1995 (2) TMI 330 - HC - Companies Law

Court upholds guidelines for stock exchange member selection, deems modifications valid

Ojas V. Khokhadagi Versus Saurashtra Kutchha Stock Exchange Ltd.

The Court dismissed the writ petitions challenging the guidelines for selecting members of the Saurashtra Kutch Stock Exchange. It found the Screening ... Recognition of stock exchanges Issues Involved:1. Legality of the guidelines issued on 9-11-1989 for the selection of members of the Saurashtra Kutch Stock Exchange.2. Adherence to and modification of the guidelines by the Screening Committee.3. Validity of the selection process of the members of the Saurashtra Kutch Stock Exchange.4. Jurisdiction and scope of judicial review under Article 226 of the Constitution.Detailed Analysis:1. Legality of the Guidelines Issued on 9-11-1989:The writ petitions challenged the grant of membership to the Saurashtra Kutch Stock Exchange Ltd. under Article 226 of the Constitution. The guidelines issued by the Government of India on 9-11-1989 were intended to ensure minimum standards of competence, integrity, and financial solvency for brokers. These guidelines included criteria such as education, experience, financial solvency, and interview performance. The guidelines mandated that applicants must obtain a minimum of 10 points on each criterion and an aggregate score of at least 50 points to be selected as brokers.2. Adherence to and Modification of the Guidelines by the Screening Committee:The Screening Committee, appointed by the Stock Exchange, modified the guidelines issued on 9-11-1989. The Committee laid down new norms for the selection of members, which included changes in the allocation of maximum marks for different criteria. For example, the maximum marks for financial position and interview were increased, while those for educational qualifications and experience were reduced. The Committee also set specific age and educational qualifications for applicants. These modifications were communicated to the Government of India, which subsequently approved the changes.3. Validity of the Selection Process of the Members of the Saurashtra Kutch Stock Exchange:The Screening Committee's selection process involved inviting applications, setting norms, and conducting interviews. Despite some complaints and a writ petition regarding the exclusion of eligible candidates, the Committee followed a structured process, including engaging a computer agency to process applications. The Committee's norms were ultimately approved by the Government of India, and the selection process was completed accordingly. The Court found no merit in the petitioners' claims that the selection process violated the guidelines or was arbitrary.4. Jurisdiction and Scope of Judicial Review under Article 226 of the Constitution:The Court examined whether the guidelines issued on 9-11-1989 were statutory conditions under Section 4 of the Securities Contracts (Regulations) Act, 1956. It concluded that the guidelines were not statutory as they were not part of the order of recognition and were not imposed after consultation with the governing body of the Stock Exchange, as required by Section 4(1)(b). The Court also considered whether administrative guidelines could confer rights and be enforced through a writ petition. It held that while guidelines could be binding, they could also be varied by the issuing authority. In this case, the modifications made by the Screening Committee were approved by the Government of India, making them valid.Conclusion:The writ petitions were dismissed as the Court found no merit in the claims. The Screening Committee's norms, as approved by the Government of India, were deemed valid, and the selection process was upheld. The Court also vacated the interim orders.