2002 (1) TMI 1224 - HC - Companies Law

Issues Involved:
1. Legality of the notification issued against the notified person.
2. Impact of the notification on the petitioner-company's business operations.
3. Jurisdiction and maintainability of the writ petition in view of the alternative remedy provided under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992.
4. Whether stock exchanges are amenable to writ jurisdiction under Article 12 of the Constitution.

Issue-wise Detailed Analysis:

1. Legality of the Notification Issued Against the Notified Person:
The petitioner-company challenged various communications and notifications issued by the Custodian under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992. The notification dated 20-11-2001 listed Shri Ajoy Kayan as a notified person, which led to the suspension of the petitioner-company's trading facilities by various stock exchanges. The petitioner argued that the company, incorporated in November 1994, could not have been involved in transactions during the material period (1-4-1991 to 6-6-1992) and thus should not be affected by the notification against Shri Kayan.

2. Impact of the Notification on the Petitioner-Company's Business Operations:
The stock exchanges, upon receiving the notification, deactivated the petitioner-company's trading terminals and requested the resignation of the notified person from the board of directors. The petitioner-company contended that it is a separate legal entity and should not suffer due to the notification against its director and majority shareholder. The company argued that its assets, including membership cards and security deposits, were not attached, and the shares of the notified person should not affect the company's business operations.

3. Jurisdiction and Maintainability of the Writ Petition in View of the Alternative Remedy:
The respondent argued that the writ petition is not maintainable due to the availability of an alternative remedy under the Act. The Act provides a complete and efficacious remedy for grievances through the Special Court. The court noted that the Special Court, manned by sitting High Court judges, has exclusive jurisdiction over matters related to transactions in securities involving notified persons. The court emphasized that the existence of an alternative remedy does not oust the writ court's jurisdiction but should be considered while exercising discretion. The court highlighted that the petitioner, being a non-notified person, could approach the Special Court for redressal of grievances.

4. Whether Stock Exchanges are Amenable to Writ Jurisdiction Under Article 12 of the Constitution:
The court examined whether stock exchanges are authorities under Article 12 and thus amenable to writ jurisdiction. The court noted that stock exchanges are bodies created under the Securities Contracts (Regulation) Act, 1956, and discharge public functions. The court referred to the memorandum of association of various stock exchanges, which indicated that their activities are conducted in public interest. The court found that there is deep and pervasive governmental control over stock exchanges, and they are subject to regulations by the Securities and Exchange Board of India (SEBI). The court concluded that stock exchanges are authorities within the meaning of Article 12 and are amenable to writ jurisdiction.

Conclusion:
The court held that the writ petition is not maintainable due to the availability of an alternative remedy under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992. The court dismissed the writ petition with liberty to the petitioner and the custodian to initiate appropriate proceedings before the Special Court. The court also held that stock exchanges are authorities under Article 12 and are amenable to writ jurisdiction.

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