MAHESH RATILAL SHAHversusUNION OF INDIA AND ORS.

                         [2010) 1 S.C.R. 784


A                     MAHESH RATILAL SHAH
                                   v.
                    UNION OF INDIA AND ORS.
          (Special Leave Petition (C) No. 21686 of 2006)
                         JANUARY 19, 2010
B
         [ALTAMAS KABIR AND CYRIAC JOSEPH, JJ.]

        Securities Contracts (Regulation) Act, 1956:

c        s.4 - Absence of publication of the Rules and Bye-laws
    of the Bombay Stock Exchange, framed prior to its recognition
    in 1956 under the Act would not render its activities illegal and
    without authority.

      ss. 7 and 9 - Non-compliance of - Listing of fake and
D bogus shares - Petitioner's a/legation that Bombay Stock
  Exchange (BSE) acted contrary to the interest of the securities
  market and investors in listing the share scrips of a company
  involved in fraudulent dealing of its scrip - Held: There is
  nothing to establish any ulterior motive on the part of BSE in
E listing the said scrip - The said scrip was listed on BSE after
  it had been listed in the Stock Exchange at Ahmedabad -
  However, as soon as information was received that the said
  company was involved in fraudulent dealing of its scrip, the
  said scrip was delisted and debaffed from trading by the BSE
F - Thus, no offence committed by BSE or its members.
       The case of the petitioner was that BSE and its
  members induced him to buy 4,50,800 shares of "Presto
  Finance Ltd." and under the assurance of BSE, he
  deposited the entire purchase amount, amounting to
G Rs.71.19 lacs. Petitioner's further case was that SSE and
  its members intentionally and deliberately cheated him by
  giving him delivery of forged share certificates and
  refused to cancel the said dealing when the same was
H                                 784
  MAHESH RATILAL SHAH v. UNION OF INDIA ANO          785
                   ORS.

 discovered and instead asked the petitioner to go to the A
  Liquidator of Presto Finance Ltd. for claiming damages.
 He filed a writ petition before High Court under Article 226
 of the Constitution for a direction upon the Union of India
 and SEBI to withdraw the recognition granted to BSE for
 alleged non-compliance with the provisions of Sections B
 7 and 9 of the Securities Contracts (Regulation) Act, 1956.
 A further direction was also sought for cancellation of
 SEBI registration of all relevant 90 members of BSE for
 fraudulently inducing investors to trade in forged scrips
 of Mis Presto Finance Ltd. and to declare the Rules, Bye- c
 laws and Regulations of the BSE as illegal, void and ultra
 vires the 1956 Act as also the Constitution of India. High
 Court summarily dismissed the writ petition holding that
 action was initiated against the Company as far back as
 in 1998-99 under Section 11B of the SEBI Act and SEBI 0
 came to a finding that all the Directors of the Company
were guilty of dealing in fake and bogus shares and
cheating the investing public at large. The High Court
also observed that the market regulator took due steps
in the matter of individual transactions and the remedy E
of the petitioner, who was aggrieved by the acts of the
promoters of the company in question, as well as its
Directors, would be in approaching the appropriate Court
to initiate criminal prosecution against the offenders. The
High Court also noted that no material was produced by
the petitioner for issuing directions for de-recognition of F
the BSE or to declare its Rules, Bye-laws and
Regulations to be ill~gal, void and ultra vires.

     The questions which arose for consideration in the
present SLP were whether in the absence of publication G
of the Rules and Bye-laws of the Bombay Stock
Exchange, which had been framed prior to its recognition
in 1956 under the 1956 Act, its activities could be said to
be without authority and whether in listing the shares of
                                                            H
    786      SUPREME COURT REPORTS            [2010] 1 S.C.R.


A M/s. Presto Finance Ltd. on the Stock Exchange, the
  Bombay Stock Exchange had acted in a manner which
  failed to ensure fair dealing and to protect the investors.

          Dismissing the Special Leave Petition, the Court
B     HELD: 1. The petitioner did not make out any case
  of malafides or irregularity on the part of the Bombay
  Stock Exchange with regard to the listing and
  subsequent de-listing of the scrip of M/s Presto Finance
  Ltd. The publication of the Rules and Bye-laws of the
C Stock Exchange was not intended in the Securities
  Contract (Regulation) Act, 1956, as otherwise some
  provision would have been made in the Act with regard
  to pre-recognition Rules and Bye-laws. While the Act
  provides for publication of amendments to the Rules and
D Bye-laws after grant of recognition, the Act is silent with
  regard to the publication of the pre-recognition Rules or
  Bye-laws which were already in existence and had been
  acted upon all along. [Para 25] [799-G-H; 800-A-C]

E      2. The scrip of M/s. Presto Finance Ltd. was listed on
  the Bombay Stock Exchange after it had been listed in
  the Stock Exchange at Ahmedabad. However, as soon as
  information was received that the said company was
  involved in fraudulent dealing of its scrip, again on
F intimation from the Ahmedabad Stock Exchange, the said
  scrip was delisted and debarred from trading by the BSE.
  The Bombay Stock Exchange had not acted in a manner
  which tended to promote the share scrip of M/s. Presto
  Finance Ltd. with any malafide motive. That apart, the
  delay of 10 years in approaching the High Court over the
G transactions in the said scrip cannot be ignored since, a
  long standing decision should not be easily interfered
  with, having regard to the fact that over the years, people
  have already settled their business in accordance
  therewith. Except for the bald allegations that the
H Bombay Stock Exchange had acted in a manner which
  MAHESH RATILAL SHAH v. UNION OF INDIA AND             787
                   ORS.

was contrary to the interest of the securities market and      A
investors in listing the share scrips of Mis. Presto
Finance Ltd. for trading, there is nothing else to establish
any ulterior motive on the part of the Stock Exchange in
listing the said scrip and, in fact, in terms of remedial
measures the Stock Exchange also invited all those who         B
bad been given forged scrips, to submit the same to the
Stock Exchange for further action. [Para 22) [798-B-G]

    Raj Narain Pandey & Ors. v. Sant Prasad Tewari & Ors.
(1973) 2 sec 35, relied on.
                                                               c
     3. Since the said Rules and Bye-laws had been in
existence from long before the enactment of Securities
Contracts (Regulation) Act, 1956 and the grant of
recognition to the Stock Exchange, the same did not
require publication in terms of Section 4 of the 1956 Act.     D
All amendments to the Rules and Bye-laws made after
grant of recognition had been duly published in the
Gazette. (Para 23) [798-H; 799-A-B]

     Ritesh Agarwal v. SEBI (2008) 8 SCC 205; Stock            E
Exchange, Mumbai v. Vijay Bubna & Ors. 1999 (2) LJ 289;
Dr. lndramani Pyarelal Gupta & Ors. v. WR. Natu & Ors. AIR
1964 SC 27 4; V. V. Ruia v. S. Dalmia AIR 1968 Bombay
347, referred to.

     4. Even if the 1956 Act did not contemplate               F
publication of the pre-recognition Rules and Bye-laws,
the position is and would continue to be rather
ambivalent if the amended R~es and Bye-laws were
published in the Official Gazette while the main Rules and
Bye-laws remain unpublished. It may, therefore, be in the      G
fitness of things to have the said Rules and Bye-laws also
published in the Official Gazette and the State Gazette to
prevent questions similar to those raised in this Special
Leave Petition from being raised in future. [Para 27] (800-
D-~                                                            H
    788      SUPREME COURT REPORTS                 [2010) 1 S.C.R.


A                      Case Law Reference :
          (2008) a sec 205           referred to          Para 8
          1999 (2) LJ 289            referred to          Para 12
          AIR 1964 SC 274            referred to          Para 12
B
          AIR 1968 Bombay 347        referred to          Para 12
          (1973) 2 sec 35            relied on            Para 15
        CIVIL APPELLATE JURISDICTION : SLP (Civil) No.
c   21686 of 2006.

        From the Judgment & Order dated 01.03.2006 of the High
    Court of Bombay at Mumbai in Civil Writ Petition (Lodg.) No.
    429 of 2006.
D         Manohar Lal Sharma, Mushtaq Ahmad for the Petitioner.
         Shyam Diwan, Pratap Venugopal, Deepti, Purushottam
    Jha, Angely Anta (for K.J. John & Co.) Jaideep Gupta, Suruchii
    Aggarwal, Anish KV for the Respondents.
E
          The Judgment of the Court was delivered by

        ALTAMAS KABIR, J. 1. Claiming to be a Sub-broker with
  one Yogesh B. Mehta, a Member of the Bombay Stock
  Exchange (hereinafter referred to "BSE"), the petitioner herein
F filed a writ petition before the Bombay High Court under Article
  226 of the Constitution against the Union of India, the Securities
  and Exchange Board of India (hereinafter referred to as the
  "SEBI") and the BSE, inter alia, for a direction upon the Union
  of India and SEBI to withdraw the recognition granted to BSE
G for alleged non-compliance with the provisions of Sections 7
  and 9 of the Securities Contracts (Regulation) Act, 1956
  (hereinafter referred to as "the 1956 Act"). A further direction
  was also sought for for cancellation of SEBI registration of all

H
  MAHESH RATILAL SHAH v. UNION OF INDIA AND                     789
          ORS. [ALTAMAS KABIR, J.]
relevant 90 members of the Stock Exchange for fraudulently              A
inducing investors to trade in forged scrips of Mis Presto
Finance Ltd. and to declare the Rules, Bye~ laws and
Regulations of the BSE as illegal, void and ultra vires the 1956
Act as also the Constitution of India. Various ancillary and
interim reliefs were also prayed for connected with the main            B
reliefs.

     2. The case of the Petitioner is that he had been induced
by the BSE and its Members to buy 4,50,800 shares of "Presto
Finance Ltd." and under the assurance of the Exchange, he               C
had deposited the entire purchase amount, amounting to
Rs. 71, 19,817.30 with the Exchange. It is the Petitioner's further
case that the Exchange and its Members had intentionally and
deliberately cheated him by giving him delivery of 1,56, 100
forged share certificates and refused to cancel the said dealing
when the same was discovered and instead asked the                      D
Petitioner to go to the Liquidator of Presto Finance Ltd. for
claiming damages.

     3. Appearing in support of the Special Leave Petition, Mr.
Manohar Lal Sharma, learned Advocate, submitted that the                E
SEBI as a statutory body established under Section 3 of the
Securities and Exchange Board of India Act, 1992 (hereinafter
referred to as the "SEBI Act"), was empowered under Section
11 of the Act to protect the interests of the investors in securities
and to promote the development of and to regulate the                   F
securities market by such measures as it thought fit for
prohibiting fraudulent and unfair trade practice relating to the
securities market.

     4. Mr. Sharma further submitted that the BSE is a body of
individuals which has been granted recognition as a "Stock              G
Exchange" under Section 4 of the 1956 Act, subject to the
provisions of Section 9 thereof, to function as a Stock Exchange
in Bombay. Under Section 12 of the SEBI Act, SEBI has
granted registration to the Members of the BSE to deal in the
securities market in the country within the ambit of the said Act       H
                                                                           \   -- .
    790       SUPREME COURT REPORTS                   [2010] 1 S.C.R

A and the Regulations made thereunder. Mr. Sharma submitted
  that the main object of the BSE is to protect the interests both
  of the brokers and dealers and of the public interested in
  securities. Rules, Bye-laws and Regulations had, therefore,
  been framed by the BSE for trading and settlement of shares
B through the BSE terminal. Mr. Sharma submitted that the said
  Rules, Bye-laws and Regulations were contrary to the
  provisions of the 1956 Act, and were, therefore, void and ultra-
  vires the Act and the Constitution. The Writ Petitioner had,
  therefore, been compelled to move the High Court in its writ
c jurisdiction, inter alia, for the reliefs indicated hereinabove.

       5. Referring to the Prospectus of M/s Presto Finance Ltd.,
  Mr. Sharma pointed out that since it had been indicated out
  therein that the shares of Presto Finance Ltd. were to be listed
  both on the Regional Exchange at Ahmedabad and in the BSE,
D the Petitioner and other investors were induced into investing
  in the shares of the company which were ultimately de-listed
  from trading in both the Stock Exchanges on account of
  fraudulent dealings, which left the Petitioner holding a large
  number of forged shares traded by the Company from the BSE.
E Mr. Sharma urged that the BSE had completely failed to protect
  the interests of the investors as it was bound to do under
  Section 4 of the 1956 Act.

          6. Mr. Sharma contended that the very existence of the
F   BSE and its activities must be held to have been vitiated from
    its very inception since it had failed to comply with the provisions
    of Section 4 of the Act of 1956 relating to grant of recognition
    to Stock Exchanges by the Central Government and, in
    particular, Sub-section (3) thereof, which reads as follows :-
G         "4(3). Every grant of recognition to a Stock Exchange under
          this section shall be published in the Gazette of India and
          also in ~he Official Gazette of the State in which the
          principal office of the Stock Exchange is situate, and such
          recognition shall have effect as from the date of its
H         publication in the Gazette of India."
  MAHESH RATILAL SHAH v. UNION OF INDIA AND                  791
          ORS. [ALTAMAS KABIR, J.]

     7. Mr. Sharma submitted that since the recognition granted      A
to BSE has neither been published in the Gazette of India or
in the Official Gazette of the State, such recognition did not
have any effect at all and in addition to the above, ever since
its recognition, the BSE has not also complied with the
provision of Section 9 of the aforesaid Act and framed Byelaws       B
for the regulation and control of contracts with the previous
approval of SEBI. It was submitted that Sub-section (4) of
Section 9 also provides for publication of the Byelaws and
reads as follows :-

     "9(4). Any Bye-laws made under this section shall be            C
     subject to such conditions in regard to previous publication
     as may be prescribed and when approved by the
     Securities and Exchange Board of India in the Gazette of
     India and in which the principal office of the recognised
     Stock Exchange is situate, and shall have effect as from        D
     the date of its publication in the Gazette of India:

           Provided that if the Securities and Exchange Board
     of India Government is satisfied in any case that in the
     interest of the trade or in the public interest any Bye-law     E
     should be made immediately, it may, by order in writing
     specifying the reasons therefor, dispense with the
     condition of previous publication."

      8. Referring to the decision of this Court in Ritesh Agarwal   F
vs. SEBI [(2008) 8 SCC 205], wherein the question as to
whether proceedings should also be taken against minors in
view of Section 11 of the Contract Act, 1872, was under
consideration, this Court held that since the father of the minors
had committed fraud in their names, it is he who should have
been proceeded against. Mr. Sharma urged that once it was            G
shown that a promoter had committed fraud, as in this case, in
listing its shares with the Exchange, thereby inducing investors
to invest in such shares, it must be held that the Exchange had
failed to comply with the provisions of clause (a) of Sub-section
(1) of Section 4 ofthe.1956 Act, which makes it mandatory that       H
    792      SUPREME COURT REPORTS                 [2010] 1 S.C.R.


A the Rules and Byelaws of a Stock Exchange have to be in
  conformity with such conditions as may be prescribed with a
  view to ensure fair dealing and to protect investors. [Emphasis
  supplied]

       9. On behalf of BSE, Mr. Shyam Diwan, learned Senior
8
  Advocate, submitted that all Stock Exchanges, including the
  BSE, acted on the basis of information received from other
  Stock Exchanges in the country. In the instant case, since the
  Scrip of Presto Finance Ltd. had been listed for trading on the
C Ahmadabad Stock Exchange, the same were also listed for
  trading on the Bombay Stock Exchange, but as soon as
  information of fraud was received from the former Stock
  Exchange, BSE immediately stopped trading in the said Scrip.
  Mr. Diwan submitted that it was required to be noted that the
  Petitioner had approached the Court ten years after the
D incident, which in itself, was sufficient ground for dismissal of
  the Writ Petition.

         10. Mr. Diwan submitted that the BSE had been
   established in 1875 as "The Native Shares and Stock Brokers
E Association" and was the first Stock Exchange in the country
   which obtained permanent recognition in 1956 from the
   Government of India under the 1956 Act and had played a
   pivotal role in the development of the Indian Capital Market. The
   recognition granted to the BSE was duly published by the
F Ministry of Finance, Government of India, in its Stock Exchange
   Division in the Gazette of India dated 31st August, 1957.
   Thereafter, the Stock Exchange Rules, Bye-laws and
   Regulations were framed in 1957 and advance print of the
   same, together with all amendments up to date, was sent to
G the Government of India. Receipt and approval of the same by
   the Government of India under the 1956 Act was also conveyed
   to the Secretary of the Stock Exchange by the Deputy Secretary
  ·in the Ministry of Finance, Department of Economic Affairs, by
   his letter dated 1st May, 1959. Mr. Diwan submitted that the
   Rules, Regulations and Bye-laws of the Bombay Stock
H
  MAHESH RATILAL SHAH v. UNION OF INDIA AND                 793
          ORS. [ALTAMAS KABIR, J.]

Exchange had been acted upon since they were framed and            A
the Petitioner also claims to have traded on the Stock Exchange
as a Sub-broker through Yogesh Mehta, said to be a member
of the Stock Exchange. Mr. Diwan submitted that when the
Rules, Bye-laws and Regulations had been continuously acted
upon for more than 50 years, it would be inequitable to hold       B
that the same were not valid on account of non-publication in
the Official Gazette or the Gazette of India in terms of Sub-
section (4) of Section 9 of the 1956 Act

     11. Mr. Diwan then urged that the scheme of Section 4 of      C
the 1956 Act relating to grant of recognition to Stock
Exchanges, makes it clear that before such grant of recognition,
the Central Government has to be satisfied that the Rules and
Bye-laws of the Stock Exchange applying for registration were
in conformity with such conditions as might be prescribed with
a view to ensuring fair dealing and to protect investors. Mr.      D
Diwan submitted that under Section 9 of the 1956 Act the
recognized Stock Exchange is required to make Bye-laws for
the regulation and control of contracts and any Bye-laws made
under the said section would be subject to such conditions in
regard to previous publication as may be prescribed, and,          E
when approved by SEBI, is to be published in the Gazette of
India and also in the official Gazette of the State in which the
principal office of the recognized Stock Exchange is situate,
and shall have effect as from the date of its publication in the
Gazette of India.                                                  F

     12. Mr. Diwan reiterated that it would be amply clear from
the above that the Rules and Bye-laws framed by the Stoe;k
Exchange before grant of recognition under Section 4 were not
required to be published in the manner indicated in Sub-Section
                                                                   G
(3) of Section 4 of the 1956 Act. Mr. Diwan submitted that only
amendrrients effected to the Rules and Bye-laws after grant of
recognition would require publication as provided for in Sub-
section (4) of Section 9 of the above Act. Mr. Diwan also
urged that since the SSE had been functioning as perhaps the       H
    794     SUPREME COURT REPORTS                  1201 O] 1 S.C.R.


A most important Stock Exchange in India, since it was granted
  permanent recognition in 1956, its performance over the past
  33 years cannot be diluted and has to be taken into
  consideration while considering the case sought to be made
  out by the Petitioner. Learned counsel submitted that, although,
B the question now sought to be raised had not at any point of
  time been raised in this Court, the same question did arise
  before the Bombay High Court in Appeal No.1101/98 arising
  out of Arbitration Petition No.130/98, Stock Exchange, Mumbai
  vs. Vijay Bubna & Ors., reported in 1999 (2) LJ 289. In the said
c decision, where the primary issue was whether an Arbitral
  Tribunal constituted under the Bye-laws framed by the BSE
  under the 1956 Act was in contravention of the provisions of
  Section 10 of the Arbitration and Conciliation Act, 1996, the
  question arose as to whether the said Bye-laws of the BSE
  required publication in the Official Gazette. Upon construction
0
  of the provisions of the Bye-laws of the BSE and the decision
  of this Court in Dr. /ndramani Pyarelal Gupta & Ors. Vs. WR.
  Natu & Ors. [AIR 1964 SC 274], the High Court held that the
  Bye-laws of the BSE were subordinate legislation and that the
  same were statutory in nature having the force of enactment
E within the meaning of Sub-Section (4) of Section 2 of the
  Arbitration and Conciliation Act, 1996. Mr. Diwan drew our
  attention to paragraph 42 of the judgment in which reference
  was made to another decision of the Bombay High Court in the
  case of V. V. Ruia vs. S. Dalmia [AIR 1968 Bombay 347],
F where the question arose as to whether the Bye-laws of the
  BSE, which were made prior to its recognition under Section
  4, needed publication under Sub-Section (4) of Section 9 of
  the 1956 Act. It was held that the Bye-laws made by the Bombay
  Stock Exchange prior to its recognition did not require
G publication in the Official Gazette, on account of the fact that
  for the purpose of obtaining recognition from the Central
  Government, the Stock Exchange was required to submit a
  copy of the Bye-laws and Rules and it is only after scr!.!tiny
  thereof that recognition was granted under Section 4. It was
H also mentioned that if, after recognition, any subsPq;.;1:::nt Bye-
  MAHESH RATILAL SHAH v. UNION OF INDIA AND                    795
          ORS. [ALTAMAS KABIR, J.]

law was made under Section 9 of the Act, then, by virtue of Sub-      A
Section (4) of Section 9 such a post-recognition Bye-law
required publication.

     13. Mr. Diwan then referred to the decision in V. V. Ruia's
case (supra,) referred to by the Division Bench of the High
Court in the aforesaid judgment, wherein it had been held that        B
the Bye-laws made by the Stock Exchange prior to its
recognition in 1956 did not require publication under Section
9(4) of the 1956 Act.

     14. Mr. Diwan's next contention was that a procedure,            C
which had been consistently followed over a long period, should
not be interfered with except for very compeliing reasons as that
could otherwise lead to chaos and unsettle the position which
had been settled over such period.
                                                                      D
       15. Referring to the Three-Judge Bench decision of this
Court in Raj Narain Pandey & Ors. Vs. Sant Prasad Tewari &
 Ors. [( 1973) 2 SCC 35]. Mr. Diwan submitted that while
 interpreting the doctrine of stare decisis, this Court had held
that a decision of long-standing on the basis of which many           E
persons would, in the course of time, have arranged their
affairs, should not lightly be disturbed by a superior court not
strictly bound itself by the decision. It was further observed that
in the matter of the interpretation of a local statute, the view
taken by the High Court over a number of years should normally
be adhered to and not disturbed. A different view would not only      F
introduce an element of uncertainty and confusion, it would also
have the effect of unsettling transactions which might have been
entered into on the faith of those decisions. It was held that the
doctrine of stare decisis can be aptly invoked in such a
situation.                                                            G

     16. Apart from being guilty of delay and laches, Mr. Diwan
submitted that the petitioner was himself in default, not being
a registered sub-broker of the BSE, although, he claimed to
be a sub-broker of Yogesh B. Mehta, a member of the Stock             H
    796     'SUPREME COURT REPORTS                 [2010] 1 S.C.R.


A   Exchange. Mr. Diwan submitted that the Special Leave Petition
    bristled with malice in law and was, therefore, liable to be
    dismissed with costs.

         17. Mr. Jaideep Gupta, learned Advocate who appeared
    for SEBI, took us through the letter dated 1st August, 1996,
8   addressed on behalf of the Ahmedabad Stock Exchange to
    Shri L.K. Singhvi, Executive Director, SEBI, informing him of
    the Report of the Committee in the matter of Presto Finance
    Ltd. In the said letter it was indicated that based on a number
    of complaints received from the investors in the scrip of Presto
C   Finance Ltd., a Special Committee consisting of three
    members, including SEBI, and a nominated public
    representative, had been constituted and after inquiry it had
    recommended that the trading in the scrip of Presto Finance
    Ltd. should not be recommended and might be de-listed
D   permanently. Mr. Jaideep Gupta referred to the inquiry report
    of the Assistant Police Inspector, General Branch, Crime
    Branch, C.1.0., Mumbai, submitted to the learned Metropolitan
    Magistrate, 33rd Court, Ballard Estate, Mumbai, stating that the
    BSE had acted promptly and diligently to protect the interest
E   of the market and as such no offence had been committed by
    BSE and those who were involved in the transactions of the
    shares of Presto Finance Ltd. in 1996. It was stated that on the
    contrary, the complainant was not a registered sub-broker of
    the Bombay Stock Exchange and had himself violated the
F   provisions of Section 23(h) of the 1956 Act, as he had also
    dealt with the above transactions as sub-broker, without being
    registered with the BSE.

       18. Mr. Gupta submitted that based on the complaints
  received from various investors relating to the issuance of fake
G and forged share certificates of Mis. Presto Finance Ltd., the
  Stock Exchange, Ahmedabad, had constituted a Special
  Committee, as indicated hereinabove, and had found the               I
  Managing Director and other Directors of the company to be
  guilty of irregularities. Accordingly, in a proceeding under
H
  MAHESH RATILAL SHAH v. UNION OF INDIA AND                    797
          ORS. [ALTAMAS KABIR, J.]

Section 11 B of the SEBI Act, 1992, SEBI had taken stringent           A
measures against the Managing Director cind other Directors
of the company for having received payments for issuance of
fake and forged shares of the company. Mr. Gupta pointed out
that on such finding, in the interest of investors in securities and
the securities market, SEBI had debarred Shri Hitendra Vasa            B
and the companies promoted by him and the group companies
of Mis. Presto Finance Ltd., from accessing the capital market
for a period of five years with effect from 22nd April, 19$l8.

     19. Mr. Gupta submitted that as far as SEBI was                   C
concerned, on receipt of information about the fraudulent share
scrips issued by M/s. Presto Finance Ltd., immediate steps had
been by SEBI to have the share scrips of the said company
de-listed from the Ahmedabad Stock Exchange as well as from
the Bombay Stock Exchange.
                                                                       D
     20. Mr. Gupta submitted that no fault could be found with
BSE in listing the shares of Presto Finance Ltd., since the same
had been listed on the Ahmedabad Stock Exchange earlier,
but as soon as information was received from the Ahmedabad
Stock Exchange that there was an element of fraud involved,            E
and the scrips had been delisted in the Ahmedabad Stock
Exchange, BSE took immediate steps to delis! the scrips and
to close trading of the said shares in order to protect the
securities market and the investors who traded in such
securities. Mr. Gupta submitted that the entire allegations made       F
by the petitioner against the Bombay Stock Exchange was
devoid of any merit and did not warrant any interference in these
proceedings.

     21. As would be evident from the pleadings and
submissions made on behalf of the respective parties, the main         G
question which we are called upon to consider is whether in
the absence of publication of the Rules and Bye-laws of the
Bombay Stock Exchange, which had been framed prior to its
recognition in 195G. :mder the 1956 Act, its activities could be
said to be without at thority. The further question which falls for    H
    798     SUPREME COURT REPORTS                  [201 O] 1 S.C.R.

A consideration is whether it can be said. as has been urged on
  behalf of the petitioner, that in listing the shares of M/s. Presto
  Finance Ltd. on the Stock Exchange, the Bombay Stock
  Exchange had acted in a manner which failed to ensure fair
  dealing and to protect the investors.
B
        22. As we have noticed hereinbefore, the scrip of Mis.
  Presto Finance Ltd. was listed on the Bombay Stock Exchange
  after it had been listed in the Stock Exchange at Ahmedabad
  and on receipt of information thereof. However. as soon as
  information was received that the said company was involved
C in fraudulent dealing of its scrip, again on intimation from the
  Ahmedabad Stock Exchange, the said scrip was delisted and
  debarred from trading by the BSE. In our view, the Bombay
  Stock Exchange had not acted in a manner which tended to
  promote the share scrip of M/s. Presto Finance Ltd. with any
D malafide motive. Apart from the above, the delay of 10 years
  in approaching the High Court over the transactions in the said
  scrip cannot be ignored since, as observed by this Court in Raj
  Narain Pandey's case (supra) a long standing decision should
  not be easily interfered with, having regard to the fact that over
E the years, people have already settled their business in
  accordance therewith. Except for the bald allegations that the
  Bombay Stock Exchange had acted in a manner which was
  contrary to the interest of the securities market and investors
  in listing the share scrips of Mis. Presto Finance Ltd. for
F trading, there is nothing else to establish any ulterior motive on
  the part of the aforesaid Stock Exchange in listing the said scrip
  and, in fact. in terms of remedial measures the Stock Exchange
  also invited all those who had been given forged scrips, to
  submit the same to the Stock Exchange for further action.
G
        23. On the question of non-publication of the Bye- laws,
  we agree with the views of the Bombay High Court in V. V.
  Ruia's case (supra) that since the said Rules and Bye-laws had
  been in existence from long before the enactment of 1956 Act
H and the grant of recognition to the Stock Exchange, the same
  MAHESH RATILAL SHAH v. UNION OF INDIA AND                 799
          ORS. [ALTAMAS KABIR, J.]

did not require publication in terms of Section 4 of the 1956       A
Act. In any event, as has been submitted by Mr. Diwan on behalf
of the BSE, all amendments to the Rules and Bye-laws made
after grant of recognition had been duly published in the
Gazette.
                                                                    B
      24. Upon considering the case made out by the petitioner
in the writ petition, the Bombay High Court held that the writ
petition, which was lacking in particulars relating to the
constitutional challenge, was not the appropriate remedy for the
petitioner, who, along with a member of the Stock Exchange,         C
had traded in the shares of the above-mentioned company. The
High Court also observed that upon the complaints made to
SEBI, action had been initiated against the Company as far
back as in 1998-99 under Section 11 B of the SEBI Act and
SEBI had come to a finding that all the Directors of. the
Company, including one Hitendra Vasa, were guilty of dealing        D
in fake and bogus shares and cheating the investing public at
large. The High Court also observed that the market regulator
had taken due steps in the matter of individual transactions and
the remedy of the petitioner, who was aggrieved by the acts of
the promoters of the company in question, as well as its            E
Directors, would be in approaching the appropriate Court to
                                                           •
initiate criminal prosecution against the offenders. Observing
that it would not be appropriate to issue any blanket writ, as
claimed by the Petitioner, when admittedly his case was
restricted to dealing in shares of one of the companies listed      F
at the Stock Exchange, the High Court summarily dismissed
the writ petition. While doing so, the High Court also noted that
no material had been produced by the petitioner for issuing
directions for de-recognition of the BSE or to declare its Rules,
Bye-laws and Regulations to be illegal, void and ultra vires.       G

    25. Agreeing with the views expressed by the High Court,
we are of the view that the Petitioner has not been able to make
out any case of malafides or irregularity on the part of the
Bombay Stock Exchange with regard to the listing and                H
    800      SUPREME COURT REPORTS                   [201 OJ 1 S.C.R.


A subsequent de-listing of the scrip of Mis Presto Finance Ltd.
  and we are also of the view that the publication of the Rules
  and Bye-laws of the Stock Exchange was not intended in the
  Securities Contract (Regulation) Act, 1956, as otherwise some
  provision would have been made in the Act with regard to pre-
B recognition Rules and Bye-laws. While the Act provides for
  publication of amendments to the Rules and Bye-laws after
  grant of recognition, the Act is silent with regard to the
  publication of the pre-recognition Rules or Bye-laws which were
  already in existence and had been acted upon all along.
c        26. In that view of the matter, we see no reason to interfere
    with the order of the Bombay High Court impugned in the
    present Special Leave Petition and the same is, therefore,
    dismissed, but without any order as to costs.

D        27. Before parting, we would, however, indicate that even
    if the 1956 Act did not contemplate publication of the pre-
    recognition Rules and Bye-laws, the position is and would
    continue to be rather ambivalent if the amended Rules and Bye-
    laws were published in the Official Gazette while the main Rules
I:: and Bye-laws remain unpublished. It may, therefore, be in the
    fitness of things to have the said Rules and Bye-laws also
    published in the Official Gazette and the State Gazette to
    prevent questions similar to those raised in this Special Leave
    Petition from being raised in future.

    D.G.                        Special Leave Petition dismissed.