Securities Appellate Tribunal
Farmer Future Producer Company Limited vs Sebi on 28 April, 2022
Author: Tarun Agarwala
Bench: Tarun Agarwala
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Date of Decision: 28.04.2022
Misc. Application No. 177 of 2022
And
Appeal No. 99 of 2022
Farmer Future Producer Company Limited
148, Satyadev Nagar, Indore
Madhya Pradesh, - 452 009 ...Appellant
Versus
1.Securities and Exchange Board of India, SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai- 400 051
2. National Commodity & Derivatives Exchange Limited 1st Floor, Akruti Corporate Park, Near G.E. Garden, L.B.S. Road, Kanjurmarg (West), Mumbai- 400 078 ...Respondents Mr. Somasekhar Sundaresan, Advocate with Mr. Robin Shah, Advocate i/b Bodhi Legal for the Appellant. Mr. Shiraz Rustomjee, Senior Advocate with Mr. Prateek Pai, Mr. Mihir Mody, Mr. Arnav Misra and Mr. Mayur Jaisingh, Advocates i/b. K. Ashar & Co. for Respondent no. 1 SEBI. Mr. Harshit Jaiswal, Advocate i/b AZB & Partners for Respondent No. 2 CORAM: Justice Tarun Agarwala, Presiding Officer Justice M. T. Joshi, Judicial Member Ms. Meera Swarup, Technical Member 2 Per: Justice Tarun Agarwala, Presiding Officer (Oral)
1. The appellant has filed the present appeal challenging the press release dated December 20, 2021 issued by Securities and Exchange Board of India ("SEBI" for convenience) whereby directions were issued to the stock exchanges having Commodity Derivatives Segment in respect of trading in derivative contracts in seven commodities. Through this press release it was stated that no new contract shall be launched for a period of one year in seven commodities, namely, Paddy (non- basmati), Wheat, Chana, Mustard seeds and its derivatives, Soya Bean and its derivatives, Crude Palm Oil, Moong.
2. The appellant is a private limited company incorporated under Section 7(2) read with Section 8 of the Companies Act, 2013 and is engaged in the business of production, procurement, sale of all agricultural, horticultural, vegetables, medicinal, spices crops including of cereals, pulse, etc. The appellant is also actively engaged in physical and futures trading of agricultural commodities on the stock exchange platform. 3
3. A preliminary objection was raised by the respondents with regard to the maintainability of the appeal. It was contended that the impugned press release was an administrative decision and was issued pursuant to the directions received from the Central Government in terms of Section 16 of the Securities and Exchange board of India Act, 1992 ("SEBI Act" for convenience).
4. On the other hand, the contention of the appellant is, that the appeal is maintainable and that the impugned order has been passed in exercise of the powers under Section 11(4)(a) of the SEBI Act.
5. In order to appreciate the rival contention of the parties, it would be appropriate to refer to the two relevant provisions which have been relied upon by the parties, namely, Section 16 and Section 11(4)(a) of the SEBI Act which is extracted hereunder.
"16. Power of Central Government to issue directions.
(1) Without prejudice to the foregoing provisions of this Act or the Depositories Act, 1996], the Board shall, in exercise of its powers or the performance of its functions under this Act, be bound by such directions on questions of policy as the Central Government may give in writing to it from time to time:4
Provided that the Board shall, as far as practicable, be given an opportunity to express its views before any direction is given under this sub-section.
(2) The decision of the Central Government whether a question is one of policy or not shall be final.
"11(4) Without prejudice to the provisions contained in sub-sections (1), (2), (2-A) and (3) and section 11B, the Board may, by an order, for reasons to be recorded in writing, in the interests of investors or securities market, take any of the following measures, either pending investigation or inquiry or on completion of such investigation or inquiry, namely:--
(a) suspend the trading of any security in a recognised stock exchange;"
6. Section 16 of the SEBI Act provides that the Central Government can issue directions to SEBI and that SEBI would be bound by such directions issued by the Central Government in writing on questions of policy. Based on the aforesaid provision it transpires that the Central Government issued a direction on August 16, 2021 to suspend future trading in "Chana". By another communication dated October 07, 2021 the Central Government issued another communication suspending future trading in Mustard (seeds and oil). The Central Government by communication dated December 19, 5 2021 again conveyed its decision to SEBI to suspend trading in seven commodities with immediate effect. Based on the aforesaid directions of the Central Government dated December 19, 2021 the impugned press release was issued by SEBI on December 20, 2021.
7. It was urged by the appellant that the impugned communication issued by the Central Government does not specify that the directions so issued are under Section 16 of the SEBI Act. Further the directions of SEBI by the impugned press release is an order under Section 11(4)(a) of the SEBI Act.
8. In our view, the provision of Section 11(4)(a) is not applicable in the instant case, as in our opinion, the impugned press release was not issued pending investigation or inquiry or completion of such investigation or inquiry. On the other hand, the impugned press release has been issued pursuant to the communication sent by the Central Government on December 19, 2021.
9. The fact that the impugned communication of the Central Government dated December 19, 2021 does not mention the provision of Section 16 of the SEBI Act is irrelevant as in our opinion the directions contained in the letter dated December 6 19, 2021 makes it clear that the directions issued by the Central Government is referable to Section 16 of the SEBI Act.
10. We are further of the opinion that the impugned press release is not an order issued under Section 11(4)(a) of the SEBI Act. In our opinion, the press release is an administrative order which has been issued pursuant to the directions issued by the Central Government under Section 16.
11. In National Securities Depository Ltd. vs SEBI in Civil Appeal No. 5173 of 2006 decided by the Supreme Court on March 07, 2017. The Supreme Court held as under:-
"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. Civil Appeal No.186 of 2007 is, therefore, allowed and the preliminary objection taken before the Securities 7 Appellate Tribunal is sustained. The judgment of the Securities Appellate Tribunal is, accordingly, set aside."
12. From a perusal of the aforesaid, it is clear that the impugned press release is an administrative order referable to Section 16 of the SEBI Act and is not an order referable to Section 11(4)(a) of the SEBI Act.
13. Reliance placed by the appellant on the decision of this Tribunal in Appeal No. 174 of 2017 J. Kumar Infraprojects Ltd. vs SEBI and Ors. decided on August 10, 2017 is misplaced. In that decision SEBI had passed an order holding certain companies as shell companies. This Tribunal held that the said order was a quasi judicial order passed under Section 11(4) of the SEBI Act and was not an administrative order passed under Section 11(1) of the SEBI Act. This judgement is clearly not helpful to the appellant's case.
14. We are consequently of the opinion that the impugned press release is an administrative order referable to the directions issued by the Central Government under Section 16 and is not a quasi judicial order.
8
15. For the reasons stated aforesaid, we do not find any merit in the contention raised by the appellant. The appeal is dismissed as not maintainable leaving it open to the appellant to approach the appropriate forum for redressal of its grievances. Misc. Application is accordingly disposed of.
16. This order will be digitally signed by the Private Secretary on behalf of the bench and all concerned parties are directed to act on the digitally signed copy of this order. Certified copy of this order is also available from the Registry on payment of usual charges.
Justice Tarun Agarwala Presiding Officer Justice M. T. Joshi Judicial Member Ms. Meera Swarup Technical Member RAJALA Digitally signed by RAJALAKSHMI H 28.04.2022 KSHMI NAIR Date: 2022.05.05 PK H NAIR 16:24:56 +05'30'