1998 (12) TMI 452 - HC - Companies Law

Summary

Issues Involved:
1. Authority of SEBI to impound or forfeit monies.
2. Requirement to follow principles of natural justice.
3. Violation of Article 300A of the Constitution.
4. Applicability of unjust enrichment doctrine.

Summary:

1. Authority of SEBI to Impound or Forfeit Monies:
The court addressed whether SEBI had the authority under the existing statute to impound or forfeit the monies received by the Stock Exchanges. It was held that SEBI had ample authority under sections 11 and 11B of the SEBI Act to take remedial measures, including impounding money to prevent market manipulation. The court noted, "SEBI has to protect the interests of the investors in Securities and has to regulate the securities market by such measures as it thinks fit."

2. Requirement to Follow Principles of Natural Justice:
The court examined if SEBI was required to follow the principles of natural justice before passing the impugned orders. It was determined that SEBI's orders were of an interim nature, and thus, pre-decisional hearing was not obligatory. The court stated, "The orders cannot be said to be the orders so as to take away any earned benefit for all times to come or an action to the prejudice of any party entailing any penal consequences for all times to come."

3. Violation of Article 300A of the Constitution:
Regarding the violation of Article 300A, the court held that the respondents had not been deprived of their property without authority of law. It was noted, "Once it has been held that the SEBI had the authority of law to pass the impugned orders, there is no question of invoking Article 300A of the Constitution of India."

4. Applicability of Unjust Enrichment Doctrine:
The court addressed whether the relief could be denied to the respondents on the principles of unjust enrichment. It concluded that the relief could not be granted regardless of unjust enrichment because SEBI acted within its legal authority. The court observed, "The SEBI had ample authority of law under the existing statutes to take action as have been taken by it."

Conclusion:
The court set aside the judgment of the learned single Judge quashing the SEBI orders and upheld SEBI's authority to take interim measures to prevent market manipulation. The Letters Patent Appeal No. 236 of 1997 was allowed, and the Letters Patent Appeal No. 237 of 1997 was partly allowed, directing a re-hearing before the SEBI Committee.