Mrs. Asha Anilkumar Kataria vs Ashokkumar s/o Kevalchand Bafna

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2007 Supreme(Bom) 738

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
N.V.Dabholkar, & M.G.Gaikwad, JJ.
Mrs. Asha Anilkumar Kataria -Appellant
versus
Ashokkumar s/o Kevalchand Bafna and other -Respondents
First appeal no.1 11 of 2006
Decided on:13th June 2007
Advocates appeared :
Shri P. V. Mandlik, Senior Counsel i/by Shri K. C. Sant,
Advocate, for appellant-plaintiff Shri P. M. Shah, Senior Counsel, i/by
Shri P.S. Shendurnikar, Advocate, for respondents-Defts.

Headnote:Civil Procedure Code, 1908 - Section 9 - Security and Ex- change Board of India Act, 1992, Sections 20-A and 21 - Securities Contracts (Regulation) Act, 1956, Section 9(2)(k)(n) - Jurisdiction of Civil Court - Suit for recovery of price of shares - Shares purchased and sold to defendants - Objection as to jurisdiction - Trial Court held suit not maintainable in absence of registration certificate under SEBI Act - Plaint rejected by A.D.J. - Challenged - Jurisdiction of Civil Court not barred - As both parties are non-members of Stock Exchange - Impugned order unsustainable - Quashed and set aside. - Arriving at a conclusion that the jurisdiction of the Civil Court is not excluded and more so, because both the parties before Court are non-members of the stock exchange, the impugned order cannot be sustained and hence, the same is quashed and set aside. The trial Court shall proceed with the suit, on merits. Once again, High Court clarify that Court has not dealt with issue of non-maintainability of the suit, because the plaintiff is not a registered sub-broker. Court has also no t dealt with issue, whether the transactions between the parties are void, against public policy and, therefore, right to recover dues thereunder is not enforceable in the Court of law.
Securities Contracts (Regulation) Act, 1956 - Section 9(2)(k) - Recognized stock exchanges - Power of, to make bye-laws - Regulation not governs a contract or transaction between two persons - Persons not being members - Regulation is with regard to contracts between member and member - Member and his constituent - Between a member and a person who is not a member. - The regulation contemplated, is about the contracts between the member and member, member and his constituent and between a member and a person who is not a member. The regulation contemplated does not govern a contract or transaction between two persons both of whom not being members.
In the matter at hands, the defendants, as client, are not members of recognized stock exchange, or SEBI. The plaintiff, as a sub-broker by taking into consideration definition of "sub- broker’ ’ in Rule 2(f) of 1992 rules, is bound to be not a member of stock exchange and the plaintiff is admittedly not a registered sub-broker. The dispute before Court is, therefore, a dispute between the two persons, who are not members of a registered stock exchange.

Judgment (Per: Dabholkar, J.):- Appellant-original Plaintiff, by present appeal, challenges the judgment and order dated 23.12.2005 delivered by 4th Adhoc Additional District Judge, Jalgaon, in Special Civil Suit No.212 of 1999.

By the impugned judgment and order, learned Additional District Judge was pleased to reject the plaint and dispose of suit, by arriving at a conclusion that Civil Court had no jurisdiction to entertain the suit.

Although suit is disposed of by rejection of plaint, since the decree as defined by Section 2(2) of the Code of Civil Procedure, 1908, includes "rejection of plaint", appeal under Section 96 is preferred, challenging the said judgment and order.

2. Special Civil Suit No.212 of 1999 was filed in the court of Civil Judge, Senior Division, Jalgaon, by present appellant for the purpose of recovery of amount of Rs.1,80,19,089.55 along with future interest at the rate of 22% per annum on the basis of averment to following effect;

Plaintiff is the sole proprietor of the proprietary concern KAT STOCKS and her husband Anilkumar Kataria works as General Manager of the said proprietary concern. In fact, the suit is filed through Shri Anilkumar, because he had dealings with defendants and he is fully conversant with the facts of the suit claim.

This is because, he looks after day-to-day transactions of the firm, he takes majority decisions regarding business and executes those. The plaintiff firm is engaged in the business of sub-brokership in the trade of shares, stocks and securities.

Defendant Nos. 1 and 2 are real brothers and sons of Defendant No.3. One Abhaykumar of Madras (Chennai) is common relative of plaintiff and defendants. Defendants were introduced to plaintiff by said Abhaykumar and the defendants claimed to be wizards in stock trading. The plaintiff was impressed by the tall claims then made by defendant Nos. 1 and 2 and accepted them as clients of KAT STOCKS. Defendants started trading in stock business through plaintiff concern.

KAT STOCKS has an office at Jalgaon and also at Bombay and so many times, business talks, personal meetings regarding shares and stocks business between plaintiff and defendants were held at Jalgaon office.

As per the normal practice, all share business, and as requested by defendants Nos. 1 and 2, majority of transactions, were of square-up nature i.e. they were bought and sold in the same settlement period and margin/difference, as the case may be;

would be credited or debited to the account of defendants.

Defendant Nos.1 and 2 always represented that they were well informed persons and that they were the best persons to take decisions as to which securities and shares they should deal and which of the positions of various companies to be kept or sold. The orders were placed by defendant Nos.1 and 2 and received by Anilkumar on telephone. The plaintiff firm has maintained regular, current, mutual and running accounts in the name of defendant no.1, wherein the transactions executed on behalf of defendants were regularly entered on day-to-day basis. The accounts thus reflect the amount due to and from the defendants.

In or around January 1996, the accounts maintained by the plaintiff in respect of defendant No.1 showed huge debit of more than 70,00,000/=. This was informed to Defendant Nos.1 and 2 and a demand was made for payment by defendant nos. 1 and 2. Paragraphs 5 to 9 contain the details as to the efforts made by Shri Anilkumar to recover the amount and as to how defendants No.1 and 2, although initially admitted the liability;

avoided the payment, by making assurances and promises of different nature. In order to show bonafides, defendant No.1 acknowledged the dues and also promised to pay interest at 22% per annum on the outstanding dues, by his letters dated 10.4.1996 and 28.10.1996.

Initially, the transactions were entered into the account of the plaintiff concern, in the name of firm K.Ashokkumar Bafna. In January 1996, defendant Nos.1 and 2 represented Mr.Anilkuma

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