TaxTMI 
TaxTMI 
2025 (6) TMI 1516
X X X X Extracts X X X X
X X X X Extracts X X X X
....he '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. The 'Rights to Issue' was closed on 05.03.2025 and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ice, 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 thereto, at 11.48 a.m. Company again sought reasons from BSE for taking s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gned 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, (2004) 6 SCC 254; 19.9. The respondents have not contended that the courts at Delhi are forum non-conveniens to them but that this Co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lations/ 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 territorial jurisdiction to entertain the present petition for the following reasons - (i) business of buying, selling or dealing in the securities of the listed companies is done through the computerized processing unit of the BSE at....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re 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 2261 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 constitute such 'cause of action' is the material facts which are imperative for the writ petitioner to plead and prove to obtain relief as claimed. Such pleaded facts must have a nexus with the subject matter of challenge based on which the prayer can be granted. The facts which are not relevant for grant of the prayer would not give rise to a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndent, 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 alleging that SEBI failed to provide the appellants an opportunity of hearing prior to revocation and that the order is unreasoned. It was further pleaded that the impugned order is contrary to the extant law. The Court observed that the grounds pleaded would show that each one of them allege acts and omissions by SEBI at Mumbai, therefore, the cause of action for chal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wever, 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 arose outside the jurisdiction of this Court, the petitioner should approach the appropriate High Court within whose territorial limits the substantial portion of the cause of action arose, and in such a situation this Court should decline to entertain the writ petition. However, the position may be different if the petitioner will be without any remedy elsewhere. The relevant part of the position read....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onsequence 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 of the notice issued by the Respondent No. 2 from time to time notifying the Graded Surveillance Measures is annexed herewith and marked as Annexure P-22. A copy of the FAQ's issued by the Respondent No. 2 is annexed herewith and marked as Annexure P-23. xxx xxx xxx 42. The Impugned Notice dated 24.02.2023 also does not provide for issuance of any show cause notice or procedure for hearing and is bereft of the basic princip....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 Certiorari or any other appropriate writ, order or direction, quashing and setting aside the Impugned Notice Nos. 20250403-52 dated 03.04.2025 and 20250404-62 dated 04.04.2025 published by the Respondent No. 2 on its website; and (ii) Issue a Writ of Certiorari or any other appropriate writ, order or direction, setting aside the Impugned Notice No. 20230224-38 dated 24.02.2023 issued by the Respondent No. 2 as being unconstitutional; and (iii) Issue a writ of mandamus or any other writ, order or direction directing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en 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 the challenge laid to the 'General Administrative Circular' and Notices, on the ground of arbitrariness and non-adherence to the principles of natural justice. For the same reason, complaint made by the petitioners to the Cyber Cell/respondent No. 3 at Delhi to take down the videos, is not a material and integral fact. 39. Even the registered office of the Company being in Delhi will not confer territorial jurisdiction on this Court. In Ashoka Marketing (supra) the Division Bench of this Court, relying upon the decisions of the Hon'ble Supreme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng 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 notification is that the petitioning company has to pay tax @ 14% to the Government of Goa. The liability arises for the specific nature of business carried on by the petitioning company within the territory of Goa. The pleadings do not reflect that any adverse consequence of the impugned notification has been felt within the jurisdiction of the High Court. At this stage, we are not concerned with the differential duty as envisaged in Schedule II (@ 6%) vis-à-vis Schedule IV (@ 14%) of the impugned notification. That is a matter having a bearing on the merits of the lit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a 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 part of the cause of action. So also the mere fact that it sent fax messages from Calcutta and received a reply thereto at Calcutta would not constitute an integral part of the cause of action. Besides the fax message of 15-1-1993, cannot be construed as conveying rejection of the offer as that fact occurred on 27-1-1993. We are, therefore, of the opinion that even if the averments in the writ petition are taken as true, it cannot be said that a part of the cause of action arose within the jurisdiction of the Calcutta High Court." (emphasis supplied) 41. A somewhat similar view has been taken by the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onstitutes 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 issuance of 'General Administrative Circular' dated 24.02.2023 by itself would not give rise to a cause of action. It is only when the said Circular is implemented, would it give rise to civil consequences, which may give rise to a cause of action. 45. In the present case, the surveillance action in terms of GSM Stage IV has been taken against the petitioners by issuing two impugned notices dated 03.04.2025 and 04.04.2025. The cause of action, thus, arose only when the said two notices were uploaded by the BSE headquartered at Mumbai, on its website. Therefore, it is misconceived to say that issuance of 'General Administrative Circular' ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 observed that the jurisdiction may be there, but Allahabad High Court can deal with the matter more effectively. The said decision is clearly distinguishable as this Court has come to definite conclusion that it has no territorial jurisdiction for the reasons noted hereinabove. 51. Mr. Sibal has relied upon Kusum Ingots (supra) to canvass the proposition that when a part of the cause of action arises within one or the other High Court, it will be for the petitioner to choose his forum. The said decision does not advance the case of the petitioners, as present is not a case where a part of the cause of action has arisen within territorial jurisdictions of two High Courts. 52. Like....