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The high court was hearing a plea challenging the notices issued by SEBI. The plea claimed that the notices were in violation of Articles 14, 19(1)(g), and 21 of the Constitution.
The Securities Board of India on Wednesday told the Bombay High Court that it will not insist on compliance with the notices issued to stock broker firms under the SEBI (Intermediaries) Regulations, 2008 requiring securities market intermediaries to intimate if they satisfy certain "fit and proper person" criteria.
The statement by Senior Advocate Rafique Dada appearing for the Board before the division bench of the Bombay High Court comprising Justice GS Patel and Justice Neela Gokhale.
"We accept Dada’s statement that given the pendency of matters before this court, SEBI is not presently insisting on compliance within 15 days which is a requirement. All rival contentions are kept expressly open," the bench recorded
The bunch of petitions filed by multiple stock broker firms challenged the Schedule 2 Clause 6 of the 2008 Regulation which states that the directors would be disqualified if a chargesheet is filed against them.
The petitioner had challenged the notices on the ground that the notices are violative of Articles 14, 19(1)(g), and 21 of the Constitution because a person would be disqualified merely on allegations
Senior Advocate Janak Dwarkadas appearing for one of the petitioners submitted that the said provision was a contravention of principles of natural justice.
"If there is a chargesheet filed, even while the charges are not proven, may lead to disqualification of a person from the intermediary within 15 days, and if the intermediary fails to comply with that, even that entity would be in violation and may not be termed as ‘fit and proper’. This is a violation of fundamental rights," he submitted.
The division bench during the hearing questioned that if the parties are made to divest their assets based on the chargesheet filed and later acquitted then what would be the process to restore the divestment.
However, the bench asked the board to file a reply to the petition challenging notices within 2 weeks.
The petitioners who had approached the court included Motilal Oswal Financial Services (MOFSL), Anand Rathi Shares and Stock Brokers, Roongta Corporate Services, CD Equisearch, Systematix Shares & Stocks (India), LKP Wealth Advisory, LKP Securities, KR Choksey Shares & Securities, and Almondz Global Securities,
Case title: Motilal Oswal Financial Services & Ors vs SEBI
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