M/S PRRSAAR THROUGH ITS PROPRIETOR VED PRAKASH GUPTAversusNATIONAL STOCK EXCHANGE OF INDIA LTD.

                        [2019] 10 S.C.R. 291                             291


         M/S PRRSAAR THROUGH ITS PROPRIETOR                              A
                 VED PRAKASH GUPTA
                                  v.
        NATIONAL STOCK EXCHANGE OF INDIA LTD.
                   (Civil Appeal No.3260 of 2017)                        B
                           JULY 22, 2019
 [A.M. KHANWILKAR AND DINESH MAHESHWARI, JJ.]
       Stock Exchange: Disciplinary Action Committee of National
Stock Exchange of India Ltd. found the appellant guilty of
                                                                         C
indulging in financial irregularities and misconduct in conduct of
business and imposed fine/penalty of Rs.10 lakhs with suspension
from trading membership for five trading days – Before the
appellate authority, appellant had specifically raised the issue about
the appropriateness of the order suspending his trading
membership and also quantum of penalty imposed by the                    D
appropriate authority – According to appellant, as per circular dated
27.06.2013, suspension of trading is not contemplated for
violations allegedly committed by him and penalty in terms of
circular dated 27.06.2013 could not exceed an amount of Rs.1 lakh
or 0.1% of the value of misuse, whichever is higher – Appellate
                                                                         E
Authority, however, did not examine these contentions but proceeded
to reject the appeal on the ground that the penalty imposed by
appropriate authority cannot be said to be unreasonable or
excessive – Therefore, impugned order is set aside and appellant is
relegated to Appellate Tribunal by restoring the appeal for
reconsideration only on the issue of quantum of punishment.              F
      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3260
of 2017
     From the Judgment and Order dated 20.02.2017 of the Securities
Appellate Tribunal at Mumbai in Appeal No. 53 of 2017
                                                                         G
      Mukesh M. Goel, R. C. Kaushik, Advs. for the Appellant.
     V. Giri, Sr. Adv., Rabin Majumder, Sumit Nagpal,
Muthucharan S., Advs. for the Respondent.

                                                                         H
                                   291
292            SUPREME COURT REPORTS                        [2019] 10 S.C.R.


A             The following Order of the Court was passed:
                                      ORDER
              1. Appeal admitted.
              2. Heard learned counsel for the parties.
B             3. 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
C     of India Ltd. which found the appellant guilty of indulging in financial
      irregularities and misconduct in conduct of business, and for which a
      fine/penalty of Rs.10 lakhs with suspension from trading membership of
      the appellant for five trading days came to be imposed.
            4. The argument of the appellant before this Court is that the
D     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             Rs. 1,00,000/- or 0.1%
                 raised by placing of clients      of the value of misuse
                 securities with bank/any          whichever is higher.
                 other financial institutions
E                viz. funds not used
                 for     respective    client
                 obligation/margins.

                  Mis-utilization of clients’
                  funds and/or securities.”
F
             5. 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.
G           6. 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
H
M/S PRRSAAR THROUGH ITS PROPRIETOR VED PRAKASH                                 293
 GUPTA v. NATIONAL STOCK EXCHANGE OF INDIA LTD.

         membership rights of a trading member if it be guilty of              A
         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
                                                                               B
         authorized in that 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          C
         to its objections and purposes.”
      7. The provision regarding suspension of business reads thus:
      “Suspension of Business:
         (8) The relevant authority may require a trading member to            D
           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     E
            purpose of upsetting equilibrium of the market or brining
            about a condition of demoralization in which prices will not
            fairly reflect market value, or”
       8. It is then submitted that ample power is bestowed on the
appropriate authority to suspend the trading membership of a member            F
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.
       9. After considering the rival submissions, it is noticed that the
appellant had specifically raised the issue about the appropriateness of
                                                                               G
the order suspending the trading membership 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:

                                                                               H
294               SUPREME COURT REPORTS                       [2019] 10 S.C.R.


A              “... 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...”
             10. The Appellate Tribunal, however, has not examined this
B     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)
C     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.
D            11. 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
E     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.
            12. We make it clear that the Appellate Tribunal will not go into
      technicalities of the effect of withdrawal of the appeal by the appellant
F     bearing No. 60/2017. The Appellate Tribunal must decide the restored
      appeal on the issue of quantum of punishment afresh expeditiously.
               13. The Civil Appeal is allowed in the above terms. No order as to
      costs.
               14. Pending applications, if any, stand disposed of.
G

      Devika Gujral                                                   Appeal allowed.




H