1998 (8) TMI 479 - HC - Companies Law

Issues Involved:
1. Constitutional validity of Rule 8(2) of the Securities Contracts (Regulation) Rules, 1957.
2. Alleged violation of Articles 14 and 19(1)(g) of the Constitution of India.
3. The power of the Central Government to frame rules under the Securities Contracts (Regulation) Act, 1956.
4. The right to carry on business in securities as a fundamental right.
5. The amenability of the Stock Exchange to writ jurisdiction.

Detailed Analysis:

1. Constitutional Validity of Rule 8(2):
The petitioner challenged Rule 8(2) of the Securities Contracts (Regulation) Rules, 1957, arguing that it was unconstitutional. Rule 8(2) outlines specific conditions for membership in a recognized stock exchange, which the petitioner contended were unreasonable and arbitrary. The court examined the rule and found it to be within the rule-making power of the government under Section 30 of the Securities Contracts (Regulation) Act, 1956. The court held that the rule did not violate any constitutional provisions and was valid.

2. Alleged Violation of Articles 14 and 19(1)(g):
The petitioner argued that the restrictions imposed by Rule 8(2) violated Articles 14 and 19(1)(g) of the Constitution, which guarantee equality before the law and the right to practice any profession or to carry on any occupation, trade, or business. The court referred to the Supreme Court's decision in Madhubhai Amathalal Gandhi v. Union of India, which upheld similar restrictions as reasonable and necessary for the regulation of the securities market. The court found that the restrictions were not arbitrary and did not violate the petitioner's fundamental rights.

3. Power of the Central Government to Frame Rules:
The respondents argued that the Central Government had the authority to frame rules under Section 30 of the Securities Contracts (Regulation) Act, 1956. The court agreed, stating that the rule-making power was clearly provided for in the Act, and the government was competent to frame Rule 8(2).

4. Right to Carry on Business in Securities:
The petitioner claimed that the right to carry on business in securities was a fundamental right under Article 19(1)(g). The court, however, held that trading in securities is not a fundamental right but a statutory right, regulated by the Securities Contracts (Regulation) Act, 1956. The court cited the Supreme Court's decision in Ibrahim Sulaiman v. M.C. Mohammed, which stated that the right to contest an election is not a common law right but a statutory right, and similar principles applied to the business of trading in securities.

5. Amenability of the Stock Exchange to Writ Jurisdiction:
The petitioner sought a writ directing the Stock Exchange to grant him membership without imposing unreasonable terms. The respondents argued that the Stock Exchange was not amenable to writ jurisdiction. The court referred to the decisions in R. Jagadesh Kumar v. P. Srinivasan and Satish Nayak v. Cochin Stock Exchange Ltd., which held that Stock Exchanges do not perform public duties and are not authorities under Article 12 of the Constitution. Therefore, they are not amenable to writ jurisdiction under Article 226. The court agreed with this view and held that no writ could be issued against the Stock Exchange.

Conclusion:
The court dismissed the writ petition, holding that Rule 8(2) of the Securities Contracts (Regulation) Rules, 1957, is constitutionally valid. The court found no violation of Articles 14 and 19(1)(g) of the Constitution. It upheld the power of the Central Government to frame rules under the Securities Contracts (Regulation) Act, 1956, and stated that the right to trade in securities is a statutory right, not a fundamental right. The court also held that the Stock Exchange is not amenable to writ jurisdiction.

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