ASM-GSM Dispute: Delhi High Court reserves order on jurisdictional issue

ASM-GSM Dispute in Delhi HC, HC reserves order on jurisdictional issue

The Delhi High Court reserved its order the Kairosoft AI Solutions vs BSE, SEBI case on Monday, The case is critical as it could have implications for how surveillance measures are imposed and challenged in the country's capital markets. The High Court reserved its order on jurisdictional issue.

The Bombay Stock Exchange as well as market regulator Securities and Exchange Board of India (SEBI) have challenged the jurisdictional issue in the case.

BSE lawyer had argued that trading, clearing, and settlement of transactions of the Kairosoft AI and other listed companies happens in Mumbai. The exchange’s lawyer cited the listing agreement and said, “Listing of the shares at the platform of BSE is also controlled at Mumbai, furthermore petitioner had accepted the aforementioned rule of BSE, under the listing agreement territorial jurisdiction expands exclusively to the jurisdiction of courts of Mumbai”.

He also added that shares are held in demat form and the depositories are also in Mumbai. BSE side also cited judgements on the issue.

Former Union Minister and senior advocate Kapil Sibal, who appeared for Kairosoft AI, opposed the action of BSE and SEBI. Sibal argued that as per Supreme Court judgment, if any action is taken without notice then that action is per se void.

On the issue of listing agreement clause, Sibal argued on behalf of Kairosoft AI and said if listing is to be done for trading of shares then company has to agree and have no choice in the matter. Sibal argued that under article 226 of the constitution, the constitutional power of the court cannot be curtailed. Sibal reiterated that “on the basis of those three videos, which have been taken down, the action still continues”. He said, “there is no cause of action as we speak” but the action still continued. Sibal cited judgements in furtherance of his arguments.

Sibal on behalf of the Kairosoft AI, requested SEBI to remove from the list of parties, to which SEBI lawyer said, “then SEBI will move an application to implead itself in the case”. SEBI lawyer also wanted to share ‘certain facts’ about the director and the company, to which court directed to share as a note. On the jurisdiction part SEBI side argued that SEBI has office in Delhi and Mumbai and BSE is located in Mumbai so jurisdiction should be Mumbai. He also mentioned that  that one of the petitioners is the wife of one of the directors of the company and holds 5 per cent shares in the company. He said, No one else has come and complained about the restrictions on the trading of the shares of the company put up by BSE. Justice Vikas Mahajan heard the arguments of BSE, SEBI and Kairosoft AI Solutions on aspect of territorial jurisdiction and as well as alternative remedies, and reserved the order.

During the hearing the questions were raised about the share price of the company and asked if it is commensurate to the assets and number of employees of the company.

The outcome of this case can have implications on how surveillance measures are imposed and challenged in India’s capital markets. The legal battle centers on BSE’s April 3 circular that placed Kairosoft under Graded Surveillance Measure (GSM) Stage 4—a regulatory tool aimed at curbing excessive stock price movement not supported by fundamentals. Kairosoft is seeking to set aside the move, arguing that it was imposed abruptly and without prior notice.

Company objected to being directly moved to GSM Stage 4, bypassing the earlier stages of the framework. The company claimed that the decision was driven by “unverified chatter” and YouTube videos posted by unknown individuals speculating on the stock’s rally. Kairosoft has denied any association with the individuals behind the videos and contended that its stock was penalized based on third-party actions which are beyond its control.

GSM, along with the Additional Surveillance Measure (ASM), is used by exchanges and SEBI to curb manipulation in illiquid or volatile stocks. In recent years, the regulator has intensified its crackdown on pump-and-dump schemes and has passed multiple orders against operators accused of misleading investors.