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TMI Blog1995 (2) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 uniformly for future selection of mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 selection. With regard to fees and deposits, the Exchanges were to prescribe the same as per their own requirements. With regard to interview, it was mentioned in the Guidelines t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscussion 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 Securities and Exchange Board of India circulated to all the stock exchanges vide Govt. of India, Ministry of Finance, Letter No. 1/112/SE/(SEBI) dated 9-11- 1989 and also the local factors relating to Saurashtra and Kutch, it was decided by the committee that maximum marks be awarded to the applicants on the following criteria: Criteria Max. Marks &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies 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 account the candidate's knowledge, integrity and the ability to provide good service. The points awarded by the individual members should then be averaged............" 9. Having fixed the aforesaid norms, the Screening Committee also prepared a proforma, which had to be filled by the applicants so that requisite information was available to the Screening Committee which would be required to be examined as per the said norm. Accordingly, on 8-5-1990, letters were sent to all the applicants, requiring them to fill up the enclosed proforma, giving details of their educational qualifications, financial position and experience, together with relevant certi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 were forwarded so as to give to the said Director full details about the procedure and working of the Committee. What is important to note is that in this Report, Shri Bhanujan stated that: "........I shall be grateful if you could kindly convey to us the advice of Government of India about the future course of action to be followed by the Committee...." 15. It seems that the said Report dated 29-10-1990 did not reach the Ministry of Finance and another copy of the same was forwarded on 28-11-1990. About a month thereafter, Shri Bhanujan received a reply dated 27-12-1990 from the Ministry of Finance, Government of lndia, in which it was, inter alia, stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply 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 application for recognition shall be made to the Central Government in Form A. Rule 6 provides that recognition shall be granted in Form B. The said Form B is as follows: "..........No.......The Central Government, having considered the applica-tion for recognition/renewal of recognition made under section 3 of the Securities Contracts (Regulations) Act, 1956 by........(name and address of exchange) and being satisfied that it would be in the interest of the trade and also in the public interest so to do, hereby grants, in exercise of the powers conferred by section 4 of the Securities Contracts (Regulations) Act, 1956 recognition to the said exchange under section 4 of the said Act for... year/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 440. It was submitted that the Stock Exchange can be asked by the Court to act upon an administrative scheme. The learned counsel also referred to the decision in M.S. Desai & Co. v. Hindustan Petroleum Corpn. Ltd. 1987 (1) GLR 375 and sought to contend that instructions are binding and if any breach occurs, and it affects any party, then a writ petition would be maintainable. While submitting that the action of the respondents was arbitrary, reliance was also placed on the decision of the Supreme Court in Kumari Shrilekha Vidyarthi v. Union of India [1991] 1 SCC 212. The other cases on which reliance was placed, which we may note, are Comptroller & Auditor General of Indiav. K.S. Jagannathan AIR 1987 SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 members, the implication is very clear and that was that the procedure which was followed by the Screening Committee and the norms which were laid down by it, stood approved. The letter of 27-12-1990, in the first paragraph referred to Shri Bhanujan's letter dated 27-11-1990 and then expressly stated that the Screening Committee was requested to com- plete the selection of members. The Government of India was aware of the fact that the norms which were laid down by the Screening Commit- tee were not identical to the ones which had been laid down in the guidelines and after applying its mind, it directed the Screening Commit- tee to complete the process of selection. At no point of time was any objection taken. 24. What puts the matter beyond any doubt is the av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 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 norms or guidelines which had to be followed for the purpose of selecting the members of the Stock Exchange were different from what was required to be followed by the other Stock Exchanges. We see no infirmity in this. 27. It was also sought to be contended that the changes which were made by the Screening Committee could not be regarded as marginal. Letter dated 9-11-1989, allowed the Selection Committee to make marginal adjustments. It would stand to reason that marginal adjustments had to be made while taking into consideration the local conditions. The said letter of 9-11-1989 did not postulate or contemplate the Selection Committee reverting to the Government of India after it had made any marginal adjustments. No consent or approval of the Government of India was requir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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