VENEET AGRAWAL v. UNION OF INDIA AND ORS

Citation: [2007] 11 S.C.R. 740

Court: Supreme Court of India

Bench: ASHOK BHAN, V.S. SIRPURKAR

Case summary

VENEET AGRAWAL v. UNION OF INDIA AND ORS.pdf

Judgment text

y VENEET AGRAWAL V. UNION OF INDIA AND ORS. OCTOBER 31, 2007 [ASHOK BHAN AND V. S. SIRPURKAR, JJ. ] A "" Securities and Exchange Board ofIndia Act, 1992: S. 31-Constitutionality and vires of1992 Rules and Regulations challenged on the ground thatprocedure mandated under s. 31 was not complied with-Held: It was not necessaryfor rules/regulations to be re-laid in the next sessions as requisite period of30 days was to be completed in one or more sessions-Hence rules/regulations ajter having been initially laid are deemed to lie in succeeding sessions till completion of30 days-Requirement ofs. 31 has been thus met-Rules/ ~t' regulations cannot be declared ultra vires on this ground-Even otherwise, provisions ofs. 31 not being mandatoryandmerely directory, rules/regulations made thereunder cannot be held to be ultra vires- SEBI (Stock Brokers and Sub Brokers) Rules andRegulations, 1992- Rules ofProcedure and Conduct ofBusiness in Lok Sabha-Rule 234.

The challenge in these appeals is relating to the vires and constitutionality ofSEBI (Stock Brokers and Sub Brokers) Rules and Regulations, 1992 on the ground that these Rules and regulations in question were laid on the table of the Lok Sabha on )""' 27. 11. 1992 while on the table ofthe Rajya Sabha on 16. 12. 1992 and the proceedings lapsed after the adjournment ofthe House sine die and since the rules and regulations were not re-laid either in the Lok Sabha or in the Rajya Sabha after the calling of the new session, the procedure mandated under s. 31 ofthe SEBI Act was not complied with. ~ Before different High Courts, various writ petitions were filed challenging the levy ofturnover fee as well as thevires ofRegulation I . , I I VENEET AGRAWAL v. UNION OF INDIA 741 .. ,. 10.

In a transfer petition filed by the SEBI before this Court for consolidating the said cases, this Court had transferred one such petition from the Bombay High Court to this Court while staying the other cases pending before the various High Courts. After hearing the said case, this Court had upheld the vires of Regulation 10 of SEBI Regulation as well as the levy ofturnover fee. On the basis of the judgment rendered by this Court, all other similar writ petitions ,A pending in the various High Courts were disposed off. Having failed . J in their challenge to the levy of turnover fee, the brokers and sub brokers have repeatedly been filing petitions on one orother grounds while their actual grievance is the turnover fee imposed by Regulation lOwhich has been upheld by this Court. In thewritpetition from which the present appeal arises, similar attempt has been made. Dismissing the appeals, the Court HELD: 1. 1.

Laying of the rules/regulations framed under pa1iicular statute for a specific period which that particular statute ~ may warrant is governed by the Rules ofProcedure and Conduct of Business in Lok Sabha. As per Rule 234 of these Rules, the rules and regulations were required to be placed before both the Houses of Parliament for a specified period and ifthe House is adjourned sine die and later prorogued, the procedure has to be completed in one or more sessions, unless otherwise provided under the Constitution or the relevant Act. In the facts and circumstances of the case, Rule 234(1) is applicable. [Paras 8, 9and11] (746-C, D; 747-E, F; 746-G] ('. 1. 2. S. 31 specifically provides that the Bill has to be placed before both the Houses for a period of thirty days which may be comprised in one session or in two or more successive sessions. The regulation, rule, sub-rule, bye law etc.

have to be re-laid in the succeeding session or sessions until the said period is completed in one session. The position has been further clarified by the Rajya . ,). Sabha Secretariat in its letter dated 9. 10. 2002 wherein the Secretariat has clarified that in the case of rules and regulations underS. 31 ofthe SEBI Act, no relaying was necessary as the statute permitted the requisite period of30 days to be completed in one or 1· \ " appellant that the rules and regulations in question are ultra vires on the ground that they were not laid before both the Houses for a total period of 30 days, as required under Section 31. -\ \ \ ~ 7. It is submitted on behalfofthe appellants that all the proceedings pending in both the Houses lapsed after the adjournment ofthe House sine die and since the rules and regulations were not re-laid either in the Lok Sabha or in the Rajya Sabha after the calling ofthe new session, the procedure mandated under Section 31 ofthe SEBI Act was not complied with.

It is also submitted that, for these reasons the rules and regulations were illegal and ultra vires ofthe SEBI Act as also the provision ofthe ,. l Constitution of India and consequently all the actions, orders and ... directions issued by the respondent against the petitioner under the said .... rules and regulations were illegal and liable to be quashed. 8. It is important to mention here that the laying ofthe rules/regulations framed under a particular statute for a specific period which that particular statute may warrant is governed by the Rules ofProcedure and Conduct ofBusiness in Lok Sabha given in Parliamentary Procedure Volume 2, page 1107. The Rule 234 ofthe said Rules which is relevant in the present case is reproduced hereunder:- 'f"· '"Rule 234. Laying ofRegulations, Rule etc. on table: (1) Where a regulation, rule, sub rule, bye laws etc.

framed in pursuance of the Constitution or of Legislative functions delegated by parliament to a subordinate Authority is laid before the House, the period specified in the Constitution or the relevant Act for which it is required to be laid shall be completed before the House is adjourned sine-die and later prorogued unless otherwise provided in the constitution or the relevant Act (2) Where the specified period is not so completed, the regulation, rule, sub rule, bye law etc. shall be re-laid in the succeeding session or sessions until the said period is completed in one session. " 9. From the perusal ofthe above mentioned rule, it is clear that Rule 234(1) is applicable in the facts and circumstances of the present case. Wherever the period required to be completed under the statute under • which rule or regulation may have been framed has to be completed in VENEET AGRAWALv. UNIONOFINDIA[BHAN,J. ] 747 one session only, sub clause 2 ofRule 234 would not apply. In the present.

case, the rules and regulations in question have been framed under Section 31 ofthe SEBI Act. The said Section ofthe SEBI Act clearly provides that the requisite period of30 days for which a rule or regulation framed under the Act is required to be laid before the Houses may be completed in one session or in two or more successive sessions. It further provides ,;.. , that ifboth the Houses agree to make any modification or reject the said rule/regulation then the rule/regulation would be enforced in the said modified form or would be annulled in accordance with the decision of the Houses. 10. In addition to the above, Rule 234 of Rules of Procedure of Conduct of Business in Lok Sabha has been further clarified in para 2. 4 of the Book of Parliamentary Procedure Volume 2, page 1701 where it has been clearly stated as under:- "2.

4 Where a statue provides that the Rule framed thereunder should be laid on the table for a certain period which may be comprised in one session or two or more sessions, it is not necessary for the Rules to be formally re-laid in the next session in order to complete the prescribed period. " ~ 11. We do not find any substance in the submission made by the Counsel for the appellant. Section 31 permits the requisite period of 30 days to be completed in one or more sessions. As per Rule 234 ofthe Rules ofProcedure and Conduct ofBusiness in Lok Sabha, the rules were required to be placed before both the Houses ofParliament for a specified period and if the House is adjourned sine die and later prorogued, the procedure has to be completed in one or more sessions, unless otherwise provided under the Constitution or the relevant Act.

In the present case, Section 31 specifically provides that the Bill has to be placed before both the Houses for a period ofthirty days which may be comprised in one session or in two or more successive sessions. The regulation, rule, sub-rule, bye law etc. have to be re-laid in the succeeding session or sessio11s until the said period is completed in one session. Rule 234, a5 noted above, has been clarified by para 2. 4 ofthe Book of Parliamentary Procedure. Where the statute provides that the rule framed thereunder should be laid on the table for a certain period which may be comprised in one session or two or more sessions, it is not necessary for the rules to be formerly re-laid in the next session in order to complete the prescribed period. Section 31 permits the requisite period of30 days in one or more sessions. There was no necessity to re-lay the rules before the Parliament in the next session as per parliamentary procedure. 12.

This position has been further clarified by the Rajya Sabha ~ Secretariat in its letter dated 9. 10. 2002 wherein the Secretariat has clarified that in the case ofrules and regulations in question under Section 31 of the SEBI Act, no relaying was necessary as the statute permitted the requisite period of30 days to be completed in one or more sessions and therefore, the rules/regulations in question after having been initially laid are deemed to lie in the succeeding sessions till the specified period is completed. Besides this the Ministry ofparliamentary Affairs vide its letter dated 9. 10. 2002 further clarified that no modification/rejection of the regulations and rules in question was done by either House. The requirement of Section 31 ofthe SEBI Act has been met with, the rules and regulations in question cannot be declared ultra vires on this ground. 13.

This apart the issue relating to the laying down ofrules/regulations on the table ofthe Houses for the period provided under the statute under which they are so framed has been dealt with by this Court in various cases. Some of these cases are Jan Mohammad Noor Mohammad Bagban v. The State ofGujarat & Anr. , [1966] 1 SCR 505, Mis. Atlas Cycle Industries Limited & Ors. v. The State ofHaryana, [1979] 2 SCC 196, Hukum Chand v. Union ofIndia, [1972] 2 SCC 601 and Bank ofIndia etc. etc. v. OP. Swarnakar & Ors. etc. etc. , [2003] 2 SCC 721. In a recent judgment, this Court followed the view taken in Mis. Atlas Cycle Industries Limited's case (supra) and Prohibition & Excise Suptd. , A. P. & Ors. v. Toddy Tappers Cooperative Society, Marredpally and Ors. , [2003] 12 SCC 738. 14. In all these ca~es, the issue relating to laying down and interpretation ofthe said regulation was exan1ined.

It has been held in all these cases that the laying ofthe rule before both the Houses ofParliament is merely a directory rule and not mandatory. In the Case of OP. VENEET AGRAWALv. UNIONOFINDIA[BHAN,J. ] 749 Swarnakar & Ors (Supra), the provision providing for laying the rules before the Legislative was exactly similar to Section 31 ofthe SEBI Act. It was also held by this Court that the said provision was directory and not mandatory. The non-compliance with the laying ofthe rule before the Parliament was not a sufficient ground to declare the rules/regulations framed under the statute as to be ultra vires. In Toddy Tappers Cooperative Society's case (supra) Hon'ble Mr. Justice Sinha in his concurring judgment following the decision in Atlas Cycle Industries Limited's case (supra) and Quarry Owners Association v. State ofBihar, [2000] 8 sec 655 and various other judgments, distinguishing the judgment in Union of India v.

National Hydroelectric Power Corporation Limited, [2001] 6 SCC 307, (which has been relied upon by counsel for the appellant before us as well) has held as under:- "The said observations, thus, must be held to be confined to the fact ofthe matter obtaining therein. In that case it was found as of DI fact that the rule had never been placed before the Legislature and, thus, there was even no substantial compliance with the law. The Bench, however, did not consider the effect ofthe directory nature ofsuch a provision, in the light ofthe decision ofthis Court inAtlas Cycle Industries (supra) and Quarry Owners' Association I (supra). The Court further did not notice the difference between the expressions 'approval' and 'permission'. Section 16 of the Water Act, construction whereof was in question did not use the expression 'prior approval'. The word 'approval' indicates an Act which has already been made and is required .

to be approved whereas in the case of 'permission', the situation would be different. This aspect ofthe matter has been considered by this Court in High Court ofJudicature for Rajasthan v. P. P. Singh and Anr, [2003] 4 SCC 239 stating : (SCC p. 255, para 40) "40. When an approval is required, an action holds good. Only ifit is disapproved it losses its force. Only when a permission is required, the decision does not become effectjve tm pe1mission is obtained. (See UP. Avas Evam Vikas Parishad and Anr. v. Friends Coop. Housing Society Ltd and Anr. , [1995] Supp 3 SCC 456, In the instant case both the , -( aforementioned requirements have been fulfifled. " 15. It was observed that provision was merely directory and not mandatory and even ifthe rules were not laid before the House at all even then the non-compliance with the laying down of the rules before the Parliament could not be a ground to declare the rules/regulations framed under the statute as ultra vires. A. 16.

Although in the present case the rules were laid before both the Houses as required under Section 31, as discussed in the earlier paragraph of the judgment but even if it is assumed that the rules/regulations in question did not complete the requisite period of30 days, the provisions ofSection 31 ofthe SEBI Act not being mandatory and merely directory, as has been held by this Court in the aforementioned cases, the rules/ regulations cannot be held to be ultra vires on the ground of noncompletion of 30 days period after laying ofthe rules before both the Houses ofParliament. -1- 17. Respondents with their reply have placed on record the three judgments of Delhi High Court in CWP No. 2942 of 2003 dated 18. 9. 2002, CWP No. 6920 of 2003 dated 3. 11. 2003 and CWP No. 2876 of 2001 dated 22. 2. 2002, wherein a challenge was raised to the rules and regulations under challenge was rejected.

Counsel for the appellant appearing before us had also appeared before the Delhi High Court in the said writ petition. In CWP No. 6920of2003, counsel who is appearing for the appellant in the pres~nt case had appeared before the High Court ofDelhi as well. This writ petition was dismissed by the . >\ High Court by imposing cost ofRs. 15,000/- by observing thus:- "Once the Regulations are declared to have been validly made, then, it is not open to argue that it was not examined from a particular angle and, therefore, the Court should examine it again. It is not appropriate to ask the Court to presume that the Court while examining the matter was not aware about the provisions contained in law and, more particularly, when the Division Bench ofthis Court had examined the matter from the same angle. It is in view ofthis, we dismiss this petition with costs which we quantify at Rs. 15,000/- which shall be deposited with the Delhi Legal Aid Service Authority within two weeks from today.

" 18. Although the writ petitioner in the present case is different but the repeated attempts are being made to get the rules/regulati,ons invalidated. This has been adversely commented upon by the High Court ofDelhi. Once the regulations are declared to have been validly m~de then it is not open to the counsel for the appellant to argue that the same was not examined from a particular angle and the court should re-examine it again. It is especially so, when the counsel who is appearing before us had appeared in the earlier cases as well. 19. For the reasons stated above, we do not find any merit in these appeals and the same are dismissed with costs which are assessed at Rs. 20,000/- in each ofthe appeals. D. G. Appeals dismissed.