TMI Blog1998 (11) TMI 696X X X X Extracts X X X X X X X X Extracts X X X X ..... 56 of 1998 seeking directions against the respondents herein for carrying out investigation for the purpose of taking action in respect of rigging of certain scrips. The petition was disposed of on September 4, 1998, by passing the following order: In view of the affidavit of respondent No. 1 and the statement of learned counsel for respondent No. 1 that the petitioner will be informed of the completion of the investigation and the proposed action, Mr. Vashi, learned counsel for the petitioner, seeks liberty to withdraw this writ petition. The writ petition is allowed to be withdrawn and is disposed of accordingly. 3. In our view, having regard to the filing of the aforesaid Writ Petition No. 1156 of 1998, by the intervener and having regard to the aforesaid order, which records a statement on behalf of respondent No. 1 that the petitioner will be informed of the completion of the investigation and the proposed action, we find that the intervener is entitled to be heard in the present petitions. Leave is accordingly granted to take out the chamber summons under Rule 121 of the High Court, Original Side Rules. The same is made returnable forthwith and is made absolute in ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a statute, one would not attribute to Parliament an intention to authorise the Commission to order a person not to deal in shares or attend a stock exchange without observing natural justice. In circumstances of likely immediate detriment to the public, it may be appropriate for the Commission to issue a warning off notice without notice or stated grounds but limited to a particular meeting, coupled with a notice that the Commission proposed to make a long-term order on stated grounds and to give an earliest practicable opportunity to the person affected to appear before the Commission and show why the proposed long-term order be not made. In short, the general principle--as distinguished from an absolute rule of uniform application--seems to be that where a statute does not, in terms, exclude this rule of prior hearing but contemplates a post-decisional hearing amounting to a full review of the original order on merits, then such a statute would be construed as excluding the audi alteram partem rule at the pre-decisional stage. Conversely, if the statute conferring the power is silent with regard to the giving of a pre-decisional hearing to the person affected and the admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal hearing. On the other hand, licences may not yet have been issued and allotments may yet have to be made. The appropriate authority may be satisfied that it would not be in the public interest to issue licences or make allotment to the person concerned, without ascertaining further details with regard to the allegations against him. In such cases, the authority may make an order of 'abeyance' under Clause 8B. Though the language of Clause 8B is capable of being read as if it applies to both allotments already made and allotment yet to be made, a reference to the marginal head, in the background of what has been provided for in Clause 8A, makes it clear that Clause 3B applies only to allotments yet to be made and licences yet to be issued. That clearly is the contextual construction of Clause 8B. Read in any other manner, there will be a totally unnecessary overlapping of and a needless conflict between Clauses 8A and 8B, with freedom to the authority to pursue action either under Clause 8A or Clause 8B each providing a different procedure of its own. We do not think that it is permissible for us to read Clauses 8A and 8B in a manner as to create needless conflict an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grieved party to be heard at a later stage. Even if the interim orders do not make provision for such an opportunity, an aggrieved party has, nevertheless, always the right to make an appropriate representation seeking a review of the order and asking the authority to rescind or modify the order. The principles of natural justice would be satisfied if the aggrieved party is given an opportunity at his request. There is no violation of the principles of natural justice if an ex parte ad interim order is made unless of course, the statute itself provides for a hearing before the order is made as in clause A. Natural justice will be violated if the authority refuses to consider the request of the aggrieved party for an opportunity to make his representation against the ex parte ad interim orders. We have referred to these four cases only to illustrate how ex parte interim orders may be made pending a final adjudication. We, however, take care to say that we do not mean to suggest that natural justice is not attracted when orders of suspension or like orders of an interim nature are made. Some orders of that nature, intended to prevent further mischief of one kind, may themselves be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal expertise to undertake such securities transactions. The decision making was not done by them and prima facie evidence shows that their activities and decision making was in control with Mr. Harshad Mehta. The SEBI submits that investigations revealed that a group of brokers of the Bombay Stock Exchange and the National Stock Exchange had as aforesaid acted on behalf of a common set of clients all of whom cornered large chunks of the aforesaid three scrips. Further, they built up unusually large positions resulting in the distortion of the market equilibrium and the artificial creation of demand. The act of these brokers prima facie carried out in a calculated and concerted manner was detrimental to the interest of the investors and the safety of the securities market. The conduct of these brokers including the petitioner above-named was not only unprofessional, reckless and unbecoming but was grossly manipulative and violative of the code of conduct of stock brokers under regulation 7 of the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992 (hereinafter referred to as 'the said Regulations'). The investigation revealed that the petitioner dealt for a grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to do business like underwriting, depository participant or custodian if they are holding registration for the same. The petitioner if it is permitted to continue to carry on fresh business would cause further harm and be detrimental to the safety of the general investors and safety and security of the market. 10. It is, inter alia, contended on behalf of the respondents that the afore said order merely prohibits the petitioners from undertaking any fresh business as a broker. The same does not amount to suspension or cancellation of the broker's licence and is, therefore, not by way of penalty. The said order does not prohibit the petitioners from carrying on transactions which they have already entered into but merely prohibits them from entering into fresh business. The same is an interim arrangement so as to protect the interests of the investors and the securities market. The said directions have been issued after a preliminary inquiry has been conducted by recording statements of various witnesses, including those of the petitioners. One of the reports in respect of the inquiry has been furnished to the Board and investigation into the other is in progress. As far a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party had other adequate legal remedies .. . If, therefore, the existence of other adequate legal remedies is not per se a bar to the issue of certiorari and if in a proper rase it may be the duty of the superior court to issue a writ of certiorari to correct the errors of an inferior court or tribunal called upon to exercise judicial or quasi-judicial functions and not to relegate the petitioner to other legal remedies available to him and if the superior court can in a proper case exercise its jurisdiction in favour of a petitioner who has allowed the time to appeal to expire or has not perfected his appeal, e.g., by furnishing security required by the statute, should it then be laid down as an inflexible rule of law that the superior court must deny the writ when an inferior court or tribunal by discarding all principles of natural justice and all accepted rules of procedure arrived at a conclusion which shocks the sense of justice and fair play merely because such decision has been upheld by another inferior court or tribunal on appeal or revision ? 13. As far as the present case is concerned, the present order was issued on October 30, 1998, and was served on the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly the phrase immediately following, i.e., the chairman shall also have powers of general superintendence and direction of the affairs of the Board . The same does not qualify what follows thereafter, i.e., and may also exercise all powers and do all acts and things which may be exercised or done by the Board . In our view, it is not necessary to dilate over this controversy as under Section 19 there is an independent power of delegation and the Board in the instant case has delegated its powers on the chairman. Section 19 provides, as under : Delegation.--The Board may, by general or special order in writing delegate to any member, officer of the Board or any other person subject to such conditions, if any, as may be specified in the order, such of its powers and functions under this Act except the powers under Section 29 as it may deem necessary. 17. In the instant case, counsel for the respondents, has placed for our perusal, a resolution passed by the Board, on August 12, 1997, which, inter alia, provides that the chairman is authorised and shall be competent to take action for any default under the provisions of the Securities and Exchange Board of India Act, Rules a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e determined by regulations. The proviso to sub-section (3) of Section 12 reads as under : Provided that no order under this sub-section shall be made unless the person concerned has been given a reasonable opportunity of being heard. 21. The aforesaid provision, which is found in Section 12 is in regard to the penalty of suspension or cancellation of a certificate of registration. This under the proviso, no doubt can be done only after affording a reasonable opportunity of being heard. However, this is not what has been done in the instant case. A preliminary inquiry into the conduct of the petitioners has been conducted. A part of the preliminary inquiry is complete and it is found that the petitioners have been indulging in malpractices. Hence, in order to safeguard the interests of the investors and to maintain the integrity of the market the petitioners have been directed not to undertake any fresh business as brokers till the inquiry proceedings are completed and further proceedings in the matter are taken. This, in our view, is an interim measure which the chairman of the first respondent is fully justified in taking. 22. It may be useful at this stage to peruse s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors and in the interests of the securities market. 24. Section 11B of the SEBI Act is an enabling provision enacted to empower the SEBI to protect the interest of investors and to promote the development of and to regulate the securities market and to prevent malpractices and manipulations, inter alia, by brokers, Such an enabling provision must be construed so as to subserve the purpose for which it is enacted. It would be the duty of the court to further the legislative object of providing a remedy for the mischief. A construction which advances this object should be preferred rather than one which attempts to find a way to circumvent it. In the case of Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. , the Supreme Court has observed, as under : It would thus appear that Section 45K(3) is an enabling provision enacted to empower the bank to regulate the conditions on which deposits may be accepted by non-banking companies or institutions and to prevent malpractices in the matter of acceptance of such deposits. Such an enabling provision must be so construed as to subserve the purpose for which it has been enacted. It is a well accepted canon of sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the securities market. The said power to issue directions under Section 11B must carry with it, by necessary implication, all powers and duties incidental and necessary to make the exercise of these powers fully effective including the power to pass interim orders in aid of the final orders. The provision of Section 11B, it is to be noted, has been introduced by an amend ment brought about in 1995 and the same seeks to confer additional power on the Board, by way of interim measures, pending inquiry. The same is intended for the protection of the interests of the investors and the securities markets. 29. The impugned orders, in our prima facie view, are fully justified. The petitioners, in the circumstances, are not entitled to interim reliefs claimed in the petition. Ad interim orders passed on November 1, 1998, and continued by an order passed on November 3, 1998, are vacated. 30. At this stage, counsel for the petitioners apply for stay of the present orders, as also for continuation of the aforesaid ad interim orders. Counsel for the respondents strongly opposes the same. 31. Having regard to the attendant facts and circumstances of the case, we permit the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X
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