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TMI Blog1995 (3) TMI 381X X X X Extracts X X X X X X X X Extracts X X X X ..... o proceed further in the matter. However, later on, this proceeding was sought to be recorded in a different manner. Originally, it had been recorded at Subject No. 2.2.4 that based on the records verified by them, they felt that there is a prima facie case to be investigated and the charges have to be framed and placed before the Disciplinary Committee. Since they are also members of the Disciplinary Committee, they cannot inves-tigate and do the job of presenting a report. Sri Naganand felt that they as Council Members will not be able to act and some independent person with necessary machinery should investigate the matter. The report of the meeting was re-cast later on to read as follows: "Mr. P. Srinivasan stated that he and Mr. S.S. Naganand had gone through the complaint and replies thereto received by the President. They felt that preliminary investigation should be made to ascertain whether there was a prima facie case against any member of the Exchange; if such a prima facie case was made out charges were to be framed and served on the person concerned. If the persons concerned deny all or any of the charges, the memorandum of charges and the reply should be forwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the points raised in regard to the merits of the matter. 3. The Disciplinary Committee made an order on 12-11-1995. It upheld the objection that the requirement of section 9(4) of the Securities Contracts (Regulation) Act ('the Act') had not been fulfilled as to prior publication in the Gazette of India and after approval of the Bye-law by the Securities and Exchange Board of India (SEBI), publication for the second time in the Gazette of India. It held that SEBI had not passed any order in writing as envisaged in the Proviso to section 9(4) dispensing with the condition of previous publication and even if SEBI had passed such an order, it is not empowered by the Proviso to dispense with the publication of the Bye-law after approval by it and without such publication, the Bye-laws can have no effect. However, they took the view that the initiation of action in this case is valid even though the Bye-laws under which such initiation is purported to be done are not valid. In doing so, they took note of the fact that citing of a wrong provision would not invalidate the exercise of power so long as the power to do so is conferred on the authority exercising the power by another p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... already commenced and the matter had been referred to the Disci-plinary Committee prior to the Executive Director becoming a Member of the Committee, the proportion of 40 : 60 between the Members and non-members had not been maintained and therefore the constitution of the Disciplinary Committee itself is illegal. The amendment to the articles of association to include the Executive Director as the Member of the Committee was made on 19-11-1994 long after the initiation of the proceedings against the petitioner by the Disciplinary Committee. The second contention urged on behalf of the petitioner is that the Disciplinary Committee itself has no jurisdiction in the absence of validly framed Bye-laws because under article 64 of the articles of association each Commit- tee should exercise its powers as are set out in the rules, Bye-laws and Regulations of the Exchange and subject to the directions, Bye-laws or Regulations that may be framed by the Management in that behalf. In the absence of any Bye-laws which has come into force, it is not possible for the Disciplinary Committee to function at all and therefore the order of the Disciplinary Committee overruling the preliminary object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Stock Exchange works and the nature of control and regulation exer- cised by the statute. Under the Act, Stock Exchange means any body of individuals, whether incorporated or not, constituted for the purpose of assisting or controlling the business of buying, selling or dealing in securities. A Stock Exchange provides facilities to liquefy capital by enabling a person who has invested money in any company by way of shares which is converted into cash by disposing of his shares in the enterprise to someone else. A Stock Exchange gives mobility to the capital in the absence of which the capital invested in the form of shares in any enterprise would become locked up. The proper working of a Stock Exchange essentially depends not only on the caliber of the Members constituting it, but also perhaps more importantly on their moral stature. In carrying out the activities in a Stock Exchange the Members thereof should be men of velour, prudence, level headed and act with wisdom even in the most adverse circumstances. They must also be men of good financial stability, considerable experience, capable of assessing the market psychology, etc. The stocks and shares are dealt with in three ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Stock Exchange for the regulation and control of contracts and also a copy of the rules relating in general to the constitution of the Stock Exchange and in particular to the governing body of such Stock Exchange, its constitution, powers of management and the manner in which its business is transacted; powers and duties of the office bearers of the Stock Exchange; admission into the Stock Exchange of various classes of members and qualification for membership; the procedure for registration of partnership firm as Member of Stock Exchange; whether rules provide for such membership and the nomina- tion and appointment of authorised representatives and clerks. The Central Government on being satisfied that it should grant recognition, may do so as provided under section 4 of the Act. Section 5 thereof provides for withdrawal of recognition under certain circumstances. The Annual Report of Stock Exchanges are to be furnished to the Central Government by the respective Stock Exchanges. The Stock Exchanges could be called upon to frame certain rules or implement such rules as may be framed by the Government. The recognised Stock Exchanges also will have to make Bye-laws subject to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgument put forth in this case. Sri R.N. Narasimha Murthy fairly conceded that he cannot put forth a case that it is a Public Authority but only confined to the argument that it discharges public duty. In the Decision of the Delhi High Court neither this point was raised nor decided. Hence, these Decisions cannot be of any assistance to the petitioner. 10. In Anadi Mukta Sadguru Muktajee Vandasjiswami Suvarna Jayanti Mahotsav Smarak Trust v. V.R. Rudani AIR 1989 SC 1607, the Supreme Court explained that Article 226 empowers the Court to issue writs for enforcement of the Fundamental Rights or other rights in respect of a company, person or authority not confined to statutory authorities and instrumentalities of the State. They would cover other persons or bodies who perform public duty. In explaining the scope of such public duty or the meaning to be attributed to that public duty, the Court noticed that what is relevant is the nature of the duty imposed on the body and the duty must be judged in the light of positive obligation owed by a person or authority to the affected party. In this case, the affected party is a Member who apprehends that he may be expelled from the S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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