M/s PRRSAAR through its Proprietor Ved Prakash Gupta vs National Stock Exchange of India Ltd.

REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.3260 OF 2017

M/S PRRSAAR THROUGH ITS PROPRIETOR VED PRAKASH GUPTA Appellant(s)

VERSUS

NATIONAL STOCK EXCHANGE OF INDIA LTD. Respondent(s)

O R D E R

Appeal admitted.

Heard learned counsel for the parties.

This appeal takes exception to the order dated 20.02.2017

passed by the Securities Appellate Tribunal at Mumbai in Misc.

Application No.49 of 2017 and in Appeal No.53 of 2017, whereby

the Appellate Tribunal rejected the appeal preferred against

the order dated 03.02.2017 passed by the Disciplinary Action

Committee of National Stock Exchange of India Ltd. which found

the appellant guilty of indulging in financial irregularities

and misconduct in conduct of business, and for which a Signature Not Verified

fine/penalty Digitally signed by DEEPAK SINGH of Rs.10 lakhs with suspension from trading Date: 2019.07.26 18:01:49 IST Reason:

membership of the appellant for five trading days came to be

imposed.

2

The argument of the appellant before this Court is that

the penalty/fine could be imposed only in the context of

Circular dated 27.06.2013. The relevant part of the circular

read thus:

“19. Improper use of funds raised by Rs. 1,00,000/- or placing of clients securities 0.1% of the value with bank/any other financial of misuse institutions viz. funds not used whichever is for respective client higher.

obligation/margins.

Mis-utilization of clients’ funds and/or securities.”

Thus, the appropriate authority could not have issued

suspension of trading membership of the appellant. Further,

the authority could not have imposed penalty/fine more than

quantified in the circular extracted above.

The respondent, however, relied on the bye-laws, Chapter

IV Rule 1, which reads thus:-

“Disciplinary Jurisdiction

(1) The relevant authority may expel or suspend and/or fine under censure and/or warn and/or withdraw any of the membership rights of a trading member if it be guilty of contravention, non-compliance, disobedience, disregard or evasion of any of the Bye Laws, Rules and Regulations of the Exchange or of any resolutions, orders, notices, directions or decisions or rulings of the Exchange or the relevant authority or of any other Committee or officer of the Exchange authorized in that 3

behalf or of any conduct, proceeding or method of business which the relevant authority in its absolute discretion deems dishonourable, disgraceful or unbecoming a trading member of the Exchange or inconsistent with just and equitable principles of trade or detrimental to the interests, good name or welfare of the Exchange or prejudicial or subversive to its objections and purposes.”

The provision regarding suspension of business reads

thus:

“Suspension of Business:

(8) The relevant authority may require a trading member to suspend its business in part or in whole:

(a) Prejudicial Business: When in the opinion of the relevant authority, the trading member conducts business in a manner prejudicial to the Exchange by making purchases or sales of securities or offers to purchase or sell securities for the purpose of upsetting equilibrium of the market or brining about a condition of demoralization in which prices will not fairly reflect market value, or”

It is then submitted that ample power is bestowed on the

appropriate authority to suspend the trading membership of a

member who indulges in prescribed misconduct. It is contended

that no fault can be found with the order passed by the

appropriate authority and has been rightly affirmed by the

Appellate Tribunal.

After considering the rival submissions, it is noticed

that the appellant had specifically raised the issue about the

appropriateness of the order suspending the trading membership 4

of the appellant and also regarding the quantum of penalty

imposed by the appropriate authority. That can be discerned

from the contention recorded in paragraph 3 of the impugned

order which, inter alia, reads thus:

“... He submitted that the decision of the DAC of NSE is in violation of NSE Circular dated June 27, 2013, because, as per that circular suspending the trading is not contemplated for the violations allegedly committed by the appellant...”

The Appellate Tribunal, however, has not examined this

contention but proceeded to reject the appeal on the specious

ground that the penalty imposed by the appropriate authority

cannot be said to be unreasonable or excessive. The argument

of the appellant was that even though the appropriate

authority can suspend the trading membership of the member

indulging in misconduct, it can be resorted to only when it

falls within the concerned Bye-law such as Bye-law 8(a) relied

upon by the respondent - which envisages that the trading

member must conduct business “in a manner prejudicial to the

Exchange” etc. Further, the penalty could not have exceeded an

amount of Rs. 1 lakh or 0.1% of the value of misuse, whichever

is higher. These arguments have not been dealt with by the

Appellate Tribunal at all.

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Resultantly, we deem it appropriate to set aside the

impugned order and relegate the appellant before the Appellate

Tribunal by restoring appeal No. 53 of 2017 to the file of the

Securities Appellate Tribunal, Mumbai for reconsideration only

on the issue of quantum of punishment awarded to the

appellant. Indeed, while passing the final order, it will be

open to the Tribunal to pass appropriate order with regard to

the amount deposited by the appellant pursuant to order dated

27.02.2017 passed by this Court.

We make it clear that the Appellate Tribunal will not go

into technicalities of the effect of withdrawal of the appeal

by the appellant bearing No. 60/2017. The Appellate Tribunal

must decide the restored appeal on the issue of quantum of

punishment afresh expeditiously.

The Civil Appeal is allowed in the above terms. No order

as to costs.

Pending applications, if any, stand disposed of.

…...................J (A.M. KHANWILKAR)

…...................J (DINESH MAHESHWARI) New Delhi July 22, 2019 6

ITEM NO.38 COURT NO.9 SECTION XVII

S U P R E M E C O U R T O F I N D I A RECORD OF PROCEEDINGS

Civil Appeal No(s). 3260/2017

M/S PRRSAAR THROUGH ITS PROPRIETOR VED PRAKASH GUPTA Appellant(s)

VERSUS

NATIONAL STOCK EXCHANGE OF INDIA LTD Respondent(s)

(FOR EXEMPTION FROM FILING C/C OF THE IMPUGNED JUDGMENT ON IA 2/2017 FOR [PERMISSION TO FILE ANNEXURES] ON IA 3/2017 FOR ON IA 4/2017 IA No. 2/2017 - EXEMPTION FROM FILING C/C OF THE IMPUGNED JUDGMENT IA No. 3/2017 - PERMISSION TO FILE ANNEXURES IA No. 1/2017 - STAY APPLICATION IA No. 4/2017 - Vacate the Order)

Date : 22-07-2019 These matters were called on for hearing today.

CORAM :

HON'BLE MR. JUSTICE A.M. KHANWILKAR HON'BLE MR. JUSTICE DINESH MAHESHWARI

For Appellant(s) Mr. Mukesh M. Goel, Adv.

Mr. R. C. Kaushik, AOR

For Respondent(s) Mr. V. Giri, Sr. Adv.

Mr. Rabin Majumder, AOR Mr. Sumit Nagpal, Adv.

Mr. Muthucharan S., Adv.

UPON hearing the counsel the Court made the following O R D E R

Appeal admitted.

The Civil Appeal is allowed in terms of the signed order.

Pending applications, if any, stand disposed of.

(DEEPAK SINGH) (VIDYA NEGI) COURT MASTER (SH) COURT MASTER (NSH)

[Signed reportable order is placed on the file] 7