The procedure consists of 2 parts :

In Part 1 the receiving member will approach BDC of last exchange and submit his objections using form BDC-1A, which will have to be rectified by the introducing member of the last exchange as per the procedures laid down for handling local exchange objections.

In the Second Part, when the introducing member of the last exchange wants to rectify the shares that have come under objection the following procedure will have to be followed :

Option 1 : In case of inter Exchange objections the introducing member of the last exchange may handover the documents under objection to the previous member through whom he has purchased the shares under objection. The introducing member of the last exchange thus has an option to settle his objection directly without going through the BDC.

Option 2 : In the alternative, the introducing member of the last exchange can approach the Bad Delivery Cell of the last exchange for rectification/replacement of the shares under company objection. In case the introducing member of the last exchange approaches the BDC of the last exchange, the BDC of the last exchange will forward the shares to the BDC of the first exchange who will in turn forward the same to the introducing member of the first exchange. The procedure to be followed for reporting such cases to the BDC of the last exchange is given below :

• The shares under objection are required to be lodged by the introducing member of the last exchange with the BDC of the last exchange in the prescribed Form BDC-1B in quadruplet. Claims for corporate benefits (if any) should also be made in Form BDC-1B.
• The following documents are required to be enclosed.

• Form BDC-1B (in quadruplet)
• Original Transfer Deed
• Share Certificate
• Company Objection Memo or Certified copy of the memo.
• In case of fake/forged/stolen/missing shares, all documents as given in SEBI Good/Bad Delivery guidelines no. 108/109. (as per Annexure C)

• Two sets of photo copies of the documents mentioned in point 2 above are required to be submitted at the time of reporting of objection. One copy of this set will be retained by the BDC of last exchange. The second set alongwith the original documents will be forwarded to BDC of first exchange.

• All above documents are required to be lodged with the BDC of last exchange in a sealed plastic pouch. The original documents alongwith one set of photocopies should be enclosed in one pouch, while the second set of photocopies should be enclosed in a separate pouch. An additional copy (fourth copy) of Form BDC-1B will be attached outside the pouch containing the second set of photocopies.
• The BDC of last exchange will give a subject to verification/counting acknowledgement to the introducing member of the last exchange on the fourth copy of Form BDC-1B by affixing a rubber stamp.
• The BDC of the last exchange will retain the pouch containing one set of photocopies for its records, while the pouch containing the original documents and one set of photocopies will be forwarded to the BDC of the first exchange after verification of the objections.
• The member is required to report objections pertaining to shares of different companies and different first introducing member in separate forms and in separate pouches. (i.e. each pouch shall contain one objection pertaining to one company and one introducing member.)
• The BDC of last exchange will affix a unique serial number called the BDC inward number on Form BDC-1B. The BDC inward no. will be an eight digit reference serial no. The first two digits will be the exchange code of the last exchange followed by a six digit serial number. All future communications pertaining to an objection should be done by using the BDC Inward No. as the reference number.
• The BDC of last exchange will verify/count the documents enclosed by the member. If the contents of the pouch are not in order the same will be returned to the last introducing member.
• The BDC of the last exchange will sort all the objections received, in the order of the first introducing exchange. All objections pertaining to the first introducing exchange will be sent in one parcel to the first introducing exchange alongwith a list of all objections enclosed.
• The BDC of the last exchange will forward the pouch containing the objections (alongwith original transfer deed, share certificate, company objection memo, other documents and one set of photocopies of all the documents) to the BDC of the first exchange within 7 days of receipt of such objections.
• The BDC of the first exchange will verify/count the contents of the pouch received from the BDC of the last exchange before handing over the same to the introducing member of the first exchange.
• The BDC of first exchange will hand over the objection to the introducing member of the first exchange on the day specified by the exchange (as per the objection schedule followed by the exchange). The BDC of the first exchange will retain the second set of photocopies for its reference after obtaining an acknowledgement on the copy of Form BDC-1B from the introducing member of the first exchange. The introducing member of the first exchange is required to rectify/replace the shares within 21 days of receipt of share under objection. If the introducing member fails to rectify/replace the shares within 21 days, the first exchange will close-out the share without going through the auction process. (see close out procedures).
• The introducing member of the first exchange will enclose the following documents while rectifying/replacing the shares under objection.

• Prescribed Form BDC-2B (four copies)
• Rectified/replaced shares
• Benefits (if any) due
• Copy of Form BDC-1B
• Copy of the company objection memo
• Demand draft for value of transfer stamps or benefits

The introducing member of first exchange will hand over the documents mentioned in point 15 above in a plastic pouch on the rectification day to the BDC of the first exchange. The BDC of the first exchange will return one copy of Form BDC-2B to the introducing member after giving a subject to verification/counting acknowledgement by affixing a rubber stamp on Form BDC-2B. Once copy of Form BDC-2B will be retained by the first exchange and the rectified documents alongwith third and fourth copies of Form BDC-2B will be returned to the BDC of the last exchange.

• BDC of first exchange will verify all the documents and return the rectified/replaced shares/demand draft and corporate benefits back to BDC of last exchange within 7 days of rectification/replacement.
• BDC of last exchange will hand over the rectified/replaced shares/demand draft for transfer stamps/close-out amount and corporate benefits back to introducing member of last exchange after verification.
• The introducing member of the last exchange will duly acknowledge the rectified shares received by affixing the rubber stamp on the copy of Form BDC-2B retained by BDC of last exchange.
• The demand draft shall be in favour of the introducing member of the last exchange.
• If the introducing member of the first exchange fails to rectify/replace the shares under objection by the prescribed rectification day the first exchange will close-out the shares without going through the auction process. (see close out procedure)
• In case of close-out by the exchange, the BDC of the first exchange will have to collect the demand draft from the introducing member of first exchange, in favour of the introducing member of the last exchange and forward the same to the BDC of the last exchange.

• If the introducing member of the first exchange finds that the objection has been wrongly reported, the member should report the invalid objection by submitting form BDC-3B in quadruplet alongwith a copy of the form BDC-1B. The shares received under objection alongwith form BDC-3B should be handed over to BDC of first exchange.
• The introducing member of the first exchange is required to report such cases to the BDC of the first exchange within a period of 7 days from the date of receipt of such objections, failing which it will be understood that the first introducing member has accepted the objections/corporate benefits reported against him and will be required to rectify/replace the shares by the rectification day or else the exchange will close-out the shares as per the close out procedure.
• BDC of first exchange will verify the validity of the objections and return the shares back to BDC of last exchange who in turn will again verify and hand over the shares to the introducing member of the last exchange alongwith a copy of the form BDC-3B and 1B.
• In case of invalid claim of Corporate Benefits the introducing member must report such cases to the BDC of the First Exchange by submitting form BDC-3B in quadruplet alongwith a copy of form BDC-1B within 7 days of receipt of the claims. In such cases the introducing member of first exchange shall retain the shares and rectify the same within the stipulated time. The BDC of the first exchange will verify that the claim for Corporate Benefit is invalid before forwarding the forms BDC-3B and 1B only to the BDC of the last exchange.

• If the introducing member of the last exchange finds that the shares received by way of rectification or replacement are not correctly rectified or the shares are bad delivery, the member is required to report such cases in the prescribed form BDC-4B (in quadruplet) to the BDC of the last exchange alongwith a copy of Form BDC-1B and 2B within 48 hours of receipt of such shares.
• If the introducing member of last exchange finds that the benefits claimed are not correctly rectified then the introducing member should accept the rectified shares and report only the non-rectified benefits claim to the BDC of the last exchange.
• The BDC of the last exchange will verify these shares/benefits and if the shares/benefits are genuinely found to be bad delivery then the BDC of the last exchange will report such cases to the BDC of the first exchange within a period of 7 days from reporting of such cases. The BDC of the first exchange will verify the claims and in case of valid claims, close-out such cases as per close out procedures. The introducing member will be intimated that the deal is being closed out and that his account will be debited accordingly. The intimation will contain full details regarding the close out.

• If the rectified/replaced shares are again returned under objection by the company such shares will be deemed as "Second time objections".
• The introducing member of the last exchange will report the shares under second time objection to the BDC of the last exchange in the form for Second Time objections. The form for such objections will be of the same format as that of form BDC-1B but the form will be of a different colour (pink colour) and the words "Second time objection" will be written in bold on the top of the form.
• The following documents are required for reporting second time objections.

• Transfer deed and share certificates returned by the company
• Company objection memo
• Second Time Objection form (in quadruplet)
• A copy of form BDC-1B and 2B which have been used for reporting the first time objection.

• The documents mentioned in point 3 above are required to be submitted in a plastic pouch.

• The BDC of the last exchange will forward the shares under second time company objections to the BDC of the first exchange. The BDC of the first exchange will, on receipt of second time company objection close-out such shares as per the close out procedures and forward the demand draft for the close-out amount to the BDC of the last exchange who will in turn forward the same to the introducing member of last exchange.

2.5 Close Out Procedures

In case the introducing member of first exchange fails to rectify/replace the shares within the stipulated time, the first exchange will directly close out the shares. The introducing member of first exchange will be debited with the amount and the Demand Draft for the close out amount will be forwarded by the BDC of the first exchange to the BDC of the Last Exchange who will in turn hand over the same to the introducing member of the last exchange.

In case the shares are not available in the auction conducted, the deal would be closed out at the

• highest of six months price or highest of ex-date price on the last exchange, whichever is later OR
• 20% over the closing price on the last rectification day whichever is higher.

In such cases, the introducing member of first exchange is required to forward a demand draft equivalent to the close-out amount to the BDC of the first exchange in favour of the introducing member of the last exchange.

In case the introducing member of first exchange fails to forward a demand draft to the BDC, the exchange will initiate action against the member as per rules and regulations of the exchange.

2.6 Corporate Benefits

• Members are required to claim corporate benefits while submitting the shares for company objection in form BDC-1B. Once the claim for benefits has been made by a member, the member cannot refuse to accept the corporate benefits.
• If the market rate of the corporate benefit is less than the cost of procurement of the benefit then such benefit will not be taken up for settlement.
• If the member is not in a position to submit the corporate benefit in the form of shares then he should submit a demand draft as per the valuation given in Annexure- alongwith form BDC-2B.
• Rectified company objections will be accepted by the BDC of the first exchange only if they are accompanied with the corporate benefits (either in the form of shares or equivalent value in the form of demand draft in favour of the introducing member of last exchange) claimed as per form BDC-1B.

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