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TMI Blog1993 (5) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... directed against the interim injunction granted by the trial court came up before the vacation court on 13-4-1993. The plaintiff in the suit, the Cochin Stock Exchange Ltd., had filed caveats before this court and opposed the application for stay of operation of the order made by the defendants in these appeals. Counsel appearing in all these appeals at that stage requested the court to hear and dispose of the civil miscellaneous appeals themselves and, consequently, the appeals themselves were heard during the vacation by consent of parties and are being disposed of by this judgment. 2. The suit, O.S. No. 175 of 1993 is filed by the Cochin Stock Exchange Ltd., a company incorporated under the Indian Companies Act and recognised as a stock exchange within the meaning of the Securities Contracts (Regulation) Act, 1956 ('the Act') for a declaration that the defendants are not authorised to carry on or establish or organise or assist in organising dealings in securities in any manner within the Ernakulam District and for a decree of permanent injunction restraining the defendants from establishing or carrying on or permitting dealings in stocks, shares and securities from building No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and is entitled to prevent any other rival from carrying on the said activities in Ernakulam District. Along with the suit the plaintiff also filed LA. No. 1357 of 1993 for an interim injunction restraining the defendants from carrying on their activities pending the suit. 3. There is some controversy before me as to whether the first defendant-company was properly served in the suit or not. Defendant Nos. 2 to 5 take the stand that there was no proper service of notice on the first defendant in the trial court. But, according to the learned counsel, for the plaintiff, since the summons taken out to the first defendant-company on the address of its registered office was returned, the plaintiff applied for service of notice on the first defendant on its Managing Director, the second defendant by invoking Order 29, rule 2, of the Code of Civil Procedure, 1908, and that the same was allowed and notice was, hence, served on the second defendant on behalf of the first defendant- company. The notice was, accordingly, served on the second defendant for and on behalf of the first defendant-company and, according to the learned counsel for the plaintiff, the said service of notice is suff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that they had applied under section 12 of the Securities and Exchange Board of India Act, 1992 for registration and that they are entitled to carry on their business. The court below found that the suit is maintainable, that the plaintiff has made out a cause of action for preventing the defendants from carrying on their proposed activities in their premises in Ernakulam, that the defendants are liable to be prevented from violating section 19 and that the plaintiff is entitled to an order of injunction as claimed by it. It is the correctness of this order that is challenged before me by the various appellants who are defendant Nos. 2 to 5 in the suit. 6. The question of the maintainability of the suit was rather elaborately argued before me by the learned counsel for the appellant appearing in CMA No. 87 of 1993 and was reiterated by counsel in the other appeals. According to the learned counsel, the suit is not maintainable for various reasons. Firstly, the suit is not one in a representative capacity under Order 1, rule 8 of the Code of Civil Procedure and since the right put forward by the plaintiff is a right enjoyed by it in common with the others, the suit ought to have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n common with others within the meaning of Order 1, rule 8 of the Code of Civil Procedure. The argument based on section 91 is also to some extent sought to be linked with the contention based on Order 1, rule 8 of the Code of Civil Procedure. According to the learned counsel, when the plaintiff seeks to prevent the defendants from carrying on their business, they are in fact seeking a relief in respect of an act that is likely to affect the public. In my view, there is no question of any public right involved in the nature of the present suit and, therefore, section 91(1) will also have no application. On the other hand, it appears to me that even assuming that section 91(1) is attracted, this would be a case where the plaintiff itself may have a right of suit existing independently of section 91(1). I am of the view that in any view this will be a case coming under section 91(2) and the arguments based on section 91(1) and Order 1, rule 8 have only to be overruled. 8. It was strongly urged on behalf of the appellants that what the plaintiff is seeking to do in the present case is to enforce a right created by the Act, and by sections 13 and 19 thereof in particular. According to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only proceed by action at common law. But there is a third class, viz., where a liability not existing at common law is created by a statute which at the same time gives a special and particular remedy for enforcing it.... The remedy provided by the statute must be followed, and it is not competent to the party to pursue the course applicable to cases of the second class. The form given by the statute must be adopted and adhered to.' The rule laid down in this passage was approved by the House of Lords in Nevile v. London Express Newspaper Ltd [1919] AC 368 and has been reaffirmed by the Privy Council in Attorney-General of Trinidad and Tabago v. Gordon Grant & Co. [1935] AC 532 and Secretary of State v. Mask & Co. [1940] 44 CWN 709; and it has also been held to be equally applicable to enforcement of rights (see Hurdutrai v. Official Assignee of Calcutta [1948] 52 CWN 343 at page 349). That being so, I think it will be a fair inference from the provisions of the Representation of the People Act to state that the Act provides for only one remedy, that remedy being by an election petition to be presented after the election is over, and there is no remedy provided at any intermedia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are to be so read as excluding resort to the civil court for vindicating such civil right ouster of jurisdiction of civil courts cannot be assumed. But this rule does not hold good where the statute creates rights for the first time. In such cases it is the machinery prescribed by the statute which creates such rights that will be available to the person. In such a case unless right is conferred on the civil courts it will not be open to a person to resort to such civil remedies." 10. It is the submission of learned counsel for the appellants that since in this case the right is created by the Securities Contracts (Regulation) Act for the first time and since no right is conferred on civil courts for the enforcement of that right, the plaintiff is not entitled to maintain the present action. With respect to learned counsel, it appears to me that this question in the form will arise only in a case where the statute that creates the rights also creates a machinery for the enforcement of that right and not in cases where the statute merely creates a right and does not create any specific machinery for its enforcement. The mere fact that the plaintiff could bring to the notice of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relating to objection by a rival mill owner or a rival licensee under the Cinema Regulations Act to the grant of licence to a rival theatre or a rival rice mill were referred to. It was said that the plaintiff at best is only a rival running a stock exchange and in the light of the legal position that such a rival claimant cannot object to another carrying on his trade or business, the plaintiff could not maintain the suit. The plaintiff has laid this suit on the ground that the plaintiff was the only recognised stock exchange entitled to carry on business in securities and that any rival is precluded from carrying on such business within the District of Ernakulam by virtue of the notification issued under the Act. There is a further contention that in the light of section 19 which had been brought into force in the area in question, the activity by the first defendant would be in violation of the statute and that anyone can sue for preventing the first defendant from violating the statutory prohibition. Counsel for the plaintiff relied on the decision of this Court in B. Govinda Rao v. District Collector [1983] KLT 328, Saina v. Konderi [1984] KLT 428, Godavari Bhai v . Cannanore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd its case that it is the only recognised stock exchange and that the defendants are carrying on a business which can be carried on only by a stock exchange and that the defendants are precluded by sections 13 and 19 from carrying on the activities they intend to carry on. A reading of the plaint shows that the plaintiff has pleaded that the plaintiff is the recognised stock exchange and that sections 13 and 19 have been brought into force in the Ernakulam District and that they prohibit dealings in securities by any person other than between the members of a recognised stock exchange. It is also pleaded that in the light of this position nobody other than the plaintiff stock exchange could do business in Ernakulam District. It is averred in paragraph 7 of the plaint that the first defendant-company has given membership to a large number of persons to function as stock brokers and they are permitting dealing in securities in their business places. It is also averred that the first defendant-company is maintaining a trading floor in its place of business. It is also averred that the members of the first defendant-company are carrying on dealings in securities as if the first defend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be met on behalf of the defendants by contending that the first defendant is only doing 'spot delivery contracts' and that by virtue of section 18 of the Securities Contracts (Regulation) Act, section 13 has been made inappli-cable to 'spot delivery contracts'. In further support of this submission the circular, Exhibit B-3 issued by the Securities and Exchange Board of India saying that the business of 'spot delivery contracts' in securities is not hit by the prohibition is also relied on. It is also contended that what is prevented by section 19 is only what is prescribed by section 13 and since a 'spot delivery contract' would not come within section 13 the same also could not be said to be prevented by section 19. The Court below has taken the view that even though 'spot delivery contracts' is not hit by the prohibition contained in section 13, the same are hit by the prohibition contained in section 19 of that Act. This finding by the trial court is seriously challenged by counsel for the appellants. 15. It may be necessary at this stage to notice the three relevant sections of the Act. The said sections are extracted below: "13. Contracts in notified areas illegal in certa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period aforesaid if the parties to the contract do not reside in the same town or locality;" 16. In Madhubhai Amathalal Gandhi v . Union of India AIR 1961 SC21,the Supreme Court observed thus: "...The Act mainly provides for the recognition of stock exchanges and for controlling the rule-making of the said exchanges. Section 4 of the Act empowers the Central Government to recognise stock exchanges subject to two conditions. Section 13 enables it to issue a notification that in a particular State or area every contract which is entered into after the date of the notification otherwise than between members of a recognised stock exchange in such State or area or through or with such member shall be illegal. Without resorting to such drastic procedure the Government is also given power to prohibit contracts in certain securities in certain areas from doing business without obtaining a licence. Spot delivery contracts are excluded from the operation of sections 13, 14, 15 and 17 of the Act, unless the Central Government by notification thinks fit to extend the operation of section 17 of the Act to such contracts. Section 19 prohibits formation of stock exchanges other than recognised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court that even the carrying on of the business of spot delivery contracts would be hit by section 19. 20. The learned counsel for the appellants relied on section 12 of the Securities and Exchange Board of India Act, 1992, to contend that the first defendant has applied under section 12 for registration and is hence entitled to carry on its business until registration is refused by virtue of the proviso to that section. Section 12 relates only to registration of stock brokers, sub-brokers, share transfer agents and others who are in the position of intermediaries associated with securities markets. It appears to me prima facie that section 12 cannot enable the defendants either to run a parallel stock exchange or have members affiliated to the first defendant and also have trading floors to permit such members to carry on business in shares and securities. Moreover, section 32 of the Securities and Exchange Board of India Act provides that the provisions of the said Act shall be in addition to and not in derogation of the provisions of any other law for the time being in force. It, therefore, appears to me that the fact that the first defendant has applied under section 12 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontracts. I am, therefore, of the view that the plaintiff has made out a prima facie case for an injunction restraining the defendants from carrying on the business akin to that of a stock exchange within the District of Ernakulam. Since I have found that the plaintiff has made out a prima facie case for injunction, it is not necessary to consider the question as to whether a prima facie case has in fact to be fully made out before an order of injunction could be granted or whether it is not sufficient to show that the balance of convenience is in favour of the grant of injunction and that a triable issue arises in the light of American Cyanamid Co. v. Ethicon Ltd. [1975] 1 All ER 504 (HL) and Joshua v. His Grace Geevarghese Mr. Discorus 1985 ILR 1 Ker. 1. 23. The next aspect that has to be considered is the question of balance of convenience. It is contended on behalf of the appellants that the defen- dants have invested considerable amounts for the purpose of carrying on their business in the premises referred to in the plaint and that the grant of an injunction restraining them from carrying on their business would result in considerable financial loss to them and that the refu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they disclosed their object in making such elaborate arrangements for the carrying on of their business. He also points out that Exhibit A-6 advertisement would itself show that their intention is not merely to do business in spot delivery contracts. I find some justification in the submis-sion made on behalf of the intervener that the defendants have not disclosed the nature of the business they propose to carry on in their premises. The objects of the first defendant-company as can be seen from the counter-affidavit filed by the fifth defendant also support the appre-hension expressed by counsel for the plaintiff that what the first defen- dant proposes to do is to have a parallel stock exchange. Having found, therefore, that section 19 would be attracted, in the light of the averments in the plaint which had not been specifically controverted, I am satisfied that the plaintiff is entitled to an injunction as granted by the trial court with a clarification. The clarification is to the effect that the first defendant is entitled to enter into spot delivery contracts. 25. In modification of the order of the trial court, I order that there will be an injunction restraining defendan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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