Debangsu Basak, J. - (1.) Two writ petitions have been taken up for hearing analogously. CAN 8384 of 2015 has also been taken up for hearing. Both the writ petitions relates to actions taken by the Securities and Exchange Board of India (SEBI) for compulsory exit of Calcutta Stock Exchange (CSE).
(2.) Learned Senior Advocate for the petitioners referring to the various provisions of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as "SEBI Act, 1992") has submitted that, the power to withdraw recognition conferred upon the Central Government or its delegate under the Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as "SCR Act, 1956") can be exercised only after the mandatory prerequisites of Sec. 5 of the SCR Act, 1956 are fulfilled. CSE was a recognized stock exchange. He has submitted that, the Central Government or its delegate has to form an opinion that, it was in the interest of trade or in public interest to initiate proceedings for withdrawal of recognition of stock exchange. A notice stating the grounds on which the withdrawal is proposed must be served upon the stock exchange. Such stock exchange has to be heard before the order of withdrawal can be issued. The order of withdrawal has to be informed with cogent reasons. He has submitted that, any regulation purported to be put in place for the purpose of withdrawal of recognition of a stock exchange by SEBI has to fulfil the requirements of Sec. 5 of the SCR Act, 1956. According to him, in the instant case, SEBI as the delegate of the Central Government has not formed an opinion that it is in public interest or in the interest of trade to close down CSE. Nothing has been disclosed on record to such effect. CSE has not been heard prior to the order of closure of its business.
(3.) Assuming that the Central Government has delegated its authority under Sec. 5 of the SCR Act, 1956 to SEBI, in the present case, according to petitioners, SEBI has not formed an opinion that it is in public interest or in the interest of trade that CSE should be derecognized. SEBI has not issued any notice giving the reasons as to why SEBI needs to derecognize CSE. Since formation of opinion in a condition precedent for the exercise of powers under Sec. 5 of the SCR Act, 1956 and the SEBI Act, 1992, and SEBI not having disclosed any materials on record with regard to such formation of opinion, all steps of SEBI to derecognize CSE are, therefore, bad.;