TaxTMI 
TaxTMI 
2010 (1) TMI 574
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....rips of M/s. Presto Finance Ltd. and to declare the rules, bye-laws and regulations of the BSE as illegal, void and ultra vires the 1956 Act as also the Constitution of India. Various ancillary and interim reliefs were also prayed for connected with the main reliefs. 2. The case of the petitioner is that he had been induced by the BSE and its members to buy 4,50,800 shares of "Presto Finance Ltd." and under the assurance of the Exchange, he had deposited the entire purchase amount, amounting to Rs. 71,19,817.30 with the Exchange. It is the Petitioner's further case that the Exchange and its Members had intentionally and deliberately cheated him by giving him delivery of 1,56,100 forged share certificates and refused to cancel the said dealing when the same was discovered and instead asked the petitioner to go to the liquidator of Presto Finance Ltd. for claiming damages. 3. Appearing in support of the Special Leave Petition Mr. Manohar Lal Sharma, learned Advocate, submitted that the SEBI as a statutory body established under section 3 of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the "SEBI Act"), was empowered under section 11 of the Act to ....
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....:- "4(3) Every grant of recognition to a Stock Exchange under this section shall be published in the Gazette of India and also in the Official Gazette of the State in which the principal office as the Stock Exchange is situate, and such recognition shall have effect as from the date of its publication in the Gazette of India." 7. Mr. Sharma submitted that since the recognition granted to BSE has neither been published in the Gazette of India or in the Official Gazette of the State, such recognition did not have any effect at all and in addition to the above, ever since its recognition, the BSE has not also complied with the provision of section 9 of the aforesaid Act and framed bye-laws for the regulation and control of contracts with the previous approval of SEBI. It was submitted that sub-section (4) of section 9 also provides for publication of the bye-laws and reads as follows :- "9(4). Any bye-laws made under this section shall be subject to such conditions in regard to previous publication as may be prescribed, and, when approved by the Securities and Exchange Board of India, shall be published in the Gazette of India and also in the Official Gazette of the State in which ....
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.... the development of the Indian Capital Market. The recognition granted to the BSE was duly published by the Ministry of Finance, Government of India, in its Stock Exchange Division in the Gazette of India dated 31-8-1957. Thereafter, the Stock Exchange rules, bye-laws and regulations were framed in 1957 and advance print of the same, together with all amendments up to date, was sent to the Government of India. Receipt and approval of the same by the Government of India under the 1956 Act was also conveyed to the Secretary of the Stock Exchange by the Deputy Secretary in the Ministry of Finance, Department of Economic Affairs, by his letter dated 1-5-1959. Mr. Diwan submitted that the rules, regulations and bye-laws of the Bombay Stock Exchange had been acted upon since they were framed and the petitioner also claims to have traded on the Stock Exchange as a sub-broker through Yogesh Mehta, said to be a member of the Stock Exchange. Mr. Diwan submitted that when the rules, bye-laws and regulations had been continuously acted upon for more than 50 years, it would be inequitable to hold that the same were not valid on account of non-publication in the Official Gazette or the Gazette o....
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....ion and Conciliation Act, 1996, the question arose as to whether the said bye-laws of the BSE required publication in the Official Gazette. Upon construction of the provisions of the bye-laws of the BSE and the decision of this Court in Indramani Pyarelal Gupta v. W.R. Nathu AIR 1963 SC 274, the High Court held that the bye-laws of the BSE were subordinate Legislation and that the same were statutory in nature having the force of enactment within the meaning of sub-section (4) of section 2 of the Arbitration and Conciliation Act, 1996. Mr. Diwan drew our attention to paragraph 42 of the judgment in which reference was made to another decision of the Bombay High Court in the case of V.V. Ruia v. S. Dalmia AIR 1968 Bom. 347, where the question arose as to whether the bye-laws of the BSE, which were made prior to its recognition under section 4, needed publication under sub-section (4) of section 9 of the 1956 Act. It was held that the bye-laws made by the Bombay Stock Exchange prior to its recognition did not require publication in the Official Gazette, on account of the fact that for the purpose of obtaining recognition from the Central Government, the Stock Exchange was required to....
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.... Exchange to Shri L.K. Singhvi, Executive Director, SEBI, informing him of the Report of the Committee in the matter of Presto Finance Ltd. In the said letter it was indicated that based on a number of complaints received from the investors in the scrip of Presto Finance Ltd., a Special Committee consisting of three members, including SEBI, and a nominated public representative, had been constituted and after inquiry it had recommended that the trading in the scrip of Presto Finance Ltd. should not be recommended and might be de-listed permanently. Mr. Jaideep Gupta referred to the inquiry report of the Assistant Police Inspector, General Branch, Crime Branch, C.I.D., Mumbai, submitted to the learned Metropolitan Magistrate, 33rd Court, Ballard Estate, Mumbai, stating that the BSE had acted promptly and diligently to protect the interest of the market and as such no offence had been committed by BSE and those who were involved in the transactions of the shares of Presto Finance Ltd. in 1996. It was stated that on the contrary, the complainant was not a registered sub-broker of the Bombay Stock Exchange and had himself violated the provisions of section 23(h) of the 1956 Act, as he ....
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....ecognition in 1956 under the 1956 Act, its activities could be said to be without authority. The further question which falls for consideration is whether it can be said, as has been urged on behalf of the petitioner, that in listing the shares of M/s. Presto Finance Ltd. on the Stock Exchange, the Bombay Stock Exchange had acted in a manner which failed to ensure fair dealing and to protect the investors. 22. As we have noticed hereinbefore, the scrip of M/s. Presto Finance Ltd. was listed on the Bombay Stock Exchange after it had been listed in the Stock Exchange at Ahmedabad and on receipt of information thereof. However, as soon as information was received that the said company was involved in fraudulent dealing of its scrip, again on intimation from the Ahmedabad Stock Exchange, the said scrip was delisted and debarred from trading by the BSE. In our view, the Bombay Stock Exchange had not acted in a manner which tended to promote the share scrip of M/s. Presto Finance Ltd. with any mala fide motive. Apart from the above, the delay of 10 years in approaching the High Court over the transactions in the said scrip cannot be ignored since, as observed by this Court in Raj Narai....