Social Action Forum for Manav Adhikar v. Union of India & Ors

ORDER %

29.09.2010 The petitioner,Social Action Forum for Manav Adhikar, describing itself an organization,which has the motto to fight for social welfare and providinglegal servicesto the underprivilegedand vulnerablesectionsofthe societyand establishhumanrights,has preferredthis publicinterestlitigation invoking the extraordinaryjurisdictionalpower of this Court with the following prayers:- ^ Certify that the digital file and physical file have been compared and the digital data is as per the physical file and no page is missing. •si rY "a. Pending the hearing and final disposal of this petition, this Hon'ble Court be pleased to stay the orders of the Board of Respondent No.l dated 02 February, 2010 and order of the Securities Appellate Tribunal, Mumbai dated 22.6.2010 in Appeal No.21 of 2010; b. Pending the hearing and final disposal of this petition, this Hon'ble Court be pleased to stay the decisions of RespondentNo.l dated November9, 2009 relatingto three orders of the Committee; c. The Hon'ble Courtbe pleasedto issue a writ of certiorarior any other writ, order or direction in the matter thereof quashingthe decisions/ordersdated 9"" November,2009 and 02"'^ February 2010; and Order dated 22.6.2010 of the SecuritiesAppellateTribunal,Mumbai in Appeal No.21 of 2010; d. The Hon'ble Court be pleased to declare that the decisions of RespondentNo.l dated November 9, 2009 relating to three orders of the Committee and the orders of the Board of RespondentNo.l dated02"^February,2010 as non est; Poge2 of14 •4 e. The Hon'ble Court be pleased to issue a writ of mandamus or any other writ, order or direction in the matter thereof directing Respondent No.l to implement the orders issued by the Committee; f. The Hon'ble Court be pleased to declare that the opinion opined by Mr. C. Achuthan is biased as he is a Director on Board of National Stock Exchange of India Limited, a SEBI regulated entity and which is the promoter and major shareholder of NSDL; g. The Hon'ble Court be pleased to order an investigation by an appropriate agency regarding various acts committed by C B Bhave in his capacity as Chairman SEBI so as to do undue favors to NSDL h. For ad-interim relief in terms of prayer (a) and (b); i. Cost of the present petition; and j. That such other and further reliefs as the nature and circumstances of the case may require be granted." Mr. Rajiv Dutta, learned senior counsel appearing for the petitioner submitted the 3'^'' respondent, who is the chairman, SEBI is the chief protagonist in ushering in all kinds of irregularities inasmuch as he has indirectly and sometimes directly applied tools in a maladroit manner to help the National Securities Depositories Limited (for short 'NSDL') and his proactive role has really crossed all boundaries if the orders passed by the SEBI are scrutinized with a studied manner. The learned counsel further Ji submitted that as a statutory body it has the sacrosanct duty to maintain and sustain the pious duty of adjudication but when allegations came up for consideration pertaining to NSDL, the respondent No.3 in a clever manner recused himself and constituteda two-membercommittee on 13'^ August, 2008 which recorded certain findings against the SEBI. Thereafter, an opinionwas soughtfrom Mr. Achuthanwhetherthe SEBI has thejurisdiction ,^ to reviewthe orderand thereafteradoptingmaladroitdispositionthe orderwas ^ reviewedpartlyin April,2009. The learnedcounselfurthersubmittedthatthe opinionthatwas furthersoughtwas whetherthe committeeworkedwithinthe parametersof the SEBI framework. In essence,the proponementofMr. Dutta is that the SEBI could not have sought such an opinion after constituting the committee inasmuch as the opinion of the committee was binding on it. The learned counsel has taken us through various paragraphs and the orders WP(C) No.6621/2010 including the orders passed by the Securities Appellate Tribunal, Mumbai (for short 'the SAT') to highlight that the entire gamut of facts would clearly \ exposit that collusion and conspiracy has been going through the marrow of the decision making process which makes the whole decision vulnerable and a sanctuary of errors. It is urged by him that after the committee took the decision, the Board ^ had become functus-qfficioand, therefore, there was no justificationor warrant to seek an opinion from Mr. Achuthan, a biased person, to clothe with the power of review or relook as obtainment of a biased opinion was . fundamentally an eye-wash. The learned senior counsel further submitted that the petitioner organisation which is dedicated and devoted to the social cause has felt obliged to arouse the judicial conscience of this Court under Article 226 of the Constitution of India to look into the functioning of the SEBI, the manner, the method and the modus operandi adopted by it to arrive at decisions. Mr. G.E. Vahanwati, the learned Attorney General, combating the aforesaid submissions, urged that the present public interest litigation is a remarkable phenomenon inasmuch as an attempt has been made to unsettle and dislodge the orders which have been passed inter se parties which is I Ad unthinkableand inconceivable. The learnedAttorneyGeneralhas submitted that whenthe respondentNo.3 hadrecusedhimselfat all pointsoftime as the orders and proceedings do clearly reveal, it is unfortunate that a social organization would come up and make unwarranted allegations since mudslinging is impermissible and unallowable in a court of law. It is his ^ furthersubmissionthatifthiskindofwritpetitionsare entertained,therewill , be no sanctity in an institution, and unless the institutions are allowed ,to surviveand functionin a. democraticbody polity the anarchy and chaos are bound to entrench into the adjudicatorysystem. It is propoundedby Mr. Vahanwatithat if a personis grieved,he can always preferan appeal before the Apex Court or he may come to this Court invokingthe writ jurisdiction but it is reallydifficultto fathomhow in a publicinterestlitigation,the orders passed by the statutoryauthoritiescan be quashed. The learned Attorney General has invited our attentionto the orders passed by the SAT on which the learnedseniorcounsel for the petitionerhas also placedrelianceupon to bolsterhis submissionthatthe said orderremotelydoes not suggestthatthere was any kind of collusionor conspiracyand, in fact, the appellateauthority has passed a reasoned order and has only recorded a concession that the stricturespassedagainstthe NSDL shouldbe expungedand, accordingly,the Page6 of14 same were expunged. It is also urgedby him that this Courtmay in a fit case entertainthe writpetitionand quashthe ordersbut does not have the requisite supervisorypower to go into the functioningof the SEBI or the SAT. To appreciate the rivalized submissions raised at the bar, we have perused the relevant provisions contained in the Securities and Exchange ^ Board of India Act, 1992 (for brevity 'the Act') which was brought into J existenceby the parliamentto promote orderly and healthy growth of the securitiesmarket and for investors'protectionand for monitoringthe stock exchangequiteapartfrom otheraspectsto be lookedinto. In the case athand, as is perceived from the prayers, it is not only manifold but absolutely ambitious. True it is, Mr. Dutta, learned senior counsel for the petitioner submittedthat all the prayersmay be deletedand the singularprayerthatthis Court should scrutinize is whether the activities of the SEBI and the activities of the respondentNo.3 should be addressed. Many an allegationhas been made and also an edificehas been soughtto be built in course of arguments that the respondentNo.3 could not have been appointed as the Chairmanof SEBI. We have been apprised by the learned Attorney General that the respondentNo.3 was appointedin the year 2008 and his term is going to be over in February, 2011. That apart, except making a bald allegation we Page7 of14 perceive nothing how the respondent No.3 is disquahfied to hold the post. In fact, on a query being made, the learned senior counsel candidly admitted that he is not really challenging the appointment of the respondent as the chairman of SEBI. To put it differently, it is beyond the scope of writ of quo warranto. ^ Thus understood,the hub of the matteris whetherthis Court should entertain a public interest litigation of this nature and direct an enquiry to be conducted by a third party agency with regard to the activities of the SEBI. On a perusal of the proceedings it is luminescentthat the respondentNo.3 has recused and constituted a committee. Hence, he had, in actuality, recused himself from the initial stage. A submission has been canvassed by the learned senior counsel for the petitioner that though the respondent No.3 had recused himself yet he had taken care to see that the interest of the NSDL is protected inasmuch as all officers do report to him. The Chairman of an institution, if we allow ourselves to say, has a dual role. When he functions as the administrative authority all officers are expected to be guided by him in the administrative capacity depending upon the Rule in vogue but as far as quasi-judicialfunctioningis concerned,they are absolutelyindependentand nothinghas been broughton recordthat the respondentNo.3 ever entrenched Page 8 of14 \ or encroachedupon their quasi judicial functioning. It is easy to make an allegationof mala fide but extremelydifficultto proveit. It is easierto make an allegationof bias but it is difficultto substantiatethe same. Quite apart from the above it is noticeablefrom the orderpassedby the Boardin respect of Rajnarayan Capital Market Services Limited, it has been mentioned as follows:- "Mr. C.B. Bhave, Chairman of SEBI, did not participate in these deliberations." It is worth noting, being dissatisfied with the aforesaid order, the NSDL preferredan appeal beforethe SAT formingthe subjectmatterof the Appeal No. 21/2010. The AppellateBoard in paragraph2 has held thus - ^ "We have heard the learnedsenior counsel on both sides. In the light of the directions issued by the Board, the appellant has I stated that it has revised its business rules and put in place additional procedures to deal with the accounts of the beneficial owners in the event of deactivation/ terminationof a depository participant. Having gone through the record, we are satisfied that no prejudice has been caused to the beneficial owners of the depository participant, namely, Rajnarayan Capital Markets Services Limited whose certificate of registration has since been cancelled. In this view of the matter and having regard to the interest of the securities market, we direct that the observations made in the impugned order, in so far as they are adverse to the appellant, shall stand expunged. Learned senior counsel on both Page 9 of14 sides agree that we need not record detailed reasons for expunging the observations in the impugned order." On a careful scrutiny of the said order, it is luculent to us that the Board has recorded its satisfaction that no prejudice has been caused to the ^ beneficialowners of the depositoryparticipant. Thus, an opinionhas been ^ formed. Thereafter,on the concessionofthe learnedseniorcounselappearing for bothsides,the observationsinthe orderimpugnedwere expunged. From the aforesaid,we really do not perceiveany kind of collusionor conspiracy. Whetherthe orderis rightorwrong,we are notrequiredto dwell upon. Needless to say, such an order is assailable in appeal before the Supreme Court under Section 15Z of the Act. In this context, we may profitablyquote a passage from L. Chandra Kumar v. Union ofIndia and others,AIR 1997SC1125 whereinthe Apex Court has held thus - "99. In view of the reasoning adopted by us, we hold that Clause2(d) of Article323A and Clause3(d) of Article323B,to the extentthey excludethe jurisdictionof the High Courts and the Supreme Court under Articles 226/227 and 32 of the Constitution, are unconstitutional. Section 28 of the Act and the "exclusionof jurisdiction"clauses in all other legislations enacted under the aegis of Articles 323A and 323B would, to Page10of14 v\ the same extent, be unconstitutional. The jurisdiction conferred upon the High Courts under Articles 2261221 and upon the Supreme Court under Article 32 of the Constitution is part of the inviolable basic structure of our Constitution. While this jurisdiction cannot be ousted, other Courts and Tribunals may perform a supplemental role in discharging the powers conferred by Articles 226/227 and 32 of the Constitution. The Tribunals created under Article 323A and Article 323B of the Constitution are possessed of the competence to test the constitutional validity of statutory provisions and rules. All decisions of these Tribunals will, however, be subject to scrutiny before a Division Bench of the High Court within whose jurisdiction the concernedTribunal falls. The Tribunals will, nevertheless, continue to act like Courts of first instance in respectof the areas of lawforwhichtheyhave beenconstituted. It will not, therefore, be open for litigants to directly approach the High Courts even in cases where they questionthe vires of statutory legislations (except where the legislation which createsthe particular Tribunal is challenged)by overlookingthe jurisdiction of the concerned Tribunal. Section 5(6) of the Act is valid and constitutional and is to be interpreted in the manner we have indicated. " We have reproduced the said paragraph only to show that an order passedby the Tribunal,namely.CentralAdministrativeTribunalor the State Administrative Tribunal would be amenable to challenge under Article 226/227 of the Constitution of India but the High Court does not have administrative control over it. Similarly, this Court does not have the power to supervise SEBI or SAT on the administrativeside. This position is undisputable. However,the submissionof the learnedseniorcounselfor the Page11 of14 petitioneris that it is not a questionof supervisingbut exercisingof power over the tribunal for the purpose of directingthe third party to conduct an enquiry into the manner in which the affairs are carried out. To put it differently, the learned senior counsel would submit that how the decision making process is vitiated by personal involvement of the members of the ^ SEBI or the appellate board. We are afraid that unless the controversy actuallytravels to this Court by an assail and requires to be decidedwithinthe parameters, this court should not direct any kind of enquiry to the affairs of SEBI or SAT. That is not withinthe domain of this Court while exercising the power either under Article 226 or 227 and Article 226/227 of the Constitution of India. Ordinarily so saying, we have parted with the case, but, a pregnant one, we are constrained to add something more. A public interest litigation was innovated as a weapon to assist the under privileged and the marginalized sections. True it is, in certain cases, the Apex Court as well as High Courts have entertained public interest litigations where the collective good, environment pollution, matters relating to right to life under Article 21 of the Constitution, etc. are sought but when question of the present nature arises, as the learned Attorney General would submit, is an attempt, an endeavour, a Page 12 of14 A deliberate and calculated effort to create a concavity and crack in the functioningof the institutions. Thesame is notpermissible. We cannot grant, despite our best efforts, a liberty to the petitioner organizationwhich has pleadedthat it is committedto the cause of poor and causeof thepeopleinplightwhen allegationshave beenmadepaintingothers by ascribingdis-reputationto them and causinga dent in the functionalismin the institutions. The said attemptcanbe comparedto one buildinga castlein Spain. If suchkind of public interestlitigationsare entertained,we are afraid, the people who really need the interventionof the court will be kept at bay. The registeredsocietymighthavenurturedan ambitionto bringa litigationof this nature but there is an old saying "ambition must be combined with acceptance". The petitioner-society has not accepted its limitation and Hr crossed its barriers and barricades. He who crosses the barriers, that is, ^ iaxmanrekha'cannotbe allowedto go scotfree. In view of the aforesaid, we direct dismissal of the writ petition with costswhichis assessedat Rs.50,000/-. The said costs shall be depositedwith the Blind Relief Association,Lai Bahadur Shastri Marg, Near Oberoi Hotel, New Delhi-110003. The costs shall be deposited within a period of four weeks from the date of receipt of the order. Page 13 of14 If the said costs is not deposited, Mr. A.S. Chandhiok, the learned Additional Solicitor General assisting Mi-. G. E. Vahanvati, the learned Attorney General is given liberty to move an application in this writ petition so that appropriate steps can be taken and the persons who represent the society can be proceeded in accordance with law. SEPTEMBER 29, 2010 vk WP (C)No.6621/2010 CHIEF JUSTICE MANMOHtW, J

* IN THE HIGH COURT OF DELHI AT NEW DELHI #78 + W.P.(C) 6621/2010 SOCIAL ACTION FORUM FOR MANAV ADHIKAR Petitioner ThroughMr. RajivDutta,Sr. Adv. with Mr. A. Prasad and Mr.Ajay Veer Singh Jain, Advs. versus UNION OF INDIA & ORS Respondents ThroughMr. G.E. Vahanwati,AttorneyGeneralof India, Mr. A.S. Chandhiok, ASG with Mr.PratapVenugopal,Adv. for R-1 & 2. CORAM: HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE MANMOHAN