Mumbai, Aug 20: The Dhanuka committee, set up to review the Securities Regulation and Contract Act (SCRA), 1956, has finalised a provision under which the functioning of an exchange's clearing house can be entrusted to a clearing corporation, subject to SEBI approval.

The committee has suggested the inclusion of the above provision in the SCRA Act. Currently, the term `clearing corporation' is not defined in the SCRA.

The term is relatively new to the Indian market, introduced only last year by the National Stock Exchange which is the only bourse in the country to have a full-fledged clearing corporation to handle settlements for both physical and demat segments.

The committee also considered including strict penal action against companies which do not adhere to the listing agreement of the exchange. ``Stock exchanges should be empowered to fine the companies for non-compliance of the listing agreement which would include non-payment for dividend or non-receipt of allotment letters,'' said Justice Dhanuka.

Currently, a stock exchange has no alternative but to delist the company. However, with the proposed provision, the exchange can impose a recurring fine, from a minimum of Rs 1,000 to a maximum of Rs 1 lakh till the company complies by the listing agreement. The judiciary should be authorised to penalise company officials with a minimum of six months to a maximum of three years imprisonment. Provisions should also be provided wherein the directors of the defaulting company are also prosecuted.

The committee has also recommended the inclusion of guidelines for investors in the Act, whereby the investor can apply to SEBI in a particular format and claim his compensation from the company which does not comply with the listing agreement.

Another recommendation in the offing is that an exchange should be empowered to fix a lumsum amount as listing fee.

This would prevent the company from defaulting on the listing fee. Currently, in case of a default, the exchange takes the extreme step of delisting the company, which acts against the interest of shareholders.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.