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

2. By an administrative circular dated 9th November, 2005, SEBI under the caption "review of dematerialization charges" issued an administrative circular Under Section 11(1) of the SEBI Act to protect the interests of investors in securities and to promote the development of, and to regulate the securities market. Depositories were advised by the said circular to amend all relevant bye-laws, Rules and Regulations in order to see that with effect from 9th January, 2006, no charges shall be levied by a depository on DPs and consequently by a DP on a beneficiary owner when a beneficiary owner transfers all securities lying in his account to another branch of the same DP or to another DP of the same depository or another depository, provided the BO account at transferee DP and that transferor DP are identical in all respects."3. A preliminary objection was raised in the appeal filed by the Respondent before the Securities Appellate Tribunal. It was urged that under the SEBI Act, SEBI has administrative, legislative and quasi-judicial functions. Appeals preferred to the Securities Appellate Tribunal can only be from quasi-judicial orders and not administrative and legislative orders. This preliminary objection was turned down by the impugned judgment dated 29th September, 2006, by the Securities Appellate Tribunal. According to the Tribunal, the expression "order" is extremely wide, and there being nothing in the Act to restrict an appeal only against quasi-judicial orders, appeals would lie against all three types of orders under the Act i.e. administrative orders, legislative orders as well as quasi-judicial orders. This was held purportedly following the decision in Clariant International Ltd. and Anr. v. Securities & Exchange Board of India [(2004) 8 SCC 524]  . The Tribunal, therefore, rejected the preliminary objection and went into the merits of the arguments against the impugned circular, and dismissed the same4. Cross appeals have been filed before us. Civil Appeal No. 5173 of 2006 has been filed by the National Securities Depositories Ltd. v. SEBI on the merits of the dismissal, whereas Civil Appeal No. 186 of 2007 has been filed by the SEBI against the rejection of the preliminary objection raised before the Securities Appellate Tribunal. We will take up the second appeal first inasmuch as if the preliminary objection were to succeed, it is clear that the merits would not have to be gone into.

Reasoning: 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.