The stipulation in the Circular restricting refunds based on the date 11.10.2021 was deemed arbitrary and discriminatory, violating Article 14 of the Constitution.

ORDER :

PRAYER: Writ Petition filed under Article 226 of the Constitution of India praying to issue a Writ of Declaration, to declare the Circular dated 02.09.2022 vide Ref No.NSE/INSP/53525 issued by the 1st Respondent to all Trading Members as illegal, arbitrary, non-est, perverse and contrary to law in as much it advises the Trading Members to refund the penalty levied on account of the “short/non-collection of upfront margins” to clients if the same has been passed on to the clients after 11th October, 2021.

An interesting issue arises for decision in this matter. The petitioner is an investor, and a trader in shares and securities. He is a client of HDFC Securities Limited (in short ‘HDFC’), which is a trading member (in short ‘TM’)/stock broker with the National Stock Exchange of India (in short ‘NSE’/’R1’).

2. HDFC is not a party to this Writ Petition and there have been some submissions by respondents counsel urging that the Writ Petition is not maintainable for want of necessary/proper party. I will deal with this shortly.

3. The prayer in the Writ Petition is for a declaration to declare Circular dated 02.09.2002 issued by R1 as illegal, arbitrary, non-est, perverse and contrary to law inasmuch as it advises the trading member to refund the penalty levied on account of short/non-collection of upfront margin to clients, if the same has been passed on to the clients after 11.10.2021.

4. The first objection to the prayer is that Circular dated 02.09.2022 is a beneficial Circular and by seeking declaration of this nature, the petitioner has, in fact, sought removal of a benefit that has been granted by the respondents. In arguing so, I believe that the respondents have lost sight of the fact that the challenge is qua the fixation of the date, 11.10.2021 and not to the Circular perse. What the petitioner is aggrieved by is the restriction under the Circular to refund the penalty levied on account of short/non-collection of upfront margin to clients, if the same has been passed on to the clients after 11.10.2021.

5. The benefit of the Circular has been made unavailable to those situations where the penalty has been passed on to clients prior to 11.10.2021. A distinction is thus made between those clients who have received demands of penalty before and after the stipulated date, that is, 11.12.2021 which is what the petitioner assails. I am of the view that the objection raised in this regard is myopic, does not have any merit and reject the same.

6. There is yet another objection on maintainability. The petitioner was aggrieved with the levy of penalty by the TM/HDFC and had also challenged the same before the GRC. An order has also been passed by the GRC on 31.03.2023. However the petitioner has neither challenged that order nor has he disclosed the litigation in that regard in the pleadings.

7. It is right that the Writ affidavit does not contain any discussion with regard to the proceedings before the GRC or the order passed by it. The writ affidavit proceeds as though the matter is a Public Interest Litigation. However, the explanation tendered is that the GRC was statutorily bound by the Circulars issued by the NSE and could not have adopted a stand contrary to the same. Hence, there would have been no purpose served in challenging that order. It is hence that the Circular has itself been challenged before this Court. I find merit in this submission.

8. Having said so, undoubtedly, there is a lacunae in the pleadings. The basis of the petitioner’s challenge is the restriction in Circular dated 02.09.2022. The writ affidavit is however bereft of any facts in regard to the case that has been filed by the petitioner before the GRC culminating in order dated 31.03.2023. There are no particulars relating to the penalty imposed or how it has been treated by the GRC and to this extent the background is entirely lacking.

9. However, I would not put this aspect of the matter against the petitioner as there is nothing the petitioner woul