Application of Margin Trading Rules: A Dispute at National Stock Exchange

Nature registered as a client with Perfect for trading and investment in securities in January 2015. The firm, which was in the business of trading i.e., buying and selling of securities listed on the NSE, had an excellent trading and credit history with Perfect. Perfect provided trading facilities as well as credit facilities for buying securities against collaterals. Nature had kept 40,000 shares of Salzer Electronics Ltd, whose market price was about Rs 180 per share, as collateral, with Perfect to get credit facility or margin trading facility . Salzer Electronics Ltd.’s shares were listed and traded on the NSE as well as the Bombay Stock Exchange Ltd (BSE). Perfect had been providing a credit facility to Nature on a continuous basis from the beginning of 2015 and the credit facility had risen from Rs. 4 million in April 2015 to about Rs. 9 million in August 2015 and finally reached Rs.16 million in January 2016. Nature used to regularize or clear the outstanding credit facility within a period of one or two weeks and pay an interest at the rate of 18 per cent per annum on any outstanding credit facility. While granting a credit facility to Nature, Perfect used to take into consideration the value of 40,000 shares of Salzer Electronics and the other shares purchased through Perfect for the purpose of calculating collaterals....