The written order of a high court division bench comprising justice Ashok Agarwal and Justice SS Parkar states that the Sebi order barring 18 brokers from undertaking fresh business till the pendency of the inquiry proceedings is "fully justified". Some of the Sebi-indicted brokers had approached the court last month challenging the regulator's order. The court had, in its oral order, turned down the request for an interim relief but admitted the petition.

The 41-page judgment available with The Financial Express has dealt in detail Sebi's powers under section 11 (B). The bench has, however, issued notices to the attorney general of India on the point raised by the brokers that section 11 and 11B are "ultra vires".

On the specificcase, the bench has held that the express grant of statutory power conferred by section 11 (B) carries the authority to use reasonable means to make such powers effective.

"If one has regard to the aforesaid principles, it would follow that the power which has been conferred by section 11B to issue direction are of a widest possible amplitude and are exercisable in the interests of investors and in order to prevent inter-alia a broker from conducting his business in a manner detrimental to the interests of the investors or the securities market. The said power to issue directions under section 11 (B) must carry with it, by necessary implication, all powers and duties incidental and necessary to make the exercise of these powers fully effective, including the power to pass interim orders in aid of the final orders", states the order.

It adds:"The provision of section 11 (B), it is to be noted, has been introduced by an amendment brought about in 1995 and the same seeks to confer additional power on theboard, by way of interim measures, pending inquiry. The same is intended for the protection of the interests of the investors and the securities markets".

The order further states:"Section 11 (B) of the Sebi Act is an enabling provision enacted to empower Sebi to protect the interest of investors and to promote the development of and to regulate the securities market and to prevent manipulations inter-alia by brokers. Such an enabling provision must be construed so as to subserve the purpose for which it is enacted. It would be the duty of the court to further the legislative object of providing a remedy for mischief. A construction which advances this object should be preferred rather than one which attempts to find a way to circumvent it".

The bench has drawn references to the Supreme Court rulings in cases like the Reserve Bank of India vs Peerless General Finance and Investment Company, Ramarao vs Lokayukta and others and Income Tax officer, Cannanore vs MK Mohammed Kunhi.

In the latter of thesecases, the Supreme Court had observed that "It is a firmly established rule that an express grant of statutory power carries with it by necessary implication the authority to use all reasonable means to make such grant effective".

The bench has also observed that in its prima facie view the Sebi order cannot be said to have passed under section 12 (which deals with registration of brokers) as contended and has instead been passed under section 11B.

The brokers had contended that the Sebi order had stopped their entire business, and was thus an order virtually passed under section 12, which could be done only after according the petitioners a reasonable opportunity of being heard.

The bench has, however, observed that the order is under section 11 (B) as it is in the nature of a direction restraining the petitioners from carrying on their business of dealing in shares.

"The same has been passed pending the inquiry into the manipulations. The same has been passed in the interests of investors and in theinterest of the securities market," the order states.