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TMI Blog1979 (2) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. One Desh Bandhu Gupta (appellant No. 2) carried on business as a share-broker in the firm name and style of Desh Bandhu Gupta & Co. (appellant No. 1), and as such was a member of the respondent. By a notification No. S.O. 2561 dated June 27, 1969, issued under section 16(1) of the Securities Contracts (Regulation) Act, 1956, the Central Govt. banned with immediate effect all forward trading in shares at all the Stock Exchanges in the country by declaring that "no person, in the territory to which the said Act extends, shall, save with the permission of the Central Govt., enter into any contract for the sale or purchase of securities other than such spot delivery contract or contract for cash or hand delivery or special delivery in any securities as is permissible under the said Act and the rules, bye-laws and regulations of a recognised Stock Exchange", but as regards the forward contracts which remained outstanding as on that date it was directed under the proviso that these could be closed or liquidated in the normal manner. On June 28, 1969, at an emergency meeting held at 10-30 a.m. the board of directors of the respondent considered the abnormal situation arising from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the board of directors of the respondent held on July 2, 1969, at 4-00 p.m. the board noticed that all members, except appellant No. 2, had complied with its directions and on a consideration of the entire matter came to the conclusion that the appellant No. 2 was intentionally evading to comply with its directions and to pay the required amount of margins and, therefore, resolved that appellant No. 2 trading in the name and style of Desh Bandhu Gupta & Co. be declared a defaulter for such failure and a notice in that behalf be pasted on the notice board and appellant No. 2 was informed about it by a telegram and a letter. The resolution passed on July 2, 1969, declaring appellant No. 2 as a defaulter exposed him under the bye-laws to a rigorous inquiry by the respondent into his financial condition and entailed other disabilities including termination of his membership of the respondent under bye-law 308 read with article 43(iv) of the articles of association. Appellant No. 2 thereupon filed a writ petition (Civil Writ No. 520 of 1969) in the Delhi High Court challenging the directions of the respondent demanding payment of interim margins as also its resolution declaring hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the remedy under writ jurisdiction was not available. On merits it was contended that the construction sought to be placed by the appellants on the proviso contained in the Central Govt. notification which dealt with closing out or liquidating the transactions outstanding as on June 27, 1969, was not correct, that under the said proviso such transactions were permitted to be closed or liquidated in accordance with the rules, bye-laws and regulations of the respondent and, therefore, the directions issued by its board of directors on June 28, 1969, to all its members including appellant No. 2 to submit their lists of outstanding transactions and to pay interim margins on the basis of the average specified rates fixed by it were proper and lawful and both the resolutions were legal and justified. The respondent, therefore, prayed for dismissal of the writ petition. On a consideration of the rival submissions made before it by counsel for the parties, the High Court upheld both the contentions of the respondent and dismissed the petition with costs. The High Court's view on both the points is challenged by the appellants before us in this appeal. In the view which we are taking o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring and such contracts could be made up to the last business day prescribed for that clearing by the respondent, and so much was permitted by the proviso contained in the notification. Moreover, in view of the crisis created by the notification the board of directors of the respondent issued the directions on June 28, 1969, having regard to bye-law 73, which were in order, and the further action taken by the respondent against the appellant No. 2 consequent upon his failure to comply with the directions was proper and justified under bye-law 308 read with article 43(iv) of the articles of association of the respondent. Since the question depends upon proper construction of the notification dated June 27, 1949, it will be desirable to set out the said notification in extenso which ran thus (See [1969] 39 Comp Cas. (St.) 155): "New Delhi, the 27th June, 1969. NOTIFICATION S.O. 2561 : In exercise of the powers conferred by sub-section (1) of section 16 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Central Government, being of opinion that it is necessary to prevent undesirable speculation in securities in the whole of India, hereby declares that no person, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urged that the last portion had nothing to do with such outstanding transactions the closing or liquidating of which was fully dealt with by the proviso. It cannot be disputed that the drafting of the notification in question has been far from happy but even so on a fair reading of the notification it is difficult to accept the construction sought to be placed thereon by counsel for the appellants. In our view, the notification was in three parts. By the first part the Central Govt. put a ban on all forward trading in shares through the stock exchanges in the country by declaring that "no person......shall, save with the permission of the Central Government, enter into any contract for the sale or purchase of securities other than such spot delivery contract or contract for cash or hand delivery or special delivery in any securities as is permissible under the said Act, and the rules, bye-laws and regulations of a recognised stock exchange ". The second part consisted of the proviso and it dealt fully with how all existing contracts remaining outstanding as on the date of the notification should be closed or liquidated, and the direction contained therein in that behalf was to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments on record which had come into existence almost simultaneously with the issuance of the notification explaining the manner in which outstanding transactions were intended to be closed or liquidated. In a press statement or press note issued by the Finance Ministry immediately upon the issuance of the notification it was stated thus : "The existing contracts entered into up to the date of the notification and remaining to be performed are, however, permitted by the same notification to be liquidated in accordance with the rules, bye-laws and regulations of the stock exchange concerned." Further, it appears that in response to a query made by the President of the respondent, Shri Maitra, Joint Director (S.E.), Ministry of Finance, Department of Economic Affairs, addressed a communication dated June 28, 1969, to the President in which he stated thus : "As stated in the notification itself, all outstanding contracts which were not liquidated till the date of notification, will have to be liquidated in accordance with the relevant rules, bye-laws and regulations of your exchange in that regard. No fresh forward transactions in any cleared security, however, is permissible. A s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Edn.), in para. 219 (at pp. 393-395), it has been stated that administrative construction (i.e., contemporaneous construction placed by administrative or executive officers charged with executing a statute) generally should be clearly wrong before it is overturned ; such a construction, commonly referred to as practical construction, although not controlling, is nevertheless entitled to considerable weight; it is highly persuasive. In Baleshwar Bagarti v. Bhagirathi Dass [1908] ILR 35 Cal. 701, 713, the principle, which was reiterated in Mathura Mohan Saha v. Ram Kumar Saha [1916] ILR 43 Cal.790, has been stated by Mukarjea J., thus : "It is a well-settled principle of interpretation that courts in construing a statute will give much weight to the interpretation put upon it, at the time of its enactment and since, by those whose duty it has been to construe, execute and apply it. I do not suggest for a moment that such interpretation has by any means a controlling effect upon the courts ;... such interpretation may, if occasion arises, have to be disregarded for cogent and persuasive reasons, and, in a clear case of error, a court would without hesitation refuse to follow such co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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