1.

THE SECURITIES AND EXCHANGE BOARD OF INDIA

The Securities and Exchange Board of India (SEBI) was constituted on 12 April 1988 as a non
statutory body through an administrative Resolution of the Government for dealing with all
matters relating to development and regulation of the Securities market and investor protection
and to advise the government on all these matters. SEBI was given statutory status and powers
through and ordinance promulgated on January 30, 1992. SEBI was established as a statutory
body on 21 February 1992. The ordinance was replaced by an Act of Parliament as 4th April
1992. The Preamble of SEBI Act, 1992 enshrines the objectives of SEBI - to protect the interest
of investor in securities market and to promote the development of and to regulate the securities
market.

Before SEBI Act, 1992, the three principal Acts governing the securities market were: (a) the
Capital Issues (Control) Act, 1947, which restricted issuer's access to the securities market and
controlled the pricing of issues; (b) the Companies Act, 1956, which sets out the code of
conduct for the corporate sector in relation to issue, allotment and transfer of securities, and
disclosures to be made in public issues; and (c) the Securities Contracts (Regulation) Act, 1956,
which provides for regulation of transactions in securities through control over stock exchanges.

FUNCTIONS OF THE BOARD

It shall be the duty of the Board to protect the interests of investors in securities and to promote
the development of, and to regulate the securities market, by such measures as it thinks fit.
These measures include:

a. regulating the business in stock exchanges and any other securities markets;

b. registering and regulating the working of stock brokers, sub-brokers, share transfer agents,
bankers to an issue, trustees of trust deeds, registrars to an issue, merchant bankers,
underwriters, portfolio managers, investment advisers and such other intermediaries who may
be associated with securities markets in any manner;

c. registering and regulating the working of the depositories, participants, custodians of

securities, foreign institutional investors, credit rating agencies and such other intermediaries as
the Board may, by notification, specify in this behalf;

d. registering and regulating the working of venture capital funds and collective investment
schemes],including mutual funds;

e. promoting and regulating self-regulatory organizations;

f. promoting investors’ education and training of intermediaries of securities markets;

g. prohibiting insider trading in securities;

h. regulating substantial acquisition of shares and take-over of companies in the securities

market;

i. calling for calling for information from, undertaking inspection, conducting inquiries and audits
of the intermediaries and self- regulatory organisations information and record from any bank or
any other authority or board or corporation established or constituted by or under any Central,
State or Provincial Act in respect of any transaction in securities which is under investigation or
inquiry by the Board;

j. performing such functions and exercising such powers under the provisions of the Securities
Contracts (Regulation) Act, 1956 as may be delegated to it by the Central Government;

k. levying fees or other charges for carrying out the purposes of this section;

l. conducting research for the above purposes;

m. calling from or furnishing to any such agencies, as may be specified by the Board, such
information as may be considered necessary by it for the efficient discharge of its functions;

n. Performing such other functions as may be prescribed.

POWERS OF THE SEBI BOARD –

The board has been assigned with following power :

1. Power of Civil court-​ Civil Court under the Code of Civil Procedure Code , 1908 for trying a
suit in respect of following matters :

i. the discovery and production of books of account and other documents, at such place and
such time as may be specified by the Board;

ii. summoning and enforcing the attendance of persons and examining them on oath;

iii. inspection of any books, registers and other documents of any person referred to in section
12, at any place;

iv. inspection of any book, or register, or other document or record of the company ;

v. issuing commissions for the examination of witnesses or documents.

2. Powers to suspend and restrain-​ The Board may, by an order, for reasons to be recorded
in writing, in the interests of investors or securities market, take any of the following measures:

a) suspend the trading of any security in a recognised stock exchange;

b) restrain persons from accessing the securities market and prohibit any person associated
with securities market to buy, sell or deal in securities;

c) suspend any office-bearer of any stock exchange or self- regulatory organisation from holding
such position;

d) impound and retain the proceeds or securities in respect of any transaction which is under
investigation;

3. Powers to regulate or prohibit issue of prospectus, offer document or advertisement

soliciting money for issue of securities-​ The Board may for the protection of investors for:

(i) the matters relating to issue of capital, transfer of securities and other matters incidental
thereto; and

(ii) the manner in which such matters shall be disclosed by the companies.

4. Power to issue directions-​ It may issue such directions-

a. to any person or class of persons referred to in section 12, or associated with the securities
market; or

b. to any company in respect of matters specified in section 11A, as may be appropriate in the
interests of investors in securities and the securities market.

5. Power to Cancel Certificate -

The Board may, by order, suspend or cancel a certificate of registration in such manner as may
be determined by regulations. However as per proviso of this section, no order under this
subsection shall be made unless the person concerned has been given a reasonable
opportunity of being heard.

2.THE SECURITIES CONTRACTS (REGULATION) ACT, 1956-

The securities contract (Regulation) Act is mainly deals with provisions for regulating the
exchanges and to ensure that transactions in stock exchanges are carried out in transparent
and regulated manner. The act gives powers to central Government, however, almost all these
powers have been delegated to SEBI.
Section 22(A​) deals with right of appeal to securities appellate Tribunal against refusal of stock
exchange to list securities of public companies.

section 22(B)​ deals with the procedures of Securities Appellate Tribunal which are equivalent
to that to code of civil procedure, 1908 (5 of 1908) and

section 22f​ deals with appeal can go to High Court.

Objects of the Act-

The object of this legislation could be clearly explained by reference to the decision of the
Supreme Court in Madhubhai Amathlal Gandhi Vs. Union of India.

It was observed that shares were transacted in the stock exchanges in three ways:-

(1) Spot delivery: A contract providing for delivery of securities on payment of a price on the day
of the contract or the next day.

(2) Ready delivery contract: This is a contract for purchase or sale of securities for the
performance of which no time is specified and which is to be performed immediately or within a
reasonable time.

(3) Forward contracts: A contract by which parties agree for their performance at a future date.

Thus, the main object of the SCRA was to regulate speculations in shares on the stock
exchange and also at the same time regulate the stock exchange itself.

The objective of SCRA is to regulate the working of stock exchanges or secondary market with
a view to prevent undesirable transactions or speculation in securities, and thereby to build up a
healthy and strong investment market in which public could invest with confidence.

It empowers the Government of India to recognize and derecognize the stock exchanges, to
stipulate laws and bye-laws for their functioning, and to make the listing of securities on stock
exchanges by public limited companies [PULCOS] mandatory.

It prohibits securities transactions outside the recognized stock exchanges. It is administered by

the Ministry of Finance, Department of Economic Affairs, Government of India. The provision of
segregation of management from trading would ensure sound decision.
3. Competition Law-

The main objective of the Competition Law is to promote economic efficiencies using
competition as one of the means of assisting the creation of market responsive to consumer
preferences.

Competition can be defined as a process wherein cost efficient production is achieved in a

structure having reasonable number of players (producers and consumers) with simple entry
and exit procedures and where exists a close substitution between products of different players
in a given industry.

The three areas of enforcement that are provided for in most competition laws are–
(i) Anti-competitive agreements
(ii) Abuse of dominance, and
(iii) Mergers which have potential for anti-competitive effect.

Need for competition

-The ultimate objective of competition is to secure the interest of the Consumer - it empowers
the consumer and offers best guarantee for consumer protection.
-It is a means of reducing cost and improving quality.
-It also implies an open market where shortages are rapidly eliminated
through the best allocation of resources.
-It accelerates growth and development; preserves economic and
political democracy.

Competition Law in India

The market principles stipulating that enterprises must be prevented from abusing their
dominance in the marketplace is an old one, recognized from the times of the rise of the great
capitalist economies of the West. Along with this realization came laws prohibiting unfair
business practices in order to encourage competition in the interests of the general public as
well as smaller businesses. John D. Rockefeller‘s Standard Oil Co. in the early 1900s and Bill
Gates‘ Microsoft Corp. towards the turn of the millennium are among the famous players whose
activities were questioned and penalized under various laws relating to competition.

India has had its own version of such a law through the Monopolies and Restrictive Trade
Practices Act, 1969 (MRTP Act). But an updated new legislation formulated for the liberalized
and booming Indian economy, the Indian Competition Act was passed in 2002.

While the Act was passed in 2002, it has been put into force in stages. In a significant
development, the government on 15th May, 2009 issued notifications giving effect from 20th
May, 2009 to, among others, the provisions dealing with anti-competitive agreements (section 3)
and abuse of dominance (section 4) in the Act. These sections regulate all types of agreements
which, among other things, deal with production, supply, distribution, storage and control of
goods or services and regulate the abuse of dominance by an enterprise or group.

Sections 5 and 6 (dealing with combination, mergers and acquisitions) came into force from
June 1st 2011 by notification S.O.479(E) dated 4th March 2011.

The Competition Commission of India (CCI) will have the power to initiate cases against
enterprises

(i) where the ―enterprise‖ is involved in anti-competitive agreements; and

(ii) where the ―enterprise‖ is indulging in abusing its/their dominance in the relevant market.

The important components of the Competition Act, 2002 are:

-Anti-competitive agreements
-Abuse of dominance
-Regulation of combinations
-Competition Advocacy

EVOLUTION OF COMPETITION LAW IN INDIA

Competition Law for India was triggered by Articles 38 and 39 of the Constitution of India. These
Articles are a part of the Directive Principles of State Policy.

-That the ownership and control of material resources of the community

are so distributed as best to subserve the common good; and

-That the operation of the economic system does not result in the concentration of wealth and
means of production to common detriment.

Objectives of MRTP Act

The principal objectives sought to be achieved through the MRTP Act were:
(a) Prevention of concentration of economic power to the common detriment;
(b) Control of monopolies;
(c) Prohibition of monopolistic trade practices;
(d) Prohibition of restrictive trade practices;
(e) Prohibition of unfair trade practices.

Prohibition of abuse of dominant position

Abuse of dominant position refers to the market power of an enterprise to exercise leverage
through exploitative and protective business practices. If an enterprise indulges in maneuvers of
imposing unfair or discriminatory pricing and imposes barriers for new entrants into relevant
market, it attracts the penal provisions of the Act. Sec.4 of the Act explicitly prohibits the abuse
of dominant position. There will be an abuse of dominant position, if an enterprise or group acts
in the following manner:

i. Conditioning purchase or sale of goods or service;

ii. Predatory pricing of goods or services;
iii. Restricting production of goods or provision of services or market there for;
iv. Restricting technical or scientific development relating to goods or services to the prejudice of
consumers;
v. Indulging in practice or practices resulting in denial of market access;
vi. Concluding contracts subject to acceptance by other parties of supplementary obligations
which, by their nature or according to commercial usage, have no connection with the subject of
such contracts;
vii. Using its dominant position in one relevant market to enter into, or protect, other relevant
market.