(Per : HONOURABLE MR.JUSTICE A.J. DESAI) 1 We have heard learned Senior Counsel Mr. Mihir Thakore and learned Senior Counsel Mr. Saurabh Soparkar assisted by learned Advocate Mr. Bijal Chhatrapati for Singhi & Co. for appellant No.1; learned Senior Counsel Mr. Kamal Trivedi assisted by learned Advocate Mr. Bijal Chhatrapati for Singhi & Co. for appellant No.2, learned Advocate Mr. Navin K.Pahwa for respondents No.6 and 7 and Mr. P.S. Champaneri, learned Assistant Solicitor General for respondents No. 1, 2 and 4 to 6.
2 The challenge in the present appeal at the initial stage was a show cause notice dated 21.6.2011 was issued by respondent No. 1 – Forward Markets Commission, Ministry of Consumer Affairs, GOI, to appellant No.2, calling upon him to show cause as to why action should not be taken against him for the following charges:
(a) You, Shri Kailash Ramkishan Gupta, the then MD/EVC and present VC of NMCE, are, therefore, directed to show cause in writing within a period of 10 days from the date of receipt of this Notice as to why action should not be taken/ initiated against you as the then Managing Director/Executive Vice Chairman of NMCE as well as in your personal capacity and in the capacity as the shareholder of the NMCE as stipulated in or under the aforesaid statutes for serious and illegal/fradulent acts of omission and commission detailed in this notice and listed more specifically in the para 11 of this notice.
(b) You are also hereby required to show cause as to why the aforesaid acts of omission and commission detailed in this notice and listed more specifically in para 11 of the notice should not be referred to other concerned departments and authorities as may be relevant for appropriate action under the relevant Acts.”
3 The said show cause notice was challenged by the present appellant No.1 by way of a Special Civil Application No. 8377 of 2011 before this Court. The said petition was dismissed by the learned Single Judge, vide judgment and order dated 8.7.2011. The said judgment and order was challenged by the appellant No.1/original petitioner by way of the present Letters Patent Appeal under Clause 15 of the Letters Patent. During the pendency of the said Appeal, the Division Bench of this Court has passed an order on 18.7.2011, which reads as under:
“Let notice be issued on the respondents through Court and by Speed Post.
Post the matter on 17th August 2011.
Pendency of the case shall not stand in the way of the appellant raising the question of jurisdiction of the authority to issue show cause notice. In such a case, the competent authority will consider the same. If any adverse decision is taken, the same shall be subject to decision of this appeal.
The civil application stands disposed of.”
4 In view of the said order, the Authority continued the hearing of the show cause notice and passed the order dated 23rd July, 2011 against the present appellant No.1 and appellant No.2.
5 The present appellant No.2 also filed a Civil Application No.8872 of 2011 impleading him as party appellant No.2 or in the alternative as party – respondent in the appeal. The said application was allowed by this Bench, vide order dated 31.01.2012 and the applicant was permitted to join as appellant No.2 in the Appeal.
6 The appellant No.1 also filed a Civil Application No. 8088 of 2011 to amend the prayer portion of the main appeal so as to challenge the impugned order dated dated 23rd July, 2011 passed by the respondent No.1 Commission. The said Civil Application was allowed, vide order dated 29th July, 2011 and appellant No.1 was allowed to amend the prayer portion of the main appeal. Accordingly, the appellant No.1 carried out the amendment in the prayer clause and thereby prayed to quash and set aside the impugned order dated 23rd July, 2011 passed by the respondent No.1- Commission.
7 The appellant No.1 also preferred a Special Civil Application No.14917 of 2011 and challenged the very Order dated 23rd July, 2011 passed by the respondent No.1 – Commission. The Division Bench of this Court, vide order dated 13th October, 2011, rejected the said petition, which reads as under:
“ Heard Senior Counsel Mr. Mihir Thakore as well as Senior Counsel Mr. S.N. Soparkar appearing with learned Advocate Mr. Bijal Chhatrapati, for the petitioners. This petition raises the same and challenges an order which is also challenged in Letters Patel Appeal No.1039 of 2011 by virtue of an Amendment brought in by Civil Application and this petition cannot be entertained and, therefore, the same is rejected.
However, it is made clear that the papers of this Special Civil Application are to be retained with the Appeal at the request of learned Advocates for the petitioners, to be used as paper book, for easy reference.”
8 At this stage, the learned counsel for the appellants have urged that no show cause notice was issued either to the appellant No.1 or to the National Multi Commodity Exchange of India Limited–respondent No.3. It is further urged that under the Forward Contracts (Regulation) Act, 1952, there is no power available to the respondent No.1 to issue such a show cause notice.
9 The aforesaid contentions raised by the learned counsel for the appellants is vehemently contested by Mr. P.S.Champaneri, learned Assistant Solicitor General of India and learned Advocate Mr.Navin Pahwa, appearing for respondent No.3 and 7, however, they have agreed that no show cause notice has been issued either to the appellant No.1 and/or respondent No.3-NMC by respondent No.1– Commission. At this stage, learned counsel for the respondent No.1 Commission Mr. Champaneri states that they will be issuing a show cause notice to the appellants as well as respondent No.3 as contemplated under the Forward Contracts (Regulation) Act 1952 and Forward Contracts (Regulation) Rules, 1954.
10 At this stage, learned Counsel for the appellants submitted that some of the documents have been supplied and some of the documents have not been supplied by the respondent No.1 Learned Counsel for the respondent No.1 – Commission submits that all documents have been supplied. However, if, any documents are in possession of the respondent No.3 and the same are not supplied to the appellants, the same may be supplied to the appellants on payment of usual charges, if any.
11 Learned Counsel for the appellants further submitted that during the pendency of the appeal, a meeting was sought to be held on 19th September, 2011, for the purpose of amending the Articles of the Association and cancelling the shares by respondent No.3. The appellant No.1 had filed a Civil Application No. 9452 of 2011 in Letters Patent Appeal No.1039 of 2011 opposing the said action of the respondent No.3. The Division Bench, while disposing of the aforesaid Civil Application, has passed the order on 8th September, 2011, which runs as under:
“ This application has been preferred by the applicant Neptune Overseas Limited, praying to restrain third respondent from holding the meeting pursuant to the Notice dated 26th August, 2011 and/or taking any action against the applicant with respect to the shares held by the applicant, in any manner whatsoever.
2. We have heard learned counsel for the parties and perused the record.
2.1 From the record it is evident that Forward Markets Commission, Government of India was holding meeting in the matter of National Multi Commodity Exchange of India Limited, Ahmedabad as per Ref. No. FMC/Comp/vi/2010/12/14. At that stage, prayer was made that the Forward Markets Commission, Government of India should not decide any issue having no jurisdiction with regard to the matter for which show cause notice was issued on the applicant. This Court by order dated 18th July, 2011, while issued notice on respondents in LPA No. 1039 of 2011, observed as follows: "Let notice be issued on the respondents through Court and by Speed Post. Post the matter on 17th Aug. 2011.
Pendency of the case shall not stand in the way of the appellant raising the question of jurisdiction of the authority to issue show cause notice. In such a case, the competent authority will consider the same. If any adverse decision is taken, the same shall be subject to decision of this appeal."
2.2 After the aforesaid observation, the Forward Markets Commission, Government of India passed a final order on 23rd July, 2011, which has been challenged by the applicant by filing a petition for amendment of the prayer, which was allowed. However, prayer for stay of the order dated 23rd July, 2011 passed by the Forward Markets Commission, Government of India was rejected by this Court on 29th July, 2011 and the matter has been fixed for hearing on 17th August, 2011.
It is informed that the hearing has been postponed to a date in October, 2011.
3. Learned counsel for the applicant would submit that third respondent is going to take a decision in it's meeting to cancel the shares, and the applicant is also going to reduce part of the share. But from the order dated 23rd July, 2011, we find that the 3rd respondent in its ExtraOrdinary Meeting of General Body can at best pass a Resolution authorizing the Exchange to refer the matter to the appropriate authorities under the Companies Act, 1956 for cancellation of the irregular allotment of 29,32,280 shares to the applicant Neptune Overseas Ltd. and take any other action as provided under the Companies Act, 1956. By the said order it was also observed that on the basis of 29,32,280 shares presently held by Neptune Overseas Limited, applicant will not have any voting right. Therefore, it is clear that the third respondent on its own cannot cancel the shares, as per paragraph 34 of the order dated 23.7.2011.
4. Learned counsel for third respondent National Multi Commodity Exchange of India Limited submitted that governing body in its Extraordinary meeting can directly cancel the shares as per Companies Act, 1956. But such submission is disputed by the learned counsel for the applicant.
We asked the learned counsel for the third respondent as to whether they intend to bypass the order dated 23.7.2011 passed by Forward Markets Commission, Government of India, giving reference to the provisions of the Companies Act, 1956. In reply, learned counsel for respondent submitted that they will comply with the final order as passed by Forward Markets Commission, Government of India. In this background, we only make it clear that once Forward Markets Commission, Government of India has taken a decision on 23rd July, 2011 with regard to the impugned 29,32,280 shares presently held by applicant Neptune Overseas Limited, it will not be desirable for the General Body of the third respondent to bypass such order by directly cancelling the shares.
5. We accordingly allow the General Body to hold its Extra ordinary meeting and may pass a Resolution authorizing the Exchange to refer the matter to the appropriate authority under the Companies Act, 1956 for cancellation of irregular allotment of 29,32,280 shares, as ordered on 23.7.2011 by Forward Markets Commission, Government of India. The appropriate authority under the Companies Act will decide the question in accordance with law after hearing the parties.
6. CA stands disposed of with the aforesaid observation.
It is needless to say that if any decision is taken by third respondent or its governing body or any other authority during the pendency of the appeal, it shall be subject to the result of this case. List main matter for hearing on 26th Sept. 2011.”
12 Needless to mention that the effect of the aforesaid order of the Division Bench would be that any decision is taken in the meeting held on 19th September, 2011 is subject to the final outcome of the present appeal.
13 The next argument advanced by the learned Counsel for the appellants is that in the Extraordinary Meeting for appointment of Managing Director was scheduled to be held on 6th February, 2012 as the term of the Managing Director Mr. Anil Mishra was expiring. It is worthy of noting that under our orders dated 31.1.2012, the same Managing Director was continued till the final disposal of the present appeal and once the appeal is finally decided, the term of Mr. Anil Mishra would also come to an end automatically.
14 In this view of the matter, we are of the opinion that, in absence of any show cause to appellant No.1 as well as the respondent No.3–NMC, the impugned Order dated 23rd July, 2011, passed by the respondent No.1 is contrary to the principle of natural justice and no action could be taken either against appellant No.1 or respondent No.3. NMC in pursuance of the impugned order passed by the respondent No.1 – Commission and the same deserves to be quashed and set aside so that a fresh order/decision may be passed by the respondent No.1-Commission on the points raised by the appellants No. 1 and 2 as well as respondent No.3, after issuing a show cause notice, inviting objections and also after considering the objections and after affording opportunity of hearing to all necessary parties. Hence the following order is passed:
(i) The impugned order dated 23rd of July,2011 passed by the respondent No.1 - Commission is quashed and set aside. The respondent No. 1 shall take a decision in accordance with law after issuing show cause notice and after hearing necessary parties. The respondent No.1 Commission shall issue show cause notice to the parties, inviting replies/objections and also after considering the objections and after affording opportunity of hearing to all necessary parties and thereafter pass an order/take decision preferably with in a period of four months from today. It is expected of that all the concerned parties would cooperate for expeditious conclusion of hearing.
(ii) Since, the appeal is disposed of today, therefore, we deem it expedient to direct the respondent No. 1- Commission to appoint some independent person other than Appellant No.2 – Shri Kailash Gupta and Shri Anil Mishra as the Managing Director and Chief Executive Officer of respondent No.3 within a week from today and for a period of one week, Mr. Anil Mishra would function as the Managing Director and CEO of the respondent No.3- NMC.
(iii) Before parting, we make it clear that we have not gone into the merits of the present appeal. We have decided this appeal only on the ground of the principle of natural justice. We also make it clear that the appellant No.2 shall not take part in the function of the respondent No.3 - NMC till the disposal of the matter by respondent No.1.
15 With the aforesaid observations and directions, the present Appeal stands disposed of accordingly.
(V.M. SAHAI,J.) (A.J. DESAI, J.) pnnair