2002 (2) TMI 1243 - HC - Companies Law

Summary

Issues:
1. Challenge to the validity of SEBI Rules, 1992 and Regulations 1992.
2. Allegation of excessive delegation of power to SEBI.
3. Allegation of violation of principles of natural justice.
4. Argument against the levy of registration fees on investors.
5. Questioning the quantum of registration fee.

Analysis:
1. The writ petitioner sought a prohibitory order against SEBI, challenging the legality of SEBI Rules, 1992, and Regulations 1992. The petitioner alleged that these regulations were unconstitutional and void ab initio. Additionally, the petitioner challenged the validity of the prohibition order related to the 'Sale and then purchase of shares,' claiming that SEBI had been delegated excessive powers without laying down guidelines, which was against the principles of natural justice.

2. The main argument of the petitioner was based on the excessive delegation of power to SEBI without following the provisions of the Securities and Exchange Board of India Act, 1992. However, the court noted that Section 31 of the Act requires any rules or regulations framed by SEBI to be laid before Parliament for scrutiny, indicating that there are checks and balances in place to prevent excessive delegation of power.

3. The court emphasized that SEBI's functions, as outlined in Sections 11 and 12 of the Act, empower it to regulate the securities market and protect investors' interests. The court found that SEBI's powers were not arbitrary or excessive, as they were in line with the objectives of the Act and subject to parliamentary oversight.

4. The petitioner argued that the levy of registration fees on investors was against the Act. However, the court clarified that the Act and rules primarily dealt with brokers and sub-brokers, not investors. The court highlighted that no registration fee had been levied on investors directly, and the regulations only required stock-brokers to pay registration fees.

5. Regarding the quantum of the registration fee, the court cited a Supreme Court decision that upheld SEBI's authority to fix the fee, provided it was within the statutory framework. The petitioner did not challenge the quantum of the fee but focused on the alleged excessive delegation of powers to SEBI, which the court found unsubstantiated.

In conclusion, the court dismissed the petition, finding no merit in the petitioner's arguments against SEBI's regulations and the levy of registration fees. The court upheld SEBI's authority under the Act and emphasized the importance of parliamentary oversight in regulating the securities market.