Appeal admitted.
Heard learned counsel for the parties.
This appeal takes exception to the order dated 20.02.2017
passed by the Securities Appellate Tribunal at Mumbai in Misc.
Application No.49 of 2017 and in Appeal No.53 of 2017, whereby
the Appellate Tribunal rejected the appeal preferred against
the order dated 03.02.2017 passed by the Disciplinary Action
Committee of National Stock Exchange of India Ltd. which found
the appellant guilty of indulging in financial irregularities
and misconduct in conduct of business, and for which a
membership of the appellant for five trading days came to be
imposed.
The argument of the appellant before this Court is that
the penalty/fine could be imposed only in the context of
Circular dated 27.06.2013. The relevant part of the circular
read thus:
“19. Improper use of funds raised by Rs. 1,00,000/- or
placing of clients securities 0.1% of the value
with bank/any other financial of misuse
institutions viz. funds not used whichever is
for respective client higher.
obligation/margins.
Mis-utilization of clients’
funds and/or securities.”
Thus, the appropriate authority could not have issued
suspension of trading membership of the appellant. Further,
the authority could not have imposed penalty/fine more than
quantified in the circular extracted above.
The respondent, however, relied on the bye-laws, Chapter
IV Rule 1, which reads thus:-
“Disciplinary Jurisdiction
(1) The relevant authority may expel or suspend
and/or fine under censure and/or warn and/or
withdraw any of the membership rights of a
trading member if it be guilty of
contravention, non-compliance, disobedience,
disregard or evasion of any of the Bye Laws,
Rules and Regulations of the Exchange or of any
resolutions, orders, notices, directions or
decisions or rulings of the Exchange or the
relevant authority or of any other Committee or
officer of the Exchange authorized in that
behalf or of any conduct, proceeding or method
of business which the relevant authority in its
absolute discretion deems dishonourable,
disgraceful or unbecoming a trading member of
the Exchange or inconsistent with just and
equitable principles of trade or detrimental to
the interests, good name or welfare of the
Exchange or prejudicial or subversive to its
objections and purposes.”
The provision regarding suspension of business reads
thus:
“Suspension of Business:
(8) The relevant authority may require a trading
member to suspend its business in part or in
whole:
(a) Prejudicial Business: When in the opinion
of the relevant authority, the trading member
conducts business in a manner prejudicial to
the Exchange by making purchases or sales of
securities or offers to purchase or sell
securities for the purpose of upsetting
equilibrium of the market or brining about a
condition of demoralization in which prices
will not fairly reflect market value, or”
It is then submitted that ample power is bestowed on the
appropriate authority to suspend the trading membership of a
member who indulges in prescribed misconduct. It is contended
that no fault can be found with the order passed by the
appropriate authority and has been rightly affirmed by the
Appellate Tribunal.
After considering the rival submissions, it is noticed
that the appellant had specifically raised the issue about the
appropriateness of the order suspending the trading membership
of the appellant and also regarding the quantum of penalty
imposed by the appropriate authority. That can be discerned
from the contention recorded in paragraph 3 of the impugned
order which, inter alia, reads thus:
“... He submitted that the decision of the DAC of NSE
is in violation of NSE Circular dated June 27, 2013,
because, as per that circular suspending the trading
is not contemplated for the violations allegedly
committed by the appellant...”
The Appellate Tribunal, however, has not examined this
contention but proceeded to reject the appeal on the specious
ground that the penalty imposed by the appropriate authority
cannot be said to be unreasonable or excessive. The argument
of the appellant was that even though the appropriate
authority can suspend the trading membership of the member
indulging in misconduct, it can be resorted to only when it
falls within the concerned Bye-law such as Bye-law 8(a) relied
upon by the respondent - which envisages that the trading
member must conduct business “in a manner prejudicial to the
Exchange” etc. Further, the penalty could not have exceeded an
amount of Rs. 1 lakh or 0.1% of the value of misuse, whichever
is higher. These arguments have not been dealt with by the
Appellate Tribunal at all.
Resultantly, we deem it appropriate to set aside the
impugned order and relegate the appellant before the Appellate
Tribunal by restoring appeal No. 53 of 2017 to the file of the
Securities Appellate Tribunal, Mumbai for reconsideration only
on the issue of quantum of punishment awarded to the
appellant. Indeed, while passing the final order, it will be
open to the Tribunal to pass appropriate order with regard to
the amount deposited by the appellant pursuant to order dated
27.02.2017 passed by this Court.
We make it clear that the Appellate Tribunal will not go
into technicalities of the effect of withdrawal of the appeal
by the appellant bearing No. 60/2017. The Appellate Tribunal
must decide the restored appeal on the issue of quantum of
punishment afresh expeditiously.
The Civil Appeal is allowed in the above terms. No order
as to costs.
Pending applications, if any, stand disposed of.
(DINESH MAHESHWARI) New Delhi July 22, 2019
Civil Appeal No(s). 3260/2017
NATIONAL STOCK EXCHANGE OF INDIA LTD Respondent(s)
(FOR EXEMPTION FROM FILING C/C OF THE IMPUGNED JUDGMENT ON IA 2/2017 FOR [PERMISSION TO FILE ANNEXURES] ON IA 3/2017 FOR ON IA 4/2017 IA No. 2/2017 - EXEMPTION FROM FILING C/C OF THE IMPUGNED JUDGMENT IA No. 3/2017 - PERMISSION TO FILE ANNEXURES IA No. 1/2017 - STAY APPLICATION IA No. 4/2017 - Vacate the Order)
Date : 22-07-2019 These matters were called on for hearing today.
CORAM :
For Appellant(s)
Mr. Mukesh M. Goel, Adv.
Mr. R. C. Kaushik, AOR
For Respondent(s)
Mr. V. Giri, Sr. Adv.
Mr. Rabin Majumder, AOR
Mr. Sumit Nagpal, Adv.
Mr. Muthucharan S., Adv.
UPON hearing the counsel the Court made the following
Appeal admitted.
The Civil Appeal is allowed in terms of the signed order.
Pending applications, if any, stand disposed of.
[Signed reportable order is placed on the file]