Kairosoft AI Solutions has initiated legal proceedings against the Bombay Stock Exchange (BSE) and Securities and Exchange Board of India (SEBI) in the Delhi High Court, marking a high-stakes showdown that could reshape how surveillance measures are applied across India’s equity markets.

The case is centered around BSE’s April 3 circular, which placed Kairosoft under Graded Surveillance Measure (GSM) Stage 4. Kairosoft contends that this punitive action was taken without proper notification or prior stages being triggered, violating principles of natural justice and due process.

Why Kairosoft Has Moved to Court

The company’s primary grievance lies in the alleged arbitrary and sudden imposition of GSM Stage 4. Under the GSM framework, stocks suspected of abnormal price movements not backed by fundamentals are subject to escalating trading restrictions across stages. However, Kairosoft was directly moved to Stage 4, skipping Stages 1 to 3 altogether.

Stage 4 restrictions are the most severe, moving the stock to a Trade-for-Trade segment, allowing trades only on Mondays, imposing a 5% price band, and demanding an Additional Surveillance Deposit (ASD) of 100% of the trade value.

Kairosoft argues this not only cripples investor interest and liquidity, but also damages the company’s image—all without a chance to respond to the concerns raised by the exchange.

Allegations of Flawed Decision-Making

The company alleges that the move was influenced by “unverified chatter” and YouTube videos speculating on the stock’s rally. It has denied any connection to the individuals behind the social media activity, arguing that its stock was penalised based on third-party content beyond its control.

Kairosoft’s plea asserts that the GSM tag was unjustly applied, and it is demanding the entire surveillance order be set aside.

SEBI’s Role and Lack of Due Process

Kairosoft has further alleged that SEBI failed to ensure transparency in the process and did not provide a platform for the company to present its defence before the action was enforced.

While SEBI and BSE use GSM and Additional Surveillance Measure (ASM) tools to clamp down on manipulative practices, Kairosoft has contended that these frameworks lack transparency and offer no scope for pre-action engagement—especially critical when corporate reputation and investor trust are at stake.

Delayed Hearing at the Delhi High Court

The hearing, originally scheduled for Tuesday, was postponed after Senior Advocate and former Union Minister Kapil Sibal, representing Kairosoft, requested a deferral. He cited that SEBI’s counter affidavit was only served the night before.

The matter will now be taken up on Wednesday, with the legal outcome potentially setting a precedent for surveillance-related disputes in the capital markets.

Implications for Market Regulation

The legal action raises broader questions about the functioning and checks on regulatory surveillance mechanisms like GSM and ASM. These tools, while important for maintaining market integrity, are now being questioned for operational opacity, lack of accountability, and the collateral damage caused to compliant companies.

Kairosoft’s move suggests companies are no longer willing to silently endure such actions and may increasingly seek judicial intervention.

This also comes amid a larger regulatory crackdown on “pump and dump” schemes, where SEBI has passed several orders against operators using false narratives to inflate stock prices.

The Bigger Picture – Investor Sentiment and Market Fairness

Kairosoft’s legal stance focuses on the impact of GSM Stage 4 on stock liquidity and investor sentiment, which it claims has deeply affected its reputation and trading volumes.

Investors, too, often face unexpected restrictions on trading, without clear explanations or opportunities to exit positions in a rational manner. The company has argued this disrupts the fair and efficient functioning of the capital market ecosystem.

If the Delhi High Court sides with Kairosoft, it could force SEBI and exchanges to revise the surveillance mechanism to include prior notifications, clarity in triggers, and the ability for companies to explain themselves before punitive restrictions are imposed.

Conclusion – What’s at Stake

The outcome of this case could be a turning point in how SEBI and stock exchanges enforce surveillance frameworks like GSM and ASM.

For companies like Kairosoft, the hope is for greater transparency, accountability, and a level playing field—where actions are based on evidence and proper procedure, not speculation or social media chatter.

Meanwhile, regulators will likely argue for strong tools to preserve market integrity. The Delhi High Court now has the tough task of balancing investor protection with corporate rights and due process.

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