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of <h1>SEBI Circular Upheld: Boost for Investor Protection</h1> <h3>Banhem Securities (P.) Ltd. Versus National Stock Exchange</h3> Banhem Securities (P.) Ltd. Versus National Stock Exchange - [2003] 48 SCL 739 (BOM.) Issues:Challenge to circular issued by SEBI Board dated 9-7-1999 regarding implementation of arbitration awards.Analysis:The main contention against the circular was that it contradicts section 36 of the Arbitration and Conciliation Act, 1996. Section 36 specifies the enforceability of an award as a decree under the provisions of the Civil Procedure Code (C.P.C.) after the prescribed time for setting aside the award has expired. It was argued that administrative instructions from SEBI cannot make an award executable if it is not enforceable under the Act. Additionally, it was pointed out that the circular only addresses situations where the award favors a client/investor against a broker, but not the other way around, potentially violating Article 14 of the Constitution. Concerns were raised about the circular's failure to provide for refunding the amount with accrued interest if the award is set aside, as it only mentions refunding the principal amount.The High Court dismissed the challenge to the circular, finding it to be well-founded. The SEBI Board issued the circular under its powers granted by sections 11 and 11B of the SEBI Act to safeguard the interests of investors. The Board's decision aimed to address the issue of arbitration awards in favor of clients/investors not being implemented, leading to difficulties for Stock Exchanges in ensuring award enforcement. The Court held that the circular's objective aligns with investor protection and does not contravene section 36 or any other provisions of the Arbitration and Conciliation Act, 1996. It was emphasized that the circular specifically pertains to members/brokers of Stock Exchanges, thereby upholding its legality and rationality.In conclusion, the petition challenging the circular was dismissed by the High Court, affirming the validity and necessity of the SEBI Board's directive to facilitate the implementation of arbitration awards in the interest of investors and ensuring the smooth functioning of Stock Exchanges.
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