LexMADHUBHAI AMATHALAL GANDHI versus THE UNION OF INDIA
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l S.C.R. SUPREME COURT REPORTS
191
MADHUBHAI AMATHALAL GANDHI
v.
THE UNION OF INDIA.
(B. P. SINHA,. c. J., J. L. KAPUR, P. B. GAJENDRA-
GADKAR, K. RrrBBA RAo and K. N. WANCHOO, JJ.)
Stock Exchange-Rules for membership-Notification laying·
conditions restricting membership -
Classification between active
members and others-,-Whether unreasonable or infringed fundamental
rights-Securities Contracts (Regulation) Act, z956, (42 of r956) s. 4
~Securities Contracts (Regulation) Rules, ·r957, rr. r7-22.
The Securities Contracts (Regulation) Act, 1956, was enact-
ed with the object of preventing undesirable transactions in
securities by regulating the stock exchange business, and the.Act
conferred an effective controlling power on. the Central Govern-
ment over the stock exchange. In exercise of the power conferred
on the Central Government to make rules the Central Govern-
ment made rules described as the Securities Contracts (Regula-
tion) Rules, 1957, providing, int~r:alia, for the•qualification for
membership of a stock exchange ·seeking recognition etc. After
the Act came into force ~wo Companies, namely, the Native Share
and. Stock Brokers' f\ssociation and the Indian Stock Exchange
Limited doing stock exchange business in Greater Bombay appli-
ed for recognition under the· Act: The Government after consi- .
dering the merits 6f the companies and the relevant circum-
stances issued a notification dated August 31, 1957, r~cognising
the Native Share and Stock Brokers' Association under the name
"The Stock Exchange, Bombay" subject to certain conditions.
One of the/cohditfons was that the members of the other com-
. pany, India·Stot~Exchange Limited, would be entitled to apply·
for membership hf the Stock Exchange, Bombay, provided they
were active members of the Indian Stock Exchange Limited for
12 months immediately preceding August 6, 1957. and they were
also eligible under r. 8(1) of the Securities Contracts (Regulation)
Rules, 1957, to be members of a recognised sto9k exchange.
Within the time granted for applying for membership a num-
ber 'of active members of the Indian Stock Exc4ange Limited
applied for membership and were admitted as members of the
recognised Stock Exchange. Though three years had elapsed
after this no member. other than the petitioner· questioned the
validity of the notification which was accepted and therecognis-
ed. Stock Exchange became established. The petitioner, how-
- ever, filed a petition under Art. 32. of the Constitution praying
. that the Union be directed to withdraw or cancel the notification
dated August 31, 1957, recognising the Stock Exchange, Bombay,
under s. 4 ·of the Securities Contracts (Regulation)· Act, 1956.
Subsequently on November 30, 1957~ the Central GoV¢mment
19150
August 17.
192
SUPRE:\iE COURT REPORTS
[ l 961]
1960
issued another notification applying s. 13 of the Act to Greater
Bombay with the result that thereafter every contract in shares
Mad1&uhha1
between the members of any unrecognised stock exchange in
An1atAalal (;andlii that city v.·ould be illegal.
The contentions of the petitiont:r in
v.
the petition for the issue of a \\·rit of mandamus v.•ere that
The Union of
under Art. 19(1){g) of the Constitution he had a fundam,,utal
India
right to carry on business in shares anJ the two notifications in
question imp0scd unreasonable restrictions on his right, that the
notification dated August 3r, 1957, \Va:> void as it \\·a:; not sa11c-
tioncsl by the provisions of s. 4 of the'Act, that the condi-
tion 2(i)(a) of the said notification classifying members oi the
Indian Stock Exchange IJimited as active members and members
who were not active infringed fundamental right granted under
Art. r4 of the Constitution and as the s1id condition was not
severable the entire notiJication was l>ad.
The respondent
besides controverting the said contentions furthe_r contended that
as the petitioner had not <!_tJestioned the validity of the Act it-
self the notification issued thereunder could not l>c questioned.
Held, that the \'olidity of a notification could not he ques-
tioned if it v;as issued under a self contained 1\ct and restated
the provisions of the Act the validity of ~hich was accepted.
If, however, the Act conferred a power on the State in general
terms and the notification issued thereunder infringed any of the
fundamental rights it could be attacked even though the Act
was valid.
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