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TMI Blog1999 (9) TMI 830X X X X Extracts X X X X X X X X Extracts X X X X ..... ership with the respondent-stock exchange, as required by rule 74(2) of the articles of association. The petitioner has, therefore, filed the present petition for a writ of mandamus or any other appropriate writ to direct the stock exchange to file the requisite Form No. 23 with the amended articles of association of the respondent-company with deletion of article 74(2). In substance, the petitioner has challenged article 74(2) read with article 74(1) of the articles of association which read as under: "Article 74 : Non-eligibility of Members of the Council. 74(1) In case of Individual Members.--No member shall be eligible to be elected as a member of the Council of Management if-- (i)…. (ii) he/she has been a member for less than three years standing on the last day for submission of proposals by candidates for election . . . (2) In case of Corporate Members. --In the case of a corporate member, one of its whole time directors subject to the fulfilment of the following conditions in addition to the above-mentioned conditions for individual members would be eligible to be elected as a member of the council of management . . ." Mr. S. N. Soparkar, learned counsel for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecognized stock exchanges and sections 7A and 8 of the Securities Act. In rejoinder, Mr. Soparkar has submitted that none of the provisions of the Securities Act override the provisions of section 274 of the Companies Act and that wherever Parliament intended to give overriding effect to any of the provisions of the Securities Act over the provisions of the Companies Act, specific provision is made to give such overriding effect to sections 7A and 8 of the Securities Act, but the question of additional qualifications necessary for being eligible for becoming a member of the governing council of the stock exchange is not a matter which falls within the provisions of section 7A or 8 of the Securities Act. Having heard learned counsel for the parties, this court is of the view that even assuming that the aforesaid view of the Bombay High Court in Cricket Club of India Ltd.'s case [1975] 45 Comp. Cas. 574 is correct and on that basis it were to be held that a public limited company would not be in a position to prescribe any additional disqualifications other than those provided in subsection (1) of section 274 of the Companies Act, the said principle will not apply in the case of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court relied on the observations in Craies on Statute Law (7th ed.) to the effect that statutory enactments, although expressed in affirmative language, are sometimes treated as having a negative implied and their provisions, though affirmative in words, are not necessarily so, if they are absolute, explicit and peremptory. Even a statute limiting anything to be in one form, although it bespoke in the affirmative, yet includes in itself a negative. When there is a special affirmative power given which would not be required because there is a general power, it is always read to import the negative. The learned judge referred to Stroud's Judicial Dictionary and observed that the expression "necessary" means something stronger than "possible" and the implication must be one which is so strong and irresistible that the alternative is not one that would appeal to a rational mind. The learned judge then referred to the observations of Lord Hardwick in a case relating to interpretation of a will and adapted them as under : Necessary implication means, not a natural necessity, but so strong a probability of intention that an intention to the contrary to that which is imputed to the Legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Central Government may prescribe under clause (a) of sub-section (1) for the grant of recognition to the stock exchanges may include, among other matters, conditions relating to-- (i) the qualifications for membership of stock exchanges ; . . . (3) Every grant of recognition to a stock exchange under this section shall be published in the Gazette of India and also in the Official Gazette of the State in which the principal office of the stock exchange is situate, and such recognition shall have effect as from the date of its publication in the Gazette of India. (5) No rules of a recognized stock exchange relating to any of the matters specified in sub-section (2) of section 3 shall be amended except with the approval of the Central Government." The relevant provisions of section 8 read as under : "8. Power of Central Government to direct rules to be made or to make rules.--(1) Where, after consultation with the governing bodies of stock exchanges generally or with the governing body of any stock exchange in particular, the Central Government is of opinion that it is necessary or expedient so to do, it may, by order in writing together with a statement of the reasons theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nge" does not carry the petitioners' case any further. Moreover, even after the formation of the stock exchange, under sub-section (1) of section 8 the Central Government has the power to direct the stock exchanges generally or a particular stock exchange to make or amend any rule relating, inter alia, to constitution of governing body of the stock exchange. Sub-section (2) of section 8 gives overriding effect to such rules made or amended under such direction of the Central Government, and the provisions of the Companies Act. It is open to the Central Government to give a direction to amend the "rules" of the stock exchange (which expression includes the articles of association) to add such disqualification under section 8(1) and then the stock exchange would be bound to comply with such direction and on publication of such rule/amended rule in the Official Gazette, it would have overriding effect over the provisions of the Companies Act (including section 274 of the Companies Act). In this respect, the court sees no difference whether the stock exchange itself imposes a disqualification which is approved by the Central Government or whether the Central Government gives a directi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scussed above, since the provisions of the Securities Act make detailed provisions for formation and governance of the stock exchanges, for rules (including articles of association) relating to constitution of the governing body of the stock exchange the principle of necessary implication is not available in the case of stock exchanges in so far as the controversy at hand is concerned. In view of the above discussion, the contention of Mr. Soparkar, based on section 7A of the Act, being oblivious of the aforesaid vital aspect of the scheme of the Securities Act, must be negatived. Once the power to provide for additional disqualifications is held to be available to the stock exchange, it is not the case of the petitioners that such an additional qualification or disqualification is unreasonable or violative of the provisions of article 14 of the Constitution. The provisions under challenge lay down that a member cannot contest for election to the office of the member of the governing council of the stock exchange, unless he has completed three years as a member of the stock exchange. The provision does not appear to be unreasonable or arbitrary nor is any such challenge levelled ..... X X X X Extracts X X X X X X X X Extracts X X X X
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