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CASE NO.: Appeal (civil) 41  of  1994

PETITIONER: M/S. SAMANT AND ANOTHER

       Vs.

RESPONDENT: BOMBAY STOCK EXCHANGE & ORS.

DATE OF JUDGMENT:       27/04/2001

BENCH: S. Rajendra Babu & Shivaraj V. Patil

JUDGMENT:

SHIVARAJ  V. PATIL  J. L...I...T.......T.......T.......T.......T.......T.......T..J

   In  this  appeal,  the appellants  have  questioned  the validity and correctness of the order dated 14.1.1991 passed by  the  High Court of Bombay in Writ Petition No.  3201  of 1990, dismissing the same.

   The  first  appellant is a partnership firm carrying  on business as share and stock brokers and the second appellant is a partner of the said firm.  They filed the writ petition in  the High Court challenging the action of the  respondent no.   1  declaring  the  appellants  as  defaulters  by  its resolution  / notice dated 25.3.1987 and to re-admit them as member.  Before the High Court mainly two grounds were urged -  (i) that the decision of the respondent no.  1  declaring the  appellants as defaulters was in violation of the  rules of   natural   justice   as   a   copy   of   the   impugned Resolution/Notice dated 25.3.1987 was not furnished nor they were  given  hearing  before taking  decision;   (2)  having regard  to  the unblemished track record of the  appellants, the  decision to declare them as defaulters was illegal  and unjustified besides being contrary to the conditions set out in  bye-law 316.  An incidental grievance of the  appellants was  that  their application for re-admission as member  was rejected contrary to the provisions contained in Rules 60 to 63.     The   respondent   no.     1   filed   a    detailed counter-affidavit  resisting  the claims of the  appellants. The  High Court after considering the respective contentions of  the parties and referring to the rules and bye- laws  of the Stock Exchange dismissed the writ petition on the ground of delay and laches by the impugned judgment and order.

   The  learned Senior Counsel for the appellants contended that  the  order declaring the appellants as  defaulters  is unsustainable  as  it  was passed in violation of  rules  of natural  justice  inasmuch  as no opportunity was  given  to explain  the  show  cause;  no reasons are recorded  in  the order  and that the Report of the Enquiry Committee was  not given.   According to him, the decision of respondent no.  1 declaring  the  appellants as defaulters was  arbitrary  and

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that  there was malice on the part of the Executive Director of  respondent no.  1.  It was further urged that in a  case like this where the impugned action of the respondent no.  1 was void, the High Court was not justified in dismissing the writ petition on the ground of delay and laches.

   The  leaned  Senior  Counsel for  the  respondents  made submissions  supporting  the  impugned judgment  and  order. From  the  records, they pointed out that all was  not  well with  the  appellants;   having  regard  to  the  facts  and circumstances  of the case it cannot be said that principles of  natural  justice  were  violated in  passing  the  order declaring   the  appellants  as   defaulters;    after   the appellants  were declared as defaulters, the membership  was auctioned  and  third party rights have come in  long  back; the High Court was justified in dismissing the writ petition on the ground of delay and laches;  according to them, there was  no  violation of any rule or bye-law in  taking  action against the appellants.

   We  have considered the rival submissions.  We  consider it  necessary to notice few facts and events which gave rise to  taking action against the appellants and the  subsequent developments.

   In  the counter affidavit filed by one Amritlal  Jashraj Shah,  the  Secretary  of the first respondent in  the  writ petition,  it  is stated that some time prior to  11.2.1986, the  appellants had fraudulently withdrawn from the clearing house  of  the  first respondent Rs.  7.30 lakhs  which  was admitted  before the Governing Board at the meeting held  on 11.2.1986;   for this a fine of Rs.  1,00,000/- was  imposed on  the  appellants  and  they  were  suspended  from  Stock Exchange;    a  writ  petition   filed  by  the   appellants challenging  the  same was dismissed;  so also  the  appeal. The  appellants  were  in financial difficulties  some  time prior  to  December,  1986 and hence  they  suspended  their business   as  per  their   letters  dated  23.12.1986   and 26.12.1986;   since certain complaints were received against the  appellants, a committee of three members was formed  by the  Governing Board of the respondent no.  1 to investigate into  the  affairs of the appellants and intimation  thereof was  given  to  them by letter dated  26.2.1987.   The  said committee examined the books of accounts and other documents of  the  appellants which were found incomplete and  not  in proper  form;  the committee obtained oral clarification and explanation  from  them and thereafter submitted its  report dated  19.3.1987.  Considering the report of the  Committee, the  Governing  Board  in  its  meeting  held  on  20.3.1987 authorised  the President and the Executive Director of  the Stock  Exchange  to  take  such action  as  was  deemed  fit including  declaring  the  appellants  as  defaulters.   The Governing Board of the respondent no.  1 in its meeting held on  25.3.1987  declared  the appellants  as  defaulters.   A notice  intimating  the said declaration was affixed on  the notice  board  of the respondent no.  1 as required  by  the rules  and  bye-laws.  The appellants by their letter  dated 31.3.1987 requested for revocation of the decision declaring the  appellants as defaulters;  the same was rejected by the Governing  Board  on 9.4.1987.  Pursuant to  the  resolution dated  31.1.1989,  offers  were  invited  for  sale  of  the membership   right   which  was   originally  held  by   the appellants.   By a resolution dated 21.4.1989, the offer  of one  Vijay  C.  Shah was accepted for Rs.  16,63,000/-.   On 29.1.1990,  Vijay C.  Shah was elected as a member.  In  the

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meanwhile   the   appellants    made   representations   and correspondence  between  15.4.1989  to   14.6.1990  to   the Government  of  India  and   other  authorities.   The  writ petition  was filed by the appellants in the High Court only on 26.10.1990.

   From  the  letter  of the  appellants  dated  23.12.1986 addressed  to the Secretary of the respondent no.  1, it  is clear  that  they stopped trading on the Stock Exchange  for the  time  being  from 4.1.1987 till  further  notice.   The appellants  addressed  a  letter   dated  31.3.1987  to  the President  of  the Governing Board of the respondent no.   1 stating  that  they were victims of circumstances  as  their clients  who had to pay to the tune of Rs.  1,25,00,000/- in respect  of transactions in shares effected by them  through the Stock Exchange have not paid the said amount.  In para 4 of the said letter, it is stated thus:-

   We  are  highly  obliged  to  the  authorities  of  the Exchange  for  the  cooperation  extended   to  us  in   the circumstances  in which we are put for no fault of ours  and more   particularly  to  the   Executive  Director  and  the President of our Exchange.

   It  may  be  noted that in the very first para  of  this letter,  the appellants have acknowledged the receipt of the notice  dated  25.3.1987  intimating   that  they  had  been declared  as  defaulters.  In the said letter they had  also sought  for reconsideration and / or review of the  decision to  withdraw the decision declaring them as defaulters.  The same was rejected on 9.4.1987.

   In the light of the averments made in the writ petition, counter  affidavit filed on behalf of the respondent no.   1 and  looking  to  the correspondence, it is clear  that  the appellants  were aware of their being declared as defaulters in  the  month of March, 1987 itself.  The same  is  evident even  from  the  first paragraph of their own  letter  dated 31.3.1987.   They  chose  to  file  writ  petition  only  on 26.10.1990.   No doubt in the meantime they had made several representations  to  various authorities.  The plea  of  the appellants  for  revocation of the action declaring them  as defaulters  was  rejected on 9.4.1987.  A  notice  declaring them  as  defaulters had been affixed on the  notice  board. Prior  to  27.3.1987 they had surrendered their office  Room No.   209,  Second  Floor,  Jeejeebhoy Tower  to  the  Stock Exchange  to  enable it to pay off their dues to  the  Stock Exchange,  if  any,  to  the member  brokers  for  defective deliveries  of shares, to the clearing house and also to the erstwhile clients.  In the circumstances, the High Court was justified  in dismissing the writ petition on the ground  of delay and laches particularly so when rights were created in favour  of  third  party namely, Vijay C.  Shah  by  selling membership  as  early  as  on   29.1.1990  pursuant  to  the resolution dated 21.4.1989.  The appellants did not take any effective  steps either to get the stay of the operation  of the  notice dated 25.3.1987 declaring them as defaulters and similarly  they  did  not take steps to pursue  to  get  any interim  order  to stop sale of membership.  Merely  because the  appellants  went  on   making  representations  to  the authorities who could not grant them any relief or that they were   not  sure  about  the   legal  position  as  to   the maintainability  of writ petition against the respondent no. 1, in our view, are not the grounds to justify the delay and

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laches  on  the  part of the appellants in filing  the  writ petition.  Nothing prevented them to take such course as was available  to  them  in law without any loss of  time.   The ground of malice urged against the Executive Director of the respondent  no.   1  cannot  be   accepted.   There  are  no sufficient  details and particulars to say how the Executive Director  had any malice against the appellants.  A list  of defaulters  against  whom  similar action was taken  by  the respondent  no.   1  was also placed before  us  during  the course of hearing.  It was also submitted that in respect of one  or  two members, action could not be taken  because  of interim orders issued by court but after interim orders were vacated,  action  was  taken against them  also.   Thus  the appellants  were not discriminated.  Further in their letter dated  31.3.1987  they  had  stated that  they  were  highly obliged  to  the  authorities  of   the  Exchange  for   the co-operation  extended  to  them  and  particularly  to  the Executive  Director.  Hence it is not possible to accept the allegation  of malice made against the Executive Director of respondent  no.   1.   The contention that the  decision  of declaring the appellants as defaulters being void ab initio, the  writ  petition  ought not have been  dismissed  on  the ground  of delay and laches, cannot be accepted.  It is  not the case of the appellants that the respondent no.  1 had no authority  to  declare  them  as  defaulters  in  the  given circumstances.   They were intimated about the  constitution of  Enquiry  Committee about the alleged irregularities  and failure  of the appellants in fulfilling their engagements / commitments.   The financial difficulties and the  inability to  discharge  their  obligations  in  making  payments   is admitted  by the appellants themselves and the Report of the Enquiry  Committee is no different.  No particular provision was  shown to us by which it could be said that the decision taken  by the respondent no.  1 declaring them as defaulters was  one taken contrary to law or without complying with any mandatory requirements prima facie.  Be that as it may, that even  after  coming  to  know of the  fact  that  they  were declared  as  defaulters at least as early as on  31.3.1987, they filed writ petition only on 26.10.1990.  The High Court having  referred to the relevant bye-laws and rules  noticed that after the appellants were declared as defaulters, their membership  vested  in  the  respondent   no.   1  and   the respondent  no.   1 had every right to sell the  same.   The High  Court  also noticed that the appellants did  not  make application for re-admission within the time and that in the meanwhile  the  rights were created in the third party.   In these  circumstances, the High Court has dismissed the  writ petition  on  the  ground of delay and laches  and  we  find justification for such dismissal of the writ petition on the ground  of  delay  and laches in the light of  facts  stated above.   Hence, we do not think it necessary to go into  the merits  of other contentions raised that too at this  length of time.

   Thus,  finding  no merit in the appeal, it is  dismissed but with no order as to costs.