2003 (10) TMI 387 - HC - Companies Law

Summary

Issues:
Challenge to the legality and validity of an administrative circular issued by respondent No. 2 regarding moving securities to trade for trade segment without hearing affected parties.

Analysis:
The petitioner, claiming to be a director and investor in a company, challenged a circular by respondent No. 2 moving securities to trade for trade segment without hearing affected parties. The petitioner argued that the decision was arbitrary, discriminatory, and violated principles of natural justice. The petitioner contended that the decision caused serious financial injury and was illegal, biased, and against regulations. On the other hand, respondent No. 2 defended the decision as a preventive measure to safeguard small investors and prevent manipulation in the market. They argued that the decision was lawful, temporary, and based on expert opinion to ensure genuine trade and protect shareholders' interests.

The Court found no substance in the petitioner's challenge, upholding the legality and validity of the circular. The Court noted that decisions like these are transitory, subject to review, and aimed at stabilizing the market and preventing manipulation. The Court emphasized the role of expert bodies in making such decisions to protect small investors and maintain market integrity. The Court rejected the petitioner's arguments of arbitrary selection and hostile discrimination, highlighting that other affected companies did not challenge the circular. The Court concluded that the circular was an administrative decision within legal boundaries, based on expert opinion, and aimed at genuine trade and preventing false transactions. The Court declined to expand judicial review under Article 226, stating that they lacked expertise in share markets. Ultimately, the Court found no malice, arbitrariness, or unreasonableness in the circular, considering it a temporary measure to control certain scrips' movement in the stock market, and dismissed the petition.