Case: National Securities Depository Ltd Vs. Securities and Exchange Board of India

securities market.Explanation.--For the removal of doubts, it is hereby declared that the power to issue directions under this Section shall include and always be deemed to have been included the power to direct any person, who made profit or averted loss by indulging in any transaction or activity in contravention of the provisions of this Act or Regulations made thereunder, to disgorge an amount equivalent to the wrongful gain made or loss averted by such contravention.11D. Cease and desist proceedings. If the Board finds, after causing an inquiry to be made, that any person has violated, or is likely to violate, any provisions of this Act, or any Rules or Regulations made thereunder, it may pass an order requiring such person to cease and desist from committing or causing such violation: Provided that the Board shall not pass such order in respect of any listed public company or a public company (other than the intermediaries specified Under Section 12) which intends to get its securities listed on any recognised stock exchange unless the Board has reasonable grounds to believe that such company has indulged in insider trading or market manipulation.12. Registration of stock brokers, sub-brokers, share transfer agents, etc.(3) The Board may, by order, suspend or cancel a certificate of registration in such manner as may be determined by Regulations:Provided that no order under this Sub-section shall be made unless the person concerned has been given a reasonable opportunity of being heard.15-I. Power to adjudicate. (1) For the purpose of adjudging Under Sections 15A, 15B, 15C, 15D, 15E, 15F, 15G [15H, 15HA and 15HB, the Board shall appoint any officer not below the rank of a Division Chief to be an adjudicating officer for holding an inquiry in the prescribed manner after giving any person concerned a reasonable opportunity of being heard for the purpose of imposing any penalty.(2) While holding an inquiry the adjudicating officer shall have power to summon and enforce the attendance of any person acquainted with the facts and circumstances of the case to give evidence or to produce any document which in the opinion of the adjudicating officer, may be useful for or relevant to the subject-matter of the inquiry and if, on such inquiry, he is satisfied that the person has failed to comply with the provisions of any of the Sections specified in Sub-section (1), he may impose such penalty as he thinks fit in accordance with the provisions of any of those sections.(3) The Board may call for and examine the record of any proceedings under this Section and if it considers that the order passed by the adjudicating officer is erroneous to the extent it is not in the interests of the securities market, it may, after making or causing to be made such inquiry as it deems necessary, pass an order enhancing the quantum of penalty, if the circumstances of the case so justify:Provided that no such order shall be passed unless the person concerned has been given an opportunity of being heard in the matter:Provided further that nothing contained in this Sub-section shall be applicable after an expiry of a period of three months from the date of the order passed by the adjudicating officer or disposal of the appeal Under Section 15T, whichever is earlier.22. Administrative functions of the Board are broadly referable to Section 11 (1) of the Act, which states as follows:11. Functions of Board. (1) Subject to the provisions of this Act, it shall be the duty of the Board to protect the interests of investors in securities and to promote the development of, and to regulate the securities market, by such measures as it thinks fit.23. Legislative functions, namely that of making of Regulations is referable to Section 30 of the Act which reads as follows:30. Power to make Regulations. (1) The Board may, by notification, make Regulations consistent with this Act and the Rules made thereunder to carry out the purposes of this Act.(2) In particular, and without prejudice to the generality of the foregoing power, such Regulations may provide for all or any of the following matters, namely:(a) the times and places of meetings of the Board and the procedure to be followed at such meetings under Sub-section (1) of Section 7 including quorum necessary for the transaction of business;(b) the terms and other conditions of service of officers and employees of the Board under Sub-section (2) of Section 9;(c) the matters relating to issue of capital, transfer of securities and other matters incidental thereto and the manner in which such matters shall be disclosed by the companies Under Section 11 A;(ca) the utilisation of the amount credited under Sub-section (5) of Section 11;(cb) the fulfilment of other conditions relating to collective investment scheme under Sub-section (2A) of Section 11AA;(d) the conditions subject to which certificate of registration is to be issued, the amount of fee to be paid for certificate of registration and the manner of suspension or cancellation of certificate of registration Under Section 12;(da) the terms determined by the Board for settlement of proceedings under Sub-section (2) and the procedure for conducting of settlement proceedings under Sub-section (3) of Section 15JB;(db) any other matter which is required to be, or may be, specified by Regulations or in respect of which provision is to be made by Regulations.24. It may be stated that both Rules made Under Section 29 as well as Regulations made Under Section 30 have to be placed before Parliament Under Section 31 of the Act. It is clear on a conspectus of the authorities that it is orders referable to Sections 11(4), 11(b), 11(d), 12(3) and 15-I of the Act, being quasi-judicial orders, and quasi judicial orders made under the Rules and Regulations that are the subject matter of appeal Under Section 15T. Administrative orders such as circulars issued under the present case referable to Section 11(1) of the Act are obviously outside the appellate jurisdiction of the Tribunal for the reasons given by us above.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]This Section appears in Chapter VIB inserted by an amendment Act of 1995. It is interesting to note that Under Section 15M, a person shall not be qualified for appointment as the Presiding Officer of the three member Appellate Tribunal unless he is a sitting or retired Judge of the Supreme Court, or a sitting or retired Chief Justice of a High Court, or is a sitting or retired Judge of a High Court who has completed not less than 7 years of service as a Judge in a High Court. This is one indicia of the fact that the Appellate Tribunal, being manned by a member of the higher judiciary, is intended to hear appeals only against quasi-judicial orders14. Similarly, in Indian National Congress (I) v. Institute of Social Welfare and Ors. [(2002) 5 SCC 685]  , this Court held that the exercise of powers Under Section 29A of the Representation of the People Act, 1951 by the Election Commission is a quasi-judicial power. After referring to R. v. Electricity Commissioner (supra) and Province of Bombay v. Kushaldas S. Advani (supra), this Court laid down:The legal principles laying down when an act of a statutory authority would be a quasi-judicial act, which emerge from the aforestated decisions are these:Where (a) a statutory authority empowered under a statute to do any act (b) which would prejudicially affect the subject (c) although there is no lis or two contending parties and the contest is between the authority and the subject and (d) the statutory authority is required to act judicially under the statute, the decision of the said authority is quasi-judicialApplying the aforesaid principle, we are of the view that the presence of a lis or contest between the contending parties before a statutory authority, in the absence of any other attributes of a quasi-judicial authority is sufficient to hold that such a statutory authority is quasi-judicial authority. However, in the absence of a lis before a statutory authority, the authority would be quasi-judicial authority if it is required to act judicially. [paras 24 and 25]It can be seen from the aforesaid decision that in addition to the tests already laid down, the absence of a lis between the parties would not necessarily lead to the conclusion that the power conferred on an administrative body would not be quasi-judicial-so long as the aforesaid three tests are followed, the power is quasi-judicial17. We now come to two judgments of this Court under Acts which deal with expert bodies like SEBI. In PTC India Ltd. v. Central Electricity Regulatory Commission [(2010) 4 SCC 603]  , this Court had to construe various Sections of the Electricity Act, 2003, and ultimately came to the conclusion that the Appellate Tribunal for Electricity has no jurisdiction to decide the validity of Regulations framed under the Central Electricity Regulatory Commission Under Section 178 of the Electricity Act, 2003. The validity of the Regulations may, however, be challenged by seeking judicial review Under Article 226 of the Constitution of India18. In so stating, a summary of findings is given in paragraph 92 of the said judgment. Sub-paras (iii), (iv), and (v) are important from our point of view, and it is stated as follows:(iii) A Regulation Under Section 178 is made under the authority of delegated legislation and consequently its validity can be tested only in judicial review proceedings before the courts and not by way of appeal before the Appellate Tribunal for Electricity Under Section 111 of the said Act(iv) Section 121 of the 2003 Act does not confer power of judicial review on the Appellate Tribunal. The words "orders", "instructions" or "directions" in Section 121 do not confer power of judicial review in the Appellate Tribunal for Electricity. In this judgment, we do not wish to analyse the English authorities as we find from those authorities that in certain cases in England the power of judicial review is expressly conferred on the tribunals constituted under the Act. In the present 2003 Act, the power of judicial review of the validity of the Regulations made Under Section 178 is not conferred on the Appellate Tribunal for Electricity(v) If a dispute arises in adjudication on interpretation of a Regulation made Under Section 178, an appeal would certainly lie before the Appellate Tribunal Under Section 111, however, no appeal to the Appellate Tribunal shall lie on the validity of a Regulation made Under Section 178." [para 92]19. This judgment was followed in Bharat Sanchar Nigam Ltd. v. Telecom Regulatory Authority of India and Ors. [(2014) 3 SCC 222]  . The Telecom Authority of India Act, 1997 had been amended in the year 2000 to take away from the expert body under the Act, viz. TRAI, all quasi-judicial functions. Post amendment, the question posed before this Court was whether TDSAT, viz. the Appellate Tribunal had in exercise of powers Under Section 14(b) of the TRAI Act, the jurisdiction to entertain a challenge to Regulations framed by TRAI Under Section 36 of the TRAI Act. This Court referred in detail to the PTC India judgment (supra) and ultimately held that TDSAT does not have such jurisdiction, Regulations being framed by TRAI Under Section 36 of the TRAI Act being legislative in nature20. A judgment of this Court dealing with the very Act we are dealing with is reported as Clariant International Ltd. and Anr. v. Securities & Exchange Board of India [(2004) 8 SCC 524]  . In our view certain observations made in this judgment almost conclude the matters raised in this appeal. While discussing the effect of the Board being an expert body, this Court in paragraph 71 stated -The Board is indisputably an expert body. But when it exercises its quasi-judicial functions, its decisions are subject to appeal. The Appellate Tribunal is also an expert TribunalIn paragraph 77 this Court further went on to state -The Board exercises its legislative power by making Regulations, executive power by administering the Regulations framed by it and taking action against any entity violating these Regulations and judicial power by adjudicating disputes in the implementation thereof. The only check upon exercise of such wide-ranging powers is that it must comply with the Constitution and the Act. In that view of the matter, where an expert Tribunal has been constituted, the scrutiny at its end must be held to be of wide import. The Tribunal, another expert body, must, thus, be allowed to exercise its own jurisdiction conferred on it by the statute without any limitation24. It may be stated that both Rules made Under Section 29 as well as Regulations made Under Section 30 have to be placed before Parliament Under Section 31 of the Act. It is clear on a conspectus of the authorities that it is orders referable to Sections 11(4), 11(b), 11(d), 12(3) and 15-I of the Act, being quasi-judicial orders, and quasi judicial orders made under the Rules and Regulations that are the subject matter of appeal Under Section 15T. Administrative orders such as circulars issued under the present case referable to Section 11(1) of the Act are obviously outside the appellate jurisdiction of the Tribunal for the reasons given by us above.