ASM-GSM dispute: Delhi High Court to hear Kairosoft vs SEBI, BSE tomorrow

ASM-GSM dispute: Delhi High Court to Hear Kairosoft vs SEBI, BSE tomorrow

The Delhi High Court will take up Kairosoft AI Solutions’ petition against the Bombay Stock Exchange (BSE) and markets regulator SEBI on Wednesday, in a case that could have implications for how surveillance measures are imposed and challenged in India’s capital markets.

The hearing was deferred on Tuesday after Kairosoft’s counsel, Senior Advocate and former Union Minister Kapil Sibal, requested a postponement, citing that SEBI’s counter affidavit had been served only the previous night.

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.

In its petition, the 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 penalised based on third-party actions beyond its control.

The firm also highlighted that the GSM tag has severely impacted liquidity and investor sentiment, as GSM Stage 4 entails strict trading curbs. Stocks under this category are moved to a Trade-for-Trade segment, limited to trading only on Mondays, with a 5% price band and an Additional Surveillance Deposit (ASD) of 100% of the trade value.

Kairosoft has challenged not just the classification but also the lack of transparency in the decision-making process by the exchange and regulator. It has questioned the rationale behind the move and the absence of any opportunity for the company to respond before punitive action was taken.

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.

The outcome of the hearing could have implications for how exchanges implement surveillance measures and the due process surrounding them.