NSE IPO Gets Green Light as Delhi HC Dismisses Challenge

Introduction

The Delhi High Court on Monday, February 16, 2026, dismissed a petition that challenged the no-objection certificate (NOC) granted by the Securities and Exchange Board of India (SEBI) to the National Stock Exchange (NSE) for its initial public offering (IPO). This ruling effectively removes a significant legal hurdle, paving the way for the country's largest stock exchange to proceed with its long-awaited public listing. Justice Jasmeet Singh, in his ruling, observed that the petition appeared to be an attempt to stall the IPO process, bringing relief to the exchange and its investors who have been waiting for nearly a decade.

The Core of the Challenge

The writ petition was filed by K. C. Aggarwal, a former judicial officer, who contested SEBI's January 30, 2026, communication that allowed the NSE to restart its IPO preparations. The petitioner's primary argument centered on alleged violations of SEBI's Corporate Action Adjustment (CAA) framework. This framework is designed to ensure that derivatives traders' positions remain economically neutral during corporate actions like bonus issues, stock splits, or special dividends. Aggarwal alleged that the NSE failed to implement this framework correctly. He claimed the exchange adjusted only the contract prices without modifying the corresponding quantities in certain instances. Furthermore, the petition argued that the NSE illegally debited dividend-equivalent amounts directly from the accounts of derivatives traders, including his own.

Petitioner's Allegations and Demands

Aggarwal contended that under the Securities Contracts (Regulation) Act, dividends are legally owed only to shareholders, and any recovery from derivatives participants lacked statutory backing. He stated that his representations to the NSE were dismissed without a proper hearing and that SEBI endorsed the exchange's position without conducting an independent investigation. The petitioner also highlighted a lack of transparency, noting that his requests for information on the debited amounts under the Right to Information (RTI) Act were rejected. Citing concerns over investor protection and market integrity, Aggarwal had sought a court order to restrain SEBI from granting any clearance for the IPO until a detailed inquiry was conducted into the matter.

The High Court's Verdict

The Delhi High Court declined to intervene, dismissing the petition. Justice Jasmeet Singh noted that the plea seemed to have been instituted with the primary intention to "interdict" or obstruct the IPO process. The court also pointed to a lack of territorial jurisdiction, observing that both SEBI and the NSE are headquartered in Mumbai, where the NOC was granted. This dismissal on jurisdictional and substantive grounds effectively ends the immediate legal challenge in Delhi, clearing a path for the NSE to move forward with its listing plans.

A Decade-Long Journey to Listing

The NSE's ambition to go public is one of the most prolonged sagas in Indian capital markets. The exchange first filed its draft IPO papers with SEBI in October 2016. However, the process was repeatedly stalled due to significant governance concerns. The most prominent among these was the co-location case, which involved allegations of certain brokers getting preferential access to trading servers. In addition to this, regulatory scrutiny over the exchange's technology systems, internal controls, and compliance processes further delayed the necessary approvals.

Remedial Measures and Regulatory Approval

Over the past few years, the NSE has undertaken significant efforts to address these legacy issues and strengthen its governance framework. The exchange has filed two settlement applications with SEBI concerning the co-location and dark fibre cases, for which it has made a financial provision of approximately ₹1,300 crore. These remedial steps were crucial in rebuilding regulatory confidence. The NOC granted by SEBI on January 30, 2026, was a clear signal of the regulator's in-principle satisfaction with the corrective actions taken by the NSE, allowing it to formally restart the IPO process.

Key Case Summary

Market Impact and Next Steps

The High Court's decision is a significant positive development for the NSE. With this legal challenge out of the way, the exchange can now focus on the operational aspects of its public offering. The proposed IPO is planned as a pure offer for sale (OFS), meaning existing shareholders will sell their stakes, and the exchange itself will not raise fresh capital. In anticipation of regulatory clearance, the NSE has already reconstituted its IPO committee and appointed Rothschild & Co as an independent adviser to guide the process. The next steps will involve appointing merchant bankers and legal counsel, preparing the Draft Red Herring Prospectus (DRHP), and filing it with SEBI.

Conclusion

The dismissal of the petition by the Delhi High Court marks a pivotal moment in the NSE's decade-long quest for a public listing. By clearing this judicial hurdle, the path is now more straightforward for India's largest stock exchange to finally enter the public markets. Investors and market participants will now be closely watching for the exchange's next moves as it formally kicks off the IPO process, a landmark event for the Indian financial ecosystem.