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This case law is related to corporate law affairs. In this case Ajay Agarwal was delegated the J.M.D. of trident steel limited. According to this case there were 52 lacs of shares of Rs.10 each at a premium of Rs. 3.50 per share totalling Rs.7 crore 2 lacs where the public issue of the said company but the company had not declared a dividend in the previous year. A show cause notice was given to the Ajay Agarwal for what good reason bearing under section 11B of the act. After that the issue before the court was that the chairman of SEBI, in accordance with sections 4(3) and 11, may have relied on section 11B of the act to bar the respondent from entering the securities market by associating with any corporate agency and to prevent the respondent from purchasing, selling or trading in securities. After all inquiry and appellate forum order the honourable Supreme Court come to this point that division bench was right in upholding the order of dismissal by setting aside the learned single judge’s order.

Keyword: – corporate law, company, SEBI, Supreme Court

COURT: Supreme Court of India

CASE NO.:CivilAppeal No. 1697 of 2005 APPELLANT:Securities and Exchange Board of India RESPONDENT:Ajay Agarwal

DATE OF JUDGMENT:25. 02. 2010

BENCH:G. S. Singhvi and A. K. Ganguly


 In this provided case, onMay 20, 1993, the respondent (Ajay Agarwal) was delegated the Joint Managing Director of Trident Steel Limited (hereinafter referred to as the Company).On the basis of a complaint received from individual members of the Bombay Stock Exchange (B.S.E.), the Board started certain inquiry concerning the public affairs of that company. There were 52 lacs of shares of Rs.10 each at a premium of Rs. 3.50 per share totalling Rs. 7 crore 2 lacs were the public issue of the said company.A further, 2000 investors were filed the complaint in the Investors Service Cell, B.S.E. In answering to the investors, the company stated that it had not declared a dividend in the previous year.”

Following the inquiry, it emerged that the company’s executive had committed to the Bank of Baroda and its director their personal holding of 7 lac 50 thousand shares, namely Mr. A.A. Kazi and Dowell leasing and financing Limited which had entrusted the non-disposal undertaking to bank of Baroda. At last, a show cause notice dated 22.12.99 was given to the respondent asking it to show cause for what good reason bearings under section 11B of the act restraining the company and a reply was sought within 15 days of receipt of the show cause notification. But the respondent issued his reaction on 1.3.2000 and 10.7.2002. After this, a case was filed by in the appellate court and held that the respondent has not been guilty of committing any offence nor has he been subjected to any penalty.


  • Whether the chairmen of the SEBI, in accordance with Sections 4(3) and 11, may have relied on Section 11B of the Act to bar the respondent from entering the securities market by associating with any corporate agency and to prevent the respondent from purchasing, selling or trading in securities?
  • Whether the Appellant Tribunal justified the revocation of SEBI’s restraining guidance under amended section 11B of the Act on the basis of claims against the corporation that occurred prior to the entry into force of certain amendments in 1995 and 2002 on grounds of violation of Article 20(1) of the Indian Constitution?


  • Securities and Exchange Board of India Act, 1992 –

Section 3 –Establishment and incorporation of Board

Section 4(3) – Save as otherwise determined by regulations, the Chairman shall also have powers of general superintendence and direction of the affairs of the Board and may also exercise all powers and do all acts and things which may be exercised or done by that Board Section 11 – Functions of Board

Section 11B – Power to issue directions”

Section 11(4) (b) – Restrain persons from accessing the securities market and prohibit anyperson associated with securities market to buy, sell or deal in securities”

·  Constitution of India –

Article 20 – Protection in respect of conviction for offences

Article 20(1) –No person shall be convicted of any offence except for violation of a law in force at the time of the commission of the Act charged as an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence

Article 367 – Interpretation

  • Cattle Trespass Act, 1871 – Section 20 – Power to make complaints

·   Code of Criminal procedure, 1973 –

 Section 2(n) – “Offence” means any act or omission made punishable by any law for the time being in force and includes any act in respect of which a complaint may be made under section 20 of the Cattle- trespass Act, 1871 (1 of 1871)

·   Income Tax Act, 1961 –

 Section 171 – provides that once income of a joint family is assessed in the hand of HUF, it will be continued to be assessed as such until one or more coparceners claims partition in the family

·   Indian Penal Code, 1860 –

 Section 53 – Punishments – the punishments to which offenders are liable under the provisions of this Code are


 Taking into consideration facts of the case and rules applicable, the Supreme Court of India concluded that the Division Bench was right in upholding the order of dismissal by setting aside the learned Single Judge’s order. The court additionally concurred with the contention by the respondent that on the date when the infringement were asserted against him, the Board didn’t have the force either under Section 11B or under Section 11(4)(b) as those arrangements came thusly via revision that. To arrive at this conclusion, the learned judges stated thatthe respondent was not found guilty of submitting any offense nor was he been exposed to any punishment. He was just been prevented by an order for a time of a long time from partner with any corporate body in getting to the securities market.”


 The present case entirely revolves around just point contended is that Section 11B of the Act dropped via alteration to the said Act with impact from 25th January, 1995 while the public issue in regard of which the censured request was passed was of November 1993 and the prospectus was of October 1993. Along these lines, it was encouraged for the benefit of the appealing party that the supposed unfortunate behaviour if any way for a while when Section 11B was not on the resolution book. After that the learned counsel for the appellant mainly urged that the powers under Section 11B can only be used prospectively and not retrospectively had been given on an erroneous appreciation of the legal provision under the said Act. It appears in the case of Govind das2 decision.”

Hence, it is notable that the substantive laws to be enforced for assurance of expense obligation must be the law which is in power in the applicable appraisal year and also it is very much settled that law to be applied for evaluation year until an amendment is made retrospectively, either specifically or with the required consequences 34”. Also, it very well might be observed that the Board passed the impugned order under section 4(3) with section 11 and section 11B of the Act. Under section 11 of the act that the Board has the right to bar an entity from entering the securities market or to prevent the buying, selling or deal of securities by any person connected with the securities market.

In the premises, it cannot be said on the grounds that any new clause in connection with the ongoing litigation has been invoked. Nor may the respondent argue that there was some wrongdoing in the proceeding.Respondent was given sufficient notification of the charges in the show cause notice and he was allowed a chance to answer of that notice and, from that point, it was observed by the court that respondent given a reasonable chance of hearing was provided before the request was passed by the Board.”

Furthermore, in the case of Rao Shiv Bahadur Singh and Anr5, J. jagannadhads interpreted on Article 20(1) and comparison between English law and American Constitution and also viewed that the language used in Article 21 is in much wider terms and similar in State of West Bengal case6. If we analyse some of the provisions of the Act it appears that the Board has been established under Section 3 as a body corporate and the powers and functions of the Board have been clearly stated in Chapter IV and under Section 11 of the said Act.””

After all this the court was give the Maxwell principle “Interpretation of Statutes” also indicated that no one has a vested right in any course of procedure. A person’s right of either prosecution or defence is conditioned by the manner prescribed for the time being by the law and if by the Act of Parliament, the mode of proceeding is altered, and then no one has any other right than to proceed under the alternate mode. [Maxwell Interpretation of Statutes, 11th Edition, p.216]7 and also the court finds that the respondent only liable for restrained for five years from associating with any corporate body but not liable any offence and penalty.


 In India SEBI was a non-legal body yet in January 1992 it turned into a legal body. SEBI has encouraged stock trades to correct the posting arrangements to guarantee the recorded organizations outfit yearly explanations to the stock trades. All the rules and administrative proportions of capital issues are intended to advance solid and effective working of the issue market.

It is an association of USA government which directs all the stock trades referenced previously. The essential obligation of this commission is to uphold all the protections laws of speculators and ventures. It was made by SECURITIES EXCHANGE ACT; 1934.This act is additionally called FEDRAL SECURITIES ACT. The primary rationale of the commission is to expand public confidence in the capital business sectors by divulgence of data about open protections contributions.”


It is notable that control request passed on the respondent carefully was not under Section 11B of the said Act. Nonetheless, the arrangements of Section 11(4) (B) of the said Act additionally stopped via correction in 2002. It should, nonetheless, be noticed that when the Board passed the request on 31st March 2004 all the alterations were on the rule. In this way, the inquiry here isn’t of review activity of the alterations. Regardless of whether the revisions to the said Act are permitted to work tentatively when the request was passed by the Board, it was engaged by the previously mentioned changes to do as such. Further, The privilege of an individual of not being indicted for any offense aside from infringement of a law in power at the hour of the commission of the demonstration charged as an offense and not to be exposed to a punishment more noteworthy than that which may have been exacted under the law in power at the hour of the commission of the offense, is a Fundamental Right ensured under our Constitution just for a situation where an individual is charged of having submitted an “offense” and is exposed to a “punishment”. Hence, the court choice was compelled to subdue the request for the Appellate Tribunal and maintains the request for the Chairman of the Board. The allure is permitted. There will be, be that as it may, no requests as to costs.


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1 Student at Symbiosis Law School, Pune

2Govindas and Ors v. Income Tax Officer and Anr, [1976 (103) ITR 123 (S.C.)]

3Reliance Jute and Industries Ltd C.I.T West Bengal, Calcutta,[1980 (1) SCC 139, P. 141 para 6]

4.Controller of Estate Duty, Gujarat-I, Ahmadabad v. M.A. Merchant and etc, (AIR 1989 SC 1710, P. 1713)

5.Rao Singh Bahadur Singh and Anrv. state of Vidhya Pradesh, (AIR 1953 SC 394) 6.State of West Bengal v.S.K. Ghosh, (AIR 1963 SC 255)

7.Union of India v. Sukumar Pyne,(AIR 1966 SC 1206, P. 1206)