Sejal Rikeen Dalal (Mrs. ) & others vs Stock Exchange, Bombay & another

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1990 Supreme(Bom) 161

IN THE HIGH COURT OF BOMBAY
Mrs. Sujata Manohar, J.
Sejal Rikeen Dalal (Mrs.) others.... Petitioners.
Versus
Stock Exchange, Bombay another.... Respondents.
Writ Petition No. 2084 of 1989, decided on 12-4-1990.
Advocates appeared :
D.R. Dhanuka with K.J. Presswalla, S.K. Wadia and D.J. Kakalia i/b Mulla and Mulla and Craigie Blunt and Caroe, for petitioners.
K.K. Singhvi with S.M. Zhunjhunwala and S.D. Vyas, for respondent No. 1.
A.R. Shinde, for respondent No. 2.

Headnote:Article 31 (1)-Property-Meaning of-Whether there is any property in the membership of the Stock Exchange Under Rule 5 relating to membership of the Stock Exchange, membership shall constitute personal permission from Exchange to exercise rights and privileges attached thereto subject to Rules, Byelaws and Regulations of Exchange-Membership is not transferable right Held-Thus there is no property in membership
       In order to decide whether there is any property in the membership of the Stock Exchange, it is necessary to refer to Rules relating to membership of the stock exchange. Under Rule 5, the membership shall constitute a personal permission from the Exchange to exercise the rights and privileges attached thereto subject to the Rules. Bye laws and Regulations of the Exchange the membership, therefore, is not a transferable right. It is only a personal permission granted by the Stock Exchange to an individual member this is brought out further by Rule 6 which States that the right of membership is inalienable. The membership rules give to a member a right of nomination which shall be personal and non-transferable. This right under Rule II can be exercised by a member of not less than 7 years standing who desires to resign. He may in turn nominate a member as set out in Rule II. In the case of a deceased member, under Rule 9, on his death, his right of nomination ceases and vests in the Exchange There is, therefore, no property in membership.
       Article 226-Any person or authority-Whether stock-Exchange is amenable to High Courts jurisdiction.
       Held-The stock Exchange is a statutory body and the Central Government is vested with supervisory powers under the said act over the functioning of the Stock Exchange the Stock Exchange is, Inter alia, established to assist, regulate and control dealing in securities and to ensure fair dealings. These are objects of public Interest. Therefore looking to the wide interpretation given to Art 226 of the Constitution, the Stuck Exchange can be considered as amenable to the jurisdiction of the High Court under Article 226 of the Constitution.
       Article 226-Mainlainability of writ petition-Scope of Article 226 is wide -It may cover even any person or body performing public duty.
       It is contended by the Stock Exchange, Bombay, who is the 1st respondent, that it is not an "authority" within the meaning of Article 226 of the Constitution of India. Hence a writ does not lie against it. The Supreme Court, however, has construed Article 226 very widely to include within the ambit of Article 226 not merely statutory authorities and instrumentalities of the State, but to cover any other person or body performing a public duty.
       SECURITIES CONTRACTS (REGULATION) ACT, 1956.
       Rules of Stock Exchange, Rules 4, 5, 6, 9 11 (b) and 28-Membersblp of Stock Exchange-It Is personal right and not propriety-Legal representative of deceased member can not secure automatically membership.

JUDGMENT - Mrs. SUJATA MANOHAR, J.:---Pradip Harkishondas Dalal was a member of the Stock Exchange, Bombay. He died in an Air Crash at Ahmedabad on 19th October, 1988. The 1st petitioner Sejal Dalal is the daughter in law of Pradip. The 3rd petitioner is the widow of Pradip. Petitioner No. 2 is the son of Pradip and petitioner No. 4 is the daughter of Pradip. 1st petitioner Sejal is the wife of the 2nd petitioner. On 6th December, 1988 petitioners Nos. 2 to 4 as the heirs and close relatives of Pradip nominated the 1st petitioner Sejal for being made a member of the Stock Exchange, Bombay. Accordingly on 15th December, 1988 the 1st petitioner applied for membership of the Stock Exchange, Bombay supported by this nomination. Her application was seconded by two members of the Stock Exchange as per requisite rules. On 2nd March, 1989 the Stock Exchange addressed a letter to petitioner No. 1 enquiring whether late Pradip Harkisondas Dalal had made any payment in respect of the outstanding liabilities of M/s. Harkisondas Laxmidas. The letter also sought details regarding the constitution of the firm of M/s. Harakshah which was a client of M/s. Harkisondas Laxmidas and whether dues were required to be paid by M/s. Harakshah to M/s. Harkisondas Laxmidas

2. It seems that M/s. Harkisondas Laxmidas was a firm of long standing. The operation of this firm, however, from the beginning of 1970 had become highly speculative. Speculative dealings were being conducted in the name of another firm M/s. Harakshah Co. which is said to have been promoted by the firm of M/s. Harkisondas Laxmidas. Originally in the firm of M/s. Harkisondas Laxmidas there were two partners Harkisondas Laxmidas (father of Pradip) and his brother Manharkant Laxmidas. After the death of harkisondas Laxmidas in 1957 or thereabouts the son of Harkisondas, Mukul Harkisondas who is the brother of Pradip, became a partner along with Manharkant Laxmidas. In the firm of M/s. Harakshah Co. the wives of Mukul Harkisondas, late Pradip, Manharkant Harkisondas, Chandrakant Harkisondas and the wife of late Harkisondas Laxmidas were the partners, each having an 18% share; the remaining 10% share belonged to Shantilal Kothari. The firm of M/s. Harakshah Co. was established in the year 1972 or thereabout.

3. It is the case of the respondents that although Pradip Harkisondas was not a partner in the firm of M/s Harkisondas Laxmidas, he held himself out as a partner of that firm. Manharkant Laxmidas died and on his death the firm of Harkisondas Laxmidas was dissolved in the month of October 1982. At the date of closure it was found that the firm was required to pay the claims of about 90 members of the Stock Exchange amounting to Rs. 32,34,900/-. It seems that there are a number of arbitration references against the firm of M/s Harkisondas Laxmidas by various customers and constituents of the firm. The total claim in these arbitration references aggregated to over Rs. 1 crore in one of the references the heirs of late Pradip are also made parties on the footing that Pradip held himself out as a partner of M/s. Harkisondas Laxmidas. It is the case of the 1st respondent that the speculative business which was the bulk of the business of M/s. Harkisondas Laxmidas was conducted in the name of M/s. Harakshah Co.; and M/s. Harakshah Co. owes a substantial amount to the firm of M/s. Harkisondas Laxmidas.

4. The Stock Exchange also received a letter dated 2nd March, 1989 from Mukul Harkisondas stating that he had filed a suit against Pradip Harkisondas being Suit No. 3384 of 1985 claiming a sum of Rs. 14 lacs from him in respect of certain business dealings between the firm of Harkisondas Laxmidas and Pradip harkisondas. He objected, in this letter, to the application of the 1st petitioner for grant of transfer of membership of Pradip Harkisondas to her at the instance of the heirs and legal representatives of Pradip Harkisondas.

5. The Stock Exchange forwarded a copy of this letter dated 2

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