Return
to Story Page
To print: Select File and then Print from your
browser's menu
Our Market Bureau
Mumbai, April 12: Ramesh Chandra Mathur, the beleaguered executive director of the Bombay Stock Exchange (BSE), today resigned his post. His resignation was accepted by the BSE governing board in the evening. His functions will be looked after by an independent management committee of senior exchange officials till a new executive director is appointed.
The resignation was widely expected in the context of the rejection of BSE president JC Parekh's petition against a Sebi dismissal order by the appellate authority in the finance ministry. With Parekh getting no reprieve, it was moot point whether Mathur would have been next in Sebi's line of fire. Mathur failed to turn up for a personal hearing with Sebi a few days ago.
Mathur's resignation brings to a close the year-old payments crisis drama in which the BSE's reputation was tarnished. The setting up of a management committee to oversee administration is part of a plan to redeem the exchange's image since it will also be responsible for implementing thenew code of ethics.
Though Sebi acted against Parekh first, Mathur too came under a cloud since the executive director's role is more important in these situations. In reply to a Sebi show cause notice on the payments crisis, Mathur alleged that Parekh and the then vice-president Rajendra Banthia had forced him to accept ad-hoc margins in the form of shares while trying to defuse the crisis. In a sharp counter-charge, Parekh had contended that it was Mathur's prerogative to ensure proper surveillance at the exchange.
A BSE board member, on condition of anonymity, said that Mathur was being made a scapegoat for the June 1998 payment crisis. The BSE had, at that time, reopened trading after official hours to enable overextended brokers to square up their positions in BPL, Sterlite and Videocon International and prevent a default.
Copies of the show-cause notice issued by Sebi against Parekh as well as court orders and the verdict of the appellate authority were placed before the BSE governing board today.The board, however, did not discuss them as the matters were subjudice.
Mathur's exit comes barely a few weeks ahead of the formal end to his tenure on April 30, but Sebi officials say that he would actually had stayed on till October 2000 as he had been given an extension. Mathur, whose appointment as the executive director of the exchange in 1995 was ratified by Sebi, came on deputation from the State Bank of India.
Mathur's fate was probably sealed when Parekh's appeal against his dismissal by Sebi was rejected by the appellate authority (AA) in the finance ministry last Friday. The AA ruled that there is no requirement under section 11 and 11B of the Sebi Act to ask a person to show cause first before a certain direction is to be issued to him.
In a 28-page order upheld the Sebi action against Parekh, the AA dismissed Parekh's contention that the Sebi chairman did not follow the procedures in place while sacking him.
"The board has to conduct an inquiry and then as a matter of natural justice theperson concerned gets an opportunity to explain the allegations against him. A two-stage provision of show cause for penalty is not envisaged under the Act", states the AA order.
"As mentioned by Sebi, even under the departmental proceedings, this opportunity is not provided. It cannot be, therefore, stated that a two-stage inquiry is a must in such cases and without it the principles of natural justice cannot be said to have been followed", the order states, adding: "In the instant case, the question is of issuing directions and not of dismissing a wholetime employee."
Parekh had questioned the Sebi directive on the grounds that there was no opportunity to show cause and notice against the penalty proposed was not issued. The cases of Town Area Committee vs Jalalabad Prasad LM and managing director, UP Warehousing Corporation, vs Vijay Narayan Vajpayee were quoted in this regard.
Sebi, however, contended that under the provisions of the Sebi Act, an inquiry was conducted in the matter and thereafter ashow-cause notice was given based on the inquiry. A copy of the inquiry report was also furnished. There is no provision under the Act for providing a show-cause notice against the penalties proposed. Sebi also contended that even in the case of disciplinary proceedings against government employees or others, it is no longer necessary to issue a notice separately on the penalty proposed.
"The question is that of issuing directions by Sebi and such directions have to be viewed in the light of the provisions of section 11 and 11B of the Sebi Act", Sebi contended.
On whether or not Sebi is empowered to issue such directions under section 11 and 11B, the AA observed that the provisions of the Sebi Act are in addition to and not in derogation of the power under other acts or laws.
The AA observed that even though invocation of the Securities Contracts Regulation Act (SCRA) was one option in taking the action against Parekh, these provisions "cannot fetter the power of Sebi to issue directions under section11 and 11B of the Sebi Act."
Sebi had, in its defence, cited the Gujarat High court verdict (reported extensively by The Financial Express) which had upheld the powers of Sebi under section 11 and 11B to issue any directions to ensure the safety and integrity of the markets.
"We are, therefore, inclined to take a view that the authority of the board (Sebi) did cover powers to issue directions to the president of the (BSE) board. Where a case is not covered by these directions, rules, regulations, bylaws of BSE will prevail. These directions are clearly in the interests of the securities market and cannot be, therefore, said to be without a nexus. The various rulings quoted by the appellant, in our view, do not apply to the instant case as the specific provisions of law under the Sebi Act do empower Sebi to issue directions in accordance with the interpretation of law mentioned above", states the AA order.
ends
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
------------------------------------------------------------
This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
------------------------------------------------------------