TMI Blog2010 (1) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... - SPECIAL LEAVE PETITION (C) NO. 21686 OF 2006 - - - Dated:- 19-1-2010 - ALTAMAS KABIR AND CYRIAC JOSEPH, JJ. Manohar Lal Sharma for the Appellant. Shyam Diwan for the Respondent. JUDGMENT Altamas Kabir, J. - Claiming to be a Sub-broker with one Yogesh B. Mehta, a Member of the Bombay Stock Exchange (hereinafter referred to as "BSE"), the petitioner herein filed a writ petition before the Bombay High Court under article 226 of the Constitution against the Union of India, the Securities and Exchange Board of India (hereinafter referred to as the "SEBI") and the BSE, inter alia, for a direction upon the Union of India and SEBI to withdraw the recognition granted to BSE for alleged non-compliance with the provisions of sections 7 and 9 of the Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as "the 1956 Act"). A further direction was also sought for cancellation of SEBI registration of all relevant 90 members of the Stock Exchange for fraudulently inducing investors to trade in forged scrips of M/s. Presto Finance Ltd. and to declare the rules, bye-laws and regulations of the BSE as illegal, void and ultra vires the 1956 Act as also the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Referring to the Prospectus of M/s. Presto Finance Ltd., Mr. Sharma pointed out that since it had been indicated out therein that the shares of Presto Finance Ltd. were to be listed both on the Regional Exchange at Ahmedabad and in the BSE, the petitioner and other investors were induced into investing in the shares of the company which were ultimately de-listed from trading in both the Stock Exchanges on account of fraudulent dealings, which left the Petitioner holding a large number of forged shares traded by the Company from the BSE. Mr. Sharma urged that the BSE had completely failed to protect the interests of the investors as it was bound to do under section 4 of the 1956 Act. 6. Mr. Sharma contended that the very existence of the BSE and its activities must be held to have been vitiated from its very inception since it had failed to comply with the provisions of section 4 of the Act of 1956 relating to grant of recognition to Stock Exchanges by the Central Government and, in particular, sub-section (3) thereof, which reads as follows : "4(3) Every grant of recognition to a Stock Exchange under this section shall be published in the Gazette of India and also in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re fair dealing and to protect investors. [Emphasis supplied] 9. On behalf of BSE, Mr. Shyam Diwan, learned Senior Advocate, submitted that all Stock Exchanges, including the BSE, acted on the basis of information received from other Stock Exchanges in the country. In the instant case, since the Scrip of Presto Finance Ltd. had been listed for trading on the Ahmedabad Stock Exchange, the same were also listed for trading on the Bombay Stock Exchange, but as soon as information of fraud was received from the former Stock Exchange, BSE immediately stopped trading in the said Scrip. Mr. Diwan submitted that it was required to be noted that the Petitioner had approached the Court ten years after the incident, which in itself, was sufficient ground for dismissal of the Writ Petition. 10. Mr. Diwan submitted that the BSE had been established in 1875 as "The Native Shares and Stock Brokers Association" and was the first Stock Exchange in the country which obtained permanent recognition in 1956 from the Government of India under the 1956 Act and had played a pivotal role in the development of the Indian Capital Market. The recognition granted to the BSE was duly published by the Mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n (3) of section 4 of the 1956 Act. Mr. Diwan submitted that only amendments effected to the rules and bye-laws after grant of recognition would require publication as provided for in sub-section (4) of section 9 of the above Act. Mr. Diwan also urged that since the BSE had been functioning as perhaps the most important Stock Exchange in India, since it was granted permanent recognition in 1956, its performance over the past 33 years cannot be diluted and has to be taken into consideration while considering the case sought to be made out by the petitioner. Learned counsel submitted that, although, the question now sought to be raised had not at any point of time been raised in this Court, the same question did arise before the Bombay High Court in Appeal No. 1101/98 arising out of Arbitration Petition No. 130/98, Stock Exchange v. Vijay Bubna [1999] 20 SCL 175 (Bom.). In the said decision, where the primary issue was whether an Arbitral Tribunal constituted under the bye-laws framed by the BSE under the 1956 Act was in contravention of the provisions of section 10 of the Arbitration and Conciliation Act, 1996, the question arose as to whether the said bye-laws of the BSE requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affairs, should not lightly be disturbed by a superior court not strictly bound itself by the decision. It was further observed that in the matter of the interpretation of a local statute, the view taken by the High Court over a number of years should normally be adhered to and not disturbed. A different view would not only introduce an element of uncertainty and confusion, it would also have the effect of unsettling transactions which might have been entered into on the faith of those decisions. It was held that the doctrine of stare decisis can be aptly invoked in such a situation. 16. Apart from being guilty of delay and laches, Mr. Diwan submitted that the petitioner was himself in default, not being a registered sub-broker of the BSE, although, he claimed to be a sub-broker of Yogesh B. Mehta, a member of the Stock Exchange. Mr. Diwan submitted that the Special Leave Petition bristled with malice in law and was, therefore, liable to be dismissed with costs. 17. Mr. Jaideep Gupta, learned Advocate who appeared for SEBI, took us through the letter dated 1-8-1996, addressed on behalf of the Ahmedabad Stock Exchange to Shri L.K. Singhvi, Executive Director, SEBI, informi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e share scrips of the said company de-listed from the Ahmedabad Stock Exchange as well as from the Bombay Stock Exchange. 20. Mr. Gupta submitted that no fault could be found with BSE in listing the shares of Presto Finance Ltd., since the same had been listed on the Ahmedabad Stock Exchange earlier, but as soon as information was received from the Ahmedabad Stock Exchange that there was an element of fraud involved, and the scrips had been delisted in the Ahmedabad Stock Exchange, BSE took immediate steps to delist the scrips and to close trading of the said shares in order to protect the securities market and the investors who traded in such securities. Mr. Gupta submitted that the entire allegations made by the petitioner against the Bombay Stock Exchange was devoid of any merit and did not warrant any interference in these proceedings. 21. As would be evident from the pleadings and submissions made on behalf of the respective parties, the main question which we are called upon to consider is whether in the absence of publication of the rules and bye-laws of the Bombay Stock Exchange, which had been framed prior to its recognition in 1956 under the 1956 Act, its activiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recognition had been duly published in the Gazette. 24. Upon considering the case made out by the petitioner in the writ petition, the Bombay High Court held that the writ petition, which was lacking in particulars relating to the constitutional challenge, was not the appropriate remedy for the petitioner, who, along with a member of the Stock Exchange, had traded in the shares of the above-mentioned company. The High Court also observed that upon the complaints made to SEBI, action had been initiated against the Company as far back as in 1998-99 under section 11B of the SEBI Act and SEBI had come to a finding that all the Directors of the Company, including one Hitendra, Vasa, were guilty of dealing in fake and bogus shares and cheating the investing public at large. The High Court also observed that the market regulator had taken due steps in the matter of individual transactions and the remedy of the petitioner, who was aggrieved by the acts of the promoters of the company in question, as well as its Directors, would be in approaching the appropriate Court to initiate criminal prosecution against the offenders. Observing that it would not be appropriate to issue any blanket ..... X X X X Extracts X X X X X X X X Extracts X X X X
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