TMI Blog2021 (7) TMI 986X X X X Extracts X X X X X X X X Extracts X X X X ..... rity under the Companies Act, 1956 vis-a-vis the Companies Act, 2013 are all matters, which can be raised before the statutory authority. This we say because, from the show cause notice it is clear that the violations are relating to the years 2007-2013 during which period the Companies Act,1956 was in force. We are also conscious of the fact that when the functions of an authority are regulated and controlled by clear statutory provisions and without any inhibitions created, we have no reason to think that the said authority would not adjudicate the issues in terms of law. - WA.No.524 OF 2021 - - - Dated:- 31-3-2021 - HONOURABLE CHIEF JUSTICE MR. S. MANIKUMAR HONOURABLE MR. JUSTICE SHAJI P. CHALY APPELLANT/PETITIONER: BY ADVS. SRI.SUKUMAR NAINAN OOMMEN SRI.SHERRY SAMUEL OOMMEN SMT.NIDHI JACOB SHRI.NITISH SATHESH SHENOY RESPONDENTS/RESPONDENTS: SRI. P. VIJAYA KUMAR, ASSISTANT SOLICITOR GENERAL SRI. K.M. JAMALUDHEEN, STANDING COUNSEL JUDGMENT SHAJI P.CHALY,J The captioned writ appeal is filed by the petitioner in W.P.(C) No.22430/2020, challenging the judgment of the learned single Judge dated 12.2.2021, whereby the learned single Judge decline ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted behind the back of the appellant. So also it was submitted that the appellant has not been furnished with copies of documents on the basis of which charges against him are proposed to be sustained. 4. The learned single Judge after taking into account the facts and figures projected by the appellant and taking note of the relevant provisions of the SEBI Act, 1992 and the SEBI (Debenture Trustees) Regulations, 1993, have concluded that the contentions so advanced by the appellant cannot be sustained and the appellant is entitled to take up all contentions before SEBI by filing suitable reply and participate in the proceedings initiated by SEBI. 5. The paramount contentions advanced by the appellant in the appeal is that the learned single Judge has failed to take note of the fact that the issue raised was in relation to the jurisdiction of SEBI to issue the show cause notice, relegating the appellant to participate in the proceedings so initiated, and therefore, cannot be sustained under law; that the learned single Judge has not taken note of the fact that the Deputy General Manager, SEBI, has issued the show cause notice on the presumption that the SEBI has supervisory p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debenture holders. Other facets and the nature of function to be discharged by a debenture trustee were also discussed in the judgment of the learned single Judge so as to arrive at the conclusions and ultimately it was held that no debenture trustee can deal in securities except under and in accordance with the conditions of registration obtained from the SEBI in accordance with the SEBI (Debenture Trustees) Regulations, 1993. 7. Relying upon regulation 7 of Regulations, 1993, it was held that no person shall be entitled to act as a debenture trustee unless; (a) he is either a scheduled bank carrying on commercial activity; or (b) a public financial institution within the meaning of section 4A of the Companies Act, 1956 ; or (c) an insurance company; or (d) a body corporate. Accordingly, it was found that the appellant, who was acting as a debenture trustee, has no case that he is holding registration to act so. Therefore, it is prima facie violation of section 12(1) of the SEBI Act, 1992. The contention advanced by the appellant that the company being a non-banking financial company is regulated by the Companies Act, the RBI Act, and Regulations ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, bearing in mind the powers and functions of the Board so created, we are proceeding to consider the rest of the functions of the Board constituted under section 11(2) without causing prejudice to the provisions of section 11(1) of the Act, 1992, which reads thus: 1. Functions of Board. (1) x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x (2) Without prejudice to the generality of the foregoing provisions, the measures referred to therein may provide for- (a) regulating the business in stock exchanges and any other securities markets; (b) registering and regulating the working of stock brokers, sub-brokers, share transfer agents, bankers to an issue, trustees of trust deeds, registrars to an issue, merchant bankers, underwriters, portfolio managers, investment advisers and such other intermediaries who may be associated with securities markets in any manner; [(ba) registering and regulating the working of the [depositories, participants, custodians] of securities, foreign institutional investors, credit rating agencies and such other intermediaries as the Board may, by notification specify in this behalf;] (c) x x x x x x x ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of investors, or orderly development of securities market etc. The Board is also conferred with power to issue such directions to any persons or class of persons referred to in section 12 or associated with the securities market. Section 12 of the Act, 1992 deals with registration of stock-brokers, sub-brokers, share transfer agents etc. and sub-section (1) thereto specifies that no stock-broker, sub-broker, share transfer agent, banker to an issue, trustee of trust deed, registrar to an issue etc. and such other intermediaries, who may be associated with securities market, shall buy, sell or deal in securities except under, and in accordance with, the conditions of a certificate of registration obtained from the Board in accordance with the regulations made under the Act, 1992. Other prohibitions are also created under the said provision to the functionaries dealing with the stock and share market. Therefore, taking into account the above provisions of Act, 1992, it is clear that certain definite powers are conferred on the authorities under the Act in order to deal with and regulate the stock and share market. The contention advanced by the appellant is that a non-banking fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the learned counsel was to impress upon us that so far as a non-banking financial company is concerned, it is guided by the provisions of the Reserve Bank of India Act, 1934 and therefore, the provisions of the SEBI Act, 1992 cannot be invoked for dealing with a transaction like the one at hand. 15. In order to understand the objectives of the Reserve Bank of India Act1934, we resort to the objects and reasons of Act, 1934. It was an Act made to constitute a Reserve Bank of India to regulate the issue of Bank Notes and the keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage and it was brought in at a time when disorganisation of the monetary systems of the world was prevalent and it was not possible to determine what will be suitable as a permanent basis for the Indian Monetary System and for other related factors. Therefore, the objectives and intention behind the Reserve Bank of India Act, 1934 is clear, to regulate the issue of Bank Notes, keeping of reserves with a view to secure monetary stability in India and generally to operate the currency and credit system of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f India v. Hindalco Industries [(2003)5 SCC 194], Carona Limited v. Parvathy Swamynathan Sons [(2007) 8 SCC 559] and Siemens Limited v. State of Maharashtra and Others [(2006)12 SCC 33]. The judgment in Hindalco Industries supra was in respect of interference in tax matters under Articles 226 and 136 wherein it was held that normally in taxation matters High Court should not interfere at the stage of show cause notice, but it is a self-imposed limitation and where the authority lacked jurisdiction to issue the notice and High Court preferred to entertain the writ petition under Article 226 and decided the issue on merits, Supreme Court would not interfere with the impugned order of the High Court on the technical ground that High Court should not interfere at the stage of show cause notice. In our considered opinion, the proposition of law laid down in the said judgment has no bearing at all to the issue at hand because the learned single Judge has dismissed the writ petition in limine and we are called upon in the appeal only to judge whether there was any jurisdictional error on the part of the learned single Judge in the matter of exercise of the discretionary jurisdiction. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al inquiry. 31. In R. v. Fulham, Hammersmith and Kensington Rent Tribunal, ex p Philippe [(1950) 2 All ER 211 (DC)] it was held that the question whether premium for renewal of tenancy was or was not paid was a jurisdictional fact and, therefore, was held to be a condition precedent for the lawful exercise of jurisdiction by a Rent Tribunal. In Brittain v. Kinnaird [(1819) 1 B B 432 : (1814-23) All ER Rep 593] however, the factum as to possession of a boat with gunpowder on board was held to be a part of the offence charged and thus a finding of fact or adjudicatory fact. It was stated: The logical basis for discriminating between these cases and other falling on opposite sides of the line, is not easily discernible. (emphasis supplied) 32. Likewise, the fact whether the petitioner was an adult in adoption proceedings was not held to be a jurisdictional fact ( Eversole v. Smith [159 SW 2nd 35 ]). 33. In Chaube Jagdish Prasad v. Ganga Prasad Chaturvedi [AIR 1959 SC 492 : 1959 Supp (1) SCR 733], the question was whether the landlord was entitled to enhancement of rent. Under the Act, he was not entitled to such rent unless a new construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition precedent. But once such jurisdictional fact is found to exist, the court or tribunal has power to decide adjudicatory facts or facts in issue. 19. Therefore, it is clear that the proposition laid down thereunder would apply only when an intricate jurisdictional issue is identified by a writ court, which in our considered opinion is not existing in the case at hand. In Siemens Limited supra, the Apex Court considered the same question as it considered in Hindalco Industries supra i.e., as to whether there is any limitation in entertaining a writ petition challenging a notice, wherein it was held that when a notice is issued with pre-meditation, a writ petition would be maintainable. However, on going through Exhibit P3 show cause notice issued by the Deputy General manager of SEBI dated 13th March, 2020, we could not locate any such eventuality, apart from the same being explanatory in nature, enabling an aggrieved person to identify the exact violations raised against him and submit a reply understanding the gamut of the issues. Therefore, taking into account the said aspects of law and facts we are of the clear opinion and view that the learned single Judge has rightl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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