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2012 (2) TMI 653 - HC - Companies LawNo show cause notice was issued either to the appellant No.1 or to the National Multi Commodity Exchange of India Limited respondent No.3 - Held that - In absence of any show cause to appellant No.1 as well as the respondent No.3 NMC the impugned Order dated 23rd July 2011 passed by the respondent No.1 is contrary to the principle of natural justice and no action could be taken either against appellant No.1 or respondent No.3. NMC in pursuance of the impugned order passed by the respondent No.1 Commission and the same deserves to be quashed and set aside so that a fresh order/decision may be passed by the respondent No.1-Commission on the points raised by the appellants No. 1 and 2 as well as respondent No.3 after issuing a show cause notice inviting objections and also after considering the objections and after affording opportunity of hearing to all necessary parties.
Issues Involved:
1. Validity of the show cause notice issued by the Forward Markets Commission. 2. Jurisdiction of the Forward Markets Commission to issue the show cause notice. 3. Compliance with the principles of natural justice. 4. Validity of the impugned order dated 23rd July 2011. 5. Appointment of the Managing Director and CEO of the National Multi Commodity Exchange of India Limited (NMC). Detailed Analysis: 1. Validity of the Show Cause Notice: The initial challenge in the appeal was against a show cause notice dated 21.6.2011 issued by the Forward Markets Commission (FMC), Ministry of Consumer Affairs, Government of India, to appellant No. 2. The notice required the appellant to show cause why action should not be taken against him for alleged serious and illegal/fraudulent acts of omission and commission. The appellant No.1 challenged this notice via Special Civil Application No. 8377 of 2011, which was dismissed by a learned Single Judge. The dismissal was subsequently challenged by way of the present Letters Patent Appeal. 2. Jurisdiction of the Forward Markets Commission: During the pendency of the appeal, the Division Bench passed an order allowing the appellant to raise the question of the jurisdiction of the FMC to issue the show cause notice. The FMC continued the hearing and passed an order on 23rd July 2011 against appellant No.1 and appellant No.2. The appellants contended that the FMC lacked the power under the Forward Contracts (Regulation) Act, 1952, to issue such a notice. The respondents, including the Assistant Solicitor General of India, agreed that no show cause notice had been issued to appellant No.1 or the NMC by the FMC. The FMC indicated it would issue a show cause notice as required under the relevant statutes. 3. Compliance with the Principles of Natural Justice: The appellants argued that the impugned order dated 23rd July 2011 was contrary to the principles of natural justice due to the absence of a show cause notice to appellant No.1 and the NMC. The Court held that in the absence of such notice, the impugned order could not stand and must be quashed. The FMC was directed to issue a show cause notice, invite objections, and afford an opportunity of hearing to all necessary parties before passing a fresh order. 4. Validity of the Impugned Order Dated 23rd July 2011: The Division Bench observed that any decision taken in the meeting held on 19th September 2011 would be subject to the final outcome of the present appeal. The Court concluded that the impugned order dated 23rd July 2011 was contrary to the principles of natural justice and deserved to be set aside. The FMC was instructed to take a fresh decision after issuing a show cause notice and considering objections from all necessary parties within four months. 5. Appointment of the Managing Director and CEO of NMC: During the pendency of the appeal, issues related to the appointment of the Managing Director were raised. The term of the current Managing Director, Mr. Anil Mishra, was extended until the final disposal of the appeal. The Court directed the FMC to appoint an independent person other than appellant No.2 and Mr. Anil Mishra as the Managing Director and CEO of NMC within a week. Mr. Anil Mishra was to continue in his role for one week until the new appointment was made. Conclusion: The appeal was disposed of with directions to the FMC to issue a show cause notice and take a fresh decision in compliance with the principles of natural justice. The Court did not delve into the merits of the appeal but focused on ensuring procedural fairness. The FMC was also directed to appoint an independent Managing Director and CEO for NMC.
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