The Delhi High Court has reserved its verdict in a significant legal tussle between Kairosoft AI Solutions, the Bombay Stock Exchange (BSE), and the Securities and Exchange Board of India (SEBI), in a case that could reshape how surveillance frameworks are applied and contested in Indian capital markets.
The bench of Justice Vikas Mahajan heard extensive arguments from all sides on the issues of jurisdiction and availability of alternative remedies. Questions were also raised during the hearing about Kairosoft’s share price in relation to its financial health and employee strength.
At the heart of the dispute is BSE’s April 3 circular that placed Kairosoft under Graded Surveillance Measure (GSM) Stage 4 — a move the company argues was abrupt, unjustified, and carried out without due notice. GSM Stage 4 is the most stringent surveillance action under SEBI’s framework and typically restricts trading of stocks deemed highly volatile or not backed by strong fundamentals.
Jurisdictional Showdown
The courtroom saw a fierce debate over whether the Delhi High Court had the jurisdiction to hear the matter.
BSE contended that all trading, settlement, and operational activities relevant to Kairosoft’s listing occur in Mumbai, where the exchange is headquartered. Quoting the listing agreement, BSE argued that it stipulates exclusive territorial jurisdiction of Mumbai courts. The exchange also highlighted that shares are held in dematerialized form with depositories based in Mumbai.
SEBI echoed BSE’s stance, noting its own offices are based in both Delhi and Mumbai, but emphasized that since BSE operates out of Mumbai, that should be the appropriate forum. It also pointed out that no other shareholder, apart from one of the petitioners — reportedly the wife of a company director — had challenged the restrictions on the company’s stock.
Kapil Sibal Counters BSE, SEBI Arguments
Representing Kairosoft AI, senior advocate and former Union Minister Kapil Sibal took aim at the regulatory actions, asserting that any measure taken without prior notice violates fundamental legal principles. He emphasized that the company was shifted directly to GSM Stage 4 without passing through earlier stages, arguing that the decision was driven by speculation and “unverified chatter” on social media platforms like YouTube — not by concrete evidence or due diligence.
Sibal further argued that companies are compelled to accept listing terms, including jurisdiction clauses, and such provisions cannot override constitutional protections under Article 226. “There is no ongoing cause of action, yet the restrictions persist,” Sibal told the court, while pointing out that the triggering videos had since been removed and that Kairosoft had no links to those who posted them.
He also pushed for SEBI to be removed as a party to the petition, prompting the regulator’s counsel to indicate SEBI would file an application to formally implead itself, citing its regulatory interests and intent to present additional information on the company and its directors.
Impact Beyond One Company
The High Court’s pending decision could have far-reaching implications. A ruling in favor of Kairosoft may compel SEBI and stock exchanges to revise how they implement surveillance measures like GSM and ASM, especially in terms of procedural fairness and transparency.
Surveillance tools like GSM and ASM have become increasingly central to SEBI’s strategy to combat market manipulation, including speculative trading and pump-and-dump schemes. The outcome of this case may offer important legal clarity on whether such measures can be legally challenged for lack of procedural safeguards — potentially setting a precedent for how India’s market watchdog balances investor protection with corporate rights.
The court has reserved its order and is expected to deliver its ruling in the coming weeks.
Case Details
Case Title: KAIROSOFT AI SOLUTIONS LIMITED Versus SEBI
Case No.: W.P.(C) 4633/2025 & CM APPL. 21406/2025
Date: 09.06.2025
Counsel For Petitioner: Sr. Adv. Kapil Sibal
Counsel For Respondent: Sr. Adv. Neeraj Malhotra
