9911796707
TMI Blog1998 (11) TMI 453X X X X Extracts X X X X X X X X Extracts X X X X ..... lations, 1995, are completed and further decisions are taken thereon by the first respondent. The order is passed on 30-10-1998 and was directed to come into effect from 2-11-1998. 2. In these petitions, a chamber summons has been taken out on behalf of Shri Jasmin B. Shah, seeking intervention in the petitions and for permis-sion to make submissions on merits of the case. The said intervenor had earlier filed, in this Court, Writ Petition No. 1156 of 1998 seeking directions against the respondents herein for carrying out investigation for the purpose of taking action in respect of rigging of certain scrips. The petition was disposed of on 4-9-1998 by passing the following order: "In view of the affidavit of respondent No. 1 and the statement of the learned counsel for respondent No. 1 that the petitioner will be informed of the completion of the investigation and the proposed action, Mr. Vashi, learned counsel for the petitioner, seeks liberty to withdraw this Writ Petition. The Writ Petition is allowed to be withdrawn and is disposed of accordingly. In our view, having regard to the filing of the aforesaid Writ Petition No. 1156 of 1998 by the intervenor and having regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "38. The High Court of Australia in Commissioner of Police v. Tanos [1958] 98 CLR 383 ibid., held that some urgency, or necessity of prompt action does not necessarily exclude natural justice because a true emergency situation can be properly dealt with by short measures. In Heatlay v. Tasmanian Racing Gaming Commission, ibid, 14 Aug. LR 519 the same High Court, held that without the use of unmistakable language in a statute, one would not attribute to Parliament an intention to authorise the Commission to order a person not to deal in shares or attend a stock exchange without observing natural justice. In circumstances of likely immediate detriment to the public, it may be appropriate for the Commission of issue a warning-off notice without notice or stated grounds but limited to a particular meeting coupled with a notice that the Commission proposed to make a long-term order on stated grounds and to give an earliest practicable opportunity to the person affected to appear before the Commission and show why the proposed long-term order be not made." "42. In short, the general principle - as distinguished from an absolute rule of uniform, application seems to be that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unity to the person concerned. It is obviously thought that the right such as it may be, to obtain a licence or allotment of goods having become crystallised into a licence or an allotment, an order under Clause 8-A may have immediate and grave prejudicial repercussions on the person concerned making it desirable that he should be heard before an order of suspension is made. So it is that Clause 8-A contemplates a pre-decisional hearing. On the other hand, licences may not yet have been issued and allotments may yet have to be made. The appropriate authority may be satisfied that it would not be in the public interest to issue licences or make allotments to the person concerned, without ascertaining further details with regard to the allegations against him. In such cases, the authority may make an order of abeyance under Clause 8B. Though the language of Clause 8-B is capable of being read as if it applies to both allotments already made and allotment yet to be made, a reference to the marginal head, in the background of what has been provided for in Clause 8-A, makes it clear that Clause 8-B, applies only to allotments yet to be made and licences yet to be issued. That clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... measure of the extent of natural justice. It may and indeed must vary from statute to statute, situation to situation and case to case. Again, it is necessary to say that pre-decisional natural justice is not usually contemplated when the decisions taken are of ad interim nature pending investigation or enquiry. Ad interim orders may always be made ex parte and such orders may themselves provide for an opportunity to the aggrieved party to be heard at a later stage. Even if the interim orders do not make provision for such an opportunity, an aggrieved party has, nevertheless, always the right to make an appropriate representation seeking a review of the order and asking the authority to rescind or modify the order. The principles of natural justice would be satisfied if the aggrieved party is given an opportunity at his request. There is no violation of a principle of natural justice if an ex parte ad interim order is made unless of course, the statute itself provides for a hearing before the order is made as in Clause A. Natural justice will be violated if the authority refuses to consider the request of the aggrieved party for an opportunity to make his representation aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n clients with whom a group of Brokers including the Petitioner abovenamed were dealing in the said three scrips are the entities closely connected to Mr. Harshad Mehta and acted as front for him. The Directors of the common clients Companies namely Mr. Anil Doshi and Dinesh Doshi are the close relations of Mr. Harshad Mehta. These persons have no financial track record of their own or experience or the professional expertise to undertake such securities transactions. The decision-making was not done by them and prima facie evidence shows that their activities and decision-making was in control with Mr. Harshad Mehta." "9. SEBI submits that investigations revealed that a group of Brokers of Bombay Stock Exchange and National Stock Exchange had as aforesaid acted on behalf of common set of clients all of whom cornered large chunks of the aforesaid three scrips. Further they built up unusually large positions resulting in the distortion of the market equilibrium and the artificial creation of demand. The act of these brokers prima facie carried out in a calculated and concerted manner was detrimental to the interest of the investors and the safety of the securities market. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the enquiry on the basis of prima facie evidence it is apprehended that if he is allowed to undertake new business, the same may be done in a way which may impair the safety and integrity of the market and may not be in the interests of the investors and may also further affect the equilibrium of the market. It is submitted that the Petitioner can continue to do business like underwriting, depository participant or custodian if they are holding registration for the same. The Petitioner if it is permitted to continue to carry on fresh business it would cause further harm and be detrimental to the safety of the general investors and safety and security of the market." 8. It is inter alia contended on behalf of the respondents that the aforesaid order merely prohibits the petitioners from undertaking any fresh busi- ness as a broker. The same does not amount to suspension or cancellation of the broker s licence and is, therefore, not by way of penalty. The said order does not prohibit the petitioners from carrying on transactions which they have already entered into but merely prohibits them from entering into fresh business. The same is an interim arrangement so as to prot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aggrieved party has exhausted his other statutory remedies, if any. But this rule requiring the exhaustion of statutory remedies before the writ will be granted is a rule of policy, convenience and discretion rather than a rule of law and instances are numerous where a writ of certiorari has been issued in spite of the fact that the aggrieved party had other adequate legal remedies. If, therefore, the existence of other adequate legal remedies is not per se a bar to the issue of certiorari and if in a proper case it may be the duty of the superior Court to issue a writ of certiorari to correct the errors of an inferior Court or tribunal called upon to exercise judicial or quasi-judicial functions and not to relegate the petitioner to other legal remedies available to him and if the superior Court can in a proper case exercise its jurisdiction in favour of a petitioner who has allowed the time to "appeal to expire or has not perfected his appeal e.g., by furnishing security required by the statute, should it then be laid down as an inflexible rule of law that the superior Court must deny the writ when an inferior Court or tribunal by discarding all principles of natural jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wers on the Chairman, the aforesaid provision does confer the said powers on the Chairman. The phrase save as otherwise determined by the regulations covers only the phrase immediately following i.e., the Chairman shall also have powers of general superintendence and direction of the affairs of the Board. The same does not qualify what follows thereafter i.e., and may also exercise all powers and do all acts and things which may be exercised or done by he Board . In our view, it is not necessary to dilate over this controversy as under section 19 there is an independent power of delegation and the Board in the instant case has delegated its powers on the Chairman. Section 19 provides, as under: " Delegation. The Board may, by general or special order in writing delegate to any member, Officer of the Board or any other person subject to such conditions, if any, as may be specified in the order, such of its powers and functions under this Act (except the powers under section 29) as it may deem necessary." 15. In the instant case, the counsel for the respondents, has placed for our perusal, a resolution passed by the Board on 12-8-1997 which inter alia provides that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board by passing of an order to suspend or cancel certificate of registration in such manner as may be determined by regulations. Proviso to sub-section (3) of section 12, reads as under: "Provided that no order under this sub-section shall be made unless the person concerned has been given a reasonable opportunity of being heard." Aforesaid provisions, which is found in section 12, is in regard to the penalty of suspension or cancellation of a certificate of registration. This under the proviso, no doubt can be done only after affording a reasonable opportunity of being heard. However, this is not what has been done in the instant case. A preliminary inquiry into the conduct of the petitioners has been conducted. A part of the preliminary inquiry is complete and it is found that the petitioners have been indulging in malpractices. Hence, in order to safeguard the interests of the investors and to maintain the integrity of the market petitioners have been directed not to undertake any fresh business as Brokers till the inquiry proceedings are completed and further proceedings in the matter are taken. This, in our view, is an interim measure which the Chairman of the first res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors and in the interest of the securities market. 21. Section 11B is an enabling provision enacted to empower SEBI to protect the interest of investors and to promote the development of and to regulate the securities market and to prevent malpractices and mani-pulations inter alia by brokers. Such an enabling provision must be construed so as to subserve the purpose for which it is enacted. It would be the duty of the Court to further the legislative object of providing a remedy for the mischief. A construction which advances this object should be preferred rather than one which attempts to find a way to circumvent it. In the case of Reserve Bank of India v. Peerless General Finance Investment Co. Ltd. AIR 1996 SC 646 the Supreme Court has observed, as under: "22. It would thus appear that Section 45-K (3) is an enabling provision enacted to empower the Bank to regulate the conditions on which deposits may be accepted by non-banking companies or institutions and (the) to prevent malpractices in the matter of acceptance of such deposits. Such an enabling provision must be so construed as to subserve the purpose for which it has been enacted. It is a well accepted cano ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er detrimental to the interests of the investors or the securities market. The said power to issue directions under section 11B must carry with it, by necessary implication, all powers and duties incidental and necessary to make the exercise of these powers fully effective including the power to pass interim orders in aid of the final orders. The provision of section 11B, it is to be noted, has been introduced by an amendment brought about in 1995 and the same seeks to confer additional power on the Board, by way of interim measures, pending inquiry. The same is intended for the protection of the interests of the investors and the securities markets. 25. The impugned orders in our prima facie view, are fully justified. The petitioners, in the circumstances, are not entitled to interim reliefs claimed in the petition. Ad interim orders passed on the 1-11-1998 and continued by an order passed on the 3-11-1998 are vacated. 26. At this stage, the counsel for the petitioners apply for stay of the present orders, as also for continuation of the aforesaid ad interim orders. The counsel for the respondents strongly opposes the same. 27. Having regard to the attendant fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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