��BEFORE THE SECURITIES
APPELLATE TRIBUNAL, MUMBAI Appeal No.158/2004 ��� ������������������������������������������������������������������� �Date of Hearing� :� 21.10.2005 ����������������������������������������������������������������������� �Date of Decision :� 2.11.2005 In the matter of: Appellant����
:� Mangalore Stock Exchange, Mangalore �� Respondent� :� Securities and Exchange Board of ����������������������� Appellant
by����� :�
Shri Umesh Shetty and Ms. Sharila ����������������������������������������������� ��������� D�souza, Advocates ����������������������� Respondent
by�� :�
Shri Kumar Desai and Ms. Daya Gupta, ����������������������������������������������� �������� Advocates Coram: ����������� �Justice Kumar Rajaratnam, Presiding Officer ����������� C.
Bhattacharya, Member ����������� R.N.
Bhardwaj, Member Per:� Justice Kumar Rajaratnam, Presiding Officer ORDERS ON
THE MAINTAINABILITY OF THE APPEAL BEFORE THE
SECURITIES APPELLATE TRIBUNAL ����������� We have heard the learned senior
counsel for the appellant, Mr. Umesh Shetty, and Mr. Kumar Desai, the learned
senior counsel for the respondent.� We
also heard Mr. Ashish Bhakta, a member of the Bar, who was requested to assist
the Court as amicus curiae.� 2.�������� The appellant in this appeal challenges
the Gazette of India Extraordinary Notification published by the Securities and
Exchange Board of India (hereinafter referred to as �SEBI�) dated 31st
of August 2004 issued under section 4(4) of the Securities Contracts
(Regulation) Act, 1956 (hereinafter referred to as �SCR Act, 1956�) read with
Government of India Notification dated 13th of September 1994.� By the impugned Notification, the appellant
ceased to be a recognized Stock Exchange and consequential orders were passed
by SEBI u/s. 19 read with section 4(4) of SCR Act, 1956 read with section 11(1)
of the SEBI Act.� The operative portion
of the impugned order reads as follows: �SEBI is mandated to ensure
that there are adequate systems, procedures and effective management in an
Exchange, which shall protect the interest of investors and develop the
securities market.� On a cumulative
analysis of the facts abovementioned, I am of the opinion that allowing MGSE to
continue in its present form may not be in the interest of trade or public
interest.� Therefore, it is essential
that immediate measures are adopted to ensure that the interests of the
investors are not further jeopardized.� I
am of the opinion that the Governing Board is unable to either perform
effectively or provide guidance and direction to MGSE and hence, any further
renewal of recognition of MGSE does not seem reasonable and justified, as it
would only serve the commercial needs of few broker members. In view of the above facts
and circumstances, and in exercise of the powers conferred upon me under Section
19 of the Securities and Exchange Board of India act, 1992, read with Section
4(4) of the Securities Contracts (Regulation) Act. 1956, read with the
Government of India Notification number F.No. 1/57/SE/93 dated In view of this Order, MGSE
shall cease to be a recognized stock exchange and therefore, it is imperative
to pass necessary directions in the interest of investors/shareholders of the
listed companies in MGSE and in the overall interest of the securities
market.� I, therefore, in exercise of
powers conferred upon me under Section 19 read with section 11(1) of SEBI act
pass the following directions:- 1)������� The money available in the Investor
Protection fund and Investor Services Cell of MGSE shall be utilized only for
the purpose for which these funds have been created, as per the articles of
MGSE.� Any pending claims of any
investors should not be appropriated for any other purpose or for payment to
the members/shareholders of MGSE. 2)������� MGSE shall set aside sufficient funds
in order to provide for settlement of any claims, pertaining to pending
arbitration cases, pending non-implemented arbitration award, if any,
liabilities/claims of contingent nature, if any, and unresolved investors
complaints/grievances lying with the exchange, on the date of this order. 3)������� The companies which are exclusively
listed in the MGSE, may consider seeking listing at other stock exchanges or
provide for exit option to the shareholders as per SEBI Delisting Guidelines. 4)������� Consequent upon de-recognition of
MGSE, the members/shareholders of MGSE shall cease to be members of a
recognized stock exchange and therefore liable to be de-registered as stock
brokers, and hence, their certificate of registration granted by SEBI shall
stand automatically cancelled. However, the said members/shareholders of MGSE
shall be liable to pay SEBI registration fees as per Schedule III of the said
regulations, till the date of this Order. ����������������������������������� �������������� F.No.SEBI/LE/19048/2004 ����������������������������������������������������������������������� �Sd/- ����������������������������������������������������������� ���� A.K. BATRA ����������������������������������������������� ��� WHOLE TIME MEMBER ������ ��SECURITIES
AND EXCHANGE BOARD OF (Emphasis by Court) 3.�������� Both sides were heard on the question
of maintainability of the appeal pursuant to an order passed by the Supreme Court
dated 1st of April 2005.� The
Supreme Court, in its order, pronounced as follows:��� ��..We are of the view that
once the Tribunal has noted that the appeal had been challenged as not being
maintainable, it should dispose of the issue of maintainability first before
passing any further order.� In that view
of the matter, the impugned order dated � 4.�������� As per the directions of the Hon�ble
Supreme Court, we have now taken up the matter only on the question of
maintainability of the appeal before dealing with the merits of the case. 5.�������� It is the contention of SEBI that the
impugned order was passed u/s. 4(4) of SCR Act, 1956 and therefore no appeal is
maintainable to the Tribunal, although it would be open to the appellant to
approach any other forum or forums to redress its grievance. 6.�������� It is the contention of the appellant
that the impugned order is appealable, although passed u/s. 4(4) of the SCR
Act, 1956 for the reason that the Whole-Time-Member has exercised powers u/s.
19 read with section 11(1) of the Securities and Exchange Board of India Act,
1992 (hereinafter referred to as �SEBI Act�).�
It is common ground that any direction given u/s. 11(1) of the SEBI Act
is appealable only to the Tribunal and nowhere else.� It was further submitted by the counsel for
the appellant that an appeal will lie u/s. 15T of the SEBI Act since it is, in
effect, an order by the Board u/s. 19 (power of delegation from the Board to
any Member of the Board under the provisions of SEBI Act) read with section
11(1) of SEBI Act.� 7.�������� The question that arises for
consideration is whether an order passed by SEBI u/s. 4(4) of the SCR Act, 1956
read with section 19 and 11 of the SEBI Act is appealable u/s. 15T of the SEBI
Act.� 8.�������� At the outset it is necessary to look
at the appeal provisions in the SEBI Act, which are set out in section 15T..� Section 15T reads as follows: ����������� �(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. (2)� No appeal shall lie to the Securities
Appellate Tribunal from �an order made- (a) by the Board on and after
the commencement of the Securities Laws (Second Amendment) Act, 1999; (b) by an adjudicating
officer, ����������� with the consent of the
parties. ����������������������������������������������������������������������������������������������� (Emphasis by Court) (3)� Every appeal under sub-section (1) shall be
filed within a period of forty-five days from the date on which a copy of the
order made by the Board or the adjudicating officer, as the case may be, is
received by him and it shall be in such form and be accompanied by such fee as
may be prescribed: Provided that the Securities
Appellate Tribunal may entertain an appeal after the expiry of the said period
of forty-five days if it is satisfied that there was sufficient cause for not
filing it within that period. (4)� On receipt of an appeal under sub-section
(1), the Securities Appellate Tribunal may, after giving the parties to the
appeal, an opportunity of being heard, pass such orders thereon as it thinks
fit, confirming, modifying or setting aside the order appealed against. (5)� The Securities Appellate Tribunal shall send
a copy of every order made by it to the Board, the parties to the appeal and to
the concerned adjudicating officer. (6)� The appeal filed before the Securities
Appellate Tribunal under sub-section (1) shall be dealt with by it as
expeditiously as possible and endeavour shall be made by it to dispose of the
appeal finally within six months from the date of receipt of the appeal.� Section
15T provides for an appeal to the Tribunal if an order is passed by the Board
under the Act or the Rules or Regulations made thereunder, which includes an
order passed by a Whole Time Member by virtue of delegated power u/s. 19 of the
SEBI Act, or by an Adjudicating Officer under the Act except when an order is
passed by consent of parties.� We shall
deal with section 19 a little later in our judgment. � 9.�������� It was submitted by Mr. Kumar Desai,
the learned senior counsel for SEBI, that the impugned order was not passed
under SEBI Act but was passed by SEBI under the provisions of the SCR Act,
1956. 10.������ Section 4 of SCR Act, 1956 deals with
grant of recognition to Stock Exchanges by the Central Government and reads as
follows: �4. Grant of recognition to
stock exchanges.- (1) If the Central Government is satisfied, after making such
inquiry as may be necessary in this behalf and after obtaining such further
information, if any, as it may require,- (a) that the rules and
bye-laws of a stock exchange applying for registration are in conformity with
such conditions as may be prescribed with a view to ensure fair dealing and to
protect investors; (b) that the stock exchange
is willing to comply with any other conditions (including conditions as to the
number of members) which the Central Government, after consultation with the
governing body of the stock exchange and having regard to the area served by
the stock exchange and its standing and the nature of the securities dealt with
by it, may impose for the purpose of carrying out the objects of this act; and (c) that it would be in the
interest of the trade and also in the public interest to grant recognition to
the stock exchange; it may grant recognition to
the stock exchange subject to the conditions imposed upon it as aforesaid and
in such form as may be prescribed. (2)� The conditions which the Central Government
may prescribe under clause (a) of sub-section (1) for the grant of recognition
to the stock exchanges may include, among other matters, conditions relating
to- (i)� the qualifications for membership of stock
exchanges; (ii) the manner in which
contracts shall be entered into and enforced as between members; (iii) the representation of
the Central Government on each of the stock exchanges by such number of persons
not exceeding three as the Central Government may nominate in this behalf; and (iv) the maintenance of
accounts of members and their audit by chartered accountants whenever such
audit is required by the Central Government. (3)� Every grant of recognition to a stock
exchange under this section shall be published in the Gazette of India and also
in the Official Gazette of the State in which the principal office of the stock
exchange is situate, and such recognition shall have effect as from the date of
its publication in the Gazette of India. (4)� No application for the grant of
recognition shall be refused except after giving an opportunity to the stock
exchange concerned to be heard in the matter; and the reasons for such refusal
shall be communicated to the stock exchange in writing. (5)� No rules of a recognized stock exchange
relating to any of the matters specified in sub-section (2) of section 3 shall
be amended except with the approval of the Central Government.� ����������������������������������������������������������������������������������� (Emphasis by Court) 11.������ The impugned order was passed under
sub-section (4) of section 4 of SCR Act, 1956, which deals with application for
grant of recognition of a stock exchange.�
12.������ Under the SCR Act, 1956 certain
additional provisions were introduced with respect to appeal provisions by
Securities Laws (Amendment) Ordinance, 2004.�
Certain orders passed by the Central Government were appealable to the
Tribunal under the provisions of the SCR Act, 1956.� These appeal provisions are identical to the
appeal provisions u/s. 15T of the SEBI Act.�
However, only certain impugned orders are appealable to the
Tribunal.� But it was submitted that an
order passed u/s. 4(4) of the SCR Act, 1956 is not appealable since no mention
is made in SCR Act that it is appealable.�
Those orders that are appealable under SCR Act, 1956 are as follows: (1)������ An order of
de-listing of securities.� This is
appealable by the listed company to the Tribunal u/s. 21A. (2)������ Refusal of stock
exchange to list securities of public companies.� There is a right of appeal to the Tribunal
u/s. 22A. (3)������ Pari Passu with the SEBI Act, all penalties imposed by the Adjudicating Officer of SEBI
are appealable u/s. 23-L. 13.������ The catch is that section 23L of SCR Act,
1956 does not refer to any order u/s. 4 except an order u/s. 4-B.� Section 4B deals with procedure for
corporatisation and demutualization of the Stock Exchanges.� Section 23L also refers to appeals to the Tribunal
u/ss. 22-B, 22-C, 22-D & 22-E.� 14.������ Section 23L reads as follows: �(1) Any person aggrieved,
by the order or decision of the recognized stock exchange or the adjudicating
officer or any order made by the Securities and Exchange Board of India under section
4-B, may prefer an appeal before the Securities Appellate Tribunal and the
provisions of sections 22-B, 22-C, 22-D and 22-E of this Act, shall apply, as
far as may be, to such appeals. (2)� Every appeal under sub-section (1) shall be
filed within a period of forty-five days from the date on which a copy of the
order or decision is received by the appellant and it shall be in such form and
be accompanied by such fee as may be prescribed: Provided that the
Securities Appellate Tribunal may entertain an appeal after the expiry of the
said period of forty-five days if it is satisfied that there was sufficient
cause for not filing it within that period. (3)� On receipt of an appeal under sub-section
(1), the Securities Appellate Tribunal may, after giving the parties to the
appeal, an opportunity of being heard, pass such orders thereon as it thinks
fit, confirming, modifying or setting aside the order appealed against. (4)� The Securities Appellate Tribunal shall send a
copy of every order made by it to the parties to the appeal and to the
concerned adjudicating officer. (5)� The appeal filed before the Securities
Appellate Tribunal under sub-section (1) shall be dealt with by it as
expeditiously as possible and endeavour shall be made by it to dispose of the
appeal finally within six months from the date of receipt of the appeal.� ����������������������������������������������������������������������������������� (Emphasis by Court) 15.������ It was vehemently submitted by Mr. Desai
that the right of appeal to the Tribunal is excluded both under the provisions
of SEBI Act and under the provisions of the SCR Act, 1956 if an order is passed
under section 4(4) of the SCR Act. 16.������ When a pointed question was put to the
learned senior counsel for the respondent that this order was also u/s. 19 read
with section 11(1) of the SEBI Act and therefore is appealable to the Tribunal,
it was rather curiously argued by Mr. Desai that the main order is not
appealable but the directions u/s. 11(1) are, admittedly, appealable before the
Tribunal.� 17.������ It was further submitted that the
directions u/s. 11 were not under challenge before the Tribunal.� 18. This
submission cuts at the root of the appeal and cannot be accepted.� It is not possible to have a truncated
appeal, one before the Tribunal and one, perhaps, under Article 226 of the
Constitution as suggested by the respondent. 19.������ The learned counsel for the appellant,
Mr. Umesh Shetty, said that the High Courts are overburdened with writ
petitions and it is not legally feasible to file an appeal of the second part
of the order, i.e. the directions issued u/s. 11 before the Tribunal and the
first part of the order under Article 226.�
Such a truncated appeal to the Tribunal only with respect to directions
u/s. 11 would lead to anomalous consequences and would not be in public
interest. 20.������ We are ultimately left with the vexed
question whether an appeal is maintainable�
u/s. 15T of the SEBI Act if a Whole Time Member passes an order as a
delegate of the Board u/s. 19 of the SEBI Act, although the impugned order is
ostensibly passed by SEBI u/s. 4(4) of the SCR Act, 1956, which by itself is
not appealable either under the provisions of SCR Act, 1956 or u/s. 15T of the
SEBI Act.� In other words, any order
passed u/s. 4(4) of the SCR Act, 1956 is, admittedly, by itself not appealable
u/s. 15T of the SEBI Act.� We have
already referred to section 4(4) in the earlier part of our order.� However, it would be relevant to refer to
section 4(4) once again.� Section 4(4)
reads as follows: �No application for the
grant of recognition shall be refused except after giving an opportunity to the
stock exchange concerned to be heard in the matter; and the reasons for such
refusal shall be communicated to the stock exchange in writing.� ����������������������������������������������������������������������������������� (Emphasis by Court) 21.������ What SEBI has done in the impugned order
was to reject the application for renewal of recognition to the Mangalore Stock
Exchange (the appellant herein) for the reasons stated in the impugned order,
although the Mangalore Stock Exchange was in existence for a long time. 22.������ After hearing the rival contentions, we
are of the view that an appeal is maintainable in the facts and circumstances
of this case for the following reasons. 23.������ Section 15T deals with appeals being
maintainable by any order of the Board under the Act or Rules or Regulations
made thereunder.� Although the competent
authority with respect to any order u/s. 4(4) was the Central Government, the
Central Government has delegated its power to the Board under SCR Act,
1956.� The power to delegate to the Board
is enshrined in section 29A of the SCR Act, 1956.� Section 29A reads as follows: �29-A.� Power to delegate.-� The Central Government may, by order
published in the Official Gazette, direct that the powers (except the power
under section 30) exercisable by it under any provision of this Act shall, in
relation to such matters and subject to such conditions, if any, as may be
specified in the order, be exercisable also by the Securities and Exchange
Board of India or the Reserve Bank of India constituted under section 3 of
the Reserve Bank of India Act, 1934 (2 of 1934).� ����������������������������������������������������������������������������������� (Emphasis by Court) 24.������ It can also be said that, on a careful
reading of section 29A of the SCR Act, 1956, there is concurrent power and
jurisdiction both by the Central Government and by the Securities and Exchange
Board of India.� Otherwise, the
Parliament in its wisdom could not have used the words �exercisable by it under
any provisions of this Act in relation to such matters and subject to such
conditions, if any, as may be specified in the order, be exercisable also
by SEBI�.� In other words, u/s. 29A the
power of the Central Government can also be exercised by SEBI
concurrently.� That is why the words �be
exercisable also by SEBI� have been included in section 29A.� Section 29A makes it clear that the power
exercisable by SEBI is concurrent with that of the Central Government. 25.������ The Gazette notification, which empowers
SEBI u/s. 29A, is dated 13.9.94 and reads as follows: �Securities Contracts
(Regulation) act, 1956: Notification under Section 29A:� Delegation of powers of the Central
Government also to SEBI �Notification No. S.O��.dated In exercise of the powers
conferred by section 29A of the Securities Contracts (Regulation) act, 1956 (42
of 1956), the Central Government hereby directs that the powers exercisable by
it under section 3, sub-section (1), (2), (3) and (4) of section 4, section 5,
sub-section (2) of section 7A, section 13, sub-section (2) of section 18,
section 22, and sub-section (2) of section 28 of the Act shall also be
exercisable by the Securities and Exchange Board of India. ����������������������������������������������������������������������������������� Sd/- ����������������������������������������������������������������������� ��� P.J. Nayak, ����������������������������������� ������ Joint Secretary to the Government of ����������������������������������������������������������� (F.No.1/57/SE/93)� 26.������ In short, we have before us section 29A,
which delegates powers to the Board and the notification issued u/s. 29A.� A strict reading of section 29A (power to
delegate) and the notification dated 13.9.94 would indicate that the power
vests only with the Securities and Exchange Board of India or the Reserve Bank
of �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.� ����������������������������������������������������������������������������������� (Emphasis by Court) 27.������ A perusal of section 19 of SEBI Act would
indicate that the Board may, in writing, delegate its powers to any Member of
the Board such of its powers under �this Act� (SEBI Act).� 28.������ By no stretch of imagination can it be
said that a Member acting on behalf of the Board can act or exercise powers
except under the provisions of the SEBI Act.�
Therefore logically when the Board delegates its authority to the Member
and a Member passes an order, he exercises powers and functions under the
provisions of the SEBI Act and not under the provisions of SCR Act, 1956.� 29.������ That is why the Whole Time Member has
issued certain directions to the appellant u/s. 11 in the impugned order.� These directions are extracted once again to
show that the impugned order has been passed under the provisions of the SEBI Act.� 30.������ The directions issued u/s 11 of the SEBI
Act in the impugned order by the Whole Time Member are as follows: �1) The money available in
the Investor Protection Fund and Investor Services Cell of MGSE shall be
utilized only for the purpose for which these funds have been created, as per
the Articles of MGSE.� Any pending claims
of any investors should not be appropriated for any other purpose or for
payment to the members/shareholders of MGSE. (2)� MGSE shall set aside sufficient funds in
order to provide for settlement of any claims, pertaining to pending
arbitration cases, pending non-implemented arbitration award, if any,
liabilities/claims of contingent nature, if any, and unresolved investors
complaints/grievances lying with the exchange, on the date of this order. (3)� The companies which are exclusively listed in
the MGSE, may consider seeking listing at other stock exchanges or provide for
exit option to the shareholders as per SEBI Delisting Guidelines. (4)� Consequent upon de-recognition of MGSE, the
members/shareholders of MGSE shall cease to be members of a recognized stock
exchange and therefore liable to be de-registered as stock brokers, and hence,
their certificate of registration granted by SEBI shall stand automatically
cancelled.� However, the said
members/shareholders of MGSE shall be liable to pay SEBI registration fees as
per Schedule III of the said regulations, till the date of this Order.� � 31.������ It is nobody�s case that any direction
issued u/s. 11 of SEBI Act is not appealable u/s. 15T.� In fact, it is common ground that any
direction issued u/s.11 by a Whole Time Member is appealable to the Tribunal
u/s. 15T.� We fail to understand how it
can be understood that this order is not appealable u/s. 15T.� When we read the order as a whole it is clear
as daylight that this order was passed by a Whole Time Member by virtue of the
delegated power under the provisions of SEBI Act. And if the Board chooses to
delegate its authority, in turn, to a Member, this can only be done u/s.
19.� And if a Whole Time Member acts u/s.
19, he, undoubtedly, acts under the provisions of SEBI Act and therefore the
impugned order is, without doubt, passed under the provisions of the SEBI
Act.� 32.������ If the Board itself would have passed the
impugned order, the position may have been different but that is not the case
here.� 33.������ But once the Board delegates its power
under the provisions of the Act to a Member and that Member passes the impugned
order after hearing the appellant, then the impugned order becomes the baby of �SEBI and not of the Central Government and
such an order, in our considered view, is appealable to the Tribunal u/s.
15T.� The fact that this is an order by
SEBI and not by the Central Government is crystal clear when we look at the
preamble before the operative portion of the impugned order, which reads as
follows: �SEBI is mandated to
ensure that there are adequate systems, procedures and effective management in
an Exchange, which shall protect the interest of investors and develop the
securities market.� On a cumulative
analysis abovementioned, I am of the opinion that allowing MGSE to continue in
its present form may not be in the interest of trade or public interest.� Therefore, it is essential that immediate
measures are adopted to ensure that the interests of the investors are not
further jeopardized, I am of the opinion that the Governing Board is unable to
either perform effectively or provide guidance and direction to MGSE and hence,
any further renewal of recognition of MGSE does not seem reasonable and
justified, as it would only serve the commercial needs of few broker members.� ����������������������������������������������������������������������������������� (Emphasis by Court) 34.������ The above statement in the impugned order
also indicates that it is the duty of SEBI to ensure that there are adequate
systems, procedures and effective management in a stock exchange to protect the
interest of investors and to develop the securities market.� Taking into account the above passage of the
impugned order, which deals with the paramount duty of SEBI in protecting the
interests of investors and in view of the delegated power exercised by the
Member and in view of the fact that directions have been issued to the
appellant u/s. 11, the appeal is maintainable. ����������������������������������������������������������������������������������� 35.������ The learned amicus curiae, Mr. Ashish
Bhakta, submitted that the power exercised by the Whole Time Member is contrary
to the SCR Act, 1956 and the Gazette Notification pursuant to it. 36.������ By virtue of section 29A of SCR Act,
1956, the Central Government delegates its power to pass orders, which is
exercisable by the Securities and Exchange Board of India. Even the
notification pursuant to section 29A delegates the power to the Board and not
to any other person. 37.������ Mr. Bhakta, the learned amicus curiae, further
submitted that the maxim delegates non
potest delegare is clearly applicable to the facts of the present
case.� According to Mr. Bhakta, when the
statute gives the power to the Board, which is reiterated in the notification,
the Board cannot, in turn, delegate its power to a Whole Time Member.� There is no authority for the Whole Time
Member to act as a delegate of the Central Government. 38.������ The learned amicus curiae relied on text
book on Administrative Law by Wayde & Forsyth, Chapter 11 of Part V, and
submitted that an element which is essential to the lawful exercise of power is
that it should be exercised by the authority upon whom it is conferred and by no one
else.� He referred to the following
passage at Chapter 11 of Part V of the Book, which reads as follows: ����������������������������������������������� �DELEGATION ����������� Inalienable discretionary power An element which is
essential to the lawful exercise of power is that it should be exercised by the
authority upon whom it is conferred, and by no one else.� The principle is strictly applied, even where
it causes administrative inconvenience, except in cases where it may reasonably
be inferred that the power was intended to be delegable.� Normally the courts are rigorous in requiring
the power to be exercised by the precise person or body stated in the statute,
and in condemning as ultra vires action taken by agents, sub-committees or
delegates, however expressly authorized by the authority endowed with the
power. �� One aspect of this principle is the rule
that the participation of non-members in the deliberations or decisions of a
collective body may invalidate its acts.�
The decision of a disciplinary committee, for example, is likely to be invalid
if any non-member of the committee has taken part in its proceedings.� It is not clear that the mere presence of a
non-member will be fatal, although in one case Lord Wright Mr said: It would be most improper
on general principles of law that extraneous persons, who may or may not have
independent interests of their own, should be present at the formulations of
that judicial decision.� 39.������ This is not the occasion to deal with the
maxim delegates non potest delegare, although
there is some force in his submission, since this is not the issue before the
Court and it may have to be debated if such an occasion arises in the future. 40.�� Reliance was also placed by the learned
amicus curiae on the judgment of the Supreme Court in State of was
submitted relying on the pronouncement of the Supreme Court that it is the
delegate who has to satisfy himself before passing orders.� This judgment has no application to the facts
of the present case since the delegate has applied the principles of natural
justice before passing the impugned order. 41.������ The Supreme Court, in 1991 SC 2137 in the
case of Yogendra Prasad vs. Addl. Registrar, Co-op. Societies, �5.� In Chintapalli Agency Taluk arrack Sales
Co-op. Society Ltd. v. Secretary (Food & Agriculture), Govt. of Andhra
Pradesh, (1978) 1 SCR 563 : (AIR 1977 SC 2313), a similar question had
arisen.� The Dy. Registrar of
Co-operative Societies gave notice to the appellant and amended under S. 16(5)
of the A.P. Co-operative Societies Act the Bye-laws of the Society so as to
restrict the area of operation within the specified area.� On a revision filed against the order under
S. 77, the Registrar gave certain direction which was assailed being without
jurisdiction.� When it came before the
High Court, the High Court allowed the writ petition.� On appeal this Court held that the power of
the Registrar is in accordance with the pre-eminent position accorded by the
Act to the Registrar under whose supervision any other person appointed under
S. 3(1) may function and act.� �It is,
therefore, not correct that the Registrar could not exercise powers under S. 77
in examining the correctness, legality or propriety of the proceedings
initiated by the Dy. Registrar under S. 16(5) of the Act�.� It was further held that the power under S.
16 is that of the Registrar, but the Dy. Registrar is empowered by the
Government to exercise the power, but under the general superintendence of the
Registrar.� Accordingly it was held that
the revision was maintainable.� The same
ratio applies to the facts on hand.� The
Registrar under S. 6(1) of the Act has his pre-eminent supervisory authority
over the functions and orders of the Registrars appointed under S. 6(2)(a) to
assist him in the discharge of the duties or functions under the Act except
over his delegate under sub-section (4) of S.6.�
His supervisory or revisional power is to correct all palpable material
errors in the orders passed or the action taken by the subordinate officers
feeding injustice.� The language couched
in S. 56 advisedly was wide of the mark to reach injustice whenever found in
the orders or actions of his subordinate officers.� Merely because the Asstt. Registrar on
reference exercised the power under sub-section (3) of S. 48, the Registrar is
not denuded of his supervisory or revisional powers under S. 56 of the
Act.� Therefore, the Addl. Registrar as
delegate of the Registrar is clearly within his power to exercise his
revisional power over the appellate order under S. 48(6) of the Act.� It is accordingly legal and valid.� The ratio in Roop Chand v. State of Relying upon the language
in sub-section (9) of S. 48 �save as expressly provided in this section�, the
Division Bench construed that the appellate order of the Deputy Registrar
passed under S. 48(6) was otherwise provided and so was not amenable to
revision under S. 56.� The learned Judges
construed that since the appellate order shall be final, the effect of language
under sub-sec. (9) of S. 48 was to exclude the revisional jurisdiction of the
Registrar under S. 56.� In addition, the
Division Bench also construed that the Registrar himself referred the dispute
to the Asstt. Registrar and any person exercising the power of the Registrar in
this behalf is to be in the parameters of his delegate and that, therefore, the
Registrar himself cannot revise his own order under S. 56.� We find it difficult to approve the ratio of
the High Court.� At the cost of
repetition we point out that S. 6, sub-section (1) and sub-section (2)(a) make
a distinction between �the Registrar� and �a person exercising the powers of
the Registrar�.� Sub-section (4)
further amplifies the exercise of the power of the Registrar by the Additional
Registrar as his delegate.� That apart,
it is clear that the Registrar is the final supervisory authority over the
subordinate officers exercising the powers or performing the duties under the
Act.� The language in S. 56 was couched
very widely without being hedged with any limitation like the revisional powers
under S. 115, C.P.C. or the similar language used in sister Acts in some other
States like A.P.� The reason appears to
be obvious.� The order of the Dy.
Registrar by language of sub-section (6) of S. 48, undoubtedly shall be final.� We are aware that when the legislature
gives �finality� to an order, it is normally not open to revision.� But still it must be construed in the light
of the Scheme of the Act, its operation and resultant effect.� The language in S. 56 is not hedged with any
limitation of the finality in sub-section (6) of S. 48.� Thus we hold that the revisional power under
S. 56 is independent of the appellate powers under Section 48(6).� The later is amenable to revision by the
Registrar.� The ratio of the Division
Bench in Din Dayal�s case (AIR 1976 Pat 179) (supra) is, therefore, not good
law.� (Emphasis by
Court) 42.� We are essentially dealing with the question
whether the impugned order is passed under the provisions of SEBI Act.� The directions are clearly u/s. 11, which,
admittedly, are appealable to the Tribunal and it would be anomalous to suggest
that the order of SEBI can be bifurcated into two parts as suggested by the
learned counsel for SEBI. 43.������ We accordingly hold, for the reasons
stated above, that the appeal is maintainable in the facts and circumstances of
the case. 44.������ The Court places on record the valuable
assistance rendered by Mr. Ashish Bhakta as amicus curiae. 45.������ Call
on ����������������������� Sd/- Justice Kumar Rajaratnam ����������������������������������������������� �Presiding Officer ����������������������������������������������������������������������������������� ����������� Sd/-��������������������������������������������������������������������������� Sd/- (R.N.
Bhardwaj)���������������������������������������������������� (C.
Bhattacharya) Member������������������������������������������������������������������ Member Place: Mumbai Date: |
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