1932 (5) TMI 8 - HC - Indian Laws

Summary

Issues Involved:
1. Whether a card or right of membership in the Bombay Native Share and Stock Brokers' Association or its sale proceeds pass to the appellant as the assignee in insolvency.
2. The nature and legal status of the Bombay Native Share and Stock Brokers' Association.
3. The applicability of the rules of the Association to the forfeiture of membership and the rights of the insolvent's assignee.
4. The relevance of Section 12 of the Transfer of Property Act, 1882, to the case.

Detailed Analysis:

1. Whether a card or right of membership in the Bombay Native Share and Stock Brokers' Association or its sale proceeds pass to the appellant as the assignee in insolvency:

The main question for determination is whether a card or right of membership of one Virji Madhavji in the Bombay Native Share and Stock Brokers' Association or the proceeds of sale thereof, when sold, pass to the appellant as the assignee in insolvency of his estate and effects. By both Courts in India, the question has been answered in the negative. The appellant claimed that the card of the insolvent and all rights and benefits annexed thereto were vested in him and that he was entitled to the net proceeds of their sale. However, the courts concluded that upon forfeiture of the membership due to insolvency, the insolvent's interest in the Association, whether in respect of his card or otherwise, became extinguished under the rules.

2. The nature and legal status of the Bombay Native Share and Stock Brokers' Association:

The Association is not a company or a partnership but a voluntary association resembling a members' club. It was formed so that its members, who are share and stockbrokers by profession, might have a hall for the transaction of their business with one another according to honourable practice. Membership is a personal thing, incapable of uncontrolled transfer, and expulsion from membership follows default or misconduct. Upon expulsion, all interest of the defaulting members in the property of the organization ceases.

3. The applicability of the rules of the Association to the forfeiture of membership and the rights of the insolvent's assignee:

The appellant's claim was based on the rules of the Association and his paramount rights as assignee in insolvency. However, the rules clearly state that upon default, the insolvent's interest in the Association and his card is extinguished. The rules are for the benefit of the "exchange creditors" and are enforceable at their instance. The learned trial Judge directed the sale of the insolvent's card and the application of the proceeds as prescribed by Rule 62, but this was not appealed by the respondents. However, their Lordships believed that the appellant's suit should have been dismissed as his case under the rules was not justified.

4. The relevance of Section 12 of the Transfer of Property Act, 1882, to the case:

The appellant argued that if the rules prevent the proceeds of the insolvent's card from benefiting the general body of creditors, they are contrary to the law of insolvency and Section 12 of the Transfer of Property Act, 1882. Section 12 states that a condition making any interest in property cease upon insolvency is void. However, their Lordships found that the nature and character of the Association meant that no interest in the card remains in the defaulting member that could pass to his assignee. The assumption of membership does not involve the transfer of any property on any condition, making Section 12 inapplicable.

Conclusion:

Their Lordships concluded that the appeal fails, agreeing with the decisions of both Courts in India. The appeal is dismissed with costs.