{ "metadata": { "analysis_of_arguments": "Regulatory authorities alleged that MCX and MCXCCL failed to adopt board-approved outsourcing policies promptly, undermined business continuity by delaying the new platform, and neglected to disclose substantial payments to 63 Moons on time. MCX and MCXCCL stressed that legal ambiguity surrounded the Outsourcing Circular\u2019s application to commodity derivative exchanges, that the TCS project was pursued in good faith, and that 63 Moons was retained solely to maintain essential operations. MCX further stated that any non-disclosure of payments was not deliberate and that external circumstances, including pandemic constraints, contributed to project delays.", "bench": [], "case_number": [], "cases_referred": [], "chunkwise_data": { "chunk_1": { "analysis_of_arguments": "One side emphasizes the necessity of updating or replacing software while ensuring proper licensing and rights over the source code. The other side highlights the feasibility and reliability of existing services and the possibility of extending or modifying current software agreements on favorable terms.", "cases_referred": [], "facts": "MCX began operating as a commodity derivatives exchange in 2003, originally under the Forward Market Commission\u2019s supervision. 63 Moons (then FTIL) initially held a full stake in MCX, though that share was eventually reduced to nil. Over time, MCX relied on 63 Moons for the trading software and associated services under long-term agreements. After SEBI took over regulatory authority upon FMC\u2019s merger in 2015, MCXCCL was recognized as a separate clearing corporation. MCX officials explored various options, including new software development and negotiations with 63 Moons, leading to the issuance of a show cause notice in October 2023 following a special examination.", "final_status": "Not provided in the excerpt.", "formatted_summary": "The document describes a dispute involving MCX\u2019s and MCXCCL\u2019s reliance on technology and service agreements with 63 Moons for a commodity trading platform, changes in regulatory oversight after FMC\u2019s merger with SEBI, and the subsequent issuing of a show cause notice by SEBI for alleged violations. It outlines the contractual background, exit clauses, and negotiations aimed at securing an updated technology solution, while highlighting the steps leading to the current proceedings.", "held": "No decision is set out in the excerpt.", "latin_principles": {}, "legal_issues": "Whether MCX and MCXCCL\u2019s arrangements with 63 Moons and the subsequent software acquisition plans complied with regulatory requirements, and whether their outsourcing approach and negotiations violated guidelines or contractual obligations, are among the core legal questions.", "statutes": { "Securities Contracts (Regulation) Act, 1956": "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 Contracts (Regulation)(Stock Exchanges and Clearing Corporations) Regulations, 2012": "10. Subsequently, vide amendment to SECC Regulations, 2012 as notified on April 02, 2018, it was provided that there would be no separate category of \u2018Commodity Derivatives Exchanges\u2019 w.e.f. October 01, 2018. Accordingly, MCX became a \u2018Stock Exchange\u2019 having a Commodity Derivatives segment, with MCXCCL as its \u2018Clearing corporation\u2019. Consequently, all regulatory provisions applicable to stock exchanges became applicable, mutatis mutandis, to stock exchanges with Commodity Derivatives segments also.", "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": "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." } }, "chunk_2": { "analysis_of_arguments": "Regulatory authorities allege that MCX and MCXCCL jeopardized business continuity by not securing timely software support and failed to disclose critical contractual information. The Noticees presumably maintain they took reasonable steps to develop a new platform within set timelines, engaged TCS in good faith, and extended 63 Moons\u2019 support only to safeguard the exchange\u2019s operations.", "cases_referred": [], "facts": "MCX initially decided not to proceed with 63 Moons\u2019 proposal due to concerns about outdated software. Instead, MCX floated an RFP for a new Commodity Derivative Platform, and ultimately awarded the contract to TCS. The project faced multiple delays, leading MCX to negotiate several extensions of the existing arrangement with 63 Moons to ensure continuity of trading and clearing operations. Over time, the \u201cgo live\u201d date for TCS software was repeatedly postponed, requiring MCX to continue paying 63 Moons for support services. SEBI issued a show-cause notice alleging that MCX and MCXCCL had failed to complete the new platform on time and made inadequate disclosures.", "final_status": "No final determination is indicated in the excerpt.", "formatted_summary": "This section narrates how MCX conducted multiple board meetings to secure a trading and settlement platform after deciding against continuing with 63 Moons\u2019 software. Despite awarding the contract to TCS, delays arose, forcing periodic extensions of 63 Moons\u2019 contract. The show-cause notice alleges that MCX and MCXCCL placed their core operations at risk, failed in timely disclosures, and potentially violated various regulatory provisions.", "held": "No conclusive holding by any adjudicatory forum is documented in the provided text.", "latin_principles": {}, "legal_issues": "The key legal questions concern whether MCX and MCXCCL adhered to prescribed regulations, disclosed essential information accurately, and ensured robust continuity measures for the trading platform. Potential violations of regulatory obligations for maintaining and transitioning core software functionality under applicable SEBI and exchange regulations are also implicated.", "statutes": { "LODR Regulations, 2015": "Paragraph 25: \u201cIn view of the above, the Noticees were alleged to have violated the following provisions of law: \u2026 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.\u201d", "SCRA, 1956": "Paragraph 25: \u201cIn view of the above, \u2026 Penal Provisions \u2026 Regulation 23A(a), 23GA and 23H of SCRA, 1956 read with 12A (2) of SCRA \u2026 and 11B (2) of SEBI Act.\u201d", "SEBI Act, 1992": "Paragraph 25: \u201cIn view of the above, \u2026 15A(b) \u0026 15 HB of SEBI Act, 1992 read with 12A (2) of SCRA and 11B (2) of SEBI Act.\u201d", "SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017": "Paragraph 25: \u201cIn view of the above, the Noticees were alleged to have violated the following provisions of law: Sr. No. Noticee No. Alleged Violations Penal Provisions 1 Noticee 1 (MCX) i. SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017. ii. Clause 3 of SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017, read-with Annexure I of the circular, including its Clause 2, 3, 4, 5, 7, 8, 11 and 13, read-with amendment to SECC Regulations, 2012 dated April 2, 2018 and SECC Regulations, 2018 and its amendment w.e.f. October 3, 2018. iii. Regulation 7(2)(f) and Regulation 7(3)(a,b \u0026 j) of SECC Regulations, 2018 read -with 12(5) of SECC Regulations, 2018. 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. 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. 3 Noticee 3 (Mr. Padala Subbi Reddy, MD \u0026 CEO of MCX and shareholder director of MCXCCL) i. Clause 1(b), 3(a), 3(b), 4(a), 4(b), 4(d), 5(b), 5(e), 5(f), 5(g) and 5(h) of Code of Conduct read -with Regulation 26(1) of SECC Regulations, 2018 read with clause 3 of PART \u2013 A schedule II of SECC Regulations, 2018 ii. Clause 1(b),1(c), 3(a), 3(b), 3(e) and 3(f) of Code of Ethics read -with Regulation 26(2) of SECC Regulations, 2018 read with regulation 33(1) of SECC Regulations 2018 and Regulation 32 of SECC Regulation 2012. 4 Noticee 4 (Mr. Narendra Kumar Ahlawat, MD \u0026 CEO of MCXCCL) i. Clause1(b),3(a),3(b),4(a),4(b),5(b),5(e),5(f),5(h) of Code of Conduct read -with Regulation 26(1) of SECC Regulations, 2018 ii. Clause 1(b),1(c),3(a),3(b),3(e) and 3(f) of Code of Ethics read -with Regulation 26(2) of SECC Regulations, 2018 iii. Clause 3 of SEBI circular dated September 13, 2017 iv. Clause 2, 5, 6 and 8.1 of Annexure I to SEBI circular dated September 13, 2017. 15HB of SEBI Act, 1992 and section 23H of SCRA, 1956 read with 12A (2) of SCRA and 11B (2) of SEBI Act.\u201d", "SECC Regulations, 2012": "Paragraph 25: \u201cIn view of the above, the Noticees were alleged to have violated the following provisions of law: \u2026 (references to SECC Regulations, 2012).\u201d", "SECC Regulations, 2018": "Paragraph 25: \u201cIn view of the above, the Noticees were alleged to have violated the following provisions of law: \u2026 (references to SECC Regulations, 2018).\u201d" } }, "chunk_3": { "analysis_of_arguments": "The Noticees contend that they have either complied with or are in the process of complying with the relevant outsourcing guidelines, citing timing and applicability issues. SEBI maintains that the Noticees were obligated to follow the circular and accompanying regulations without delay, alleging that the standards and policies were not properly implemented within the stipulated timeframes.", "cases_referred": [], "facts": "The dispute arises from an alleged failure by MCX and MCXCCL to implement certain outsourcing guidelines while entering into contracts related to trading software with 63 Moons (formerly FTIL) and TCS. Following a show cause notice (SCN) issued by SEBI, the Noticees submitted replies and attended personal hearings. Prior to this, they had filed settlement applications under the relevant SEBI regulations, which they later withdrew. The case is now at the stage where SEBI is examining the alleged violations, having received and considered multiple replies and hearing submissions from the Noticees.", "final_status": "No final determination is provided in the excerpt.", "formatted_summary": "This section details alleged non-compliance with SEBI\u2019s outsourcing guidelines by MCX and MCXCCL, among others, for key IT services contracts. SEBI issued a show cause notice asserting violations of SEBI Act, SCRA, and SECC Regulations. The Noticees filed and later withdrew settlement applications, instead submitting formal replies. Personal hearings were conducted, focusing on whether the circular and regulatory provisions were applicable and fully implemented. No final judgment has yet been reached, with the authority considering evidence and arguments regarding the outsourcing policies, due diligence requirements, and timeline of compliance.", "held": "No specific holding or conclusion is stated in the provided portion of the order, and the matter remains under consideration.", "latin_principles": {}, "legal_issues": "Whether MCX and MCXCCL, along with individual officers, violated SEBI\u2019s Outsourcing Circular and related regulations by not adopting board-approved outsourcing policies and due diligence processes for core IT functions on time, and whether these alleged lapses contravene SECC Regulations, SEBI Act, and SCRA provisions.", "statutes": { "SCRA, 1956": "\u201c27. The SCN called upon the Noticees to show cause as to why appropriate direction(s) under Section 11B(2) of SEBI Act, 1992 and 12A(2) of SCRA , 1956 should not be issued against them on account of the alleged violations mentioned in this SCN.\u201d", "SEBI (Settlement Proceedings) Regulations, 2018": "\u201c28. 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\u2026.\u201d", "SEBI Act, 1992": "\u201c27. The SCN called upon the Noticees to show cause as to why appropriate direction(s) under Section 11B(2) of SEBI Act, 1992 and 12A(2) of SCRA , 1956 should not be issued against them on account of the alleged violations mentioned in this SCN.\u201d", "SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017": "\u201c31. I note that primarily, the allegations made against the Noticees in the SCN emanate from the allegation of violation SEBI Circular No. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017 (\u201cOutsourcing Circular\u201d) by MCX and MCXCCL.\u201d", "SECC Regulations, 2012": "\u201c3 Noticee 3 \u2026 Clause 1(b),1(c), 3(a), 3(b), 3(e) and 3(f) of Code of Ethics read -with Regulation 26(2) of SECC Regulations, 2018 read with regulation 33(1) of SECC Regulations 2018 and Regulation 32 of SECC Regulation 2012\u2026\u201d", "SECC Regulations, 2018": "\u201c3 Noticee 3 \u2026 i. Clause 1(b), 3(a), 3(b), 4(a), 4(b), 4(d), 5(b), 5(e), 5(f), 5(g) and 5(h) of Code of Conduct read -with Regulation 26(1) of SECC Regulations, 2018 read with clause 3 of PART \u2013 A schedule II of SECC Regulations, 2018\u2026.\u201d" } }, "chunk_4": { "analysis_of_arguments": "The Noticees contend that the Outsourcing Circular did not extend to commodity derivative exchanges and clearing corporations due to regulatory distinctions and the absence of explicit directives. They assert that later master circulars did not incorporate this requirement for commodity segments. On the other hand, it is argued that once MCX and MCXCCL attained recognition as a Stock Exchange and a Clearing Corporation, the circular\u2019s provisions automatically covered them.", "cases_referred": [], "facts": "The dispute arises from an alleged violation of an Outsourcing Circular in relation to a trading software contract entered into by MCX and MCXCCL with 63 Moons (formerly FTIL) and TCS. The Noticees maintain that, at the time, the circular did not apply to commodity derivative exchanges or clearing corporations, citing the separate regulatory framework then in place. Regulatory proceedings ensued, focusing on whether MCX and MCXCCL fell under the scope of this circular once the Forward Markets Commission was merged with SEBI. The matter now centers on determining the extent of the circular\u2019s applicability.", "final_status": "No final decision is reflected in the excerpt.", "formatted_summary": "In this portion of the order, the regulator examines whether the Outsourcing Circular applies to MCX and MCXCCL, entities that transitioned from commodity derivative exchanges to a recognized stock exchange and clearing corporation structure. The Noticees argue that this circular did not apply due to the previously distinct regulatory treatment of commodity derivative markets and no explicit statement that it should extend. The order highlights the timeline of regulatory changes, references various circulars and master circulars, and discusses the ambiguity surrounding the applicability of the Outsourcing Circular in the commodity derivatives context.", "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 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 (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 Clearing Corporations, lends further credence to this view." }, "legal_issues": "Whether the Outsourcing Circular issued prior to the merger of FMC with SEBI applies to MCX and MCXCCL once they became recognized as a Stock Exchange and a Clearing Corporation, and if so, whether its provisions were violated.", "statutes": { "SECC Regulations, 2012": "35. I note that there are other allegations of violations 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 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.", "SECC Regulations, 2018": "35. I note that there are other allegations of violations 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 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." } }, "chunk_5": { "analysis_of_arguments": "The SCN contended that MCX and MCXCCL erred by not clarifying the Outsourcing Circular\u2019s applicability, delaying the new platform\u2019s launch, and failing to negotiate effectively with 63 Moons. MCX and MCXCCL countered that there was legal ambiguity regarding the applicability of the Outsourcing Circular to commodity derivatives operations, that they eventually formulated an outsourcing policy, and that attempts to preserve continuity of service with 63 Moons were made in good faith based on the legal and commercial advice received.", "cases_referred": [], "facts": "This matter arises from a dispute regarding a trading software contract involving MCX, MCXCCL, 63 Moons, and TCS. The primary question was whether certain SEBI guidelines, referred to as the Outsourcing Circular, applied to the Commodity Derivatives Segment once MCX and MCXCCL became recognized entities. A show cause notice (SCN) was issued alleging that MCX and MCXCCL had failed to implement the Outsourcing Circular, and that they violated provisions under the SECC Regulations, 2012 and 2018. In the course of proceedings, the issue of delayed operationalization of a new platform with TCS and the extension of contractual arrangements with 63 Moons were also examined. Ultimately, the allegations concerning violation of the Outsourcing Circular and related regulations were heard and addressed at this stage.", "final_status": "Disposed of with findings that the allegations of non-compliance did not sustain.", "formatted_summary": "This portion of the order addresses the question of whether the SEBI Outsourcing Circular applies to MCX and MCXCCL\u2019s operations in the Commodity Derivatives Segment. Because of the legal ambiguity at the time, the authority determines that there was no clear breach by MCX or MCXCCL regarding Outsourcing Circular compliance. Corresponding allegations of violating SECC Regulations, 2012 and 2018 do not stand. The SCN also alleged that MCX management failed to secure favorable contractual arrangements with 63 Moons and effectively implement a new trading platform with TCS, but the ultimate conclusion is that these contentions do not result in any proven violation. The matter is therefore disposed of without adverse findings.", "held": "The adjudicating authority concluded that, owing to the legal ambiguity surrounding the Outsourcing Circular, no violation on the part of MCX and MCXCCL was established. Consequently, the linked allegations under the SECC Regulations were also not upheld, and the matter was disposed of without any adverse finding against MCX or MCXCCL.", "latin_principles": {}, "legal_issues": "Whether the Outsourcing Circular issued by SEBI was applicable to the Commodity Derivatives Segment of recognized stock exchanges and clearing corporations and whether MCX and MCXCCL violated this circular and the applicable SECC Regulations by alleged delays or omissions in software contract management.", "statutes": { "Master Circulars": "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": "44. The above observations show that there was legal ambiguity on the issue of whether the Outsourcing Circular was applicable to Commodity Derivative Segments in the first place. In view of such legal ambiguity, I am inclined to accept the explanation submitted by MCX and MCXCCL for delayed implementation of the provisions of the Outsourcing Circular. I note that MCX and MCXCLL have subsequently formulated an Outsourcing Policy, in terms of Clause 3 of the said Circular, which shows that they have taken remedial steps. Accordingly, I find that the allegation of violation of the provisions of Outsourcing Circular against MCX and MCXCCL does not sustain.", "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 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 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 show cause notice contended that MCX did not initiate negotiations soon enough, failed to consider legal action, and relied on overly optimistic timelines with the new vendor. MCX countered by emphasizing business judgment, asserting that negotiations were pursued with 63 Moons, legal opinions advised caution, and TCS\u2019s reputation validated the timeline estimates for the CDP Project.", "cases_referred": [], "facts": "MCX previously engaged 63 Moons (formerly FTIL) for software services, and upon expiry of the existing agreement, MCX explored new options, including an RFP for a proposed CDP Project. TCS was later selected as the vendor. A show cause notice alleged that MCX failed to secure an early extension with 63 Moons and did not adequately consider legal or fallback measures. MCX responded by outlining its negotiation attempts and reliance on external advice, culminating in the present order.", "final_status": "Disposed", "formatted_summary": "In this section, the order examines allegations against MCX concerning its software contracts with 63 Moons and TCS. After reviewing the show cause notice\u2019s concerns about delayed negotiations, legal strategies, and project timelines, the authority accepts MCX\u2019s explanations as business judgments made with prudence. Consequently, the allegations were not upheld, and the matter was disposed.", "held": "It was held that the allegations regarding inadequate negotiation and planning were not sustainable. The explanations provided by MCX were found satisfactory, reflecting that management\u2019s approach was a reasonable business decision and not a deliberate lapse. No adverse finding was made against the management, and the matter was concluded without penalty.", "latin_principles": {}, "legal_issues": "Whether MCX\u2019s management fell short in conducting timely negotiations with 63 Moons; whether it should have pursued legal remedies earlier; whether the steps taken to engage TCS and plan the CDP Project were adequately assessed; and whether delays or business decisions caused any unjustifiable risk or costs.", "statutes": {} }, "chunk_7": { "analysis_of_arguments": "Regulatory authorities contended that MCX and MCXCCL did not timely disclose higher costs paid to 63 Moons, failed to manage the CDP Project effectively, and lacked continuity in key personnel. The entities argued that the delays resulted primarily from external constraints including COVID-19 restrictions and the vendor\u2019s pace of work, maintaining that they took reasonable steps and made relevant updates in accordance with project milestones.", "cases_referred": [], "facts": "MCX and its clearing arm, MCXCCL, decided to shift from software services provided by 63 Moons to a new technology platform developed by TCS (CDP Project). The CDP\u2019s go-live date was postponed multiple times, allegedly because of project delays, leading to increased costs as MCX continued to rely on extended services from 63 Moons. Management reassured the Board and took steps to address concerns, including appointing relevant personnel. Eventually, the CDP Project launched on the date the show-cause notice (SCN) was issued. Prior to this stage, the regulator examined whether these delays and cost overruns contravened any disclosure or governance requirements.", "final_status": "The allegations were not established and the matter was disposed of.", "formatted_summary": "In this section, the order addresses allegations that MCX and MCXCCL delayed implementation of a new technology platform (CDP) from TCS, incurring substantial costs by continuing services from 63 Moons. Management cited pandemic-related constraints and project complexities. Regulators questioned delayed disclosures about significant quarterly payments. Ultimately, the adjudicator concluded that while laboring under challenging conditions, MCX and MCXCCL provided acceptable explanations and had not inadequately disclosed material information. Consequently, no regulatory breach was established, and the matter was disposed of, with an emphasis on the need for thorough governance and disclosure in similar circumstances.", "held": "It was held that MCX and MCXCCL had provided credible explanations for the project delay and cost overruns, and they were ultimately not found in violation of the asserted regulatory provisions. The decision underscored the importance of timely disclosures and proper governance for future cases.", "latin_principles": { "mutatis mutandis": "Paragraph 82 states, \u0027As per Regulation 33 (1) of SECC Regulations, 2018, \u201cThe disclosure requirements and corporate governance norms as specified for listed companies shall mutatis mutandis apply\u2026\u201d\u0027" }, "legal_issues": "Whether MCX and MCXCCL failed to make essential disclosures to the public regarding increased payments to 63 Moons, and if any governance lapses occurred due to project delays and extensions of the software service agreement.", "statutes": { "LODR Regulations, 2015": "85. 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.", "SECC Regulations, 2012": "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.", "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" } }, "chunk_8": { "analysis_of_arguments": "SEBI contended that the payments to 63 Moons were material information mandating disclosure under the regulations. MCX admitted a lapse but termed it an inadvertent mistake. Regarding allegations of incorrect disclosure in a press release, MCX clarified the purpose was only to announce an extension of existing managed services agreements. TCS maintained that its timeline information was correctly conveyed, leading SEBI to find no fault with TCS or the other noticees on that aspect.", "cases_referred": [], "facts": "MCX failed to disclose substantial quarterly payments made to 63 Moons (formerly FTIL) in a timely manner, even though these payments significantly exceeded MCX\u2019s preceding annual profits. A Show Cause Notice was issued by SEBI, alleging violation of disclosure requirements under applicable regulations. MCX eventually acknowledged the lapse and stated that the omission was inadvertent. Prior proceedings involved evaluating the correctness of MCX\u2019s public statements and TCS\u2019s reported timeline for the CDP project. By this Order, SEBI has imposed a monetary penalty on MCX and disposed of proceedings against the other noticees.", "final_status": "A monetary penalty was imposed on MCX, and proceedings against other noticees were disposed.", "formatted_summary": "SEBI initiated proceedings against MCX and others over material non-disclosures of quarterly payments to 63 Moons that exceeded MCX\u2019s prior annual profits. The Show Cause Notice alleged violations under LODR and SECC Regulations. MCX acknowledged an omission but characterized it as an inadvertent error. After reviewing the evidence and submissions\u2014including arguments that TCS\u2019s timelines were appropriately conveyed\u2014SEBI found MCX in violation of disclosure obligations, ultimately imposing a monetary penalty of Rs. 25 lakh upon MCX. Proceedings against the other noticees were concluded without further penalty, underscoring the regulatory emphasis on timely and accurate disclosures by listed entities.", "held": "SEBI\u2019s Whole Time Member held MCX liable for violating disclosure norms and imposed a penalty of Rs. 25,00,000/-. The allegations against other noticees were dropped. The decision affirms the obligation of timely disclosure of material financial impacts by listed entities.", "latin_principles": {}, "legal_issues": "The principal legal issue is whether MCX\u2019s failure to promptly and accurately disclose material information regarding its payments to 63 Moons constituted a violation of the relevant listing and disclosure regulations, and whether any incorrect or misleading disclosures were made to the public or the regulator by MCX or other noticees.", "statutes": { "LODR Regulations, 2015 - Regulations 4(1)(d), 4(1)(e), 4(1)(i), 30(12)": "Paragraph 84: \u201c84. 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.\u201d\n\nParagraph 85: \u201c85. 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.\u201d\n\nParagraph 86 (excerpt where these provisions are mentioned): \u201c86. ... 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...\u201d", "SCRA, 1956 - Section 12A(2)": "Paragraph 90 (excerpt): \u201c90. 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; ...\u201d", "SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995 - Rule 5": "Paragraph 90 (excerpt): \u201c90. ... read with Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995 ...\u201d", "SEBI Act, 1992 - Section 11B(2) and Section 19": "Paragraph 90 (excerpt): \u201c90. 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...\u201d", "SEBI Act, 1992 - Section 15HB": "Paragraph 86 (excerpt): \u201c86. ... Accordingly, such information has to be treated as material information... 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...\u201d", "SEBI Act, 1992 - Section 15J": "Paragraph 89: \u201c89. While imposing the monetary penalty, I have considered the factors, as mentioned under Section 15J of the SEBI Act, 1992.\u201d", "SECC Regulations, 2018 - Regulation 33(1)": "Paragraph 84 (excerpt): \u201c84. ... 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.\u201d\n\nParagraph 86 (excerpt): \u201c86. ... 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...\u201d", "Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties) Rules, 2005 - Rule 5": "Paragraph 90 (excerpt): \u201c90. ... 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...\u201d" } } }, "counsels": [], "delivered_date": null, "facts": "MCX started operations in 2003 under the Forward Market Commission and depended on 63 Moons (formerly FTIL) for trading software through long-term agreements. When the Forward Market Commission merged with SEBI in 2015, MCX\u2019s clearing segment was formed into MCXCCL. Citing software obsolescence, MCX issued an RFP for a new Commodity Derivatives Platform and selected TCS as the vendor. Repeated project delays led MCX to repeatedly extend 63 Moons\u2019 services, incurring significant costs. SEBI issued a show cause notice alleging non-compliance with outsourcing requirements, inadequate disclosures of substantial payments, and delays in operationalizing the new platform. The Noticees filed and then withdrew settlement applications, after which personal hearings and multiple procedural steps occurred to examine the applicability of the Outsourcing Circular, the adequacy of due diligence, and the timeliness of disclosures.", "final_status": "The matter was disposed of, with a monetary penalty imposed on MCX for its disclosure lapse and no adverse findings against other noticees.", "first_party": [ "1. Securities and Exchange Board of India" ], "grouped_statutes": { "LODR Regulations, 2015": [ "Paragraph 25: \u201cIn view of the above, the Noticees were alleged to have violated the following provisions of law: \u2026 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.\u201d", "85. 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.", "Paragraph 84: \u201c84. 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.\u201d" ], "Master Circulars": [ "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": [ "Paragraph 90 (excerpt): \u201c90. 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...\u201d" ], "SEBI (Settlement Proceedings) Regulations, 2018": [ "\u201c28. 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\u2026.\u201d" ], "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 \u201cAll recognised stock exchanges\u201d, or to \u201cAll National Commodity Derivatives Exchanges\u201d. 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": [ "Paragraph 25: \u201cIn view of the above, the Noticees were alleged to have violated the following provisions of law: Sr. No. Noticee No. Alleged Violations Penal Provisions 1 Noticee 1 (MCX) i. SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017. ii. Clause 3 of SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017, read-with Annexure I of the circular, including its Clause 2, 3, 4, 5, 7, 8, 11 and 13, read-with amendment to SECC Regulations, 2012 dated April 2, 2018 and SECC Regulations, 2018 and its amendment w.e.f. October 3, 2018. ...\u201d", "\u201c31. I note that primarily, the allegations made against the Noticees in the SCN emanate from the allegation of violation SEBI Circular No. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017 (\u201cOutsourcing Circular\u201d) by MCX and MCXCCL.\u201d", "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 \u201cAll recognised stock exchanges\u201d, or to \u201cAll National Commodity Derivatives Exchanges\u201d. 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.", "44. The above observations show that there was legal ambiguity on the issue of whether the Outsourcing Circular was applicable to Commodity Derivative Segments in the first place. In view of such legal ambiguity, I am inclined to accept the explanation submitted by MCX and MCXCCL for delayed implementation of the provisions of the Outsourcing Circular. I note that MCX and MCXCLL have subsequently formulated an Outsourcing Policy, in terms of Clause 3 of the said Circular, which shows that they have taken remedial steps. Accordingly, I find that the allegation of violation of the provisions of Outsourcing Circular against MCX and MCXCCL does not sustain." ], "Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties) Rules, 2005": [ "Paragraph 90 (excerpt): \u201c90. 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...\u201d" ], "Securities Contracts (Regulation) Act, 1956": [ "1. Pursuant to a special purpose examination of Multi Commodity Exchange of India Ltd. (\"MCX\") and Multi Commodity Exchange Clearing Corporation Ltd. (\"MCXCCL\"), the Securities and Exchange Board of India (hereinafter referred to as \"SEBI\") issued a show cause notice dated October 16, 2023 (\"SCN\") to the Noticees for certain alleged violations of the provisions of Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 (\"SECC Regulations, 2018\"), SEBI Act, 1992, Securities Contracts Regulation Act, 1956 (\"SCRA, 1956\") and various other Rules/Regulations/directions/Circulars issued thereunder.", "Paragraph 25: \u201cIn view of the above, the Noticees were alleged to have violated the following provisions of law: \u2026 15HB of SEBI Act, 1992 and section 23H of SCRA, 1956 read with 12A (2) of SCRA and 11B (2) of SEBI Act.\u201d", "\u201c27. The SCN called upon the Noticees to show cause as to why appropriate direction(s) under Section 11B(2) of SEBI Act, 1992 and 12A(2) of SCRA , 1956 should not be issued against them on account of the alleged violations mentioned in this SCN.\u201d", "Paragraph 90 (excerpt): \u201c90. 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...\u201d" ], "Securities Contracts (Regulation)(Stock Exchanges and Clearing Corporations) Regulations, 2012": [ "10. Subsequently, vide amendment to SECC Regulations, 2012 as notified on April 02, 2018, it was provided that there would be no separate category of \u2018Commodity Derivatives Exchanges\u2019 w.e.f. October 01, 2018. Accordingly, MCX became a \u2018Stock Exchange\u2019 having a Commodity Derivatives segment, with MCXCCL as its \u2018Clearing corporation\u2019. Consequently, all regulatory provisions applicable to stock exchanges became applicable, mutatis mutandis, to stock exchanges with Commodity Derivatives segments also.", "Paragraph 25: \u201cIn view of the above, the Noticees were alleged to have violated the following provisions of law: \u2026 (references to SECC Regulations, 2012).\u201d", "\u201c3 Noticee 3 \u2026 Clause 1(b),1(c), 3(a), 3(b), 3(e) and 3(f) of Code of Ethics read -with Regulation 26(2) of SECC Regulations, 2018 read with regulation 33(1) of SECC Regulations 2018 and Regulation 32 of SECC Regulation 2012\u2026.\u201d", "35. I note that there are other allegations of violations 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 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.", "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.", "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. (\"MCX\") and Multi Commodity Exchange Clearing Corporation Ltd. (\"MCXCCL\"), the Securities and Exchange Board of India (hereinafter referred to as \"SEBI\") issued a show cause notice dated October 16, 2023 (\"SCN\") to the Noticees for certain alleged violations of the provisions of Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 (\"SECC Regulations, 2018\"), SEBI Act, 1992, Securities Contracts Regulation Act, 1956 (\"SCRA, 1956\") and various other Rules/Regulations/directions/Circulars issued thereunder.", "Paragraph 25: \u201cIn view of the above, the Noticees were alleged to have violated the following provisions of law: \u2026 (references to SECC Regulations, 2018).\u201d", "\u201c3 Noticee 3 \u2026 i. Clause 1(b), 3(a), 3(b), 4(a), 4(b), 4(d), 5(b), 5(e), 5(f), 5(g) and 5(h) of Code of Conduct read -with Regulation 26(1) of SECC Regulations, 2018 read with clause 3 of PART \u2013 A schedule II of SECC Regulations, 2018\u2026.\u201d", "35. I note that there are other allegations of violations 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 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.", "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.", "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", "Paragraph 84 (excerpt): \u201c84. ... 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.\u201d" ], "Securities and Exchange Board of India Act, 1992": [ "1. Pursuant to a special purpose examination of Multi Commodity Exchange of India Ltd. (\"MCX\") and Multi Commodity Exchange Clearing Corporation Ltd. (\"MCXCCL\"), the Securities and Exchange Board of India (hereinafter referred to as \"SEBI\") issued a show cause notice dated October 16, 2023 (\"SCN\") to the Noticees for certain alleged violations of the provisions of Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 (\"SECC Regulations, 2018\"), SEBI Act, 1992, Securities Contracts Regulation Act, 1956 (\"SCRA, 1956\") and various other Rules/Regulations/directions/Circulars issued thereunder.", "Paragraph 25: \u201cIn view of the above, the Noticees were alleged to have violated the following provisions of law: Sr. No. Noticee No. Alleged Violations Penal Provisions 1 Noticee 1 (MCX) i. SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017. ii. Clause 3 of SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017, read-with Annexure I of the circular, including its Clause 2, 3, 4, 5, 7, 8, 11 and 13, read-with amendment to SECC Regulations, 2012 dated April 2, 2018 and SECC Regulations, 2018 and its amendment w.e.f. October 3, 2018. iii. Regulation 7(2)(f) and Regulation 7(3)(a,b \u0026 j) of SECC Regulations, 2018 read -with 12(5) of SECC Regulations, 2018. 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. 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. 3 Noticee 3 (Mr. Padala Subbi Reddy, MD \u0026 CEO of MCX and shareholder director of MCXCCL) i. Clause 1(b), 3(a), 3(b), 4(a), 4(b), 4(d), 5(b), 5(e), 5(f), 5(g) and 5(h) of Code of Conduct read -with Regulation 26(1) of SECC Regulations, 2018 read with clause 3 of PART \u2013 A schedule II of SECC Regulations, 2018 ii. Clause 1(b),1(c), 3(a), 3(b), 3(e) and 3(f) of Code of Ethics read -with Regulation 26(2) of SECC Regulations, 2018 read with regulation 33(1) of SECC Regulations 2018 and Regulation 32 of SECC Regulation 2012. 4 Noticee 4 (Mr. Narendra Kumar Ahlawat, MD \u0026 CEO of MCXCCL) i. Clause1(b),3(a),3(b),4(a),4(b),5(b),5(e),5(f),5(h) of Code of Conduct read -with Regulation 26(1) of SECC Regulations, 2018 ii. Clause 1(b),1(c),3(a),3(b),3(e) and 3(f) of Code of Ethics read -with Regulation 26(2) of SECC Regulations, 2018 iii. Clause 3 of SEBI circular dated September 13, 2017 iv. Clause 2, 5, 6 and 8.1 of Annexure I to SEBI circular dated September 13, 2017. 15HB of SEBI Act, 1992 and section 23H of SCRA, 1956 read with 12A (2) of SCRA and 11B (2) of SEBI Act.\u201d", "\u201c27. The SCN called upon the Noticees to show cause as to why appropriate direction(s) under Section 11B(2) of SEBI Act, 1992 and 12A(2) of SCRA , 1956 should not be issued against them on account of the alleged violations mentioned in this SCN.\u201d", "Paragraph 86 (excerpt): \u201c86. ... 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...\u201d", "Paragraph 89: \u201c89. While imposing the monetary penalty, I have considered the factors, as mentioned under Section 15J of the SEBI Act, 1992.\u201d", "Paragraph 90 (excerpt): \u201c90. 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...\u201d" ] }, "held": "The adjudicating authority concluded that allegations involving outsourcing violations were not sustained due to legal ambiguity, but MCX was found liable for failure to disclose significant payments to 63 Moons in a timely manner. A monetary penalty was imposed on MCX, underscoring the obligation for prompt disclosure of material financial information by listed entities.", "latin_principles": { "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 for Commodity Derivatives Market. Applying the legal maxim expressio unius est exclusio alterius, it is argued that the Outsourcing Circular did not apply to Commodity Derivatives Exchanges and their Clearing Corporations.", "mutatis mutandis": "Paragraph 82: \u201cAs per Regulation 33(1) of SECC Regulations, 2018, \u2018The 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.\u2019\u201d" }, "legal_issues": [ "Whether MCX and MCXCCL violated outsourcing and disclosure obligations under applicable regulations", "whether the Outsourcing Circular applied to commodity derivative exchanges after the FMC\u2013SEBI merger", "whether the repeated delays in implementing a new trading platform and continued reliance on 63 Moons amounted to breaches of regulatory duties", "whether material payments and extended contracts required prompt disclosure under LODR norms", "whether individual officers bore liability for any lapses." ], "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": "From dictionary #2: \u201cParagraph 25: \u2026 Regulation 4(1)(c), 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\u201d.\nFrom dictionary #7: \u201cRegulation 4(1)(d), 4(1)(e) and 30(12) of LODR Regulations, 2015 require timely disclosures. Regulation 4(1)(i) mandates that filings must contain relevant information\u2026\u201d.\nFrom dictionary #8 (Regulations 4(1)(d), 4(1)(e), 4(1)(i), 30(12)): \u201cParagraph 84: \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. Paragraph 85: Provisions mandate disclosure of accurate, adequate, explicit, and timely information\u2026 Paragraph 86: Such information has to be treated as material information which ought to have been disclosed\u2026\u201d.", "Master Circulars": "From dictionary #5: \u201c43. It is further noted that subsequently, SEBI issued Master Circulars from time to time which either applied to Stock Exchanges or to Commodity Derivatives Segment. Comparison showed the Outsourcing Circular was mentioned only in Master Circulars for Stock Exchanges, not in those for the Commodity Derivatives Segment\u2026\u201d.", "SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995 - Rule 5": "From dictionary #8: \u201cParagraph 90 (excerpt): \u2026 read with Rule 5 of the SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995\u2026\u201d.", "SEBI (Settlement Proceedings) Regulations, 2018": "From dictionary #3: \u201c28. The SCN was duly served. The Noticees subsequently filed Settlement applications under the SEBI (Settlement Proceedings) Regulations, 2018, then withdrew the same\u2026\u201d.", "SEBI Circular dated January 10, 2019": "From dictionary #5: \u201c43. SEBI issued Master Circulars from time to time. Certain circulars, such as SEBI Circular dated January 10, 2019 on \u2018Committees at Market Infrastructure Institutions,\u2019 appear in both sets of Master Circulars, whereas the Outsourcing Circular does not\u2026\u201d", "SEBI Circular dated September 28, 2018": "From dictionary #5: \u201c42. SEBI Circular dated September 28, 2018 abolished the concept of Commodity Derivatives Exchanges, stating all norms issued till date shall be applicable to Commodity Derivatives Segments to the extent relevant. There was no clarity on whether earlier Circulars addressed to \u2018All Stock Exchanges\u2019 prior to 2018 applied to Commodity Derivatives Segments\u2026\u201d.", "SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017 (Outsourcing Circular)": "From dictionary #2: \u201cParagraph 25: \u2026 Clause 3 of SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017\u2026 read-with Annexure I\u2026 Outsourcing approach\u2026\u201d.\nFrom dictionary #3: \u201c31. I note that primarily, the allegations made against the Noticees \u2026 emanate from the alleged violation of SEBI Circular No. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017 (\u2018Outsourcing Circular\u2019)\u2026\u201d.\nFrom dictionary #5 (also referred to as \u2018Outsourcing Circular\u2019): \u201c44. The above observations show that there was legal ambiguity on whether the Outsourcing Circular was applicable to Commodity Derivative Segments\u2026 In view of such ambiguity, I am inclined to accept the explanation\u2026 The allegation of violation of its provisions by MCX and MCXCCL does not sustain\u2026\u201d.", "Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties) Rules, 2005 - Rule 5": "From dictionary #8: \u201cParagraph 90 (excerpt): \u2026 read with Rule 5 of Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties) Rules, 2005\u2026\u201d.", "Securities Contracts (Regulation) Act, 1956 (SCRA, 1956)": "From dictionary #1: \u201c1. Pursuant to a special purpose examination of MCX and MCXCCL, SEBI issued a show cause notice dated October 16, 2023\u2026 alleged violations of SCRA, 1956\u2026\u201d.\nFrom dictionary #2: \u201cParagraph 25: In view of the above, \u2026 section 23H of SCRA, 1956 read with 12A (2) of SCRA\u2026 11B (2) of SEBI Act\u2026\u201d.\nFrom dictionary #3: \u201c27. The SCN called upon the Noticees to show cause \u2026 12A(2) of SCRA, 1956\u2026\u201d.\nFrom dictionary #8 (Section 12A(2)): \u201cParagraph 90 (excerpt): \u2026 in the exercise of the powers conferred upon me under Section 12A(2) of SCRA, 1956 read with Rule 5\u2026\u201d.", "Securities Contracts (Regulation)(Stock Exchanges and Clearing Corporations) Regulations, 2012": "From dictionary #1: \u201c10. Subsequently, vide amendment to SECC Regulations, 2012\u2026 it was provided that there would be no separate category of \u2018Commodity Derivatives Exchanges\u2019 w.e.f. October 01, 2018\u2026\u201d.\nFrom dictionary #2: \u201cParagraph 25: In view of the above, the Noticees were alleged to have violated SECC Regulations, 2012\u2026\u201d.\nFrom dictionary #3: \u201c3 Noticee 3 \u2026 read-with Regulation 32 of SECC Regulation 2012\u2026\u201d.\nFrom dictionary #4: \u201c35. I note that there are other allegations of violations\u2026 referencing the Outsourcing Circular by MCX and MCXCCL\u2026\u201d.\nFrom dictionary #5: \u201c45. \u2026 I find that the allegation of violation of the provisions of Outsourcing Circular against MCX and MCXCCL does not sustain, the related allegations pertaining to violation of SECC Regulations, 2012\u2026 do not stand\u2026\u201d.\nFrom dictionary #7: \u201c78. For the above stated observations\u2026 I find that the allegation of violations of SECC Regulations, 2012 and SECC Regulations, 2018\u2026 are not established\u2026\u201d.", "Securities Contracts (Regulation)(Stock Exchanges and Clearing Corporations) Regulations, 2018": "From dictionary #1: \u201c1. Pursuant to a special purpose examination\u2026 alleged violations of SECC Regulations, 2018\u2026\u201d.\nFrom dictionary #2: \u201cParagraph 25: In view of the above, the Noticees were alleged to have violated provisions of SECC Regulations, 2018\u2026\u201d.\nFrom dictionary #3: \u201c3 Noticee 3 \u2026 Clause 1(b), 3(a), 3(b), 4(a)\u2026 read-with Regulation 26(1) of SECC Regulations, 2018\u2026\u201d.\nFrom dictionary #4: \u201c35. I note that there are other allegations of violations \u2026 which emanate from the alleged violation of Outsourcing Circular\u2026\u201d.\nFrom dictionary #5: \u201c45. I note that various provisions of SECC Regulations, 2012 and SECC Regulations, 2018 have been invoked\u2026\u201d.\nFrom dictionary #7: \u201c82. As per Regulation 33 (1) of SECC Regulations, 2018, \u2018The disclosure requirements and corporate governance norms as specified for listed companies shall mutatis mutandis apply\u2026\u2019. \u2026\u201d.\nFrom dictionary #8 (Regulation 33(1)): \u201cParagraph 84: MCX violated provisions of LODR Regulations, 2015 read-with Regulation 33(1) of SECC Regulations, 2018\u2026 Paragraph 86: The allegation of violations of these provisions stands established\u2026\u201d.", "Securities and Exchange Board of India Act, 1992": "From dictionary #1: \u201c1. Pursuant to a special purpose examination of Multi Commodity Exchange of India Ltd. (MCX) and Multi Commodity Exchange Clearing Corporation Ltd. (MCXCCL), the Securities and Exchange Board of India (hereinafter referred to as \u2018SEBI\u2019) issued a show cause notice dated October 16, 2023 to the Noticees for certain alleged violations\u2026\u201d.\nFrom dictionary #2: \u201cParagraph 25: \u2026 15A(b) \u0026 15HB of SEBI Act, 1992 read with 12A (2) of SCRA and 11B (2) of SEBI Act\u2026\u201d.\nFrom dictionary #3: \u201c27. The SCN called upon the Noticees to show cause as to why appropriate direction(s) under Section 11B(2) of SEBI Act, 1992 and 12A(2) of SCRA, 1956 should not be issued against them\u2026\u201d.\nFrom dictionary #8 (Sections 15HB, 15J, 11B(2), 19): \u201cParagraph 86 (excerpt): \u2026 MCX is liable for a monetary penalty under Section 15HB of the SEBI Act, 1992\u2026 Paragraph 89: While imposing the monetary penalty, factors under Section 15J of SEBI Act, 1992 were considered\u2026 Paragraph 90: In exercise of powers under Section 11B(2) of the SEBI Act, 1992\u2026 Section 19 of SEBI Act, 1992\u2026\u201d." }, "statutes_headnotes": { "LODR Regulations, 2015": "\u2014 Disclosure obligations \u2014 Alleged violation of Regulations 4(1)(c), 4(1)(d), 4(1)(e), 4(1)(i) and 30(12) read with SECC Regulations, 2018 \u2014 Listed entity must provide accurate and timely disclosures \u2014 MCX failed to disclose substantial payments to 63 Moons \u2014 Outsourcing allegations not sustained due to ambiguity \u2014 Monetary penalty on MCX \u2014 Emphasizes strict adherence to LODR norms for transparency.", "Master Circulars": "\u2014 Applicability of Outsourcing Circular \u2014 Master Circulars for Stocks and Clearing include it; Commodity Derivatives Master Circulars omit it \u2014 SEBI Circular dated January 10, 2019 is common, but Outsourcing Circular is missing in Commodity Derivatives \u2014 Legal ambiguity led to exoneration for outsourcing violations \u2014 Penalty on MCX for delayed disclosure of substantial payments.", "SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995": "\u2014 Applicability of Outsourcing Circular disputed \u2014 Alleged delay in TCS-based platform and extended reliance on 63 Moons \u2014 Outsourcing violations not sustained \u2014 Failure to disclose payments to 63 Moons found \u2014 Monetary penalty imposed \u2014 Highlights prompt disclosure obligations under LODR.", "SEBI (Settlement Proceedings) Regulations, 2018": "\u2014 Settlement applications and withdrawal \u2014 Outsourcing violation allegations not sustained due to ambiguity \u2014 MCX penalized for delayed disclosure of substantial payments \u2014 Emphasizes timely disclosure by listed entities.", "SEBI Circular dated January 10, 2019": "\u2014 \u0027Committees at Market Infrastructure Institutions\u0027 \u2014 Included in Master Circulars for both stock and commodity segments \u2014 Unlike Outsourcing Circular, whose applicability was ambiguous, this 2019 Circular was recognized \u2014 Enforcement focused on disclosure lapses rather than outsourcing.", "SEBI Circular dated September 28, 2018": "\u2014 Outsourcing obligations \u2014 Ambiguity in application to commodity derivative exchanges post-FMC\u2013SEBI merger \u2014 Legal uncertainty on extension of earlier circulars \u2014 Delayed TCS transition and repeated 63 Moons extensions \u2014 Failure to disclose substantial payments \u2014 Monetary penalty on MCX for disclosure lapses \u2014 Outsourcing violation allegations not sustained due to unclear applicability.", "SEBI circular no. SEBI/HO/MRD/DP/CIR/P/2017/101 dated September 13, 2017": "\u2014 Outsourcing obligations under Clause 3 with Annexure I \u2014 Ambiguous applicability to Commodity Derivatives after FMC\u2013SEBI merger \u2014 MCX and MCXCCL formulated Outsourcing Policy \u2014 Outsourcing violation not sustained \u2014 Monetary penalty only for delayed disclosures.", "Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties) Rules, 2005": "\u2014 Outsourcing obligations and timely disclosure post-FMC\u2013SEBI merger \u2014 Allegations of outsourcing breaches not proved \u2014 Non-disclosure of significant payments established \u2014 Monetary penalty on MCX \u2014 Emphasis on robust governance and LODR compliance.", "Securities Contracts (Regulation) Act, 1956": "\u2014 SCN by SEBI challenging Outsourcing Circular applicability \u2014 Delays in new platform and reliance on 63 Moons \u2014 Alleged violation of SEBI Act, SCRA, and SECC Regulations \u2014 Outsourcing allegations not sustained \u2014 MCX penalized for delayed disclosures \u2014 Emphasis on prompt disclosure.", "Securities Contracts (Regulation)(Stock Exchanges and Clearing Corporations) Regulations, 2012": "\u2014 Commodity Derivatives Exchanges, post\u20132018 amendment MCX is a Stock Exchange \u2014 Outsourcing allegations not proved due to ambiguity \u2014 Timely disclosure of payments to 63 Moons mandated \u2014 MCX penalized for delay \u2014 Other allegations dismissed.", "Securities Contracts (Regulation)(Stock Exchanges and Clearing Corporations) Regulations, 2018": "\u2014 Outsourcing obligations post-FMC\u2013SEBI merger \u2014 Delays in new platform, repeated 63 Moons extensions \u2014 Outsourcing allegations not proved due to ambiguity \u2014 MCX liable for delayed disclosures under Regulation 33(1) \u2014 Monetary penalty imposed.", "Securities and Exchange Board of India Act, 1992": "\u2014 Outsourcing obligations under Outsourcing Circular \u2014 Whether applicable to commodity derivative exchanges post-FMC\u2013SEBI merger \u2014 Alleged violations not sustained due to legal ambiguity \u2014 Delays in implementing new TCS-based platform and reliance on 63 Moons \u2014 Failure to disclose substantial payments promptly under LODR \u2014 Monetary penalty on MCX for disclosure lapses \u2014 Emphasis on timely disclosures." } }, "summary": { "formatted_summary": "The dispute involved MCX\u2019s transition from software provided by 63 Moons to a new system developed by TCS, with repeated project delays and considerable costs tied to extended agreements. Regulatory notices alleged that MCX and MCXCCL had not complied with the Outsourcing Circular once the exchange was under SEBI\u2019s purview, that they delayed implementing the new platform, and that substantial payments to 63 Moons were not promptly disclosed. MCX argued there was uncertainty about the circular\u2019s applicability to commodity derivatives and maintained that retaining 63 Moons was necessary to sustain operations. Following hearings and submissions, a monetary penalty was levied on MCX for disclosure lapses, while other allegations and proceedings against additional parties were dismissed, highlighting the importance of robust governance and timely disclosures." } }