MUMBAI APPEAL NO. 1/2001 In the matter of: R.K. Agarwal Appellant Vs. Securities
and Exchange Board of India
Respondent
APPEARANCE None for the Appellant Mr.
K.R.C.V. Seshachalam
(Appeal arising out of the order dated 3.11.2000 made by the Chairman, Securities and Exchange Board of India) ORDER In the
present appeal, the Appellant has challenged the order dated 3.11.2000
made by the Chairman, Securities and Exchange Board of India, whereby the
Appellant was directed to relinquish the office of President of Uttar Pradesh
Stock Exchange (the exchange). By the same order the Appellant was also
disqualified to be a member of the Governing Board or office bearer of
the exchange as well as any capital market related public institution for
a period of 2 years from the date of the order.
The Appellant
was Vice President of the exchange during the period 1998-99. He took over
as President of the exchange with effect from 18.12.1999. During his tenure
as Vice president and also as President of the exchange, the Appellant
was allegedly involved in certain activities, which were not in tune with
the official position he was holding in the exchange. Northern Regional
office of the Respondent conducted an inspection of the exchange during
September 1999 and reported certain irregularities. Based on the findings
of the said inspection, etc., the Appellant was issued Show Cause Notice
seeking explanation. He was also given reasonable opportunity of being
heard. Based on the written reply to the Show Cause Notices and the oral
submissions made during the course of the personal hearing the Chairman
of the Respondent concluded that:
The Appellant
had exceeding his authority as Vice President of the exchange by interfering
with margin and surveillance system of the exchange;
The Appellant
had failed to initiate any action against the two members of the exchange
who had allegedly become members by submitting fake educational certificates.
The Appellant,
walked out of a Board meeting which was chaired by him intentionally with
a view to disrupt the proceedings of the meeting to delay decision making
in a matter of considerable importance to the exchange.
The Appellant
got the trading terminal of another broker deactivated / reactivated by
unwarrantedly interfering in the surveillance related activities of the
exchange.
The Chairman
has viewed that "the conduct of the President of UPSE, Mr.
R.K. Agarwal
has got serious questions on the transparency and integrity of the system.
This has also created an adverse public perception, which is harmful to
the confidence of the investors and the market. He has further viewed that
"all these actions of Mr. R.K. Agarwal raise serious issues of propriety
and credibility and his conduct has been found to be unbecoming of a head
of the organisation and the President of the Exchange". Based on the said
view, the Chairman ordered "in the interest of fostering investor confidence
and for promoting transparency and the integrity in the functioning of
the capital market, in exercise of powers under section 11 and 11B of the
SEBI Act, 1992, read with Securities Contracts (Regulation) Act, 1956",
the Appellant to relinquish the office of President of the exchange. He
was also made ineligible to hold any public position in future as member
of the Governing Board or office bearer of the exchange as well as any
capital market related public institution for a period of 2 years from
the date of the impugned order i.e. from 3.11.2000.
On receipt
of the Respondent's reply to the appeal in the Tribunal, the appeal was
posted for hearing 14.3.2000. The Appellant filed a rejoinder vide letter
dated 12.3.2000 (received on 14.3.2000) and also informed the Tribunal
by the said letter that he had expressed his views in the appeal and also
in the rejoinder and there was nothing further to state. The Representative
of the Respondent sought permission to submit its submission in writing.
The request was allowed. The Respondent filed thereafter its written submission.
The Appellant
has denied all the charges leveled against him by the Respondent. According
to the Appellant, the office order regarding reallocation of work of trade
operation and margin was issued by him, when he was Vice President on 4.6.1999
in the absence of the President and Executive Director, in exercise of
the powers conferred on him under clause 120(C) of the Articles of Association
of the exchange and that office order was issued to streamline the functioning
of the exchange in its best interest. The order was withdrawn on 16.8.1999.
According to him if the order was issued without the authority as alleged,
it was the duty of the Executive Director to bring it to the notice of
the Appellant as required under article 100 of the Articles of Association
of the exchange, that the Executive Director on return from leave did not
advise the Appellant to revoke the order. According to the Appellant he
never interfered in the maters concerning Margins and Trade Operation of
the exchange, as alleged by the Respondent.
With reference
to the allegation that the Appellant had failed to take action against
Shri D.K. Gupta and Shri R.K. Garg, who allegedly got membership of the
exchange by producing fake certificates, the Appellant has stated that
action could not be taken against the members for want of the concerned
original files. He has denied the charge that he disrupted the meeting
in which the matter was to come up for discussion, by staging a walk out
of the meeting. It has also been stated that the Allahabad High Court vide
its order dated 25.5.2000 had restrained the exchange from taking action
against the said members and as such it was not possible for him to take
any action against them. It has been alleged that the Allahabad High Court's
order was concealed from him. According to the Appellant, he and other
elected members of the Governing Board walked out of the meeting held on
17.5.2000 as they fled humiliated by the remarks made by the SEBI nominee
in the meeting, and that even after he walked out of the meeting, there
was sufficient quorum and the Board with rest of the members could have
decided the matter, which they did not do. He has denied the charge that
he has amended the minutes of the board meeting from which he had walked
out.
The Appellant
has also denied his involvement in the deactivation and reactivation of
the trading terminal of M/s. RBS Srivastava. He has stated that it was
the General Manager of the exchange who deactivated / reactivated the trading
terminal. The Appellant had only informed the General Manager about the
misbehaviour of a member and when the member apologised the matter was
not pursued further, that the misconduct of the member was subsequently
discussed in the Disciplinary Committee and then in the Board meeting and
the Broker's trading terminal was further suspended for one day. According
to the Appellant he was in no way involved in the matter.
According
to the Appellant power given to the Respondent under sections 11 and 11B
of the Securities and Exchange Board of India Act, 1992 (the Act) to issue
directions is for the purpose of regulating the securities market and to
protect the interests of the investors and not to pass mandatory orders
in the nature of punitive action against the office bearers of the stock
exchanges, that the impugned order was an exercise of power beyond jurisdiction.
The Appellant has alleged that before passing the impugned order no reasonable
opportunity was given to him to explain his views. He has also alleged
that show cause notice dated 25.8.1999 was issued to him while he was acting
as Vice President. Again another show cause notice was issued to him on
16.8.2000 when he was President. But a common enquiry was conducted and
the impugned order was passed with undue haste with malafide intention.
According to him the prejudice on the part of the Respondent is evident
from the fact that the impugned order was issued on 3.11.2000, in such
a hurry so as to precede the Annual General Meeting fixed on 25.11.2000,
with a view to inflict 'penalty' on the Appellant, before he demitted office
on 25.11.2000. The appellant has claimed that during his regime he had
done praiseworthy work to benefit the exchange and its users.
According
to the Appellant, the impugned order will override the provisions of the
Companies Act in as much as the right of removal of a Director is a recognised
right of the share holders under section 284 read with section 190 of the
Companies Act which can be exercised only by the share holders, against
an errant director or against a director who is considered by them as dishonest
and not protecting their interest fairly and faithfully, that such right
cannot be curtailed by the Respondent. According to the Appellant the impugned
order adversely affects the lawful rights of the shareholders without giving
them a right of hearing and will run contrary to the spirit of the provisions
of Companies Act, and in striking contrast to the legislative intent embodies
therein giving the shareholders the prime right to remove any such director
of the company. Further, that the office of director of the exchange can
be vacated only as per the provisions of Article 116 of the Articles of
Association of the exchange and not by issuing any punitive order by the
Respondent.
The Appellant
has stated that the proceedings by the Respondent and hearing dated 13.10.2000
are null and void in view of the order dated 25.5.2000 of the Allahabad
High Court in writ petition No. 26040 of 2000. According to him even the
show cause notice dated 16.8.2000 itself is bad in the eyes of law as it
did not refer to any provisions of the Act or any other law pursuant to
which the said show cause notice was issued. It has been stated that contesting
in the election for the directorship of the exchange was a fundamental
right of the Appellant. The impugned order had deprived the Appellant of
his said constitutional right. According to him it is well settled position
of law that the SEBI / Courts have no power whatsoever to interfere in
the internal affairs of the exchange, that the Respondent could have used
its powers within the purview of the Act by amending the bye-laws of the
exchange or issuing guidelines, etc. The substantive prayer of the Appellant
in the appeal is to (i) cancel / set aside the impugned order dated 3.11.2000
and (ii) order status quo of Appellant in relation to the Presidentship
and Directorship at the time of passing of the impugned order on 3.11.2000.
The Respondent
in its written reply / submission has by and large reiterated the version
appearing in the impugned order. According to the Respondent, the appeal
is not maintainable for the reason that it has been filed beyond the prescribed
time and that it has become infructuous as the tenure of the Appellant
as President has already elapsed.
The Respondent
has submitted, that the Appellant, when he was holding the office of Vice
President of the exchange had issued an office order on 4.6.1999 regarding
reallocation of work of trading operations and margins, that he had no
authority to issue such an office order being Vice President at the relevant
time, that too when the President met the Executive Director of the exchange
were away from office only for a day i.e. on the date of issue of the said
office order. The Respondent has stated that it had issued several circulars
to all stock exchanges requiring them to set up separate surveillance department
to carry our exclusively the functions of the surveillance and to ensure
that the Governing Board of stock exchanges do not interfere with the affairs,
functions and working of the surveillance department. According to the
Respondent it had made clear in these circulars that the Executive Director
would be wholly and directly responsible for the proper and independent
functioning of the surveillance department, that despite such clear instructions
the Appellant in total disregard to the same issued the office order on
4.6.1999 meddling with the functions of the surveillance mechanism in the
exchange. The fact that such an order was issued in a hurry during the
"one day absence" of the President and Executive Director suggests the
motive of the Appellant. According to he Respondent article 120 of the
Articles of Association of the exchange does not empower the Vice President
to do whatever he wants, when the President is away from office temporarily
for a day or so, as it happened in the instant case. In fact in terms of
the Respondent's circular in the matter, even if the President is away
from office temporarily for a day or so, as it happened in the instant
case. In fact in terms of the Respondent's circular in the matter, even
the President of the exchange could not have issued such an office order,
that when it is beyond the authority of the President o issue such an office
order, a person acting for one day as a President cannot issue such an
order. The Respondent further stated that through the Appellant had claimed
that his action was to streamline the functioning of the exchange, he has
not explained how the said office order helped to improve the functioning
of the exchange. Respondent stated that the Appellant's submission that
the Executive Director did not advise him to withdraw or cancel the said
order and as such the order was in order is not correct, as a bad order
cannot be made good by withdrawing it. According to the Respondent the
question is on the Appellant's conduct with reference to exercise of excessive
authority.
With reference
to the Appellant's conduct relating to taking action against 2 members
(Mr. D..K. Gupta and Mr. R.K. Garg) acquiring membership of the exchange
by submitting forged educational certificates, the Respondent has stated
that though the Appellant had promised to the Chairman, SEBI that he would
take immediate steps in the matter, he not only back tracked but also created
a situation by walking out of the meeting held on 17.5.2000, with a view
to stop the Governing Board taking up the matter for consideration and
that he also amended the minutes of the said meeting in the subsequent
meeting held on 26.5.2000. According to the Respondent the Appellant's
submission that to consider the case of these two members original files
were not available, etc. is only an excuse. It has been stated that in
the meeting held on 26.5.2000, which was chaired by the Appellant, in the
absence of public / SEBI representative, he got the decision of the Board
dated 6.10.1997 reconfirmed, waiving the requirement of minimum educational
qualification of the said two members, that this itself indicates the attitude
of the Appellant in protecting those two brokers against whom serious charges
were pending consideration. According to the Respondent the conduct of
the Appellant to favour the said two members who had allegedly procured
membership of the exchange by producing fake certificates is a serious
matter and the failure to take any action against the said two members
raised serious question of impropriety on the part of the Appellant.
As per
the submissions made by the Respondent, the Appellant had directed the
General Manager of the exchange to take action against M/s. RBS Srivastava,
a member of the exchange, and acting on the Appellant's instructions the
General Manager immediately deactivated the trading terminal of the member.
Subsequently, the terminal was reactivated on the instructions of the Appellant.
The Appellant has admitted that the reactivation of trading terminal of
the said member was on his direction. This is a clear case of unwarranted
interference of the Appellant in the surveillance related activities of
the exchange which was one of the tasks executed only by the surveillance
department in terms of the circular issued by the Respondent.
The Respondent
has stated that Securities Contracts (Regulation) Act (SCR Act) gives ample
powers to SEBI to direct stock exchanges to make bye laws, etc. The stock
exchange governing boards are required to follow the provisions of SCR
Act, Rules and Bye-laws made thereunder, provisions of SEBI Act, and the
directives of SEBI which are given in the interests of securities market.
The provisions of the Companies Act, relied and cited by the Appellant,
according to the Respondent, are not relevant to the present case. With
reference to the Appellant's averment about the order dated 25.5.2000 of
Allahabad High Court in Writ Petition No. 26040 of 2000, the Respondent
has stated that the said order in no way restrained the Respondent from
passing the impugned order against the Appellant.
With reference
to the Appellant's contention about the scope of sections 11 and 11B of
the Act, the Respondent has stated that in SEBI Vs. Alka Synthetics Ltd.
(1999(9) SCL-460) a division bench of the Gujarat High Court has clearly
explained the reach and scope of the sections and that the impugned directions
are well within the purview of the said sections. The Respondent has also
cited the observation made by the Bombay High Court in Ramrakh R. Bohra
v. SEBI (1999(33) CLA 243) that the sections "empower the Board to issue
directions for the purpose of securing the proper management of intermediary
or person, as may be appropriate in the interests of the investors in securities
and securities market �" Respondent had cited yet another decision wherein
the Delhi High Court (MZ Khan v. SEBI (AIR 1999 Del. 164) had stated that
"under section 11 of the SEBI Act, the SEBI has the power to protect the
interest of the investors in securities and to promote the development
of and to regulate the securities market, by such measures as it thinks
fit. The power is of very wide nature and is not hedged in by any restrictions
�.. In case the provisions of section 11 are construed in a restrictive
manner, the interests of the investor in securities and development and
regulations of securities market will suffer." The Respondent has stated
that in view of the interpretation of the scope of section 11 and 11B made
by various High Courts the impugned order, is well within the powers and
jurisdiction of the Respondent and that a member of the exchange who is
guilty of undue interference, maladministration and misconduct can be restrained
from holding any substantive official position having a bearing on the
securities market, by issuing directions.
The respondent
has also denied the Appellant's version that the impugned order was made
without following the principles of natural justice in undue haste with
malafide intention by concealing material facts.
Referring
to the Appellant's version that the provisions of the Companies Act have
been ignored
I have
carefully considered the submissions made by the parties in their pleadings.
The Respondent's
argument that the appeal is time barred and that it has become infructuous
is without any basis. In terms of section 15T of the Act any person aggrieved
by an order made by SEBI or the Adjudicating Officer is entitled to prefer
an appeal to the Tribunal within a period of forty five days from the date
of receipt of the copy of the order by the party. In the instant case,
it is seen that order dated 3.11.2000 was issued to the Appellant vide
Respondent's letter dated 6.11.2000 which according to the Appellant was
received at Kanpur on 8.11.2000. It is seen that the appeal was first presented
in the Registry of the Tribunal on 22.12.2000, i.e. within the prescribed
time limit of 45 days. The Respondent's view that since the tenure of the
Appellant as President of the exchange has come to end in December, 2000
the appeal has become infructuous is also baseless. Perhaps the Respondent
has not fully understood the scope of the impugned order. It is to be noted
that by the impugned order the Appellant was not only directed to relinquish
the office of President forthwith but was also made ineligible to hold
any public position in any capital market related public institutions for
a period of 2 years from the date of the order. Since the said disqualification
still continues. I do not see any reason to consider that the order has
become infructuous to be appealed against. The preliminary objections raised
by the Respondent have no merit and therefore I override the same.
On a perusal
of the impugned order and the submissions made by the parties, it is clear
that the impugned order is relatable to the conduct of the Appellant during
his tenure as Vice President and subsequently as President of the exchange.
The Respondent has cited three instances to support its version that the
Appellant had acted without authority and in a manner unbecoming of the
position he was holding in the exchange.
It has
been admitted by the Appellant also that he had issued an office order
on 4.6.1999, reallocating the work of trading, operations and margin review
in the exchange, in the absence of the President and the Executive Director,
when they were away for a day, from the office. The Appellant has stated
that in terms of article 120 (c) of the Articles of Association, in the
absence of the President, the exercise the presidential power and the Executive
Director did not advise him to recall or cancel the said order, though
in terms of article 100, the Executive Director was required to advise
him so, if the order was issued without authority, and the fact that he
did not do so shows that the Appellant's action was not beyond the authority
vested in him. He has also defended his action of issuing the order saying
that "the order was issued to streamline the functioning of the exchange,
without prejudice and in its best interest". There is no dispute about
the fact that the office order dated 4.6.1999 had a bearing on the surveillance
function vested in the department of surveillance coming under the exclusive
control of the Executive Director. Respondent has cited several circulars
issued by it to stock exchanges requiring them to set up separate surveillance
department to carry out exclusively the functions of surveillance and also
stating in clear terms that the Governing Board should not interfere with
the affairs, functions and working of the surveillance department. It is
to be noted that market surveillance is of considerable importance and
allowing the elected members of the broking community to have access to
the same would not be in the interest of fair market operations. Similarly
the "margin" decision is also very important from the safety angle of the
investors. Stock exchanges have certain protection mechanism to meet the
volatility of the market and the speculators. One of the safeguards is
the requirement of margins. If this system is tampered with and the margins
are altered without sufficient cause, in a hasty manner that would result
in serous consequences. I find it extremely difficult to agree with the
submission made by the Appellant that he had issued the office order on
4.6.1999 in such hurry when he was holding only one-day charge of the President's
office, "to streamline the functioning of the exchange, in its best interest".
The Appellant has not started anywhere in his submission a to what was
the deficiency in the then exiting system and what was the mighty hurry
to issue such an order when he was holding the office of the President
just for a day and that too knowing very well that "surveillance" department
is out of bounds of the President's powers. An action which even the president
of the exchange is not authorised to take, cannot be taken by a person
temporarily discharging the functions of the president. Taking into consideration
the facts before me, I have no hesitation to endorse the Respondent's view
on the conduct of the Appellant in this regard.
Now coming
to the Appellant's role in the context of action against two members who
had allegedly procured membership of the exchange by producing fake certificates,
it is very difficult to exonerate the Appellant from the charges levelled
against him as the sequence of events establish that he had failed to act
properly and reasonably in the matter. The Appellant's version that since
that the original files were not handed over to him he could not attend
to the matter is worth discarding as demonstrated by his conduct. The conduct
of the Appellant leading a walkout from the meeting of the Governing Board
held on 17.5.2000 and amending the minutes of the said meeting by him cannot
be viewed lightly in the context of the over all conduct of the Appellant
in the matter. Despite the fact that the Appellant had assured Chairman
of the SEBI in a meeting held on 14.2.2000 that the files would be traced
out and necessary action would be taken against the members when the matter
came up for discussion in the meeting of the Board held on 17.5.2000 chaired
by him, he staged a walk out, obviously with a view to debilitate the Governing
Board taking any action in the matter. He did not stop there. He was fully
aware of the fact that the case of the said two members procuring membership
allegedly by producing fake certificates, was very much alive and the Respondent
had asked the Appellant to take action, in a Board meeting chaired by him
held on 26.5.2000, in which the representatives of the Respondent and other
public representatives were absent, a resolution was passed, rectifying
and reconfirming the decision of the Board taken in the meeting held on
6.10.1997 wherein the elected members of the Governing Board had waived
the requirement of minimum educational qualification of the said two members,
with a view to allow them to continue with their membership, obviating
the need for prescribed qualification. It is seen from the conduct of the
Appellant, as explained by the Respondent, remaining unrebutted, the Appellant
had informed the Governing Board that it was not desirable to raise the
issues concerning the said two members' eligibility qualifications in any
Board meeting as it was fully concluded in the meeting of the Board held
on 6.10.1997 and in the meeting held on 26.5.2000 chaired by him in the
absence of the SEBI nominee Directors and Public Representative Directors,
it was decided that no further discussion on the issue of the validity
of membership of the said Shri R.K. Garg and Shri D.K. Gupta should take
place in the Board meeting as the same stood concluded and closed. There
is no explanation from the Appellant justifying the need to take such a
decision, especially when non-elected nominee directors representing public
interest and SEBI were not present in the meeting. In this context it is
to be remembered that at that point of time there was no restraint order
from the High Court, before the Appellant. It is evident that the Appellant
was thwarting action against the said two members, who were facing the
grave charge of producing fake certificates to procure membership. The
Appellant's role, as it emerges from his conduct cannot be viewed leniently.
As President of the exchange he was expected to probe into the matter to
reach at the truth and take suitable action, instead of attempting to hush
up the matter on technical grounds.
Coming
to the deactivation / reactivation of the trading terminals of M/s. RBS
Srivastava on 14.6.2000 it is clear from the Appellant's own version that
it was done in the context of the misbehaviour of a broker with him. The
Appellant's argument that it was not done by the General Manager may be
technically correct. But it was done by the General Manager at the behest
of the Appellant is amply clear from the facts before me. The fact that
the action against the member was endorsed by the Disciplinary Committee
subsequently does not justify the Appellant's involvement in the matter.
As the
totality of the facts and circumstances of the specific cases discussed
in the impugned order, it cannot be said that the Appellant had not acted
beyond his authority and his conduct was not unbecoming of the office he
was holding in the exchange at the relevant time.
Having
come to the conclusion as stated above, the next question is as to whether
the Respondent's order is legally in order.
The impugned
order is issued under sections 11 and 11B of the Act. Section 11 of the
Act enumerates the powers and functions of the Board. Section 11B enables
the Respondent to issue directions to achieve the objectives for which
the Securities and Exchange board of India is established. Section 11B
in a sense is more specific and action oriented. Section11B which is considered
more relevant in the context is extracted below for ready reference.
"Power
to issue directions:
11B. Save as otherwise provided in section11 if after making or causing to be made an enquiry, the Board is satisfied that it is necessary - (i) in the interest of investors, or orderly development of securities market; or
Gujarat
High Court had examined the scope of section 11 and section 11B vis-à-vis
the Respondent's position, while deciding an appeal against the Single
Judge's order in Alka Synthetics Case (supra). The basic issue for consideration
before the Division Bench in the said appeal was as to whether the Respondent
had the authority to issue an order under section 11B of the Act for impounding
or forfeiting the money received by stock exchange as per the concluded
transactions under its procedure, until final decision is made. While negating
the views of the Single Judge, and upholding the Respondent's power to
issue such a direction under section 11B The Court observed.
"The SEBI Act is an Act of remedial nature and, therefore, the present cases could not be compared with the cases relating to the fiscal or taxing statutes or other penal Statutes for the purposes of collection of levy, taxes, etc. As and when new problems arise, the call for new solutions and the whole context in which the SEBI had to take a decision, on the basis of which impugned orders were passed, cannot be said in the to be without authority of law in the fact of the provisions contained in section11 and section 11B. As the language of section11(1) itself shows and as the matters for which the measures can be taken are provided in sub-section(2) of section 11. It is clearly made out by the plain reading of the language of the section itself that the SEBI has to protect the interests of the investor in Securities and has to regulate the securities market by such measures as it things fir and such measures may be for any or all of the matters provided in sub-section (2) of section 11 and in the discharge of his duty cast upon the SEBI as a part of its statutory function, it as been invested with the powers to issue directions under section11B. ���. Thus, so far as the authority of law in the SEBI to issue such directions is concerned, such authority to take measures as it thinks fit is clearly discernible on the basis of the provisions contained in section 11 read with section 11B of the SEBI Act. ��.. We have to therefore consider and interpret the power of SEBI under the provisions so as to see that the objects sought to be achieved by Act is fully served, rather than being defeated on the basis of any technicality ��.The duty and function had been entrusted o take such measures as it thinks fit and in order to discharge this duty, the power is vested under section 11B. �.. The authority has been give under the law to take appropriate measures as it thinks fit and that by itself is sufficient to cloth the SEBI with the authority of law".
Having invested with such a duty the legislature has give ample power to effectively enforce the same. One of such powers is the power to issue directions as provided under section 11B of the Act. As the Delhi High Court in M.Z. Khan's case (supra) said "under section 11 of the SEBI Act the SEBI has the power to protect the interests of the investors in securities and to promote the development of and to regulate the securities market by such measures as it thinks fit. The power is of a very wide nature and not hedged by any restriction". True scope of section 11B was also subjected to examination by the Bombay High Court in Ramrakh R. Bohra Vs. SEBI (1999) 33 CLA 243 (Bom). In the said case the High Court observed that: "Section 11B 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 RBI v. Peerless General Finance & Investment Co. Ltd. [1996] 20 CLA 195/AIR 1996 SC 646 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-baking companies or institutions and (the) 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 statutory construction that "it is the duty of the court to further Parliament's aim of providing a remedy for the mischief against which the enactment is directed and the court should prefer a construction which advances this object rather than one which attempts to find some way of circumventing it."�..
In the
case of ITO v. Mohammed Kunhi AIR 1969 SC 430 it as been observed as under:
"�. It is a firmly established rule that an express grant of statutory power carried with it by necessary implication the authority to use all reasonable means to make such grant effective��" Therefore in our view, the express grant of statutory power confirmed by section 11B carries the authority to use of reasonable means to make such power effective."
The Appellant's
contention that by the impugned order he has been deprived of his fundamental
right to contest election to the governing board of the exchange is baseless.
The Respondent is empowered to disqualify a person from occupying any office
in the exchange, if it is satisfied that the involvement of such a person
in the management of the exchange would not be in the interest of the exchange.
It cannot be said that the impugned order is an unjustified interference
in the management of the exchange and on the freedom of the Appellant.
The order is directed against the Appellant in the context explained in
the order and issued in public interest.
The Appellant's
contention that the principles of natural justice were not followed in
his case is contrary to the facts. As could be seen from the impugned order
the Appellant was issued show cause notices. He had replied to the same.
He also made oral submissions. It is seen that the Appellant was given
sufficient opportunity to explain his view-point before passing the impugned
order. Further, the appellant's contention that he was served with two
show cause notices and the show cause notices were deficient, etc. does
not in any way affect the proceedings before he Respondent and the resultant
order. Even though the Appellant has alleged malafide on the part of the
respondent he has not in any way substantiated the said allegation. A wild
allegation or malafide conduct of the Respondent without any material to
substantiate the same need be discarded. The Appellant's submission that
in view of the Allahabad High Court's order dated 16.8.2000, the Respondent
should not have issued the impugned order is of no force as the said order
was in a writ petition filed by S/Shri R.K. Garg and D.K. Gupta in a matter
concerning them and not with reference in the inquiry proceedings initiated
against the Appellant by the Respondent or the impugned order.
The Appellant's
contention that the Respondent has passe the order ignoring the rights
of the shareholders of the exchange, in terms of the provisions of the
Companies Act is also of no force. As already stated, the impugned order
is issued under sections 11 and 11B of the Act and it is not in any way
overriding the provisions of the Companies Act. Companies Act does not
prohibit, authorities under other statutes, taking action against the management
/ officers of the companies for violation of the provisions of other statutes.
Taking
into consideration the facts and circumstances of the case, I do not think
that this Tribunal would be justified in interfering with the impugned
order. The impugned order is therefore upheld and the appeal is dismissed.
(C.
ACHUTHAN)
Place:
Mumbai
PRESIDING OFFICER Date: April 30, 2001 |
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