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TMI Blog2010 (12) TMI 1363X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of monetary incentive entered into an agreement with the Appellant for procurement of applications for subscribing to a public issue of the Appellant. In order to raise funds for its projects, the Appellant-company floated a public-cum-right issue of shares aggregating to Rs. 699,00,00,000/- and also a public issue of fully convertible debentures aggregating to Rs. 349,93,75,200/-. The case of the Appellant-Plaintiff is that relying upon the representation of the Respondent/Defendant who undertook to procure subscription applications to the tune of Rs. 10crore in accordance with the incentive scheme dated 23.1.1995, the Appellant released an amount of 50% of the incentive amount of Rs. 2,50,000/- to the Respondent. The public issue, however, was not subscribed to the required extent and the Respondent also failed to get the committed subscription as per the incentive scheme. Since the public issue failed, the Appellant had to refund the amount to the various applicants-subscribers to the share issue and the fully convertible debentures issue. As per the incentive scheme, if the Defendant failed to get the committed subscription, he had to refund double the amount of the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... echanism for redressal of grievances and to protect the interests of investors in securities and to promote the development of, and to regulate, the securities market and for matters connected therewith or incidental thereto and for this purpose, Securities and Exchange Board of India has been established and as per Section 15(Z) of the Securities and Exchange Board of India Act, 1992, any person aggrieved by any decision or order of Securities Appellate Tribunal may file an appeal to the High Court within 60 days from the date of communication of the decision or the order. Section 15(Y) of the Securities and Exchange Board of India Act, 1992 reads as under: 15(Y). Civil Court not to have jurisdiction No civil court shall have jurisdiction to entertain any suit for proceeding in respect of any matter which an Adjudicating Officer appointed under this Act or a Securities Appellate Tribunal constituted under this Act is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act. 13. Section 30 of the Securities and Exchange Board o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board (or the Adjudicating Officer) under this Act shall be appealable except as provided in (Section 15T or) Section 20 and no civil court shall have jurisdiction in respect of any matter which the Board (or the Adjudicating Officer) is empowered by, or under, this Act to pass any order and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any order passed by the Board (or the Adjudicating Officer) by, or under, this Act. 6. A reading of the aforesaid provisions being Sections 15(Y) and 20A shows that whereas Section 15(Y) provides that a Civil Court will not have jurisdiction with respect to any action taken or to be taken in pursuance to any power conferred by the SEBI Act and that the Civil Court will not have jurisdiction to entertain any suit or proceedings in respect to any matter which the adjudicating officer appointed under the SEBI Act or Securities Appellate Tribunal constituted under the said Act is empowered to decide. Section 20A deals with bar of jurisdiction of the Civil Court with respect to matters which are appealable as provided in Section 15T or Section 20. Though there does seem to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt out a specific provision in the SEBI Act by which such a recovery suit can be entertained by any of the authorities under the SEBI Act, however, the learned counsel could not point out any such provision either in the Act or any of the regulations. The learned Counsel for the Respondent has harped upon the scheme of the SEBI Act and its regulations to contend that there is a bar of jurisdiction of Civil Courts in terms of the aforesaid Sections 15(Y) and 20A. This argument is however without legs because the provisions of Sections 15(Y) and 20A come into force, only if, firstly the adjudicating officer or the Board or the Appellate Tribunal can decide such a suit for recovery of money. The object of bar of jurisdiction whether under Section 9 Code of Civil Procedure or under Section 15(Y) and 20A of the SEBI Act is that there is an adjudicating mechanism which can be resorted to. Surely, it is not the intention of the legislature while enacting Sections 15(Y) and 20A of the SEBI Act that there cannot at all be adjudication and a person is barred from approaching any forum where the lis can be decided. The counsel for the Respondent also sought to urge that the contract in questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose, and that the orders also suffer from breach of principles of natural justice which results in making them void ab initio. The learned single judge has found that the orders cannot be sustained and the reliefs could not be denied to the Petitioners even on the principles of unjust enrichment. Accordingly, the impugned order July4,1996, in Special Civil Application No. 2224 of 1996, and the order dated January25, 1996, in Special Civil Application No. 5483 of 1996, made by the Board as affirmed by the Central Government by its order dated May 22, 1996, have been quashed to the extent they direct impounding of the monies recovered by the respective stock exchanges on the closing transactions. I do not understand as to how at all this paragraph will help in determination of the issue in question in the present case. I do not find any discussion in this para as to which provision would entitle adjudication by the Board or the adjudicating officer or the Appellate Tribunal of the suit of the present nature. The counsel for the Respondent finally sought to contend that since there is a vacuum in the regulations, SEBI is entitled to decide the issues which are subject matter of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... becomes necessary to refer to the provisions which enable Board or Adjudicating Officer to pass any orders and the nature of the subject upon which those authorities are empowered to pass orders. Only subject matters of that nature shall stand excluded from the jurisdiction of Civil Court and for the purpose a reference to provisions elsewhere becomes necessary. So far as nature of subjects and the orders those can be passed thereon by the Board, the same can be seen in Chapter IV titled as Powers and Functions of the Board . From the text of Section 11, it is evident that it is the duty of the Board to protect the interest of investors in securities and to promote the development of and to regulate the securities market by measures as it thinks fit. Some of the measures those can be taken by the Board are enlisted in Sub-section (2), which includes registration and regulation of the working of the stock brokers and sub brokers. The nature of the orders those can be passed finds place in Sub-section (4) of Section 11. By Sub-section (3), the Board is empowered with all the powers of Civil Court while exercising the powers under Clauses (i) and (i-a) of Sub-section (2) of Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endment) Act, 1999, or by an order passed by an Adjudicating Officer, can prefer an appeal to Securities Appellate Tribunal. It is needless to say that the Securities Appellate Tribunal shall be dealing with the same subject matters which the Board and the Adjudicating Officer are empowered to deal with. A reference may be made also to Section 15-K(2), which runs thus: 15 K- Establishment of Securities Appellate Tribunal. (1) ... (2) The Central Government shall also specify in the notification referred to in Sub-section (1) the matters and places in relation to which the Securities Appellate Tribunal may exercise jurisdiction. No notification of the Central Government is relied upon by learned Counsel for the Respondents to demonstrate that the civil dispute regarding non payment by the client to the sub broker is covered as a subject over which Securities Appellate Tribunal can exercise jurisdiction. Having gone through all the provisions of SEBI Act, 1992, pertaining to various authorities under the Act and their powers, we have not been able to find out a provision that empowers either authority to deal with a dispute regarding non payment by client to the sub broker the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of statutory terms and conditions and that, therefore, jurisdiction of the civil court is taken away. (Emphasis added) It is therefore quite clear that there is no question of bar of jurisdiction of Civil Court in a suit for recovery such as the present where the company seeks to invoke a contractual obligation against a person who promises to bring in a particular amount of subscription but fails to do so. There is no provision in the SEBI Act or its regulations for an adjudicating officer or the Board or the Appellate Tribunal to pass a decree for recovery in cases such as the present. 12. In view of the above, I find that the impugned judgment and decree is wholly unsustainable and is accordingly set aside. The trial Court failed to address the real issue as to which was the provision under which the adjudicating officer or the Board or the Appellate Tribunal can adjudicate upon a suit for recovery such as the present one which was filed before it. I have already reproduced the relevant paragraphs of the judgment of the trial Court and the same is conspicuously silent as to which of the provisions entitles adjudicating officer or the Board or the Appellate Tribunal to decide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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