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TMI Blog1997 (2) TMI 411X X X X Extracts X X X X X X X X Extracts X X X X ..... Regulation, 1992) for enquiry to be undertaken by one Shri R.V. Nadar, Enquiry Officer. The letter was also accompanied by a memorandum containing the adverse finding of the inspection teem. The petitioner was called upon to reply within 30 days of the receipt of the notice and to produce documentary evidence in support of his reply. The petitioner was also informed that if he so desires, he could appear in person or through any other person duly authorised by him before the Enquiry Officer. The petitioner vide letter dated 30-11-1994 replied the notice and refuted the charges levelled against him. He relied on his earlier reply dated 14-9-1994, in response to the finding of inspection, as the charges in the notice under Regulation 28(2) of the SEBI Regulations, were based on the finding of the inspection. The Enquiry Officer also granted the petitioner an opportunity of personal hearing. The petitioner took the service of one Shri Shreyas Parikh, Chartered Accountant to appear before the Enquiry Officer. The Enquiry Officer submitted the report to SEBI under memo dated 20-1-1995. The recommendation was made for the suspension of the petitioner from its stock broking business for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also liable for penalty under Regulation 26(1) of the SEBI Regulations. (e)The member has dealt with a sub broker Shri Nitin Modi who is neither registered with SEBI nor has applied for registration. He has, therefore, violated rule 3 of SEBI (Stock Brokers and Sub- Brokers) Rules, 1992. (f)In continuation to his violation at (1) above the member also allowed Shri Nitin Modi to enjoy unrestricted privileges of membership of the Ahmedabad Stock Exchange. This has resulted in violation of rule 6 of ASE Rules. (g)The member is guilty of unbusiness like conduct by purchasing shares on behalf of this client Modi Consultants at rates which were different from the prevailing market rates. The member purchased 100 shares of Vesnvious @ Rs. 61 on 11-1-1994 and sold the same on the next day @ Rs. 86 on behalf of Modi Consultants against the prevailing market rate of Rs. 61, Rs. 61.50. Further, on 12-1 -1994, he purchased 4600 shares of Himachal Telecommunications @ Rs. 83 against the market rate of Rs. 110 on behalf of the same firm. This has resulted in the violation of Bye-law 357 (ii) of ASE Bye-laws. The member is also liable for penalty under Bye-laws 355(b) of ASE Bye-laws. (h)The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of brokerage. In a statement recorded at the time of inspection on 14-2-1994, the petitioner admitted his mistake in allowing Shri Modi to operate freely on his behalf and without charging brokerage. During the hearing of 27-3-1995, he ex- plained that Ahmedabad Stock Exchange had not clearly explained the procedure for registration of sub-broker to its member and hence Shri Mitesh M. Sheth had dealt with Shri Modi as a client. On proper appreciation of facts, the appellate authority upheld the finding of the SEBI on these two charges, as well. Regarding the charge 'G', it was found that the purchase of the shares of Himachal Communication at lower than market rate was not reported to the Exchange. The explanation given by the petitioner was not found to be satisfactory. The finding in this regard was also upheld. The petitioner however was exonerated of the charge at item 'H'. 5. The appellate authority rejected the contention raised with respect to procedure adopted by the Enquiry Officer and the Sr. Executive Director, SEBI, saying that the proceedings before the SEBI authorities are essentially of administrative nature. The Supreme Court judgment which was cited before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the SEBI Act empowers the SEBI to provide for such measure that it may think fit with a view to protecting the interest of securities and to permit the develop-ment of, and to regulate the securities market. Chapter IV deals with powers and functions of the Board. Section - II enumerates the functions of the Board. Clause (a) of sub-section 2 provides for regulating the business in stock exchanges and other securities market. Section 12 provides for registration of stock brokers, share transfer agents and other intermediaries associates with securities market. Sub-section (3) empowers SEBI to suspend or cancel a certificate of registration granted by it under sub-section (1). However, this is permissible only in accordance with the Regulations made by SEBI in this behalf. The proviso to the sub-section enacts the principles of natural justice and requires that before making an order for cancellation or suspension of a certificate of registration, a reasonable opportunity of being heard must be given to the person against whom the order is sought to be made. Obviously because any order passed by SEBI under this sub-section may affect vital civil rights of the concerned person. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the proviso appended to the sub-clause prohibits the appearance of a lawyer or advocate to represent the stock broker at the Enquiry. The second proviso permits the appearance of lawyer or advocate only in a case where the lawyer or advocate has been appointed by the Board as 'presenting officer', Sub-clause (7) provides that the Enquiry Officer shall after taking into account all relevant facts and the submission made by the stock broker, submit a report to the Board and recommend the penalty to be awarded in the notice. Regulation 29 provides that, on receipt of the report from the Enquiry Officer, the Board shall consider the same and issue a show-cause notice as to why the penalty as it considered appropriate should not be imposed. Regulations 2, 3,4 and 5 provide the procedure for consideration by the Board. Regulation 30 provides the effect of suspension and cancellation of registration of a stock broker. For the convenience and ready reference, Regulations 28 and 29 are reproduced as follows :-- "28. Manner of holding enquiry-- (1)For the purpose of holding an enquiry under Regulation 27, the Board may appoint an Enquiry Officer. (2)The Enquiry Officer shall issue to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28(5) of the SEBI Regulations. It is contended that the first proviso to Regulation 28(5) is violative of articles 19(1)(a) and 21 of the Constitution. It is urged that the litigant has got a fundamental right to be represented by a counsel in any Court of law or Tribunal and his fundamental right under article 21 is part of the litigant's life. It is contended that the provision is arbitrary inasmuch as it does not give any discretion even to the Board or the Inquiry Officer to permit the appearance of a lawyer in a case in which complicated questions of fact and law are involved. 10. On the other hand, it is contended by Mr. K.N. Raval, that no litigant has fundamental right to the represented by a lawyer or advocate in any Court of law or the Tribunal. The only fundamental right recognised by the Constitution is under article 22(1), by which an accused who is arrested and detained in custody, is entitled to consult and be defended by the legal representative of his choice. Even there also, article 22(3)(b) makes an exception in case of any person arrested or detained under any law providing for preventive detention. He further submits that whether lawyer should be allowed to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitution of India, he could not have been removed from service, except after inquiry in which he had been given a reasonable opportunity of being heard in respect of the charges levelled against him. A trained police prosecutor was appointed as the officer to present the case before the Enquiry Officer. After his appointment, the employee submitted an application stating that, as the departmental representative is legally trained person to conduct such prosecution, he will be prejudiced in his defence unless he is permitted to engage a counsel to appear and defend him during the enquiry. This request was turned down. The Enquiry Officer recommended the appellant's re- moval from service. On the basis of that recommendations, disciplinary authority served on the appellant a notice to show cause as to why he should not be removed from the service. The appellant submitted the explanation, but the same was not accepted and as a result, he was ordered to be removed from service. The appellant unsuccessfully challenged the order of his removal from service. The question arose before the Apex Court whether the appellant was given reasonable opportunity to defend himself in accordance wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to appear through legal practitioner, refusing to grant his request would amount to denial of reasonable request to defend himself and the principle of natural justice would be violated. In the said case, a charge sheet was drawn up as against employee for the alleged miscon- duct. Before the Enquiry Officer, employee submitted a request seeking permission to engage legal practitioner for his defence which was turned down. The employer relied upon Regulation 12(8) of the Bombay Port Trust Employees Regulations, 1976, which reads as under : " ' 12(8): The employee may take the assistance of any other employee or, if the employee is a class III or a class IV employee, of an 'Office Bearer' as defined in Clause (d) of section 2 of the Trade Unions Act, 1926 (16 of 1926) of the union to which he belongs, to present the case on his behalf, but may not engage a legal practitioner for the purpose unless the said Presenting Officer appointed by the disciplinary authority is a legal practitioner, or, the disciplinary authority, having regard to the circumstances of the case, so permits.'" [Emphasis supplied] (p. 110) 15. A reading of section 12(8) shows that, ordinarily the employee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Court examined the grievance of the employee, after referring its earlier decision, particularly in case of C.L. Subrarnaniam ( supra) and also the board of trustees, with reference to the provisions of rule 7(5) of the Civil Services (Punishment and Appeal) Rules, 1952. The relevant part of the said rules is extracted as follows: -- "7(5) where the punishing authority itself enquires into any charge or charges or appoints an Enquiry Officer for holding enquiry against a person in the service of the Government, it may, by an order, appoint a Government servant or a legal practitioner to be known as a 'Presenting Officer" to present on its behalf the case, in support of the charge or charges.'" (p. 1222) The person against whom a charge is being enquired into, shall be allowed to obtain the assistance of a Government servant, if he so desires, in order to produce his defence before the Enquiring Officer. If the charge or charges are likely to result in the dismissal of the person from the service of the Government. Such person may, with the sanction of the Enquiry Officer, be represented by counsel" Considering the case, it was found that the refusal to sanction the services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o permit, the consistent view of the Courts is that the question whether the delinquent should be permitted to be represented by a legal practitioner, has to be decided on a case to case basis on the situational particulars and the special requirements of justice of the case. In the matter of exercise of discretion, one of the relevant factor is whether there is likelihood of combat being unequal entailing a miscarriage of failure of justice and denial of real and reasonable opportunity for defence by reasons of employees being pitted against the Presiding Officer, who is a trained in law. The view is that the provisions should be liberally construed. 18. Tlie survey of the provisions of the SEBI Act clearly shows that the entire business of the stock broker is regulated by the provisions of the SEBI Act, 1992 and the Regulations made thereunder. Section 12 pro- vides for Board to Registrar, Stock Brokers, Share Transfer agents and other intermediaries associated with the securities market. Sub- section (3) empowers SEBI to suspend or cancel a certificate of registra-tion granted by it under sub-section (1). Thus, the order of the Board under this sub-section (3) would affect vita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not even vested with power to consider that in the facts of the case, representation of a stock broker through lawyer is expedient. The statutory provisions are required to be in consonance of the principle of natural justice inasmuch as the right of a person having serious civil and pecuniary consequences are not jeopardised, except by a fair procedure. The extent of the application of course depends upon the frame work of the statute. Bearing in mind the scheme of the SEBI Act and the Regulations, as discussed, a complete embargo under proviso to sub-rule (5) of Regulation 28 on the enquiry Officer or the appropriate authority even to consider a request of the delinquent stock broker to permit him to be defended through lawyer, in my view, is bound to lead to considerable hardships affecting the civil rights of a person arbitrarily and unreasonably which deserves to be struck down being violative of Articles 19 and 21 of the Constitution of India. 20. The contention of the learned counsel for the SEBI that no request was made by the petitioner that he may be permitted to appear through lawyer, has no force as in view of the proviso to sub-rule (5) of Regulation 28, such a pra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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