1999 (10) TMI 646 - HC - Companies Law

Summary

Issues Involved:
1. Whether a writ under Article 226 of the Constitution can be issued against the Stock Exchange, Mumbai.
2. Merits of the case concerning the Arbitration Committee's award and the requirement for the petitioner to deposit a sum for appeal.

Issue-wise Detailed Analysis:

1. Whether a writ under Article 226 of the Constitution can be issued against the Stock Exchange, Mumbai:

2. A preliminary objection was raised by respondent No. 2, contending that a writ under Article 226 of the Constitution would not lie against respondent No. 1, the Stock Exchange, Mumbai.

3. The Stock Exchange, Mumbai, is a recognized Stock Exchange under the Securities Contracts (Regulation) Act, 1956, and is governed by its own rules, bye-laws, and regulations. The Central Government recognizes the Exchange under sections 3 and 19 of the Act and has the power to withdraw recognition under section 5. The Exchange must file periodical returns and annual reports with the Central Government and SEBI, and its rules and bye-laws must be approved by SEBI and the Central Government. SEBI can nominate members to the Governing Board, and the Central Government can supersede the Board and suspend business under sections 11 and 12, respectively. An appeal against refusal to list securities lies with the Central Government under section 22.

4. SEBI regulates the business and functions of the Exchange under section 11 of the SEBI Act, 1992, and the Central Government has control over SEBI under sections 16, 17, and 18. The appointment of the Exchange's Executive Director requires SEBI's approval.

5. Respondent No. 2's counsel cited several judgments to argue that no writ under Article 226 can be issued against the Stock Exchange, Mumbai, including Chander Mohan Khanna v. NCERT, Satish Nayak v. Cochin Stock Exchange Ltd., R. Jagadeesh Kumar v. P. Srinivasan, Rakesh Gupta v. Hyderabad Stock Exchange Ltd., and Tekraj Vasandi v. Union of India.

6. Conversely, the counsel for the petitioner and respondent No. 1 argued that the Stock Exchange, Mumbai, is amenable to writ jurisdiction under Article 226, citing various facts and circumstances and relying on judgments such as Shri Anadi Mukta Sadguru Shree Muktajee Vandasjiswami Suvarna Jayanti Mahotsav Smarak Trust v. V.R. Rudani and Mrs. Sejal Rikeen Dalal v. Stock Exchange.

7. The Supreme Court in Shri Anadi Mukta Sadguru Shree Muktajee Vandasjiswami Suvarna Jayanti Mahotsav Smarak Trust held that a writ under Article 226 can be issued against any person or body performing public duty. This Court in Mrs. Sejal Rikeen Dalal's case concluded that the Stock Exchange, Bombay, is amenable to writ jurisdiction under Article 226 due to its statutory functions and public interest objectives.

8. The petitioner's counsel also relied on Rajasthan State Electricity Board v. Mohan Lal and Ajay Hasia v. Khalid Mujib Sehravardi, where the Supreme Court gave a wide interpretation to the term 'authorities' under Article 12 to include various statutory corporations.

12. The respondent No. 1's counsel further supported the amenability of the Stock Exchange to writ jurisdiction under Article 226 by citing U.P. State Co-op. Land Development Bank Ltd. v. Chandra Bhan Dubey and other significant judgments like Dwarka Nath v. ITO and Praga Tools Corpn. v. C.A. Imanual.

21. From the judgments cited, it is clear that the jurisdiction under Article 226 can be exercised against any person or authority rendering a public utility service. The objective of a writ of mandamus is to reach injustice wherever it is found.

22. Based on the facts and circumstances and the judgments cited, the Court held that a writ of mandamus under Article 226 would lie against the Mumbai Stock Exchange.

2. Merits of the case concerning the Arbitration Committee's award and the requirement for the petitioner to deposit a sum for appeal:

23. In an Arbitration proceeding before the Arbitration Committee of Mumbai Stock Exchange, an award was passed in favor of respondent No. 2, directing the petitioner to pay Rs. 1,14,38,467.75 by the award dated 26-6-1999.

24. The petitioner filed an appeal against the award. Bye-law 291A of Mumbai Stock Exchange requires a full deposit of the amount unless exempted by the Governing Body or the President. The petitioner sought full exemption from deposit due to financial constraints and the value of her membership card.

25. The Mumbai Stock Exchange informed the petitioner that the Governing Board decided her appeal would be considered if she deposited Rs. 50 lakhs.

26. The petitioner made another plea for total exemption, citing her financial condition. The Board allowed her to deposit securities worth Rs. 50 lakhs instead of cash and considered her existing deposits with the Exchange.

27. The Stock Exchange counsel pointed out that full deposits are typically required, and the petitioner had already received more than a 50% concession and the option to deposit securities.

28. Respondent No. 2's counsel emphasized that the award becomes a decree under the Arbitration and Conciliation Act, 1996, and the full amount should be deposited to secure his client's interests.

29. The Court found that the petitioner had already been given a significant concession and the option to deposit securities. Therefore, the Governing Board's decisions were not unreasonable, illegal, or arbitrary.

30. The petition was dismissed as devoid of merits.