2007 (10) TMI 397 - SC - Companies Law

Constitutionality validity of SEBI (Stock Brokers and Sub-Brokers) Rules and Regulations, 1992 - Held that - Appeal dismissed. Although the writ petitioner in the present case is different but the repeated attempts are being made to get the rules/regulations invalidated. This has been adversely commented upon by the High Court of Delhi. Once the regulations are declared to have been validly made then it is not open to the counsel for the appellant to argue that the same was not examined from a particular angle and the court should re-examine it again. It is especially so, when the counsel who is appearing before us had appeared in the earlier cases as well.

Summary

Issues Involved:
1. Vires and constitutionality of SEBI (Stock Brokers and Sub-Brokers) Rules and Regulations, 1992.
2. Compliance with Section 31 of the Securities and Exchange Board of India Act, 1992 regarding the laying of rules before Parliament.
3. Directory vs. mandatory nature of the requirement to lay rules before Parliament.

Issue-wise Detailed Analysis:

1. Vires and Constitutionality of SEBI (Stock Brokers and Sub-Brokers) Rules and Regulations, 1992:
The primary contention in the appeals was the vires and constitutionality of SEBI (Stock Brokers and Sub-Brokers) Rules and Regulations, 1992. The High Courts of Bombay and Uttaranchal upheld the vires and constitutionality of these rules and regulations. The challenge was primarily based on the procedural aspect of the rules not being laid before both Houses of Parliament as mandated by Section 31 of the SEBI Act.

2. Compliance with Section 31 of the Securities and Exchange Board of India Act, 1992:
Section 31 mandates that every rule and regulation made under the SEBI Act must be laid before each House of Parliament for a total period of thirty days, which can be in one session or multiple sessions. The appellant argued that the rules were not laid for the required period as the Houses were adjourned sine die and not re-laid in the new session. The rules were laid before the Lok Sabha on 27-11-1992 and before the Rajya Sabha on 16-12-1992, with both Houses adjourned sine die on 23-12-1992 and the new session starting on 22-2-1993.

3. Directory vs. Mandatory Nature of the Requirement:
The court examined Rule 234 of the Rules of Procedure and Conduct of Business in Lok Sabha, which clarifies that if the period specified for laying the rules is not completed in one session, the rules must be re-laid in succeeding sessions until the period is completed. However, Section 31 of the SEBI Act allows the completion of the requisite period in one or more sessions, making the re-laying unnecessary. The court referred to various precedents, including Atlas Cycle Industries Ltd. v. State of Haryana and Bank of India v. O.P. Swarnakar, which established that the provision for laying rules before Parliament is directory and not mandatory. Thus, even if the rules were not laid for the full period, it would not render them ultra vires.

Final Judgment:
The court found no substance in the appellant's submission that the rules were ultra vires due to non-compliance with Section 31. The rules were laid before both Houses as required, and the procedure mandated by Section 31 was followed. The court dismissed the appeals, reiterating that the requirement to lay rules before Parliament is directory, not mandatory, and upheld the validity of the SEBI (Stock Brokers and Sub-Brokers) Rules and Regulations, 1992. The appeals were dismissed with costs assessed at Rs. 20,000 in each appeal.