MAHESH RATILAL SHAH versus UNION OF INDIA AND ORS.

Citation: [2010] 1 S.C.R. 784 · Decided: 19-01-2010 · Supreme Court of India · Bench: ALTAMAS KABIR · Disposal: Dismissed

Judgment (excerpt)

A 
B 
[2010) 1 S.C.R. 784 
MAHESH RATILAL SHAH 
v. 
UNION OF INDIA AND ORS. 
(Special Leave Petition (C) No. 21686 of 2006) 
JANUARY 19, 2010 
[ALTAMAS KABIR AND CYRIAC JOSEPH, JJ.] 
Securities Contracts (Regulation) Act, 1956: 
c 
s.4 - Absence of publication of the Rules and Bye-laws 
of the Bombay Stock Exchange, framed prior to its recognition 
in 1956 under the Act would not render its activities illegal and 
without authority. 
ss. 7 and 9 - Non-compliance of - Listing of fake and 
D bogus shares - Petitioner's a/legation that Bombay Stock 
Exchange (BSE) acted contrary to the interest of the securities 
market and investors in listing the share scrips of a company 
involved in fraudulent dealing of its scrip - Held: There is 
nothing to establish any ulterior motive on the part of BSE in 
E listing the said scrip - The said scrip was listed on BSE after 
it had been listed in the Stock Exchange at Ahmedabad -
However, as soon as information was received that the said 
company was involved in fraudulent dealing of its scrip, the 
said scrip was delisted and debaffed from trading by the BSE 
F - Thus, no offence committed by BSE or its members. 
The case of the petitioner was that BSE and its 
members induced him to buy 4,50,800 shares of "Presto 
Finance Ltd." and under the assurance of BSE, he 
deposited the entire purchase amount, amounting to 
G Rs.71.19 lacs. Petitioner's further case was that SSE and 
its members intentionally and deliberately cheated him by 
giving him delivery of forged share certificates and 
refused to cancel the said dealing when the same was 
H 
784 
MAHESH RATILAL SHAH v. UNION OF INDIA ANO 
785 
ORS. 
discovered and instead asked the petitioner to go to the 
A 
Liquidator of Presto Finance Ltd. for claiming damages. 
He filed a writ petition before High Court under Article 226 
of the Constitution for a direction upon the Union of India 
and SEBI to withdraw the recognition granted to BSE for 
alleged non-compliance with the provisions of Sections 
B 
7 and 9 of the Securities Contracts (Regulation) Act, 1956. 
A further direction was also sought for cancellation of 
SEBI registration of all relevant 90 members of BSE for 
fraudulently inducing investors to trade in forged scrips 
of Mis Presto Finance Ltd. and to declare the Rules, Bye- c 
laws and Regulations of the BSE as illegal, void and ultra 
vires the 1956 Act as also the Constitution of India. High 
Court summarily dismissed the writ petition holding that 
action was initiated against the Company as far back as 
in 1998-99 under Section 11B of the SEBI Act and SEBI 
0 
came to a finding that all the Directors of the Company 
were guilty of dealing in fake and bogus shares and 
cheating the investing public at large. The High Court 
also observed that the market regulator took due steps 
in the matter of individual transactions and the remedy 
E 
of the petitioner, who was aggrieved by the acts of the 
promoters of the company in question, as well as its 
Directors, would be in approaching the appropriate Court 
to initiate criminal prosecution against the offenders. The 
High Court also noted that no material was produced by 
the petitioner for issuing directions for de-recognition of F 
the BSE or to declare its Rules, Bye-laws and 
Regulations to be ill~gal, void and ultra vires. 
The questions which arose for consideration in the 
present SLP were whether in the absence of publication G 
of the Rules and Bye-laws of the Bombay Stock 
Exchange, which had been framed prior to its recognition 
in 1956 under the 1956 Act, its activities could be said to 
be without authority and whether in listing the shares of 
H 
786 
SUPREME COURT REPORTS 
[2010] 1 S.C.R. 
A M/s. Presto Finance Ltd. on the Stock Exchange, the 
Bombay Stock Exchange had acted in a manner which 
failed to ensure fair dealing and to protect the investors. 
B 
Dismissing the Special Leave Petition, the Court 
HELD: 1. The petitioner did not make out any case 
of malafides or irregularity on the part of the Bombay 
Stock Exchange with regard to the listing and 
subsequent de-listing of the scrip of M/s Presto Finance 
Ltd. The publication of the Rules and Bye-laws of the 
C Stock Exchange was not intended in the Securities 
Contract (Regulation) Act, 1956, as otherwise some 
provision would have been made in the Act with regard 
to pre-recognition Rules and Bye-laws. While the Act 
provides for publication of amendments to the Rules and 
D Bye-laws after gran

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