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Case Law Details

Case Name : SEBI Vs Ajay Agarwal (Supreme Court of India)
Appeal Number : Civil Appeal No. 1697 of 2005
Date of Judgement/Order : 25/02/2010
Related Assessment Year :





41. It is a well known canon of construction that when Court is called upon to interpret provisions of a social welfare legislation the paramount duty of the Court is to adopt such an interpretation as to further the purposes of law and if possible eschew the one which frustrates it.

42. Keeping this principle in mind if we analyse some of the provisions of the Act it appears that the Board has been established under Section 3 as a body corporate and the powers and functions of the Board have been clearly stated in Chapter IV and under Section 11 of the said Act.

43. A perusal of Section 11, Sub-Section 2(a) of the said Act makes it clear that the primary function of the Board is to regulate the business in stock exchanges and any other securities markets and in order to do so it has been entrusted with various powers.

44. Section 11 had to be amended on several occasions to keep pace with the `felt necessities of time’. One such amendment was made in Sub Section (4) of Section 11 of the said Act, which gives the Board the power to restrain persons from accessing the securities market and to prohibit such persons from being associated with securities market to buy and sell or deal in securities. Such an amendment came in 2002.

45. From the statement of objects and reasons of the Amendment Act of 2002, it appears that the Parliament thought that in view of growing importance of stock market in national economy, SEBI will have to deal with new demands in terms of improving organisational structure and strengthening institutional capacity.

46. Therefore, certain shortcomings which were the existing structure of law were sought to be amended by strengthening the mechanisms available to SEBI for investigation and enforcement, so that it is better equipped to investigate and enforce against market malpractices.

47. Section 11-B which empowers the Board to issue certain directions also came up by way of amendment in 1995 by Act 9 of 1995. The Statements of Objects and Reasons of such amendments show one of the objects is to empower the Board to issue regulations without the approval of the Central Government. (See para 3(e) of the Statements of Objects and Reasons). Section 11-B of the Act thus empowers the Board to give directions in the interest of the investors and for orderly development of securities market, which, as noted above, is one of the twin purposes to be achieved by the said Act. Therefore, by the 1995 amendment by way of Section 11-B Board has been empowered to carry out the purposes of the said Act.

48. As noted above, there is no challenge to those provisions which came by way of amendment. In the absence of any challenge to those provisions, it cannot be said that even though Board is statutorily empowered to exercise functions in accordance with the amended law, its power to act under the law, as amended, will stand frozen in respect of any violation which might have taken place prior to the enactment of those provisions. It is nobody’s case that Board has exercised those powers in respect of a proceeding which was initiated prior to the enactment of those provisions. In fact Board has issued the show cause notice in terms of Section 11-B and considered the reply of the respondent. In such a situation, there has no infraction in the procedure.

49. Therefore, the entire basis of the order of the Appellate Tribunal that provision of Section 11- B cannot be applied retrospectively has been passed on an erroneous basis, as discussed herein above.

50. Provisions of Section 11-B being procedural in nature can be applied retrospectively.

51. The appellate Tribunal made a manifest error by not appreciating that Section 11-B is procedural in nature. It is a time honoured principle if the law affects matters of procedure, then prima facie it applies to all actions, pending as well as future. See K. Eapan Chako Vs The Provident Investment Company (P.) Ltd. [AIR 1976 SC 2610] wherein Chief Justice A.N. Ray laid down those principles.

52. Maxwell in his “Interpretation of Statutes” also indicated that no one has a vested right in any course of procedure. A person’s right of either prosecution or defence is conditioned by the manner prescribed for the time being by the law and if by the Act of Parliament, the mode of proceeding is altered, and then no one has any other right than to proceed under the alternate mode. [Maxwell Interpretation of Statutes, 11th Edition, p.216].

53. These principles, enunciated by Maxwell, have been quoted with approval by the Supreme Court in its Constitution Bench judgement in Union of India Vs Sukumar Pyne [AIR 1966 SC 1206 at p.1209]

54. For the reasons discussed above, this Court is constrained to quash the order of the Appellate Tribunal and upholds the order of the Chairman of the Board.

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