Sep 08, 2006
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Orders :
Orders of SAT
IN THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Misc. Application No. 27 of 2006
in
Appeal No. 107 of 2006
Date of Decision: 8.9.2006
M/s. Al-Falah Investments Ltd. …… Appellant
Versus
Securities & Exchange Board of India …… Respondent
Present:
Mr. Bharat Merchant, Advocate for the appellant
Mr. Ravi Hedge, Advocate for the respondent
Coram:
Justice N.K. Sodhi, Presiding Officer
C. Bhattacharya, Member
R. N. Bhardwaj, Member
Per: Justice N.K. Sodhi, Presiding Officer (oral)
There is a delay of more than three years in filing this appeal. An application has been filed seeking condonation of the delay. It is not disputed that the appellant company has three directors and they are real brothers. The appellant had been working as a stock broker in the market and was a member of the National Stock Exchange (NSE) and had been registered as such with the Securities and Exchange Board of India (for short the Board). It is common case of the parties that the business premises of the appellant company were raided by the police on 29.1.2000 and that all the three directors of the company were arrested. They were charged with offences under Sections 120B, 409, 420 and 471 IPC. They remained in custody till 17.2.2004 on which date they were released on bail. They have since been acquitted by the Metropolitan Magistrate, New Delhi by his judgment dated 20.12.2005. It may be mentioned that during the pendency of the criminal case all the assets of the appellant company including its membership card of NSE had been attached. It is stated that after the order of acquittal the assets were released only on 24.12.2004 and thereafter the directors of the company approached NSE in January 2006 for the restoration of the membership of the company. It is further stated that the appellants then came to know that the Board by its impugned order dated 23.12.2002 had already cancelled the certificate of registration of the appellant as a stock broker. The NSE is said to have directed the appellant to approach the Board to get the order of cancellation set aside. It appears that the appellant has been shuttling between the NSE and the Board and one sent it to the other without taking any steps to consider the request for restoration of the membership. It is for this reason that there has been a delay of more than 3 years in filing the appeal. The learned counsel for the respondent has no objection if the delay in the circumstances of the case is condoned. We are also satisfied that the appellant has shown sufficient cause for not filing the appeal within time. In this view of the matter the application is allowed and the delay in filing the appeal condoned.
2. The appeal is admitted. NSE is Respondent no. 2. It has been served and is represented by counsel who is not present today though he appeared on the last date of hearing. The issue involved in the appeal is a short one and since we propose to dispose of the same by issuing directions to the respondents we have taken up the appeal for final hearing. The appellant is a stock broker and a member of the NSE. It had been expelled from the membership for failure to meet its capital requirements for continuance of its membership. It appears that some amounts were due to the NSE which were not paid despite several notices and, therefore, the trading facility was withdrawn and the membership was suspended with effect from March 29, 2000. Since the dues remained outstanding despite several opportunities having been given to the appellant to pay them, they were adjusted from the cash deposits of the appellant lying with NSE. NSE then advised the appellant to replenish the deficit in its interest free security deposit in cash to meet the requirement of Base Minimum Capital of Rs. 50 lacs and it was also required to furnish a security deposit of Rs. 25 lacs in cash, bank guarantee or approved securities. The appellant was not in a position to replenish the deficit nor did it replenish its interest free securities deposit and could not even furnish a security deposit as required by NSE and, therefore, the appellant was expelled from the membership of NSE. When the appellant ceased to be a stock broker on being expelled from the membership of NSE, the Board as a consequence thereof cancelled its certificate of registration. The grievance of the appellant is that when it approaches the NSE for the restoration of its membership, it told that it should approach the Board which has already cancelled the certificate of registration and when the appellant approached the Board it is unable to grant registration because the appellant had ceased to be a stock broker. The appellant is obviously in a catch twenty two situation. In the circumstances, we dispose of the appeal with a direction to NSE to consider the request of the appellant for the restoration of its membership and pass an appropriate order thereon in accordance with law provided, of course, the appellant meets all the statutory requirements. Let the needful be done on or before October 31, 2006. In case the membership is restored, it will be open to the appellant to approach the Board for a fresh registration as a stock broker. If such an application is filed the Board too, shall consider the same in accordance with law and pass an appropriate order thereon.
No costs.
Sd/-
Justice N. K. Sodhi
Presidi ng Officer
Sd/-
C. Bhattacharya
Member
Sd/-
R. N. Bhardwaj
Member