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TMI Blog2006 (9) TMI 602X X X X Extracts X X X X X X X X Extracts X X X X ..... en by the Board are beyond the pale of the appellate jurisdiction of this Tribunal. It is submitted that the aforesaid circular was not issued in exercise of judicial/quasi judicial powers and, therefore, no appeal would lie. 2. We will deal with the preliminary objection first. This objection pertains to the scope and ambit of Section 15T of the Act. Since the issue is purely legal, we straightaway refer to the relevant provisions of this Section which read as under: 15T. (1) Save as provided in Sub-section (2), any person aggrieved, (a) by an order of the Board made, on and after the commencement of the Securities Laws (Second Amendment) Act, 1999, under this Act, or the rules or regulations made thereunder; or (b) by an order made by an adjudicating officer under this Act, may prefer an appeal to a Securities Appellate Tribunal having jurisdiction in the matter. (emphasis supplied) A reading of the aforesaid provision leaves no room for doubt that any person who feels aggrieved by "an order" made by the Board may prefer an appeal to the Securities Appellate Tribunal (for short the Tribunal). The word "order" according to Blacks Law Dictionary means " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ections 11(4), 11-B, 11-D, 12(3) and Sections 15-A to 15-HB and urged that these are some of the sections under which the Board exercises its judicial power and that the orders passed thereunder would be amenable to the appellate jurisdiction of the Tribunal. He further contended that the Board and its officers also exercise judicial power while issuing directions under various regulations framed by the Board and the exercise of that power too, would be subject to the appellate jurisdiction of the Tribunal. In other words, the learned Advocate General wants the provisions of Section 15T of the Act to be read in a restrictive manner so as to limit the right of appeal only to those orders made by the Board in the exercise of its judicial/quasi judicial functions. Another argument of the learned Advocate General is that, in any case, the impugned circular issued by the Board is legislative in character and, therefore, not appealable. He placed strong reliance on the judgment of the Supreme Court in Union of India v. Cynamide India Ltd. to contend that the impugned circular was legislative in nature, and, therefore, beyond the appellate jurisdiction of the Tribunal. 3. While we agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the expression "every order" appearing in Section 7 of the Bombay Government Premises (Eviction) Act, 1956 had to be interpreted in its proper perspective and not in a manner restrictive. The said expression in Section 7 which provides for an appeal against every order of the competent authority was construed to confer a right of appeal to the Government as well and the expression was not restricted to orders in favour of the Government appealable only by the alleged unauthorized occupiers. 5. What is contended by the learned Advocate General is that the circulars issued by the Board and policy decisions taken by it are beyond the appellate jurisdiction of this Tribunal. We are not impressed with this argument. The word "circular" according to Chambers Dictionary means "a letter or notice sent to a number of persons". The Concise Oxford Dictionary (Ninth Edition) defines the word circular to mean a letter, decision or order "for distribution to a large number of people". The Board had taken a decision reviewing dematerialization charges and instead of issuing separately an order to each and every intermediary affected thereby had passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a body of experts in its administrative orders, policy decisions and regulations. 6. During the course of arguments it was submitted that legislative activity of the Board could not be the subject matter of appeal before the Tribunal. It was argued that the impugned circular which is legislative in nature could not be appealed against. Here again, we have our reservations. It is clear that the Board exercises its legislative powers when it frames Regulations under Section 30 of the Act. The impugned circular has not been issued in exercise of that power though the word order, according to Blacks Law Dictionary includes a rule and a regulation. It is an administrative decision taken by the Board while performing its duty under Section 11 to protect the interest of the investors. We may mention that even the legislative power of the Board under Section 30 is not without limits. The exercise of that power is restricted by the provisions of Section 30 itself which provides that the Board may by notification make regulations consistent with the Act and the rules made thereunder to carry out the purposes of the Act. What, if the regulations framed are not consistent with the Act and wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the jurisdiction of the High Courts within whose territorial jurisdiction the Tribunal concerned falls will serve two purposes. While saving the power of judicial review of legislative action vested in the High Courts under Articles 226/227 of the Constitution, it will ensure that frivolous claims are filtered out through the process of adjudication in the Tribunal. The High Court will also have the benefit of a reasoned decision on merits which will be of use to it in finally deciding the matter. The learned Judges finally concluded as under: Before moving on to other aspects, we may summarise our conclusions on the jurisdictional powers of these Tribunals. The Tribunals are competent to hear matters where the vires of statutory provisions are questioned. . The Tribunals will consequently also have the power to test the vires of subordinate legislations and rules. However, this power of the Tribunals will be subject to one important exception. The Tribunals shall not entertain any question regarding the vires of their parent statutes following the settled principle that a Tribunal which is the creature of an Act cannot declare that very Act to be unconstitutional. In such cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oard which is meant to govern the two depositories and their participants and is also meant to benefit the investors. Instead of issuing the order to the individuals who are large in numbers, the Board has chosen to issue a circular for the benefit of all concerned. It is squarely covered by the words "an order" appearing in Section 15T of the Act and is appealable. 10. In Clariant International Ltd. and Anr. v. Securities and Exchange Board of India the Supreme Court examined the provisions of the Act and the appellate jurisdiction of the Tribunal which has been constituted to hear appeals against the orders of an expert body like the Board and observed as under: The Board is indisputably an expert body. But when it exercises its quasi judicial functions; its decisions are subject to appeal. The Appellate Tribunal is also an expert Tribunal. Only such persons who have the requisite qualifications are to be appointed as members thereof as would appear from Sub-section (2) of Section 15M of the said Act.... Throughout the world, specialized adjudicators are performing numerous roles. There are diverse specialized tribunals in America as also in the Commonwealth countrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en submissions filed after the conclusion of arguments, the Board has placed reliance on some other decisions of the Supreme Court as well and xerox copies of those judgments have also been furnished. We have carefully gone through those judgments and are of the view that none of them advances the arguments raised on behalf of the Board that the impugned circular is not appealable. It is, therefore, not necessary to deal with those judgments separately. 12. This brings us to the merits of the impugned circular and we will now examine whether it is in consonance with the objects sought to be achieved by the Act. The policy of the Board is to encourage investors to hold securities in demat mode (electronic form) which are held by depositories on behalf of the beneficial owners (investors). In order to appreciate the true import of the impugned circular it is necessary to understand how a depository and its participants function. A depository is a company formed and registered under the Companies Act which has been granted by the Board a certificate of registration under Sub-section (1A) of Section 12 of the Act. Learned Counsel for the parties inform us that at present there are onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard in its wisdom thought that the investors should be freed of this cost. It then issued the impugned circular conveying to the two depositories and all their participants and also to the investors in general its decision that no charges shall be levied by a depository on its participant and consequently the participant shall not levy any charges on a beneficial owner when the latter (beneficial owner) transfers all the securities lying in his account to another participant of the same depository or to another depository. It was made clear that the beneficial owners account with the transferee participant and the transferor participant should be one and the same i.e. the two accounts should be identical in all respects. It was also clarified that in case the account with the transferor participant was a joint account, the account with the transferee participant should also be a joint account in the same sequence of ownerships. The depositories and their participants were advised to put in place necessary systems and procedures to differentiate between an account closure transaction and a normal share transfer transaction before the coming into force of the impugned circular so as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service, the investor had to pay the fee that was levied by the depositories or their participants. The Board felt and, in our view rightly, that this was unfair and unreasonable. Why should an investor pay for closing his account with a depository or its participant on account of unsatisfactory service. The result was that an investor had to put up with a particular participant or even with a depository no matter the service rendered to him was unsatisfactory because closing the account meant payment of charges. This discouraged the investors to close their account and transfer their securities to other participants or depositories. It is for this reason, the Board directed the depositories and their participants not to levy any charge when an investor closes his account and transfers his securities to another participant or even to another depository. The object underlying the impugned circular is rather laudable and protects the interests of the investors. It will lead to competition amongst the depositories and their participants which will compete with each other to render better service to their clients (investors) so that they continue to retain their accounts with them. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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