Gujarat High Court on Thursday issued notice to Securities and Exchange Board Of India (SEBI) while hearing a public interest litigation (PIL) challenging the stock market regulator's notification with regard to regional stock exchanges (RSE).

A division bench of Chief Justice Bhaskar Bhattacharya and Justice J B Pardiwala, hearing the PIL also issued notice to Union Ministry of Corporate Affairs. All respondents have been asked to file replies to the objections in two weeks. 

The PIL had challenged the SEBI notification, which made it mandatory for RSE to have minimum net worth of Rs 100 crore and annual turnover of Rs 1000 crore. A shareholder of Ahmedabad Stock Exchange (ASE), Kirit Bhatt, who is also chairman of Investor Protection and Education Research Centre, had filed the PIL last month. Bhatt has challenged the SEBI's order, claiming it to be 'illegal'.

Bhatt had claimed that SEBI did not consult the regional stock exchanges before taking the decision. He also claimed that RSEs were not given opportunity for hearing. In its notification issued on June 20, 2012, SEBI had announced that all the stock exchanges which do not have net worth of Rs 100 crore and annual turnover of Rs 1000 crore, would be derecognised.

The PIL had claimed that the SEBI’s decision would severely affect the RSEs and their shareholders. And such a decision by the regulator may even force some of the exchanges to close their operations, thereby creating a threat on their existence.

The petition noted that the logic behind fixing net worth and turnover to this tune was not disclosed by SEBI. It had also claimed that the decision was taken with a malafide intention and was to benefit only the big stock exchanges like Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).