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`SEBI has no objection to CSE, BSE merger'

Jayanta Mallick

KOLKATA, Sept. 17

THE Securities and Exchange Board of India (SEBI) has no objection to the proposal for a merger of the Calcutta Stock Exchange (CSE) with the Bombay Stock Exchange (BSE).

The convenor of the Calcutta Stock Brokers' Association (CSBA) and former President of CSE, Mr Ajit Day, told Business Line that the market regulator welcomed the proposal and has assured the association of its assistance in this regard.

The proposal will be pushed through after CSE finalises its accounts for 2000-2001. CSBA was formed by the CSE brokers after the elected directors resigned from the governing committee following the crisis in March.

The governing committee of the financially drained bourse is having a tough time finalising the accounts for the financial year 2000-01. CSE brokers have actively been pursuing the merger proposal for the past few months. As the amalgamation would requir e determination of the exchange's networth, finalisation of the latest balance sheet is crucial for getting on with the valuation process.

The principal problem revolves around the accounting treatment for the drawals from the general reserves of around Rs 19 crore during the payment crisis in March. The drawals had to be effected to make smooth payouts insisted upon by the SEBI.

The drawals, which were made following a governing committee resolution, are to be ratified by the shareholders or member brokers.

The current governing committee of CSE, consisting of 10 non-elected directors (the Executive Director, SEBI nominees and public representatives), has postponed the AGM for 2000-01 to December 31, 2001.

The postponement is believed to be linked to the resolution pertaining to the drawal from the general reserves. Incidentally, the present incumbent's appointment as ``acting'' ED was approved by SEBI with effect from August 13 to December 31.

Mr Day, who is on the consultative committee of the bourse, said that the broker-members would not approve a resolution for adjusting drawals from the general reserves. ``It has income-tax implications.'' He pointed out that the CSE is a non-profit compa ny governed under Section 11 of the Companies Act.

The exchange has initiated legal proceedings against three main defaulters and their entities for recovery.

The present committee has not made up its mind on whether to adjust drawals against the general reserves or treat them as a loss. It has sought the opinion of the statutory auditors, S.S. Kothari & Associates.

Depending on the treatment, the exchange will close the books with a loss of around Rs 12 crore or a surplus. In Mr Day's opinion, if the drawal is taken as a ``loss'', CSE would lose I-T exemptions, which would mean further funds erosion.

CSE earns around Rs 6 crore annually on account of listing fees. Currently, it has around 500 active members. Among its most valuable assets are a building in the business district of Kolkata and a prime plot of land.