TaxTMI 
TaxTMI 
2025 (6) TMI 1516
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....he petitioner no. 1 company (hereinafter, the 'Company'). The challenge is also laid to the 'General Administrative Circular' dated 24.02.2023 issued by respondent no. 2/BSE. 2. The case set out in the petition is that on 23.02.2017 respondent no. 2/BSE introduced the 'Graded Surveillance Measure' (for short, 'GSM') Framework in consultation with respondent no. 1/SEBI, whereby it was provided that if it is noticed that any securities witness abnormal price rise not commensurate with financial health of the company & fundamentals like Earnings, Book Value, Net worth etc., the securities will be made subject to the GSM Framework. 3. On 24.02.2023, impugned General Administrative Circular was issued by respondent no. 2/BSE providing that messages/videos are being circulated with recommendations to deal in certain share scrips and such share scrips based on any unusual price/volume variation/trading concentration and other factors, may be shortlisted for surveillance action to GSM Stage-IV. 4. On 14.02.2025 and 18.02.2025, Company announced 'Rights to Issue' of its 8,00,000 equity shares available for subscription from 20.02.2025 at a fixed price of Rs. 250/- per share. 5. ....
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....public that the securities mentioned in the 'Annexure I' to the notice, which included Company's securities, have been shortlisted based on circulation of videos and unusual price/volume movement and shall be treated under GSM Stage-IV. 14. Thereafter, on 04.04.2025, BSE published second impugned notice on its website whereby it informed the general public that the securities mentioned in the annexure to the notice, which included Company's securities, shall be moved to their respective higher stages of GSM w.e.f. 07.04.2025 as per the provisions of GMS framework and the trading members were requested to take precaution while trading in the said securities. As per the annexure to the notice, Company's securities were shown to be moved to GSM IV stage. 15. On 07.04.2024, at 11.29 a.m., Company became aware of the aforesaid action taken by BSE and sought reasons from respondent no. 2/BSE for such an action taken against it. On the same day at 11.36 a.m. BSE wrote to the Company that shortlisting of securities under the GSM framework was purely on account of market surveillance reasons and it should not be construed as an adverse action against the concerned Company. Pursuant th....
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....SE at Mumbai. Accordingly, the cause of action has arisen at both Mumbai and Delhi; 19.4. The impugned notices were published by the BSE on its website at Mumbai. Accordingly, this is the only cause which has exclusively arisen at Mumbai; 19.5. The infringement of the rights of the petitioners on account of issuance of the impugned notices took place only at Delhi as the Company has its registered office at Delhi; 19.6. Though the impugned notices were published on the website of the BSE, the same were accessed by the petitioners at New Delhi. Accordingly, the impugned notices are to be deemed to have been communicated to the petitioners at New Delhi; 19.7. Impugned notices placed restrictions on the trading of the shares of the Company. While shares are traded on an online platform from all across the country, the situs of the shares is at the registered office of the Company at Delhi; 19.8. Therefore, it is contended by Mr. Sibal that significant part of cause of action has arisen at Delhi and only a miniscule part of cause of action has arisen at Mumbai. He places reliance on Kusum Ingots & Alloys Ltd. vs. Union of India and Another, ....
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....use, the Issuer hereby covenants and agrees that it shall comply with the following: i. The SEBI (Listing Obligations And Disclosure Requirements) Regulations 2015 and other applicable regulations/ guidelines/ circulars as may be issued by SEBI from time to time. ii. The relevant byelaws/ regulations/ circulars /notices /guidelines as may be issued by the Exchange from time to time. iii. Such other directions, requirements and conditions as may be imposed by SEBI/ Exchange from time to time." 21. He draws attention of the Court to Rule 1.3 of the Rules of BSE which deals with the exclusive jurisdiction clause, to contend that only the Courts of Mumbai have the exclusive jurisdiction to entertain the present writ petition. The same reads as under: Rule 1.3 Jurisdiction Save and except as specifically provided otherwise, the Rules, Byelaws and Regulations shall be subject to the exclusive jurisdiction of the Courts of Mumbai irrespective of the location of the place of business of the members and clients in India or the place where the concerned transaction may have taken place. 22. He submits that this Court does not have the territ....
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....sofar as reliance placed by Mr. Venugopal on Rule 1.3 of the BSE Rules is concerned, the Hon'ble Supreme Court in Maharashtra Chess Association vs Union of India and Ors., (2020) 13 SCC 285 has held that an exclusive jurisdiction clause cannot oust the jurisdiction of a Writ Court under Article 226 of the Constitution. 26. Arguments were also addressed by the learned senior counsels for the parties on the issue of alternative efficacious remedy as well, however, the same will assume relevance only upon this Court holding in affirmative as to its territorial jurisdiction. 27. In the present case the relevant provision invoked by the petitioner is Clause (2) of Article 226^1 of the Constitution which provides that the 'cause of action' must at least arise in part within the territories in relation to which the High Court exercises jurisdiction, to clothe that High Court with jurisdiction to entertain and try a writ petition. The Hon'ble Supreme Court in State of Goa v. Summit Online Trade Solutions (P.) Ltd. and Ors. (2023) 7 SCC 791 observed that expression 'cause of action' has not been defined in the Constitution, but in the context of a writ petition, what would constit....
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....essential facts for maintaining a writ petition. Relying upon the decisions of the Hon'ble Supreme in Kusum Ingots (supra) and Summit Online Trade Solutions (supra), the Court observed that in the context of maintaining a writ petition, cause of action are the material facts which are imperative for the writ petitioner to plead and prove, if traversed by the respondent, in order to support his right to the judgment of the Court. The facts pleaded in the writ petition must have a nexus on the basis whereof a prayer can be granted. The facts which have nothing to do with the prayers made therein cannot be said to give rise to a cause of action. 29. In the said case the challenge was to a Revocation Order dated 10.11.2023 whereby Settlement Order stood revoked and withdrawn by SEBI in terms of Regulation 28 of the SEBI (Settlement Proceedings) Regulations of 2018 on the ground of alleged failure of the appellants therein to comply with the terms of the Settlement Order, which was assailed before this Court. The Court noted that the challenge to the impugned Revocation Order had been raised, inter-alia, on the grounds of non-adherence to the principles of natural justice by SEBI all....
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.... in the writ petition the cause of action for challenging the impugned order against SEBI has arisen at Mumbai. 16.2. In the facts pleaded by the Appellants for invoking the writ jurisdiction of the Courts at Delhi, undoubtedly, it cannot be said that the High Court of Delhi had no territorial jurisdiction for admittedly, the Appellants reside within the jurisdiction of this Court. However, none of the facts pleaded by the Appellants for invoking the jurisdiction of this Court are integral and material fact for challenging the Impugned Revocation Order. The said facts are not sufficient for compelling this Court to hear the matter on merits. For the same reason, the contention of the situs of shares of BNL is not an integral fact. (emphasis supplied) 30. Reference in this regard may also be had to a decision of this Court in West Coast Ingots Pvt. Ltd. (supra), wherein a Division Bench of this Court was considering a question as whether this Court should decline to exercise its writ jurisdiction because a significant part of cause of action has not arisen within its territorial jurisdiction. The Court observed that where significant part of the cause of action ....
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....lly with regard to the issuance of impugned 'General Administrative Circular' dated 24.02.2023 and two impugned notices dated 03.04.2025 and 04.04.2025, issued by BSE. The relevant grounds in the writ petition reads as under: "40. The Petitioners submit that the Respondent No. 2 has failed to provide any reasons as to why the Petitioner No. 1 stock has been put in the highest category of the GSM which has led to the consequence that the Petitioner No. 1's stock only being available for trade once a week i.e. only on Monday and a trader seeking to trade in the Petitioner No. 1's stock has to deposit 100% additional amount over and above the value of the share to trade in the same. The above action is not only contrary to the GSM Framework which provides that a stock shall be put into surveillance stagewise starting from "GSM Stage-0" to "GSM Stage-IV" based on a periodic review of the stock but has been done without issuing any show cause notice to the Petitioners or providing an opportunity of hearing. This action of the Respondent No. 2 is in flagrant violation of Article 14 of the Constitution of India and in violation of the basic principles of natural justice. A copy o....
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....ed and unguided discretion with the Stock Exchange to invoke civil consequences against a company without even providing the reason thereof which can be tested by a competent court. Such vesting of unbridled and arbitrary executive power without any statutory backing is unconstitutional." (emphasis supplied) 33. Likewise, the fact pleaded to invoke the territorial jurisdiction this Court, are also reproduced herein below: "45. The Petitioner submits that this Hon'ble Court has the territorial jurisdiction to deal with the present Petition, inasmuch as, the direct effect of the Impugned Notices is on the Petitioners and its shareholders at New Delhi. The Petitioners made the complaints to the Cyber Cell/Respondent No. 3 at Delhi to take down the impugned videos. The Petitioners expected the Respondent No. 2 to take cognizance of the complaint made by the Petitioner and accept the situation in view of the various opinions being published even prior to the impugned Youtube videos. Accordingly, a part of the cause of action has arisen at Delhi." (emphasis supplied) 34. Whereas the prayer made in the petition reads thus: "(i) Issue a Writ of Certi....
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....icate the dispute. The only fact pleaded in the writ petition to invoke the territorial jurisdiction of this Court, as noted in para 33 above, is that the direct effect of the impugned notices is on the petitioners and its shareholders at New Delhi and that the complaints were made by the petitioners to the Cyber Cell/respondent No. 3 at Delhi to take down the videos in question. Mr. Sibal has also argued that the situs of shares is in Delhi as the registered office of the Company is in Delhi, therefore, the rights of the petitioners have been impacted in Delhi. 38. However, it has not been alleged in the petition as to who are the shareholders in Delhi whose rights have been infringed. Incidentally, the petitioner no. 2 is a resident of Faridabad and not of Delhi. Further, the shares are admittedly, traded through online platform all across the globe, therefore, it cannot be said that situs of shares is in Delhi merely because the registered office of the Company is in Delhi. The presence of some of the shareholders in Delhi or situs of shares are not the facts that would constitute a material or integral part of the cause of action, as the same has no relevance or nexus with t....
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....cause empowering the High Court to decide the dispute and that, at least, a part of the cause of action to move the High Court arose within its jurisdiction. Such pleaded facts must have a nexus with the subject-matter of challenge based on which the prayer can be granted. Those facts which are not relevant or germane for grant of the prayer would not give rise to a cause of action conferring jurisdiction on the court. These are the guiding tests. 18. Here, tax has been levied by the Government of Goa in respect of a business that the petitioning company is carrying on within the territory of Goa. Such tax is payable by the petitioning company not in respect of carrying on of any business in the territory of Sikkim. Hence, merely because the petitioning company has its office in Gangtok, Sikkim, the same by itself does not form an integral part of the cause of action authorising the petitioning company to move the High Court. We hold so in view of the decision of this Court in National Textile Corpn. Ltd. v. Haribox Swalram [National Textile Corpn. Ltd. v. Haribox Swalram, (2004) 9 SCC 786]. The immediate civil or evil consequence, if at all, arising from the impugned noti....
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....d the rates subsequently. When it learnt that it was considered ineligible it sent representations, including fax messages, to EIL, ONGC, etc., at New Delhi, demanding justice. As stated earlier, the Steering Committee finally rejected the offer of NICCO and awarded the contract to CIMMCO at New Delhi on 27-1-1993. Therefore, broadly speaking, NICCO claims that a part of the cause of action arose within the jurisdiction of the Calcutta High Court because it became aware of the advertisement in Calcutta, it submitted its bid or tender from Calcutta and made representations demanding justice from Calcutta on learning about the rejection of its offer. The advertisement itself mentioned that the tenders should be submitted to EIL at New Delhi; that those would be scrutinised at New Delhi and that a final decision whether or not to award the contract to the tenderer would be taken at New Delhi. Of course, the execution of the contract work was to be carried out at Hazira in Gujarat. Therefore, merely because it read the advertisement at Calcutta and submitted the offer from Calcutta and made representations from Calcutta would not, in our opinion, constitute facts forming an integral pa....
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....me by itself does not give rise to any cause of action, nor the contention of accessing such videos by the petitioners in Delhi is a relevant fact based on which impugned 'General Administrative Circular' and 'Notices' issued by BSE can be quashed. Clearly, the YouTube videos are not material or integral fact to the cause of action. 43. Lastly, Mr. Sibal has also argued that the impugned 'General Administrative Circular' dated 24.02.2023 is a general circular having effect in the entire country and the same has led to the infringement of fundamental rights of the petitioners at Delhi on account of its impact/effect, thus, the same constitutes cause of action in Delhi. Notably, the said Circular dated 24.02.2023 was issued by the BSE cautioning all concerned that where it is found that messages/videos are being circulated to investors by unregistered or unauthorised entities inducing them to deal in certain scrips, which is detrimental to the interests of investors and also adversely affecting the integrity of the securities market, such scrips will be shortlisted based on certain factors mentioned therein for surveillance action similar to GSM Stage IV. 44. Indubitably, the i....
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....within the jurisdiction of this Court, this Court would have territorial jurisdiction to entertain the petition. However, it is equally settled that the facts pleaded must constitute a material, essential or integral part of the cause of action Alchemist Ltd. and Anr. vs. State Bank of Sikkim and Ors., (2007) 11 SCC 335. The cause of action, thus, does not comprise of all the pleaded facts; rather it has to be determined on the basis of the integral, essential and material facts which have a nexus with the lis. [Bharat Nidhi (supra).]. The facts pleaded by the petitioners to invoke the territorial jurisdiction of this Court, as noted above, cannot be said to be essential, integral or material facts so as to constitute a part of "cause of action" within the meaning of Article 226 (2) of the Constitution. 49. Before parting, the decisions relied upon by Mr. Sibal on the aspect of territorial jurisdiction may also be adverted to. 50. In Om Prakash Srivastava (supra), the judgment of High Court of Delhi was set aside and the matter was remitted on the ground that the High Court without saying that no part of the cause of action arose within its territorial jurisdiction, had obser....