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2006 DIGILAW 2643 (RAJ)

Suneel Dutt Goyal v. The SEBI

2006-09-05

SHIV KUMAR SHARMA

body2006
Judgment Shiv Kumar Sharma, J.-The prayer of the petitioner in instant writ petition is as under: (a) The stock exchange be directed to first decide the claims of the petitioner and the SEBI to regulate and supervise its disposal is accordance with law. (b) Prior to final disposal of 16-annas claims of the petitioner no auction to the membership of Mahesh Kumar Gupta (Respondent No. 3) be allowed to the stock exchange. (c) The role of SEBI and its nominees in the whole affair leading to the proposed auctioning of the membership card of Mahesh Kumar Gupta (Respondent No. 3) be directed to be investigated by CBI. (d) Theentire matter leading to declaration as defaulter to Mahesh Kumar Gupta (Respondent No. 3) by the defaulter committee be quashed”. 2. Contextual facts depict that the petitioner is a member of stock exchange Jaipur (Respondent No. 2) since 1989. Respondent No. 2 is a body corporate, incorporated with the Registrar of Companies Rajasthan Jaipur and has about 500 members. Mahesh Kumar Gupta (Respondent No. 3) was dealing with the petitioner and ultimately a sum of about Rs. 4.7 lakhs was to be received from Respondent No. 3 by the petitioner. 3. SEBI was formulated in the year 1992 and a status of regulating body was conferred upon it by virtue of the Securities and Exchange Board of India Act, 1992. Over all 22 recognised stock exchanges through out India are being controlled and governed by SEBI. The Central Government holds appellate jurisdiction as well as supervisory status over SEBI. The terms of enrollment of members laid down by Central Government were accepted by the Stock Exchange and announced for public knowledge through press advertisement dated 28.01.1989. One of the condition of enrollment of members of Jaipur Stock Exchange was that membership of Jaipur Stock Exchange (for short ‘JSE’) was not transferable. 4. It is averred in the writ petition that the arbitrary, inflated and bogus claims to the tune of Rs. 20 lakhs had been included against the claims of Respondent No. 3 and the defaulter Committee of JSE declared Respondent No. 3 as defaulter and made attempt to auction the membership. The attempt was not only illegal but jeopardized the very fundamental rights to trade of the petitioner. 5. 20 lakhs had been included against the claims of Respondent No. 3 and the defaulter Committee of JSE declared Respondent No. 3 as defaulter and made attempt to auction the membership. The attempt was not only illegal but jeopardized the very fundamental rights to trade of the petitioner. 5. The Respondent No. 2 JSE filed reply to writ petition raising preliminary objection that the dispute between petitioner and Mahesh Kumar Gupta (Respondent No. 3) pertains to their mutual and contractual dealings which are not within the purview of Bye-law No. 335 of JSE. The petitioner himself vide letter dated 21.03.1995 stated that alleged outstanding amount Rs. 4,65,624.50/-was due on account of difference dealings which Mr. Mahesh Kumar Gupta accepted and agreed to pay him vide agreement dated 22.08.1994. As such the alleged claim is of contractual nature and which does not fall within the purview of writ jurisdiction. 6. I have heard rival submissions and scanned the material on record as well as the case law cited by learned Counsel for parties. 7. In Vinay Bubna vs. Stock Exchange Mumbai, 1999 (6) SCC 215 , it was indicated by their Lordships of the Supreme Court that once a defaulting members ceases to be a member of the stock exchange on interest in his card remains and it cannot be regarded as his asset. 8. In Stock Exchange Ahmedabad vs. Assistant Commissioner of Income-Tax, 2001 Vol 105 Company Cases 76, Three Judge Bench of Hon’ble Supreme Court propounded as under :-“The stock exchange rules, bye-laws and regulations have been approved by the Government of India under the Securities Contracts (Regulation) Act, 1956. There is no challenge to these rules. The question whether right of membership confers upon the member any right of property is, therefore, to be examined within the framework of the rules, bye-laws and regulations of the exchange. On a plain and combined reading of the rules, it is clear that the right of membership is merely a personal privilege granted to a member, it is non transferable and incapable of alienation by the member or his legal representatives and heirs except to the limited extent as provided in the rules on fulfillment of conditions provided therein”. 9. In State of U.P. vs. Bridge & Roof Co. 9. In State of U.P. vs. Bridge & Roof Co. (India) Ltd., 1996 (6) Supreme 586 , it was held that any dispute relating to interpretation of the terms and conditions of such a Contract cannot be agitated, and could not have been agitated, in a writ petition. 10. Coming to the facts of the instant case I find that since the petitioner has not sought to enforce any statutory rights or obligation caste upon the respondents, the very remedy adopted by the petitioner, in my opinion, is misconceived. Whether any amount is due to respondents from the petitioner and whether refund or refusal to pay the amount by the respondent is justified or not, are the matters which cannot be agitated in or adjudicated upon in a writ petition. The question whether right of membership confers upon the member any right of property, is to be examined within the framework of the rules, buy-laws and regulations of the Exchange. The right of membership is merely a personal privilege granted to a member. It is neither transferable nor capable of alienation by the member except to the limited extent as provided in the rules on fulfillment of conditions provided therein. 11. In Bombay Stock Exchange vs. Jaya L. Shah, 2004 (1) SCC 160 , on which reliance is placed by the petitioner, it was observed that there does not exist any distinction between a member and non-member in terms of Rule 16 and in the event the amount of the card money available in the hands of the Exchange is not sufficient to satisfy all the claims, the same has to be distributed on a pro rata basis. The ratio indicated in this case is not of any help of the petitioner since the claim of the petitioner is of contractual nature and it does not fall within the purview of writ jurisdiction. 12. For these reasons, the writ petition being devoid of merits stands dismissed without any order as to costs.