2015 (1) TMI 1435 - HC - Indian Laws

Court Upheld Order Inducting Directors under Forward Contracts Act

First Commodities Exchange Of India Limited Versus Union Of India, Forward Markets Commission, K.V. Krishnakumar, Navas P.A.,K. Kunjikomu, M.P. Krishnan,

The court upheld the order directing the induction of respondents 3, 4, and 5 as Directors of the company under the Forward Contracts (Regulation) Act, ... Appointing respondents 3, 4 and 5 be taken on the Board of Directors of the Company with immediate effect - grant of recognition to an association - main contention urged by the petitioners was that the 2nd respondent did not have any power under the Forward Contracts (Regulation) Act, 1952 to issue such an order - HELD THAT:- A reading of Section 6(1) of Forward Contracts (Regulation) Act shows that the grant of recognition to an association shall be subject to such conditions as may be prescribed or specified. In Ext.R3(b) notification dated 23/1/09 also, recognition granted to the petitioner Company has been made subject to the condition that 'said exchange shall comply with such directions as may, from time to time be given by the Forward Markets Commission'. Therefore, on the strength of the enabling provision contained in Section 6(1), while issuing Ext.R3(b) notification, the Central Government specified that the first petitioner shall comply with such directions as may be issued from time to time by the Commission. Similarly, Section 14A(1) obliges the association to carry on business relating to forward contracts only under a certificate of registration and in accordance with the conditions specified therein. In Ext.R3(c) certificate of registration, various conditions have been specified and the first condition is that 'the said association shall comply with such directions as may from time to time, be given by the Forward Markets Commission'. Therefore, both in Ext.R3(b) and in Ext.R3(c) and in Sections 6 and 14A of the Act, enabling provisions have been incorporated entitling the Forward Markets Commission to issue directions from time to time and the first petitioner Company is obliged to comply with such directions. These statutory provisions and the scheme of the Act thus show that pervasive control has been conferred on the Central Government and the Forward Markets Commission and there is nothing in the Act which suggests that the Central Government or the Commission cannot direct induction of members to the Director Board of the 1st petitioner Company in the circumstances as pointed out in Ext.P15. Thus, it was perfectly within the jurisdiction of the 1st respondent to have issued Ext.P15 - interim prayer sought for by the petitioners declined. Issues:Challenge to order directing induction of directors on the Board of Directors of a company under the Forward Contracts (Regulation) Act, 1952.Analysis:The writ petition challenged an order (Ext.P15) by the 2nd respondent directing the induction of respondents 3, 4, and 5 as Directors of the company. The main contention was that the 2nd respondent lacked the power under the Forward Contracts (Regulation) Act, 1952 to issue such an order. The respondents argued that the order was within statutory powers, and respondents 3, 4, and 5 had already assumed directorship. The company had obtained recognition under Section 5 of the Act and a certificate of registration under Section 14B. The Act confers powers on the Central Government and the Forward Markets Commission to grant recognition, issue directions, and control various aspects of forward contracts business.The Act mandates compliance with directions issued by the Forward Markets Commission for recognized associations. The company's recognition and registration were subject to complying with such directions. The provisions of the Act empower the Central Government and the Commission to issue directions, levy penalties, and control various aspects of forward contracts business. The Act does not prohibit the Central Government or the Commission from directing the induction of members to a company's Board of Directors under specific circumstances.The petitioner relied on a Supreme Court judgment regarding the powers of a statutory body in internal management matters. The Supreme Court had emphasized that as long as a power furthers the provisions of the Act and is not incompatible with the body's purpose, it can be legally conferred. Applying this principle, the court found that the 1st respondent was within jurisdiction to issue Ext.P15. Given this finding and that respondents had already assumed directorship, the court declined the petitioners' interim prayer. The judgment highlights the statutory control conferred on the Central Government and the Commission and the legality of issuing directions for induction of directors under the Act.