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Gujarat High Court
Judgename :J.R.Vora, M.R.CALLA
SECURITIES AND EXCHANGE BOARD OF INDIA - Appellant
Versus
ALKA SYNTHETICS LIMITED - Respondent
L.P.A. 236 of 1997
Decided On : 12/29/1998
This Court find that SEBI had ample authority of law under the existing statutes to take action as have been taken by it. The impounding or forfeiture of the money received by Stock Exchanges as per the concluded transactions for squaring up the outstanding transactions etc. are all steps in aid. On the basis of the settled principles of interpretation of statutes right from Heydons case (1584) 3 Co. Rep. 7a (V) the construction has to be given so as to supress the mischief and advance the remedy, and to suppress the subtle inventions and evasions for continuance of the mischief, and "pro privato commodo" and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, pro bono publico." SEBI has only taken a remedial measure to ascertain the evils and the directions have been issued to preserve the subject matter of dispute till the final decision is taken.
[Para 17]
(b) Principles of Natural Justice - Application of - Excluded in the cases & circumstances stated.
In our opinion in the cases of following nature the principles of natural justice stand excluded : -
A.
Decision as a prelude to taking further proceedings in the course of which the party concerned will have an opportunity to be heard, e.g. ex parte injunctions, search warrants, seizure of goods, the cases of preventive detention etc.
B.
Cases of collection of evidence to be used later on in the making of a decision.
C.
When any preliminary order is drawn during an interval only and for a limited period and purpose at hand.
D.
The cases in which the body having the power to pass the final orders is also charged with the duty under the statute to strike a balance between the rights of the parties and the object sought to be advanced and achieved by the statute under which it seeks to function.
E.
The cases in which the effect of the ex parte orders may be undone or the mischief caused is capable of being salvaged later on after hearing the concerned party.
F.
Where for ends of public policy the practical considerations demand or for reason of expediency and promptitude, an immediate action is required to be taken to save the ill or evil object from reaching the point of no return.
[Para 19]
(c) Securities & Exchange Board of India Act, 1992 - Secs. 11 & 11B - Orders dt. 4.7.1996 and Order dt. 25.1.1996 passed by SEBI - Requirement to follow the principles of natural justice - In absence of any statutory requirement of pre-decisional hearing & keeping in view the nature of the said impugned order there was no requirement on the part of SEBI to follow the principles of natural justice before passed orders.
The Courts must be very slow to read, construct and enforce an implied obligation to follow natural justice even in cases of bodies dealing with the property rights particularly when the activity is only a trading activity based on speculation in a market controlled by such body under law.
[Para 19]
Keeping in view the position of law, as aforesaid, and that there was no statutory requirement of pre decisional hearing and keeping in view the contents and the nature of the impugned order, we are of the opinion that it was not obligatory on the part of the SEBI to follow the principles of natural justice before passing the impugned orders dated 4.7.1996 and 25.1.1996 and thus we answer question No. 2 in favour of the appellants.
[Para 20]
(d) Securities & Exchange Board of India Act, 1992 - Secs. 11 & 11B - Orders dt. 4.7.1996 & 25.1.1996 passed by SEBI - Constitutional validity - Once when it has been held that the SEBI had the authority of law to pass the impugned orders there is no question of same being violative of Constitution - Constitution of India, 1950 - Art. 300A.
So far as the question with regard to the order being violative of Art. 300A of the Constitution of India is concerned, it will be sufficient to say that firstly the respondents Companies have not been deprived of any part of their property as such. It is only a case of not allowing a party to take away the money claimed to have been earned by it in a speculative market controlled by SEBI for the time being till a decision is taken on the basis of the investigation ordered by the SEBI. The question No. 1 regarding SEBIs authority under law under the existing statutes has already been answered in favour of the appellants and, therefore, it cannot be said to be a case of deprivation of a property without authority of law. Once it has been held that the SEBI had the authority of law to pass the impugned orders, there is no question of invoking Art. 300A of the Constitution of India, as even if it is taken to be a case of depriving of property for the time being, it is not a case of doing so without authority of law and, therefore, this third question formulated by us is answered against the respondents Companies.
[Para 21]
( 1 ) IN these Appeals we are directly concerned with the limits of powers of enforcement of the Security and Exchange Board of India (for short sebi) which regulates capital market of the country. Capital market has acquired a status of the system as a part and parcel of the national economy where the companies seek to raise funds for different types of transactions in the course of their business and individuals invest their savings. Earlier, we had an Act known as Securities Contracts (Regulation) Act. 1956 (Act No. 42 of 1956) to prevent undesirable transactions in securities by regulating business or dealings therein, by providing for certain other matters connected therewith. This Act provided for the recognized Stock Exchanges and the control of the Central Government on such recognised Stock Exchanges. With the passage of time, the Government felt more concerned with the healthy growth of the securities market and taking into consideration the relevant factors influencing the growth of capital market it realised the necessity to pass a comprehensive Legislation for setting up a statutory Apex board to promote orderly and healthy growth of the securities market and pending the enactment of the so conceived comprehensive Legislation, the Ministry of finance, Department of Economic Affairs (Investment Division) passed a Resolution dated 12-4-1988 constituting the SEBI under the overall administrative control of the Ministry of Finance. While SEBI was functioning under the aforesaid Resolution dated 12-4-1988 under the new economic policy, certain reform measures were initiated in 1991, including the Capital Market Reforms and Stock Exchange reforms, and the statutory powers to regulate the Securities Markets were sought to be conferred on the SEBI. Keeping in view the tremendous growth of the Capital markets through increasing participation of the public, investors confidence in the capita] Markets and with the object of ensuring investors protection. Securities and exchange Board of India Ordinance, 1992 was promulgated by the President on 30-1-1992 and ultimately the Securities and Exchange Board of India Act, 1992 (Act No. V of 1992) was enacted and notified on 4-4-1992 and it was deemed to have come into force from 30-1-1992 in terms of Sec. 1 (3) of the Act. After narration of the factual aspects hereinafter in brief, it will be our endeavour to adjudicate the questions raised in these Appeals while assailing the judgment of the learned single Judge in the light of the object of the SEBI Act. The Act provides for the pr6tection of the interests of investors in securities and to promote the development and to regulate the Securities Markets and for matters connected therewith or incidental thereto, the relevant provisions of the Act and the set of concerned regulations and as to what should be the real impact of such provisions so as to make the SEBIs control over the Capital Markets to be effective and meaning further to ensure orderly and healthy growth of the Securities Markets and for investors protections.
( 2 ) ). In the case of Letters Patent Appeal No. 236 of 1997 arising out of Special civil Application No. 2224 of 1996, the brief resume of the facts is as under :- (A) M/s. Alka Synthetics Ltd. , (original petitioner) is a Public Limited Company registered under the Indian Companies Act, 1956 having its registered office at Ahmedabad. (B) Prior to 1993 Magan Industries Ltd. (for short "mil") was a Public Limited company with 1,444,000 allotted shares and in February 1993 it had come out with public issue of 3,656,000 shares of Rs. 10. 00 each. 56,000 shares were reserved for Directors, 9200 for employees and 1,250,000 for NRIs. The total number of shares offered to the public was 3,541,700 and total shares allotted to promoters were 1,500,000 subject to lock in. (C) On 25-1-1995 SEBI Act was amended by Securities Laws (Amendment) Act, 1995. (D) On 1-6-1995 MIL was listed with Bombay Stock Excha
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