9911796707
TMI Blog1995 (2) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Companies Act. 3. According to the articles of association of the company, which articles had been approved by the Central Government, the number of members which it could have, were 300. At the time of granting of recognition, 40 members already existed. Therefore, 260 members had to be taken in by respondent No. 1. 4. On 5-8-1989, respondent No. 1 invited applications from those persons who wanted to become members of the company. The last date for receipt of the applications was 31-8-1989. In all, 1587 applications were received and they were required to be processed and selection made therefrom. 5. According to article 4 of the articles of association of the respondent- Exchange, the members were to be selected by a Screening Committee, constituted by the Government, which were to have 3 nominees of the Government. It appears that on 9-11-1989, the Government of India, Ministry of Finance, issued a letter to the Presidents/Executive Directors/ Secretaries of the various Stock Exchanges in India, along with which it forwarded a note on authorisation criteria for Brokers suggested by the SEBI which was required to be followed by the Selection Committees unif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had demonstrably high level of familiarity with all aspects of security business and while matriculation was fixed as minimum educational qualification, the point system was to give weight age to higher educa-tional qualifications. It was also suggested that after sometime, the minimum educational qualification should be increased to graduation. With regard to experience, it was stated that minimum three years' experience would be required for being authorised as a Broker. Concern- ing financial soundness, stipulation was made with regard to minimum working capital requirement and it was suggested that it was desirable to fix a minimum of Rs. 1 lakh for all Exchanges, but periodic monitoring would be required, though the minimum working capital requirements would need to vary from Exchange to Exchange. It was clarified that working capital would include only cash and readily marketable securi- ties and was not to include property, jewellery, vehicles, etc. Reference was also made to the total asset requirement and it was stated that the minimum level of the same would vary from Exchange to Exchange and that assets in excess of minimum stipulation would qualify for points towards se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gard to the change in the norms which were laid down by this Screening Committee for the purposes of making selection of the members to the respondent-Stock Exchange, it is now necessary to refer to the relevant minutes of the Screening Committee in some detail. 8. Preliminary meeting of the Screening Committee was held on 13-4-1990 and as the discussion remained inconclusive, in the next meeting, more discussion took place which was held on 4-5-1990. Accord-ing to the minutes of 4-5-1990, the Screening Committee discussed at length the norms for selection of the members and the following norms were laid down: "(1) The screening committee decided that all applicants who were below 21 years and above 60 years of age as on 31-8-1989, i.e., the date for receipt of applications for the membership of Saurashtra Kutch Stock Exchange Ltd., Rajkot be rejected. The screening committee also decided that all applicants who have not passed the 12th Std. or an equivalent examination be rejected. (2) The question of laying down norms for selection of members was considered by the screening committee. Taking into account the note on 'Authorisation Criteria for brokers' prepared by the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r every additional Rs. 1 lakh subject to a maximum of 5 marks. Fixed assets will be given weightage at the rate of 1 mark for every Rs. 1 lakh subject to a maximum of 5 marks within the overall aggregate of 25 marks. Note : Financial position has to be as per the certified audited statements, ( iii ) Experience ( a )General experience related to trade, business and industry, includ-ing services, both in the private and public sectors to be awarded 5 marks provided he has a minimum of 2 years' experience. ( b )Experience in any area related to securities market to be awarded marks indicated below, this would include work as Sub-Broker, Authorised Assistant, Investment adviser, Corporate analyst or experience in a merchant banking concern or finance department of a company or an audit firm: 1 year to 3 years 5 Above 3 years up to 5 years 10 Above 5 years 15 Note : Experience to be supported by relevant certificates/documents. Max. Marks ( iv ) Interview 35 Each member of the interview committee should assess the candidate independently and award points taking into a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter dated 9-11-1989 and Annexures to it. Hence adjourned to 5-11-1990." 14. 0n 1-10-1990, a letter was written by the Director, Ministry of Finance, Department of Economic Affairs, Government of India, to Shri Bhanujan, Chairman of the Screening Committee, asking him to send a report on the process of selection of members of the respondent-Stock Exchange. In reply to the same, Shri Bhanujan sent a report dated 29-10-1990. In the said report, it was, inter alia, stated that the members of the Selection Committee had laid down norms in its meeting held on 4-5-1990 and : "..........these norms were framed taking into account the note on authori-sation criteria for brokers prepared by Securities and Exchange Board of India and circulated to all Stock Exchanges by the Ministry of Finance, Government of India. It may be mentioned here that in finalising the norms, we have also kept the local factors relating to Saurashtra and Kutch and accordingly some modifications were incorporated." The said Report also contained the details of the marks, which were to be awarded under different criteria and along with the Report, Minutes of all the meetings of this Screening Committee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re statutory and were binding on the Stock Exchange. In this connection, reference was made to section 4, which deals with the grant of recognition of Stock Exchanges. Section 4(1)( a ) and ( b ) reads as follows : "4. Grant of recognition to stock exchanges. (1) If the Central Government is satisfied, after making such inquiry as may be necessary in this behalf and after obtaining such further information, if any, as it may require, ( a )that the rules and bye-laws of a stock exchange applying for registration are in conformity with such conditions as may be prescribed with a view to ensure fair dealing and to protect inves-tors; ( b )that the stock exchange is willing to comply with any other condi-tions (including conditions as to the number of members) which the Central Government, after consultation with the governing body of the stock exchange and having regard to the area served by the stock exchange and its standing and the nature of the securities dealt with by it, may impose for the purpose of carrying out the objects of this Act; and" The Central Government has also framed the Securities Contracts (Regulations) Rules, 1957 and Rule 3 states that the applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ody of the Stock Exchange before any conditions are imposed. In the present case, it cannot be disputed that prior to the issuance of the letter dated 9-11-1989, no such consultation with the Governing Body of the respondent-Stock Exchange had ever taken place. This being so, the guidelines which were issued on 9-11-1989 cannot be regarded as being statutory conditions postulated by section 4 (1)( b ) . 18. It was then submitted by Shri Vaghela that even if the said conditions are regarded as administrative guidelines or directions, they were meant to be complied with by all the Stock Exchanges in India and certain rights flow therefrom. It was contended that if there is any variation of the condition, then an aggrieved party can approach the Court in order to seek reliefs. In support of this contention, the learned counsel sought to rely on the oft-quoted judgment of Ramana Dayaram Shetty v. Interna-tional Airport Authority of India AIR 1979 SC 1628, as also the decision of the Supreme Court in Union of Indiav. Anglo Afghan Agencies AIR 1968 SC 718. Another decision relied upon in this connection was in Narendra Kumar Maheshwari v. Union of India [1990] Supp. SCC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that there was a departure made by the Screening Committee from the guidelines which were laid down by the Central Government. The Screening Committee, when it framed its norms, did maintain the four criteria, which had been laid down by the Central Government, viz., that of education, experience, financial solvency and interview. The manner in which the points were to be allotted was, however, changed. The changes which were made known to the Government when Shri Bhanujan submitted his report on 29-10-1990. What was the departure which was made from the guidelines was clearly spelt out in the said report. With a view that the Central Government, Ministry of Finance, which had issued the earlier guidelines was made fully aware of what the Screening Committee had done, the copies of all the minutes of the Screening Committee were forwarded. Shri Bhanujan then as Chairman of the Committee, asked the Govern- ment of India as to what was its advice about the future course of action to be followed by the Committee. When the reply dated 27-12-1990 was received by Shri Bhanujan from the Government of India that the Committee should proceed with work of completing the selection of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Normally, if such an agent or a nominee does not follow the directions of the principal, then it is for the principal to take appropriate action. But, the principal can, in appropriate cases, ratify the action of the agent or the nominee. In the present case, the Screening Committee decided to vary the points which had been indicated in the guidelines, while retaining the four criteria. This decision of the Screening Committee was impliedly, if not explicitly, ratified by the Central Government, when on 27-12-1990, Mr. Bhanujan was told, in writing, that the process of selection should proceed. The guidelines were not meant to be published, nor were the norms meant to be published. 26. The effect in law of the aforesaid discussion would be that the guidelines of 9-11-1989 laid down by the Central Government would stand superseded by the norms laid down by the Screening Committee as approved by the Central Government. The norms will now be regarded as the norms duly approved or laid down by the Central Government and, therefore, it is not correct to contend that there has been any variation or violation of the norms or guidelines. As far as respondent No. 1 is concerned, the nor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case. 29. The learned counsel for the petitioners had also sought to contend, by trying to draw our attention to the case of each of the petitioners, that they should have been called for interview. We, however, in exercise of our jurisdiction under article 226, do not consider it proper to go into and investigate disputed questions of fact. It may, however, be noticed that as per the norms which were laid down by the Screening Committee, none of the petitioners had qualified for being called for interview. 30. On behalf of one of the petitioners, viz., Shri Jagadish K. Chandarana, petitioner No. 3, it was, however, contended that, according to the norms laid down, he would get much more than 36 marks which were the qualifying marks and that he should have been called for interview. The case of the respondents, however, is that Mr. Chandarana had not filed along with his application documents in support of his claim for experience and, therefore, the aggregate marks of Shri Chandarana were only 35 and not more than 36. While petitioner No. 3 contends that these certificates were submitted, the respondents' contention is to the con- trary. Obviously, this is a dis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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