Last week, Sebi withdrew its recognition, citing irregularities in DSE’s demutualisation programme seven years ago. Of 2,500 companies listed on DSE, about 1,700 are not listed on any other bourse, leaving investors in these stranded. Some prominent companies listed on DSE are Delhi Flour Mills, the makers of Shakti Bhog atta, Bajaj Electricals and Bajaj Leasing & Finance. The Birla Cotton and Weaving Mills, belonging to the KK Birla family and industrial refrigeration entity Frick India are others.

Over the past couple of years, Sebi has been issuing circulars and directives to ensure migration of companies and investors to national exchanges such as BSE and the National Stock Exchange, as the policy was to shut down unviable regional stock exchanges (RSEs). Exclusively listed companies were asked to either go for BSE/NSE direct listing or opt for voluntary delisting. Companies failing to do either of these were to be shifted to a Dissemination Board and considered delisted.

Anjali Aggarwal, vice-president, Corporate Professionals Capital, a Delhi-based merchant banker, said the derecognition meant almost all the 1,700 companies would be shifted to the Dissemination Board, and thus deemed unlisted, without having to follow the Sebi Delisting Regulations and without any obligation to pay the public shareholders. “This order has left shareholders in a lurch,” Aggarwal said.

Prakash Jalan, managing director of Grovy Exports & Marketing, a company listed on DSE since 1985, said: “I have complied with all the rules and regulations for the past 30 years. I have paid the listing fees regularly. I don’t care what they do with DSE. But why should I and my shareholders be penalised for no fault of ours?”

Jalan said he had initiated a process two months earlier for migration to BSE under a Sebi-approved plan for companies in RSEs. “We have filled all the forms and paid over Rs 4 lakh in fees to various bodies such as the depositories, clearing corporation, etc. Suddenly, everything has come to a standstill.” Grovy was in the process of raising capital through private placement, which has been hit.

Vikas Chandra, company secretary, Skyweb Infotech, said: “ We are very aggrieved by the Sebi order. We were in the process of direct listing with BSE.” Chandra said his company had also initiated a preferential allotment and had applications and filing fee for an open offer. “We had started these processes in September, when we had written to DSE. At that time, we had no idea that the exchange was under investigation or that it would be shut down without notice. Now, if you ask them anything, there is no response. Overnight, we have all become unlisted entities.”

Chandra said about 400 shareholders of his company were stranded because of these developments.

An email questionnaire to the Sebi spokesperson did not elicit a response.

A merchant banker who deals with companies listed on DSE such as Grovy said at least seven or eight of his clients, which had taken legitimate efforts for migration to other bourses, were stuck. “We had a long discussion with the regulator. They are aware of the situation. Their point was that the policy on regional exchanges had been communicated almost two years ago. Yet, they are working on ways to address the issues of investors,” he said.

He also indicated the matter might end in court, as some of the aggrieved parties are exploring legal options.