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TMI Blog1995 (2) TMI 294X X X X Extracts X X X X X X X X Extracts X X X X ..... go into the facts which are indeed complex and diverse, since, in my opinion, the writ petitions are fit to succeed on the ground of violation of the rules of natural justice alone. The articles of association of the stock exchange, which are deemed to be rules under section 2( g ) of the Securities Contracts (Regulations) Act, 1956, under which the stock exchange has been established, read with its bye-laws, provide for penalties, such as, defaulter, expulsion, suspension, fine, etc. Article 29 in this connection may be noticed in extenso : "29( a )The council may, subject to the provisions of the Securities Contracts (Regulation) Act, 1956, and the Rules framed thereunder from time to time, make bye-laws and regulations for defining what acts or omissions constitute a member committing the same a defaulter, or what acts or omission render him liable to expulsion, suspension, fine or withdrawal or suspension of rights and privileges of membership and other consequences. ( b )If any person becomes a defaulter within the meaning so defined by the bye-laws and regulations made in that behalf as aforesaid, the council shall declare him a defaulter and thereupon all the consequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pportunity to defend himself in the matter of proposed expulsion or suspension of membership which are by far less stringent penalties, no such protection whatsoever is available to him in the matter of declaration as defaulter. The consequences of declaration of defaulter are the severest as it disables the person from trading in shares and securities in any stock exchange of the country. It would not be out of place to mention here that in the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992, a detailed procedure has been laid down in regard to giving show-cause notice, manner of holding enquiry against any action in the matter of suspension or cancellation of registration, with a right of appeal to the Central Government. The stock exchange would be well advised to consider suitably amending its bye-laws making the same more in conformity with the rules of natural justice and fair play. However, the absence of the provisions in regard to giving opportunity of hearing or enquiry cannot affect the rights of the persons in the least. It is well-settled that where there are specific provisions made in the statute in regard to opportunity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be given an opportunity to represent his case before he is put on the blacklist." The same view was reiterated later in the case of Raghunath Thakur v. State of Bihar, AIR 1989 SC 620, wherein it was observed : "It has to be realised that blacklisting any person in respect of business ventures has civil consequences for the future business of the person concerned in any event. Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have the right of being heard and making representations against the order." The observations made hereinabove apply on all fours to the declaration of defaulters. It not only casts a stigma but may also affect the livelihood of the person. There can be no doubt that observance of the rules of natural justice and fair play are obligatory. It is an admitted position that no opportunity of hearing was given to the petitioners before the impugned decision was taken, nothing to say of any enquiry. The respondents have taken the stand that the petitioners had been given ample opportunity to clear their liabilities which they did not do and in the circumstances they cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have decided not to go into individual cases. It may well be that the petitioners or some of them are not creditworthy or unblemished. Their cases may not also be the same but as would appear from the impugned notification and the communications in that regard, they all have been treated alike. The facts constituting default or the reasons for coming to the conclusion have not at all been stated in the impugned notification/communication. In Mukherjee ( S.N. ) v. Union of India, AIR 1990 SC 1984, a Constitution Bench of the apex court emphasized the need of recording reasons in exercising quasi-judicial functions in the following words (at page 1995) : "An important consideration which has weighed with the court for holding that an administrative authority exercising quasi-judicial functions must record the reasons for its decision, is that such a decision is subject to the appellate jurisdiction of this court under article 136 of the Constitution as well as the supervisory jurisdiction of the High Courts under article 227 of the Constitution and that the reasons, if recorded, would enable this court or the High Courts to effectively exercise the appellate or supervisor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f natural justice which govern exercise of power by administrative authorities. The rules of natural justice are not embodied rules. The extent of their application depends upon the particular statutory frame-work whereunder jurisdiction has been conferred on the administrative authority . . . except in cases where the requirement has been dispensed with expressly or by necessary implication, an administrative authority exercising judicial or quasi judicial functions is required to record the reasons for its decision." If reasons had been indicated in respect of the petitioners it would have been more convenient and appropriate to consider their cases. Even counsel for the respondents was not in a position to take the stand that all the petitioners stand on the same footing. The only way out in the circumstances was to consider the matter as if we were giving a post-decisional hearing. In a case beset with complex and intricate facts, many of them being of a technical nature, we decided not to embark upon such an exercise and to remit the matter back for fresh consideration. One of the aspects in controversy was that the decision had been taken by the then executive director ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd taking appropriate decision. For the reasons stated above, I am satisfied that there has been a gross violation of the principles of natural justice causing prejudice to the petitioners. The writ petitions are fit to be allowed on this ground alone. In the result, the writ petitions are allowed. The impugned decisions as contained in the notifications and the communications thereof, copies whereof have been marked annexures 13 and 14 in C.W.J.C. No. 1761 of 1991, annexures 11 and 11-A in C.W.J.C. No. 1308 of 1991, annexures 12 and 13 in C.W.J.C. No. 2404 of 1991, annexures 11 and 12 in C.W.J.C, No. 1758 of 1991 and annexures 2 and 2-A in C.W.J.C. No. 1126 of 1991 are quashed. The council of management of the Magadh Stock Exchange is directed to reconsider the matter in the light of the observations made hereinabove and take appropriate decision in accordance with law within two months. The petitioners, however, will not be allowed to enter the ring and participate in transactions of sale and purchase of shares and securities in the meantime. The consequential benefits, if any, of the quashing of the impugned decisions shall abide by the fresh decision as aforesaid. There wil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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