A division bench, during a recent hearing, said the reliefs prayed for by the petitioner were vague and could not be granted because the parties named in it were not respondents in the writ.

A Public Interest Litigation (PIL) has sought to restrain Sebi from imposing sudden margin charges upon Indian investors during the trading and termed it as against the Sebi Act. The PIL had also sought inquiry in respect of share transactions of some companies, which had not been named as respondents.

Accusing Sebi of "effecting market sentiments" by creating artificial demand and supply with the help of top brokers and FIIs by applying the "margin rule" during the trading, the PIL, by advocate Manhor Lal claimed this had affected prices of various scrips.

"Sebi has allowed FIIs and other institutions to trade without depositing any margin in the stock exchange, while it is imposing margin rule on Indian investors resulting in the controlling of the market by them (FIIs)," the PIL said.

However, Sebi, in its briefs placed before the court, said margins were essentially "pre or part payment" advance in the form of earnest money for fulfilment of the commitment towards the final settlement on the share sold or bought.

Sebi counsel Saurabh Kiripal said: "Some of the regulators preferred to term the margin as insurance against default of performance, committed during the trading."

Mr Kiripal said the regulatory authorities had used margins from time to time as an effective tool for managing and containing risk in the capital market and ensuring safety to investors.

Sebi has set up a "group on risk management for equity markets" comprising representatives of the stock exchanges, market participants and people from academic fields and before imposing any new margin, the issue was discussed by the group and due publicity was made through media, he said.

Referring to the transactions by mutual funds, FIIs and other institutional investors, the Sebi counsel said the exemption to them were given because they were regular and long term players in the stock markets.

He said the imposition of margin rule had resulted in increase of delivery base business.

However, the petitioner claimed that under the Act, Sebi's role was confined only to regulate the stock exchanges not controlling the trading in the market by imposing margins.

"Due to this illegal act of Sebi, the market index (Sensex) had once reached at a point of 6006 but crashed to around 4000 point resulting in passing of thousand crore of rupees in the hands of FIIs and other institutions," Mr Sharma claimed. "The margin game has been used as a lethal weapon for controlling the market by FIIs, other institutions and top brokers upon the interest of small and marginal investors," he said.

(PTI)