2010 (3) TMI 677 - HC - Companies Law

Direction to the Cochin Stock Exchange to sell the membership card of the first judgment debtor in that exchange and deposit the amount after deducting the dues from that member, to the exchange Held that -The stock exchange has not challenged the decree and has dealt with the matter in such an ignoble manner, to say the least, is unfortunate. But the same will not confer validity to the direction under the decree for sale of the membership card of the first defendant and deposit of the amount before the court to satisfy the decree debt. Such direction in the light of the statutory provisions and interdictions placed thereunder cannot be set at naught and rendered meaningless by a court exercising its jurisdiction irregularly and granting a decree for sale of the card of a member in an exchange. Such a direction issued in the decree passed in a suit is inexecutable. The order passed by the learned Sub-Judge directing for sale of the membership card of the first defendant by the stock exchange is set aside. The decree holder is free to realise the decree debt from the property of the judgment debtors Nos. 1 and 2 in accordance with law and also against their person, if so provided under the decree. Revision is allowed.

Issues:
1. Executability of a court order directing the sale of a membership card by a stock exchange.
2. Whether a membership card in a stock exchange constitutes property of the member.
3. Jurisdiction of a civil court to direct the sale of a membership card in an execution proceeding.

Issue 1: Executability of Court Order
The High Court of Kerala addressed the challenge against an order directing the Cochin Stock Exchange to sell a membership card in execution proceedings from a decree. The decree holder, a bank, sought to realize a debt by selling the membership card of the first defendant in the exchange. The court examined whether the court order directing the sale of the membership card and depositing the proceeds was executable. The court emphasized that only the property of the judgment debtor could be sold in execution.

Issue 2: Membership Card as Property
The court analyzed whether a membership card in a stock exchange is considered the property of the member. Referring to a previous judgment, the court clarified that membership in a stock exchange is a personal privilege and not the member's property. In case of default, the member's rights in the membership card vest with the exchange, making it the exchange's absolute property. The court highlighted that the rules and bye-laws of the exchange govern the handling of sale proceeds from auctioning a defaulter's membership card.

Issue 3: Jurisdiction of Civil Court
The court scrutinized the jurisdiction of a civil court to direct the sale of a membership card in a stock exchange. It noted that the court's decree, in this case, directing the sale of the membership card was without jurisdiction and violated statutory provisions. Despite the stock exchange not challenging the decree, the court emphasized that the direction for sale of the membership card was inexecutable. The court set aside the order directing the sale of the membership card and allowed the decree holder to realize the debt from the property of the judgment debtors in accordance with the law.

In conclusion, the High Court of Kerala held that a membership card in a stock exchange is not the property of the member and cannot be sold in execution proceedings. The court emphasized the importance of statutory provisions and ruled that the direction for sale of the membership card was without jurisdiction, rendering it inexecutable. The court allowed the revision, setting aside the order directing the sale of the membership card and granting the decree holder the right to realize the debt from the judgment debtors' property.

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