2015 (9) TMI 1193 - HC - Companies Law

Application for injunction in a defamation action brought by the National Stock Exchange ( NSE ) - The NSE complains that an article published on 19th June 2015 by Defendants Nos. 2 and 3, Ms. Sucheta Dalal and Mr. Debashish Basu, on their online news and analysis journal or website moneylife in, is per se defamatory. - Ms. Dalal is the Managing Editor of Moneylife; Mr. Basu is its Executive Editor. Their article accuses the NSE of actively permitting, in circumstances that I will describe in somewhat greater detail shortly, illicit trading advantages being afforded to a select few using high-end technology. Held that - this is not directly a question of freedom of press or free speech. At the same time I do not believe that a defamation action should be allowed to be used to negate or stifle genuine criticism, even pointed criticism or criticism that is harshly worded; nor should it be allowed to choke a fair warning to the public if its interest stands threatened in some way. It is to me a matter of very great dismay that the NSE should have attempted this action at all. Except where it is shown that the article complained of is facially defamatory, that is to say, it is prima facie intended to defame or libel, an injunction will not readily be granted. Every criticism is not defamation. Every person criticized is not defamed. We forget that it is these persons we are so wont to mock who are, truly, the watchdogs of our body politic, the voice of our collective conscience, the sentinels on our ramparts. They may annoy. They may irritate. They certainly distress and cause discomfort. That is not only their job. It is their burden. Watchdogs respond to whistles and whistles need whistleblowers; and between them if they can ask what others have not dared, if they can, if I may be permitted this, boldly go where none have gone before; if they can, as they say, rattle a few cages, then that is all to the good. Neither of our principal stock exchanges are strangers to scandal; no matter what the NSE may think of itself, and even if Dr. Tulzapurkar insists that the past is the past and irrelevant today, public memory is not that short. The scams that beleaguered our exchanges in the past, and those that continue to occupy the time of this Court have at least in part come to light because of persons like Ms. Dalal and her fellow travellers. If regulatory agencies have been compelled to make changes, and if our own Supreme Court has felt it necessary to step in with drastic orders, it is because every oversight process has either failed or been subverted. The Plaintiffs are in error when they describe Ms. Dalal as some out-of-control lone wolf. The nation may or may not want to know; Ms. Dalal does. So do her readers. And, as it happens, so do I. She is certainly entitled to ask, to question, to doubt and to draw legitimate conclusions. Today, all our institutions face the crisis of dwindling public confidence. Neither the NSE nor the judiciary are exceptions to this. It presents a very real dilemma, for the existence of our institutions is posited on that very public confidence and faith and its continuance. The challenge is, I think, in finding legitimate methods of restoring that public trust, that balance. Hence the cries for transparency and accountability everywhere; and I see no reason why the NSE should be any exception to this. As a result, there is no prima facie case made here at all, nor is there any question of balance of convenience or any sort of prejudice being caused to the Plaintiffs if the injunction sought is declined. I will not grant the injunction sought. The Notice of Motion is dismissed. The previous ad-interim order is vacated. Our Courts are not to be treated as playgrounds for imagined and imaginary slights for those who command considerable resources. There will be an order of costs in the amount of ₹ 1.5 lakhs each in favour of Ms. Dalal and Ms. Basu separately. In addition, the Plaintiff will pay an amount of ₹ 47 lakhs in punitive and exemplary costs payable not to the Defendants but to public causes, viz., in equal parts to the Tata Memorial Hospital and the Masina Hospital, it being made clear that these amounts are to be used only for the free treatment of the indigent. - Decided against the petitioner.

Summary

Issues Involved:
1. Application for injunction in a defamation action.
2. Allegations of illicit trading advantages at NSE.
3. Defendants' publication of allegedly defamatory articles.
4. Verification and response to allegations.
5. Legal standards for defamation and fair comment.
6. Costs and exemplary damages.

Detailed Analysis:

1. Application for Injunction in a Defamation Action:
The National Stock Exchange (NSE) sought an injunction against the defendants for publishing an allegedly defamatory article. The article accused NSE of permitting illicit trading advantages to select traders using high-end technology, based on an anonymous letter addressed to SEBI and copied to Ms. Dalal.

2. Allegations of Illicit Trading Advantages at NSE:
The article published on moneylife.in accused NSE insiders of allowing certain institutions to profit illegally through high-frequency trading (HFT) and algorithmic trades (algo trades). The article suggested that NSE's management of HFT servers until 2013 needed a detailed review by SEBI or an investigation agency.

3. Defendants' Publication of Allegedly Defamatory Articles:
The defendants, Ms. Dalal and Mr. Basu, published articles on 19th June and 8th July 2015 alleging serious wrongdoings by NSE. The articles implied that NSE's insiders facilitated illegal trades and that the NSE operated like a fortress, unwilling to provide information or clarification.

4. Verification and Response to Allegations:
Ms. Dalal, after receiving the anonymous letter, made inquiries with various regulators and traders. She emailed the Chairman of SEBI and top NSE officials seeking their response to the allegations but received no reply. The court noted that the NSE did not mention these communications in the plaint, which suggested an attempt to mislead.

5. Legal Standards for Defamation and Fair Comment:
The court referenced several legal precedents to determine whether the articles constituted fair comment. It was emphasized that fair comment must be based on facts and made in the public interest. The court found that Ms. Dalal took reasonable steps to verify the information and sought NSE's response before publishing the articles. The court held that the articles were not defamatory as they were published after due diligence and in the public interest.

6. Costs and Exemplary Damages:
The court dismissed the application for injunction and vacated the previous ad-interim order. It awarded costs of Rs. 1.5 lakhs each to Ms. Dalal and Mr. Basu. Additionally, the court imposed Rs. 47 lakhs in punitive and exemplary costs on NSE, payable to Tata Memorial Hospital and Masina Hospital for the free treatment of the indigent. The application for stay was refused.

The judgment emphasized the importance of freedom of speech and expression, especially in matters of public interest, and criticized the NSE for attempting to stifle legitimate criticism through legal action.