Document Fragment View

Matching Fragments

a) Mr. Sinha failed to fulfill one of the eligibility condition as laid down in sub-section (5) of Section 4 of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as ‘SEBI Act’), as well as the qualification contained in Government communication, which required that the Chairman shall be a person of high integrity.
b) The appointment of respondent No.4 is the result of manipulation, misrepresentation and suppression of vital material before the Search-cum-Selection Committee and the Appointment Committee of the Cabinet (hereinafter referred to as ‘ACC’).

Conclusions:

27. We have considered the submissions made by the learned counsel for the parties. Although all the respondents have raised the preliminary issue about the maintainability of the writ petition, we shall consider this submission after we have considered the issue on merits. The foremost issue raised by the petitioner and emphasized vehemently by Mr. Parshant Bhushan is that respondent No.4 lacks the integrity and does not meet the eligibility conditions laid down in sub-section (5) of Section 4 of the SEBI Act. Additionally, respondent No.4 does not fulfil the conditions contained in communication of the government dated 10th September, 2010 which emphasizes, keeping in view the role and importance of SEBI as a regulator, that it is desirable that only a person with high integrity and reputation should be appointed as Chairman of SEBI.

29. We agree with Mr. Bhushan that SEBI is an institution of high integrity. A bare perusal of the SEBI Act makes it apparent that SEBI was established to protect the interests of investors in securities and to promote the development of, and to regulate the securities market. In fact, the SEBI Act gives wide ranging powers to the Board to take such measures as it thinks fit to perform its duty to protect the interests of investors in securities and to promote the development of, and to regulate the securities market. These measures may provide for regulating the business in stock exchanges and any other securities markets. Further measures are set out in Sections 11(1), (2)(a to m) to enable SEBI to perform its duties and functions efficiently. Section 11(2)(a) provides that the Board may take measures to undertake inspection of any book, register, or other document or record of any listed public company or a public company which intends to get its securities listed on any recognised stock exchange. The Board can exercise its power where it has reasonable grounds to believe that such company has been indulging in insider trading or fraudulent and unfair trade practices relating to securities market. To enforce its directions, the Board has powers under Section 11(4) to issue any suspension/restraint orders against the persons including office bearers of any stock exchange or self regulatory organisation. It can impound and retain the proceeds or securities in respect of any transaction which is under investigation. The wide sweep of the powers of SEBI leaves no manner of doubt that it is the supreme authority for the control and regulations and orderly development of the securities market in India. It would not be mere rhetoric to state that in this era of globalisation, the importance of the functions performed by SEBI are of paramount importance to the well being of the economic health of the nation. Therefore, Mr. Bhushan is absolutely correct in emphasising that the Chairman of SEBI has to be a person of high integrity. This is imperative and there are no two ways about it. The importance of the functions performed by SEBI has been elaborately examined by this Court in the case of Sahara India Real Estate Corporation Ltd. & Ors. Vs. Securities and Exchange Board of India & Anr.[4] Justice Radhakrishnan, upon examination of the various provisions of the SEBI Act, has observed that it is a special law, a complete code in itself containing elaborate provisions to protect interest of the investors. The paramount duty of the Board under the SEBI Act is to protect the interest of the investors and to prevent unscrupulous operators to enter and remain in the securities market. It is reiterated in paragraph 67 that SEBI is also duty bound to prohibit fraudulent and unfair trade practice relating to securities markets. Similarly, Justice Khehar in the concurrent judgment has emphasised the importance of the functions performed by SEBI in exercise of its powers under Section 11. In paragraph 303.1, it is observed as follows :-

“303.1. Sub-section (1) of Section 11 of the SEBI Act casts an obligation on SEBI to protect the interest of investors in securities, to promote the development of the securities market, and to regulate the securities market, “by such measures as it thinks fit”. It is therefore apparent that the measures to be adopted by SEBI in carrying out its obligations are couched in open-ended terms having no prearranged limits. In other words, the extent of the nature and the manner of measures which can be adopted by SEBI for giving effect to the functions assigned to SEBI have been left to the discretion and wisdom of SEBI. It is necessary to record here that the aforesaid power to adopt “such measures as it thinks fit” to promote investors’ interest, to promote the development of the securities market and to regulate the securities market, has not been curtailed or whittled down in any manner by any other provisions under the SEBI Act, as no provision has been given overriding effect over sub-section (1) of Section 11 of the SEBI Act.” In sub-paras 303.2, 303.3 and 303.4, the powers of SEBI under Section 11(2), 11(3) and 11(4) have been analysed and elaborately explained.