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2003 (10) TMI 659 - SC - SEBISurplus amount available from securities deposited by the defaulter - Right of a third party to realise his due out of the corpus of the Defaulters Committee - contract for or relating to purchase or sale of securities - HELD THAT - Unfortunately before the High Court it has not been disclosed that any date has been prescribed in terms of cl. 7 of Bye-law 343. In its first affidavit the exchange has categorically stated that they had enough surplus at its hands wherefrom the claim of the respondents could be satisfied. It however as noticed hereinabove filed an additional affidavit as also a further affidavit taking a different stand. As indicated hereinbefore before us as also a statement has been filed for the purpose of showing that there exists a shortfall of 70 lakhs. We are of the opinion that the matter be considered afresh by the learned Single Judge of the High Court. The High Court is requested to consider the claims of the respondents in the light of the observations made hereinbefore as also upon directing the Exchange to file a fresh statement of accounts if it is found neat and proper. In the event any doubt or dispute arises the High Court would be entitled to appoint a competent person as CIT to go into the said accounts and submit a report to it at the cost of the Exchange However if it is found that the Governing Board has not specified any date in terms of cl. 7 of Bye-law 343 it shall issue such direction/directions as it may deem fit and appropriate for doing complete justice not only to the respondents but also to the other creditors similarly situated. In view of the fact that the respondents herein had obtained a decree in her favour as bank as on 15th Feb. 1994 we would request the High Court to consider the desirability of disposing of the matter as expeditiously as possible preferably within four months from the date of this order. This appeal is disposed of on the above terms with no order as to costs.
Issues Involved:
1. Interpretation of the Securities Contract (Regulation) Act, 1956 vis-a-vis rules, bye-laws, and regulations. 2. Right of a third party to realize dues from the corpus of the Defaulters' Committee. 3. Validity and enforcement of arbitration awards and decrees. 4. Distribution of assets of a defaulting member of the Bombay Stock Exchange. Summary: 1. Interpretation of the Securities Contract (Regulation) Act, 1956: The main issue in this appeal is the interpretation of the Securities Contract (Regulation) Act, 1956 (the Act) concerning the rules, bye-laws, and regulations framed thereunder, particularly regarding the right of a third party to realize dues from the corpus of the Defaulters' Committee. The Bombay Stock Exchange (Exchange) is recognized under the Act, and its rules, bye-laws, and regulations govern the rights and obligations of its members and constituents. 2. Right of a Third Party to Realize Dues: C.S. Shah, a registered broker and member of the Exchange, was declared a defaulter, and his membership vested in the Exchange. The respondent had claims against Shah and obtained an arbitration award in her favor, which was made a rule of the Court. In execution of the decree, a garnishee notice was issued to the Exchange to pay the respondent. The Exchange contended that the amount available for distribution was to be paid pro rata among all creditors, and the respondent was not entitled to attach any part of the amount. 3. Validity and Enforcement of Arbitration Awards and Decrees: The respondent argued that the proceeds from the sale of a membership card must be distributed among creditors, including non-members. The Exchange contended that the dues of the Exchange, Clearing House, and members had priority and that the respondent's claim should be paid pro rata. The learned Single Judge and the Division Bench of the High Court rejected the Exchange's contention and made the garnishee notice absolute, directing the Exchange to pay the respondent. 4. Distribution of Assets of a Defaulting Member: The Supreme Court examined the rules and bye-laws of the Exchange, noting that the membership card is not the personal property of the defaulter and that the proceeds from its sale must be distributed according to the priority set out in Rule 16. The Court emphasized that the Defaulters' Committee holds the assets as a trustee for the benefit of creditor members and that any surplus after satisfying the claims of members should be available for other creditors, including non-members. Conclusion: The Supreme Court directed the High Court to reconsider the matter, taking into account the observations made regarding the distribution of assets and the claims of the respondent. The High Court was requested to expedite the disposal of the matter, considering the respondent had obtained a decree as early as 15th Feb., 1994. The appeal was disposed of with no order as to costs.
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