.\n\nDictionary 7 Reference (cited collectively as \u201cSECC Regulations, 2012 and SECC Regulations, 2018\u201d):\n\n78. For the above stated observations, findings and reasons, I find that the allegation of violations of the provisions of SECC Regulations, 2012 and SECC Regulations, 2018 levelled against the Noticee\u2026 are not established.\n", "Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018": "Dictionary 1 Reference:\n\n1. Pursuant to a special purpose examination of Multi Commodity Exchange of India Ltd. (\u201cMCX\u201d) and Multi Commodity Exchange Clearing Corporation Ltd. (\u201cMCXCCL\u201d), the Securities and Exchange Board of India (hereinafter referred to as \u201cSEBI\u201d) issued a show cause notice dated October 16, 2023 (\u201cSCN\u201d) to the Noticees for certain alleged violations of the provisions of Securities Contracts (Regulation)(Stock Exchanges and Clearing Corporations) Regulations, 2018 (\u201cSECC Regulations, 2018\u201d), SEBI Act, 1992, Securities Contracts Regulation Act, 1956 (\u201cSCRA, 1956\u201d) and various other Rules/Regulations/directions/Circulars issued thereunder.\n\nDictionary 2 Reference:\n\n25. In view of the above , the Noticees were alleged to have violated the following provisions of law: \u2026 iii. Regulation 7(2)(f) and 7(3)(a,b \u0026 j) of SECC Regulations, 2018 read-with 12(5) of SECC Regulations, 2018. \u2026 Clause 1(b), 3(a), 3(b) \u2026 read-with Regulation 26(1) of SECC Regulations, 2018 \u2026 read with Regulation 33(1) of SECC Regulations, 2018 ...\n\nDictionary 3 Reference:\n\n2 Noticee 2 (MCXCCL) i. SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017 ii. Regulation 7(2)(f) and 7(4) (a, b \u0026 g) read -with 12(5) of SECC Regulations, 2018 iii. Clause 3 of SEBI circular dated September 13, 2017 iv. Clause 2, 3, 4, 5, 6, 8.1 and 8.3 of Annexure I to SEBI circular dated September 13, 2017. 15HB of SEBI Act, 1992 and section 23GA and 23H of SCRA 1956 read with 12A (2) of SCRA and 11B (2) of SEBI Act.\n\nDictionary 4 Reference:\n\n35. I note that there are other allegations of violations of the provisions of SECC Regulations, 2012 and SECC Regulations, 2018 against the Noticees, as mentioned in the Table under Para 25 above, which primarily emanate from the aforementioned allegations pertaining to violation of the Outsourcing Circular by MCX and MCXCCL. Holding the Noticees guilty of such violations mainly hinges on the issue as to whether the allegation of violation of the Outsourcing Circular by MCX and MCXCCL is established or not.\n\nDictionary 5 Reference:\n\n45. I note that various provisions of SECC Regulations, 2012 and SECC Regulations, 2018 have been invoked against the Noticees for issues which are directly linked to alleged non-implementation of the Outsourcing Circular by MCX and MCXCCL. As the allegations of violation of the Outsourcing Circular against MCX and MCXCCL do not sustain, the related allegations pertaining to violation of SECC Regulations, 2012 and SECC Regulations, 2018 against the Noticees do not stand.\n\nDictionary 7 Reference:\n\n82. As per Regulation 33(1) of SECC Regulations, 2018, \u201cThe disclosure requirements and corporate governance norms as specified for listed companies shall mutatis mutandis apply to a recognised stock exchange and a recognised clearing corporation.\u201d\n\nDictionary 8 Reference:\n\n84. It is alleged in the SCN that MCX, by failing to make appropriate disclosures\u2026 MCX violated the provisions of Regulation 4(1)(d), 4(1)(e), 4(1)(i) and 30(12) of LODR Regulations, 2015, read-with Regulation 33(1) of SECC Regulations, 2018\u2026\n", "Securities Contracts (Regulation) Act, 1956": "Dictionary 1 Reference (noted with extra space in the original):\n\nFINAL ORDER Under Section 11B (2) of the Securities and Exchange Board of India Act, 1992 and Section 12A (2) of the Securities Contracts (Regulation ) Act, 1956 In respect of: Noticee No. Name of the Noticee PAN 1. Multi Commodity Exchange of India Ltd. (MCX) AADCM8239K 2. Multi Commodity Exchange Clearing Corporation Ltd. (MCXCCL) AAFCM9108B 3. Padala Subbi Reddy AAEPP1891N 4. Narendra Kumar Ahlawat ABZPA1574H 5. Sanjay Golecha AAFPG7183F 6. Himanshu Ashar AANPA6741R 7. Manav Jain AIUPJ4118Q (The aforesaid entities are hereinafter individually referred to by their respective names / Noticee no. and collectively as \u201cNoticees\u201d, unless the context specifies otherwise) In the matter of Trading Software contract of MCX and MCXCCL with 63 Moons (erstwhile FTIL) and TCS.\n\nDictionary 2 Reference:\n\n25. In view of the above , the Noticees were alleged to have violated the following provisions of law: \u2026 Regulation 23A(a), 23GA and 23H of SCRA, 1956 and 15A(b) \u0026 15HB of SEBI Act, 1992 read with 12A (2) of SCRA and 11B (2) of SEBI Act \u2026\n\nDictionary 3 Reference (noted as SCRA, 1956):\n\n2 Noticee 2 (MCXCCL) i. SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017 ii. Regulation 7(2)(f) and 7(4) (a, b \u0026 g) read-with 12(5) of SECC Regulations, 2018 iii. Clause 3 of SEBI circular dated September 13, 2017 iv. Clause 2, 3, 4, 5, 6, 8.1 and 8.3 of Annexure I to SEBI circular dated September 13, 2017. 15HB of SEBI Act, 1992 and section 23GA and 23H of SCRA 1956 read with 12A (2) of SCRA and 11B (2) of SEBI Act.\n\nDictionary 8 Reference:\n\n90. In view of the reasons recorded in detail in this Order , I, in the exercise of the powers conferred upon me under Section 11B(2) of the SEBI Act, 1992 and Section 12A(2) of SCRA, 1956 read with Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995; Rule 5 of Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties) Rules, 2005 and Section 19 of SEBI Act, 1992, hereby order as follows: (a) MCX (Noticee 1) is hereby imposed with a monetary penalty... (b) MCX shall remit/pay the amount of penalty mentioned above within 45 days of receipt of this order...\n\n", "Securities and Exchange Board of India Act, 1992": "Dictionary 1 Reference:\n\nFINAL ORDER Under Section 11B (2) of the Securities and Exchange Board of India Act, 1992 and Section 12A (2) of the Securities Contracts (Regulation ) Act, 1956 In respect of: Noticee No. Name of the Noticee PAN 1. Multi Commodity Exchange of India Ltd. (MCX) AADCM8239K 2. Multi Commodity Exchange Clearing Corporation Ltd. (MCXCCL) AAFCM9108B 3. Padala Subbi Reddy AAEPP1891N 4. Narendra Kumar Ahlawat ABZPA1574H 5. Sanjay Golecha AAFPG7183F 6. Himanshu Ashar AANPA6741R 7. Manav Jain AIUPJ4118Q (The aforesaid entities are hereinafter individually referred to by their respective names / Noticee no. and collectively as \u201cNoticees\u201d, unless the context specifies otherwise) In the matter of Trading Software contract of MCX and MCXCCL with 63 Moons (erstwhile FTIL) and TCS.\n\nDictionary 2 Reference:\n\n25. In view of the above , the Noticees were alleged to have violated the following provisions of law: \u2026 Regulation 23A(a), 23GA and 23H of SCRA, 1956 and 15A(b) \u0026 15HB of SEBI Act, 1992 read with 12A (2) of SCRA and 11B (2) of SEBI Act \u2026\n\nDictionary 3 Reference (noted as SEBI Act, 1992):\n\n2 Noticee 2 (MCXCCL) i. SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017 ii. Regulation 7(2)(f) and 7(4) (a, b \u0026 g) read -with 12(5) of SECC Regulations, 2018 iii. Clause 3 of SEBI circular dated September 13, 2017 iv. Clause 2, 3, 4, 5, 6, 8.1 and 8.3 of Annexure I to SEBI circular dated September 13, 2017. 15HB of SEBI Act, 1992 and section 23GA and 23H of SCRA 1956 read with 12A (2) of SCRA and 11B (2) of SEBI Act.\n\nDictionary 8 Reference (noted as SEBI Act, 1992):\n\n86. I note that the quarterly payments made by MCX to 63 Moons for 3 quarter between Oct. 2022 \u2013 June 2023 , which totalled Rs. 222 Crore, was much larger than the annual profit of MCX for previous FY 2021 -22, which stood at Rs. 118 Crore . This information was a material information, since the said quarterly payments exceeded the quarterly payments made earlier to 63 Moons by many times. The increased quarterly payments can be said to have huge bearing on the profitability of MCX. Accordingly, such information has to be treated as material information which ought to have been disclosed by MCX to public, in terms of the provisions of Regulation 30(12) read with Regulations 4(1)(d), 4(1)(e) and 4(1)(i) of the LODR Regulations, 2015. MCX has admitted that it failed to disclose the same to public. However, it has submitted that the same was an inadvertent mistake. As MCX has admitted the lapse, I find that the allegation of violations of the abovementioned provisions of LODR Regulations, 2015 and SECC Regulations, 2018 by MCX stands established. Accordingly, MCX is liable for a monetary penalty under Section 15HB of the SEBI Act, 1992 for the abovementioned provisions of LODR Regulations, 2015 and SECC Regulations, 2018.\n\n\n" }, "statutes_headnotes": { "LODR Regulations, 2015": "\u2014 Disclosure obligations \u2014 MCX failed to disclose large quarterly payments that overshadowed annual profits \u2014 Contravention of \u003cstrong\u003eRegs. 4(1)(d), 4(1)(e), 4(1)(i), 30(12)\u003c/strong\u003e read with \u003cstrong\u003eReg. 33(1) - SECC Regulations, 2018\u003c/strong\u003e \u2014 Non-disclosure admitted as inadvertent \u2014 Monetary penalty under \u003cstrong\u003eSec. 15HB - SEBI Act, 1992\u003c/strong\u003e \u2014 Allegations against co-noticees dismissed \u2014 Reinforces need for transparent governance.", "Master Circular": "\u2014 Outsourcing Circular applicability \u2014 Commodity Derivatives Segment omitted in Master Circulars \u2014 Confusion led to delay in TCS platform transition \u2014 No Outsourcing Circular violation by MCX \u2014 Failure to disclose substantial quarterly payments penalized under \u003cstrong\u003eSEBI Act, 1992 \u2014 S. 15HB\u003c/strong\u003e \u2014 Highlights need for regulatory clarity and prompt disclosures.", "SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995": "\u2014 Special purpose examination \u2014 Outsourcing Circular\u2019s applicability to commodity derivative exchanges \u2014 Delay in policy and non-disclosure of fees \u2014 No violation of Outsourcing Circular found \u2014 Monetary penalty for non-disclosure under \u003cstrong\u003eSEBI Act, 1992 \u2014 S. 15HB\u003c/strong\u003e \u2014 Allegations against co-noticees dismissed \u2014 Emphasizes timely disclosures and compliance.", "SEBI (Settlement Proceedings) Regulations, 2018": "\u2014 Settlement Applications \u2014 Noticees initially sought settlement but withdrew \u2014 Allegations of delayed transition, inadequate disclosures, and outsourcing non-compliance \u2014 MCX penalized for failing to disclose substantial quarterly payments \u2014 Allegations against other noticees dismissed \u2014 Clarifies Outsourcing Circular\u2019s applicability to commodity derivative exchanges.", "SEBI Circular dated January 10, 2019": "\u2014 Committees at Market Infrastructure Institutions \u2014 Circular referenced in Master Circulars for Stock Exchanges, Clearing Corporations, and Commodity Derivative Segments \u2014 Outsourcing Circular absent for Commodity Derivatives \u2014 Confusion over applicability \u2014 Penalty for non-disclosure, not Outsourcing violation \u2014 \u003cstrong\u003eSEBI Act, 1992 \u2014 S. 15HB\u003c/strong\u003e \u2014 Allegations against co-noticees dismissed \u2014 Underscores clear disclosure practices.", "SEBI Circular dated March 22, 2021": "\u2014 Outsourcing obligations \u2014 Whether applicable to Commodity Derivative Exchanges \u2014 Confusion over scope led to delayed vendor transition \u2014 MCX held liable solely for non-disclosure of significant quarterly payments to 63 Moons \u2014 Monetary penalty imposed \u2014 Allegations against co-noticees dismissed \u2014 Emphasizes transparent governance and timely compliance.", "SEBI Circular dated September 28, 2018": "\u2014 Outsourcing Guidelines \u2014 Abolished concept of CDEs and extended norms to commodity derivatives \u2014 Confusion over earlier circulars \u2014 MCX not in breach of Outsourcing Circular but liable for failing to disclose significant quarterly payments \u2014 Monetary penalty under \u003cstrong\u003eSEBI Act, 1992 \u2014 S. 15HB\u003c/strong\u003e \u2014 Reaffirms transparent governance and timely compliance.", "SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017": "\u2014 Outsourcing Guidelines \u2014 Applicability to commodity derivative exchanges questioned \u2014 Alleged breach, delayed implementation, and large undisclosed payments to 63 Moons \u2014 MCX penalized for disclosure lapses \u2014 Allegations against other noticees dismissed \u2014 Stresses timely disclosure and regulatory compliance.", "Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties) Rules, 2005": "\u2014 Imposition of monetary penalty \u2014 Applicability of \u003cstrong\u003eOutsourcing Circular\u003c/strong\u003e to commodity derivatives exchanges contested \u2014 No violation of Outsourcing Circular found \u2014 MCX penalized for non-disclosure of substantial payments (Rs. 25 Lakh) \u2014 Allegations against other noticees dismissed \u2014 Emphasizes transparent governance and timely reporting.", "Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012": "\u2014 \u003cstrong\u003eOutsourcing Guidelines\u003c/strong\u003e \u2014 \u003cstrong\u003eApplicability to Commodity Derivatives Exchanges\u003c/strong\u003e under \u003cstrong\u003eSECC Regulations\u003c/strong\u003e \u2014 Ambiguity over compliance timeline \u2014 MCX penalized for failing to disclose substantial quarterly payments \u2014 Allegations against co-noticees dismissed \u2014 Emphasizes transparency and timely adherence to norms.", "Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018": "\u2014 \u003cstrong\u003eOutsourcing Circular\u003c/strong\u003e \u2014 Applicability to \u003cstrong\u003eCommodity Derivatives Exchange\u003c/strong\u003e prior to 2018 not established \u2014 \u003cstrong\u003eDisclosure Norms\u003c/strong\u003e under \u003cstrong\u003eReg. 33(1) read with LODR Regulations, 2015\u003c/strong\u003e \u2014 MCX failed to disclose substantial quarterly payments exceeding annual profits \u2014 Monetary penalty imposed \u2014 Allegations against other noticees dismissed.", "Securities Contracts (Regulation) Act, 1956": "\u2014 \u003cstrong\u003eOutsourcing Guidelines\u003c/strong\u003e and \u003cstrong\u003eDisclosure Obligations\u003c/strong\u003e \u2014 Alleged delayed compliance and inadequate oversight \u2014 MCX found liable for failing to disclose significant quarterly payouts to 63 Moons \u2014 Monetary penalty imposed \u2014 Confusion over circular\u2019s scope not a valid defense \u2014 Allegations against co-noticees dismissed.", "Securities and Exchange Board of India Act, 1992": "\u2014 \u003cstrong\u003eOutsourcing Guidelines\u003c/strong\u003e \u2014 \u003cstrong\u003eCommodity Derivative Exchanges\u003c/strong\u003e \u2014 Applicability of \u003cstrong\u003eSEBI Outsourcing Circular dated September 13, 2017\u003c/strong\u003e under \u003cstrong\u003eSECC Regulations, 2018\u003c/strong\u003e \u2014 No breach of Circular found \u2014 MCX failed to disclose large quarterly payments exceeding its annual profits \u2014 Non-disclosure under \u003cstrong\u003eReg. 30(12) read with LODR Regulations, 2015\u003c/strong\u003e \u2014 Monetary penalty under \u003cstrong\u003eSection 15HB\u003c/strong\u003e \u2014 Allegations against other noticees dismissed." } }, "summary": { "formatted_summary": "SEBI conducted a special purpose examination into MCX and MCXCCL\u2019s contractual arrangements with 63 Moons for trading software and their transition to a TCS-developed platform. It issued show cause notices alleging delayed implementation of outsourcing guidelines, inadequate disclosure of significant costs, and procedural lapses in vendor selection, prompting multiple board discussions, replies, and personal hearings. The core questions concerned whether the Outsourcing Circular applied to commodity derivative exchanges, whether MCX and MCXCCL\u2019s management acted prudently in negotiating contract extensions and overseeing risk controls, and whether disclosures about project delays and fees were timely. Eventually, SEBI imposed a monetary penalty on MCX for failing to disclose substantial quarterly payments to 63 Moons, while other allegations regarding outsourcing policy and any wrongdoing by co-noticees were dismissed. The proceedings highlighted the importance of transparent governance and regulatory clarity in the commodity derivatives segment." } }