1995 (3) TMI 330 - HC - Companies Law

Summary

Issues Involved:
1. Allegations of fraudulent conduct by the petitioner.
2. Validity and constitution of the Disciplinary Committee.
3. Jurisdiction and authority of the Disciplinary Committee in the absence of valid Bye-laws.
4. Allegations of bias against the Chairman of the Disciplinary Committee.
5. Maintainability of a writ petition against the Stock Exchange.

Detailed Analysis:

1. Allegations of Fraudulent Conduct by the Petitioner:
The petitioner, a Member of the Bangalore Stock Exchange Limited, faced allegations from the 6th respondent, T.S. Gopalakrisnan, of fraudulently preparing a contract in collusion with an Assistant General Manager and collecting substantial amounts from C.R. Thimmaiah and the Defaults Committee. The Council of Management of the Stock Exchange appointed P. Srinivasan and S.S. Naganand to investigate these allegations. Their preliminary report suggested a prima facie case, leading to further investigation by B.S. Venkatanarasiah and P.K. Rungta, who confirmed the allegations and recommended a detailed inquiry by the Disciplinary Committee.

2. Validity and Constitution of the Disciplinary Committee:
The petitioner raised objections regarding the constitution of the Disciplinary Committee, arguing that it was not in accordance with article 62(a) of the Stock Exchange's articles of association, which mandates a 40:60 ratio between member brokers and non-members. The Disciplinary Committee, however, overruled these objections, stating that the President and Executive Director had excused themselves, and the remaining members maintained the required ratio. The Committee also noted that the 1st respondent was elected to preside over the Committee following the President's recusal.

3. Jurisdiction and Authority of the Disciplinary Committee in the Absence of Valid Bye-laws:
The Disciplinary Committee acknowledged that the Bye-laws under which the inquiry was initiated had not been validly brought into force due to non-compliance with section 9(4) of the Securities Contracts (Regulation) Act. However, they argued that the initiation of action was still valid, as their authority could be traced to article 64 of the articles of association, allowing them to proceed even without the specific Bye-laws.

4. Allegations of Bias Against the Chairman of the Disciplinary Committee:
The petitioner contended that the 1st respondent was biased, having participated in the preliminary investigation and the Council meetings where the report was considered. This participation, according to the petitioner, compromised the fairness of the trial. The respondents countered this by asserting that the 1st respondent's role was limited and did not preclude him from sitting on the Disciplinary Committee.

5. Maintainability of a Writ Petition Against the Stock Exchange:
The respondents argued that a writ petition was not maintainable against the Stock Exchange, as it is a company engaged in commercial activities and does not owe a public duty. The Court supported this view, explaining that the Stock Exchange's actions in regulating membership do not constitute a public duty. The Court referenced the Supreme Court's decisions in Anadi Mukta Sadguru and Praga Took Corpn., emphasizing that mandamus lies to secure the performance of a public duty, which was not applicable in this case.

Conclusion:
The Court concluded that the Stock Exchange, in regulating its membership, does not perform a public duty amenable to writ jurisdiction. Consequently, the petition was dismissed, and the rule was discharged.