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Lalbhai Fulchand Vs. the Ahmedabad Share and Stock Brokers' Association (20.08.1942 - BOMHC) - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtMumbai
Decided On
Case NumberSecond Appeal No. 253 of 1942
Judge
Reported inAIR1943Bom180; (1943)45BOMLR226
AppellantLalbhai Fulchand
RespondentThe Ahmedabad Share and Stock Brokers' Association
DispositionAppeal dismissed
Excerpt:
ahmedabad share and stock brokers' association rules, rule 117(b)-construction of rule-transactions between a member as constituent and another member-jurisdiction of board of association to decide disputes.;rule 117(6) of the rules made by the ahmedabad share and stock. brokers' association which provides that 'the board may order a member who fails to meet an obligation to a member or non-member arising out of a stock exchange transaction to be declared a defaulter', means that if the board find an obligation binding on a member, whether to another member or to a non-member, arising out of a stock exchange transaction, then they can act on the rule. there is nothing in the rule to show that the member must have incurred the obligation as a broker. failure by a constituent to carry out..........in this way. the plaintiff and defendant no. 16 are both members of the ahmedabad share and stock brokers' association which is sued as defendant no. 1 and which i will refer to as 'the association.' defendants nos. 2 to 15 are said to be officers of the association and defendant no. 3 is described as 'amratlal dalsukhbhai haji,' and he is, we are told, the same person as defendant no. 16 who is described as 'amratlal dalsukhbhai'. it is irregular to sue the same person twice over, and if he is sued twice over, it is desirable to sue him in the same name. his name had better be struck out as defendant no. 16. he is sufficiently before the court in his capacity as defendant no. 3, and i will refer to him hereafter, for brevity's sake, as 'the defendant.'3. the plaintiff and the defendant.....
Judgment:

John Beaumont, Kt., C.J.

1. This is an appeal from a decision of the District Judge of Ahmedabad upholding a decision of the fourth Joint Subordinate Judge, Ahmedabad.

2. The case arises in this way. The plaintiff and defendant No. 16 are both members of the Ahmedabad Share and Stock Brokers' Association which is sued as defendant No. 1 and which I will refer to as 'the Association.' Defendants Nos. 2 to 15 are said to be officers of the Association and defendant No. 3 is described as 'Amratlal Dalsukhbhai Haji,' and he is, we are told, the same person as defendant No. 16 who is described as 'Amratlal Dalsukhbhai'. It is irregular to sue the same person twice over, and if he is sued twice over, it is desirable to sue him in the same name. His name had better be struck out as defendant No. 16. He is sufficiently before the Court in his capacity as defendant No. 3, and I will refer to him hereafter, for brevity's sake, as 'the defendant.'

3. The plaintiff and the defendant are, and at all material times were, both members of the Association, and they had dealings with one another in certain shares, and it is admitted in this Court that the plaintiff was dealing with the defendant as a constituent, and that their relations were not those of broker and broker. As a result of the transactions for the sale and purchase of shares the defendant claimed that the plaintiff owed him a substantial sum of money, and on August 14, 1939, he wrote to the Honorary Secretary of the Association saying that the plaintiff had not paid him Rs. 34,435 for valan of August delivery, and asking the Association to recover the money. The matter seems to have been referred to the Defaulters' Committee, but inasmuch as the plaintiff was not a defaulter, the Committee, on August 16, decided to refer the matter to the Governing Board. On August 17, the matter came before the Governing Board, and it is noted in the minutes that both parties, that is the plaintiff and the defendant, stated that the Board should decide the matter. Thereupon the Board referred the matter to a Sub-Committee. On August 20, the Sub-Committee went into the matter and came to the conclusion that the defendant's claim for Rs. 34,435 appeared to be genuine, and expressed the view that the plaintiff should immediately pay up that amount, and they so reported to the Governing Board. The plaintiff, having presumably got to hear of that report, wrote a letter on the same day, namely August 20, to the President and Directors of the Association saying that the Association had no power to determine the matter, although he had previously agreed to the Board doing so. The Governing Board on August 21 considered the report of the Sub-Committee, and resolved that the report be adopted, and that the plaintiff within fifteen days should pay to the defendant a sum of Rs. 34,435. As soon as the plaintiff was informed of that resolution, he started this suit asking for a declaration that the resolution of August 21 passed by the Governing Board of the Association is illegal, ultra vires, and not binding, and for an injunction restraining the Association from taking any steps affecting his rights as a member of the Association pursuant to that resolution. The suit is in the nature of a quia timet suit, the plaintiff being afraid that the Association may take action against him, but up to the moment thep to the moment the Association has not taken any action against him. I understand that an interim injunction was granted so as to maintain the Status quo.

4. The Association is governed by certain rules, and, no doubt, most of the rules deal with transactions between members as brokers, and with the conduct of members as brokers. Where one member deals with another member as broker and broker, the transactions between them have to be settled through the Clearing House on the settlement day, and there are rules regulating such matters. It is admitted however in this case, as I have already said, that the plaintiff was not dealing as a broker; he was dealing as a constituent, and his case is that that being so, none of the rules affect him in his capacity as constituent, and that the Board cannot take any action against him. The Board have intimated that they think that the case falls within Rule 117(b), and it was under that rule that they decided to go into the matter.

5. Rule 117(A) provides :

A member unable to fulfil his engagements shall be publicly declared a Defaulter by the Honorary Secretary in consultation with the President and thereby ceases to be a Member.

6. Rule 117(6) says :

The Board may order a Member who fails to meet an obligation to a Member or Non-Member arising out of a Stock Exchange transaction to be declared a Defaulter.

Both the lower Courts held that the Governing Board were entitled to deal with the matter under Rule 117(6), and that, therefore, the plaintiff's suit failed, and no injunction should be granted.

7. It is argued in this Court that all the rules are confined to conduct and transactions of members as such, and various authorities have been cited, including the old case of Morrison v. Glover (1849) 4 Ex. 430 which has been frequently followed. In that case there was a rule that matters in dispute between the Society and any member were to be referred to arbitration, and the Court held that that rule only applied to matters in dispute between the Society and the member as such. The ratio decidendi is expressed by the Court in these words (p. 444) :-

On consideration we are of opinion, that if any other rule be established than this, that matters in difference between the Society and its members, in the character of members, can alone be referred to arbitration; if we go one step beyond that, then extraneous matters of any kind, which may happen to be in dispute between the Society and any of its members, ought to be the subject of a reference.

Now, it seems to me that that reasoning might well apply to a matter falling within Rule 117(a), where the language is very wide : 'A member unable to fulfil his engagements....' I think it might well be said that 'engagements' must mean engagements as a member, because, otherwise any contract which a member was unable to fulfil would bring into operation the rule, and that can hardly have been intended. But it seems to me that reasoning of that nature cannot apply to a case falling within Rule 117(6), where the language is carefully guarded : 'The Board may order a member who fails to meet an obligation to a member or non-member arising out of a Stock Exchange transaction to be declared a Defaulter.' If the Board find an obligation binding on a member, whether to another member or to a non-member, arising out of a Stock Exchange transaction, then they can act on the rule. There is nothing whatever in the rule to show that the member must have incurred the obligation as a broker. Failure by a constituent to carry out his obligations to a broker arising from Stock Exchange transactions is conduct very detrimental to the broker, and, if the constituent happens to be a member, and therefore amenable to the Board, one would expect the Board to have power to deal with him. I see no reason for not giving to the language of Rule 117(6) its natural meaning. Where the obligation is not admitted, and is not the subject of a decision of a Court, the Board, no doubt, have to run the risk of their finding that an obligation exists being subsequently challenged; and Mr. Patel for the appellant has sought to challenge the finding in this case. But that course is clearly not open to him in second appeal. Both the lower Courts have noted that the plaintiff agreed to the Board determining the matter, and in so far as that is a finding of fact, it is binding upon us. In any case, even if the plaintiff had not agreed to refer the matter to the Board, and to be bound by their decision, the Board have come to the conclusion that there is an obligation, and there is no evidence before us to justify us in saying that that conclusion was wrong. That being so, in my judgment, the Board are entitled, if they so chose, to act under Rule 117 (b), and the plaintiff has failed to establish his right to an injunction to restrain them from so doing, or to a declaration that the resolution of August 21 is ultra vires.

8. In my opinion the lower Courts were right in holding that the plaintiff's suit failed.

9. Other rules have been referred to, but as I am satisfied that the case falls within Rule 117 (b), it is unnecessary to consider them.

10. The appeal fails, and must be dismissed with costs.

11. Rules in Civil Application No. 368 of 1942 discharged with costs.

12. There will be only one set of costs.

Wassoodew, J.

13. I agree.


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