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Anand Rathi and ors. Vs. Securities and Exchange Board of India and anr. - Court Judgment

SooperKanoon Citation
SubjectCivil
CourtMumbai High Court
Decided On
Case NumberW.P. No. 628 of 2001
Judge
Reported in2002(2)ALLMR646; 2002(2)BomCR403; (2002)1BOMLR150; [2002]110CompCas837(Bom); 2002(1)MhLj522
Acts Securities and Exchange Board of India Act, 1992 - Sections 1(3), 3, 4, 11, 11B, 11(2), 11(3), 11(4), 12, 12(3), 30, 45-K, 45K(3), 73, 89, 144(2) and 161(2); Punjab Municipal Act - Sections 232 to 235, 238 and 238(1); Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 - Regulations 26 to 29; Constitution of India - Article 14, 19, 19(1), 21 and 226; Public Utility Holding Company Act, 1935 - Sections 11(2); Securities Contracts (Regulations) Act, 1956
AppellantAnand Rathi and ors.
RespondentSecurities and Exchange Board of India and anr.
Appellant AdvocateAbhishek Singhvi and ;Amit Desai, Advs. and ;Zal Andhyarujina, Adv., i/b., Amarchand Mangaldas & Co.
Respondent AdvocateG.E. Vahanvati, Adv. Gen, ;Kumar Desai, Adv., i/b., Maneksha Sethna and Co., ;Virag Tulzapurkar and ;Sagar Divekar, Advs., i/b., Wadia Gandhy & Co.
DispositionPetition dismissed
Excerpt:
.....analyse the evidence in detail and come to conclusion on the merits of the case. the operation of stock markets and the functioning of brokers is not only highly technical but very complex. the exercise to he carried out will invoke not merely the interpretation of the above circulars and the parameters of the authority of the president of the b.s.e. but also the collection of the material relating to innumerable transactions, the corelation of the same with various factors such as the time, and rate at which they were entered into and also the relationship between the conflicting entries thereto. it is the sebi and not the court that must carry out this analysis.;s.e.b.i. as a regulatory agency has been constituted with avowed object of protecting the interest of the investors. the..........by the sebi confirming the order dated 12-3-2001.3. the 1st petitioner is a broker at the bombay stock exchange and he was president of the stock exchange during the relevant period. the petitioners nos. 2 to 5 are private limited companies engaged in broking, investments, banking etc. the respondent no. 1 sebi is constituted under section 3 of the said act. the respondent no. 2 is the bombay stock exchange which is recognized under the said act and is a leading stock exchange in the country. the respondent no. 2 is regulated by the sebi under the securities contracts (regulations) act 1956 and the said act.4. a few months ago on 28-2-2001, the finance minister introduced what was widely seen as 'an investor friendly budget'. the general expectation was that the stock markets in the.....
Judgment:
ORDER

A.P. Shah, J.

1. Rule is issued and is made returnable forthwith.

2. This Writ Petition under Article 226 of the Constitution has been filed for the issue of writ of certiorari to quash and set aside the order dated 12-3-2001 and the Circular of even date issued by the Securities and Exchange Board of India (SEBI) in exercise of powers under Section 11 read with Section 11B of the Securities and Exchange Board of India Act 1992, hereinafter referred to as the said Act. The petitioners are also seeking to quash orders dated 30-3-2001 and 13-4-2001 passed by the SEBI confirming the order dated 12-3-2001.

3. The 1st petitioner is a broker at the Bombay Stock Exchange and he was President of the Stock Exchange during the relevant period. The petitioners Nos. 2 to 5 are private limited companies engaged in broking, investments, banking etc. The respondent No. 1 SEBI is constituted under Section 3 of the said Act. The respondent No. 2 is the Bombay Stock Exchange which is recognized under the said Act and is a leading Stock Exchange in the country. The respondent No. 2 is regulated by the SEBI under the Securities Contracts (Regulations) Act 1956 and the said Act.

4. A few months ago on 28-2-2001, the Finance Minister introduced what was widely seen as 'an investor friendly budget'. The general expectation was that the stock markets in the country would be buoyed by such a budget. In fact between 28-2-2001 and 1-3-2001 itself, as a reaction to the budget, the sensex rose by 201 points. However, on the next day i.e. 2-3-2001 there was sudden and unexpected fall in the stock market and the sensex dropped by a total of 176 points. In the wake of the drastic and totally unexpected fall in the market and apprehending possible attempts to manipulate the securities market, investigations were undertaken by the SEBI. Some news papers carried articles alleging that the 1st petitioner who was the President of Stock Exchange had illegally obtained some price/market sensitive information, obtained from an officer of the surveillance department in the presence of certain other brokers. During the investigation the transcripts of telephonic conversation revealed that the 1st petitioner had obtained information in respect of certain specific scrips and brokers on 2-3-2001 from Shri Aran Dhanawade, a junior officer of the Surveillance Department of the Bombay Stock Exchange. The 1st petitioner resigned from the post of President on 7-3-2001.

5. On 12-3-2001 the Chairman of the SEBI in exercise of powers under Section 11 read with Section 11B of the said Act passed me impugned order which reads as follows --

'SECURITIES AND EXCHANGE BOARD OF INDIA '

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