9911796707
TMI Blog2003 (3) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... hereby the stock exchange is restrained from making any payment of the debt due to Suresh Shah, member-broker on the Bombay Stock Exchange (the BSE), on the ground that the said broker had failed to pay arrears of income-tax amounting to Rs. 37,48,651. In other words, the Bombay Stock Exchange is the garnishee who is prohibited from making payment of the debt to the assessee in default-Suresh D. Shah. Under the said prohibitory order dated May 10, 1996, the stock exchange membership card allotted to the broker for doing business and his accounts in the books of the BSE were attached/frozen. Being aggrieved by the aforestated two orders, the stock exchange has filed this petition. Facts The petitioner is a stock exchange recognized by the Central Government under the Securities Contracts (Regulation) Act, 1956, and constituted with the main object of protecting, in public interest, the status of brokers, dealers and investors and in order to assist, regulate and control, in public interest, dealings in securities in order to ensure fair dealing, integrity and to protect equitable principles of trade and business. Respondent No. 1 is the Assessing Officer having jurisdiction over i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This was apart from claims pending in arbitration, amounting to Rs. 11,41,575 as on December 19, 1996. By letter dated October 5, 1995, the Assessing Officer informed the stock exchange that since the broker was declared a defaulter by the stock exchange n June 29, 1994, his membership card may be auctioned. By the said letter, the stock exchange was informed that the said broker was in arrears of income-tax to the tune of Rs. 25,43,551 and, therefore, it was necessary to apportion a part of the amount realised from the auction for the purposes of meeting outstanding income-tax dues. Accordingly, the stock exchange was called upon by the Assessing Officer to issue a cheque in favour of the RBI in respect of outstanding demands. By the said letter, the Assessing Officer further stated that he would be issuing notice under section 226(3) of the Income-tax Act on receiving intimation from the stock exchange regarding auctioning of the membership card. By letter dated October 11, 1995, a reply was given by the stock exchange to the Assessing Officer, inter alia, stating that under rules 5 and 6 of the Bombay Stock Exchange Rules, the membership right was a personal privilege and was, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not a part of the Bombay Stock Exchange. That BOI Share Holding Ltd. was a company incorporated under the Companies Act in which the Bombay Stock Exchange held 49 per cent. and the Bank of India held 51 per cent. By the said affidavit, the title of accounts maintained by the stock exchange and the balances in the said accounts as on May 10, 1996 (i.e., the date on which the prohibitory order was issued), has been disclosed as follows : Rs. I. Clearing house account : (a) Vallan (settlement account) 16,799 (credit) (b) General charges (expenses) account 63,268 (debit) (c) Defaulters' account 1,98,055 (credit) II. Membership security deposit (securities) 1,37,100 III. Membership security deposit (in cash) 44,000 IV. Interest-free deposit for construction account (for office space) 1,25,000 As per the said affidavit, the balance surplus of Rs 37,85,199.93 was lying with the stock exchange as on February 25, 2003, after adjusting the liability of the defaulting broker to the clearing house and to the creditor-members of the stock exchange and also after paying to the clients of the defaulting broker, the amounts in terms of arbitration allowance. This was in additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to the broker or to his family members in the event of his death or to the official assignee in the event of the broker being declared insolvent. A statement is handed over by the stock exchange to the court indicating the surplus amount lying with the exchange out of sale proceeds of the nomination right of the defaulter-member and other assets. That statement reads as under : Rs. "Surplus amount presently lying with the exchange out of the sale proceeds of the nomination right of the defaulter member 37,85,199.93 Less : (i) 5 per cent. to be paid to investors' protection fund as per general body resolution 1,89,259.00 (ii) 5 per cent. to be paid to brokers contingency fund as per general body resolution 1,89,259.00 (A) Balance surplus payable to official assignee pursuant to general body resolution dated October 13, 1999 34,06,680.00 (B) Other assets : (i) Membership security deposit (securities) valued as at February 7, 2003, and not as yet realized 1,11,220.00 (ii) Credit balance with the clearing house as on February 17, 2003 1,53,538.00 (A+B) Therefore, Rs. 35,60,218 plus the realized value of the securities to be handed over to the official assigne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be open to the stock exchange to auction the membership card of the defaulter and from the amount realised and recovered on behalf of the defaulter, a sum of Rs. 37.50 lakhs would be kept separately as a deposit with the stock exchange." In view of the said interim order, the Tax Recovery Officer, vide letter dated October 11, 2000, called upon the stock exchange to give particulars of the liability of the stock exchange and also to furnish the particulars of the realised value of the membership card, if auctioned, as per the directions of the High Court. Therefore, in this petition, the important issue which arises for determination is : whether the Department was entitled to attach and recover its dues from the sale proceeds of the membership card and whether the Department was entitled to attach the deposits of Suresh Shah (broker) under the above mentioned various heads on the ground that the Income-tax Department had a priority claim over all other creditors of Suresh Shah, including the BSE and the clearing house. Arguments : Mr. Dastur learned senior counsel appearing on behalf of the Bombay Stock Exchange, contended that the membership card was a privilege conferred on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n right is required to be paid over to the broker and, therefore, if this court directs, the stock exchange has no objection to handing over the said amount to the Income-tax Department. However, Mr. Dastur reiterated the caveat that the entire surplus amount belonged to the stock exchange and the balance surplus is being offered to the department/official assignee only in view of the resolution dated October 13, 1999, and that too, after appropriating/adjusting/setting off amounts payable by the broker to the stock exchange, clearing house and other creditor members/clients in whose favour arbitration awards have been given. Mr. Dastur contended that the membership card was not a debt under rule 26(1)(a). That, the card was not the property of the broker. Therefore, rule 26(1)(a) did not apply to the membership card. He further contended that in this case, there was only an intention to issue notice under section 226(3) of the Act. That the notice under section 226(3) was never issued, and, therefore, the prohibitory order, dated May 10, 1996, issued by the Tax Recovery Officer under section 220(2) was bad in law. He further contended that the impugned prohibitory order, dated May ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 226(3) because that section only refers to money due and payable by the garnishee to the assessee, whereas rule 26 refers to the debt which is attached as a property and, therefore, that property needs to be particularised which, in this case, has not been done and, therefore, the prohibitory order is bad in law because without identification of the debt, the prohibitory order under rule 26 is bad in law. It was contended that the Tax Recovery Officer in this case should have addressed a letter to the stock exchange enquiring as to whether that broker was maintaining any accounts in the books of the stock exchange. That, no such letter was addressed and, therefore, the particulars of accounts have not been collected from the stock exchange. He contended that rule 26 requires particulars of the account to be mentioned and in the absence of such particulars, the prohibitory order was bad in law. Mr. Dastur relied upon the judgment of the Supreme Court in the case of Stock Exchange, Ahmedabad v. Asstt. CIT [2001] 248 ITR 209 ; [2001] 3 SCC 559, in support of his contention that the membership card was a privilege conferred on the broker ; that the membership card was not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view of the resolution of October, 1999, the surplus became payable to the broker as an exception to the general rule. Mr. Dastur further clarified that 90 per cent. of the surplus consideration realised from the auction of the membership right would become payable to the defaulting broker only in the event of there being a surplus. That, in cases of deficits, no amount would become payable to the broker-member and in such cases, there would be no question of handing over the balance to the Department. He, therefore, contended that even the resolution of October, 1999, would apply only in cases of surplus on account of sale of membership rights. He contended that as far as distribution of the sale proceeds of the nomination rights of the defaulter is concerned, the same is required to be applied strictly as per the priority in rule 16. At this stage, it may be mentioned, once again, that in this case, we are concerned with the sale proceeds of the nomination rights of the defaulter and credit balances in the abovementioned accounts of the broker in the books of the stock exchange. Therefore, these two are distinct and different items of distribution. As stated above, the stock e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of the Income-tax Act. He contended that the membership card was the property of the broker and, therefore, the sale proceeds of the nomination rights of the defaulter should be first utilised to discharge the claims of the Income-tax Department before it is paid over to the stock exchange for distribution under rule 16. Mr. Desai contended that the judgment of the Supreme Court in the case of Stock Exchange, Ahmedabad [2001] 248 ITR 209 was only confined to the nature of the right of the broker qua membership card. He contended that the Supreme Court was not concerned in that case with the attachment of the accounts of the broker in the books of the stock exchange. He contended that in that judgment, the Supreme Court was not concerned with the attachment of deposits of the defaulting broker held by the stock exchange under various heads. He, therefore, contended that the point arising in this petition is res integra because the Supreme Court judgment does not deal with forfeiture of security deposits as also deposits held under various heads like margin money, securities deposited by the member in the form of physicals and in the form of cash, etc. He contended that in ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibutes the amount to liquidate the liabilities of the defaulting member and, therefore, it cannot be said that the entire sale proceeds belong to the BSE and they can do what they like with such sale proceeds. That, on forfeiture, the defaulting member has no right of action against the BSE and yet, on forfeiture, the stock exchange distributes the sale proceeds amongst itself, clearing house, member-creditors, etc. In the circumstances, he contended that there was no absolute vesting of the card and the accounts in the stock exchange when the member is declared a defaulter. In short, the contention advanced on behalf of the Department is that if the membership card was the property of the stock exchange, then on the sale of such property, the sale proceeds could not have been used for discharging the liabilities of the broker to the stock exchange, to the clearing house, to the creditor-members, etc., and since the sale proceeds are utilised for that purpose, but the membership card was the property of the member-broker. Mr. Desai further submitted that even the judgment of the Supreme Court in the case of Vinay Bubna v. Stock Exchange, Mumbai [1999] 97 Comp Cas 874 has not decide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the member and, therefore, the sale proceeds of the nomination rights of the defaulter-member belonged to the defaulter-member and, therefore, such realised value was attachable under rule 26 of Schedule II to the Act. Mr. Desai, therefore, contended that the various rules and bye-laws of the stock exchange indicate that once a member is declared to be a defaulter, the stock exchange receives the monies, which it uses to discharge the various liabilities of the defaulters to the stock exchange, clearing house and other creditor-members. That, even after forfeiture or vesting of the assets in the defaulters' committee, the proceeds are applied by the stock exchange to discharge the liabilities of the defaulter to the stock exchange, clearing house and other members. That the stock exchange treats the said sale proceeds for distribution proceedings as belonging to the defaulter and, accordingly, it is the stock exchange who discharges the liability of the defaulting-member to the stock exchange, clearing house and other members. Mr. Desai further contended that on auction, the sale proceeds of the nomination rights of the defaulting member undergo a change in character and such sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s' committee which applies the sale proceeds and credit balances to discharge the liability of the defaulting member to the stock exchange, to the clearing house and to other creditor-members. He contended that the very fact that the stock exchange is required to apply the service to liquidate the liabilities of the broker shows that all proceeds belong to the stock exchange and not to the defaulter. He contended that every broker-member places security in the form of cash, shares, etc., with the stock exchange. That, under rule 43, there is a lien in favour of the stock exchange on such security, which is taken from the broker-member to secure fulfilment of the obligations by the broker-member, not only to the stock exchange, but also to his client (investors) and under rule 43, the first lien is in favour of the stock exchange. He contended that Vinay Bubna had challenged the validity of these rules and they have been upheld not only by the Bombay High Court, but also by the Supreme Court in the above judgment reported in Vinay Bubna v. Stock Exchange [1999] 97 Comp Cas 874 ; [1999] 5 JT 164, para. 11. He further contended that the stock exchange is not a trader. In this connecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue from the stock exchange or held by the stock exchange and, therefore, notice under section 226(3) was invalid. Mr. Dastur contended that in that case, the Department had sought to attach the auction proceeds, margin money and security, deposit by invoking section 226(3) and that particular impugned notice was struck down. He, therefore, contended that on all points, the judgment of the Supreme Court was applicable to this case. Mr. Dastur next submitted that the Income-tax Department had no right over the sale proceeds of the nomination rights of the defaulting member unless there remained a balance surplus after meeting all obligations of the broker. That ordinarily, such balance surplus vested in the stock exchange but as an exception, in view of the resolution of October, 1999, the balance surplus became payable to the broker. That, but for the resolution, the balance surplus vested in the stock exchange and it was not attachable. Mr. Dastur contended that the object of the BSE is not to make profits. That, the BSE was there to keep public confidence in the stock exchange. That, the BSE provided a comfort to investors. That, the clearing house was not a part of the Bombay St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r security account and in the clearing house account. It does not apply to surplus on account of auction of nomination rights. He contended that the investors' protection account and trade guarantee account were the funds belonging to the stock exchange. That, under the resolution of the stock exchange, every member is required to contribute 5 per cent. to each of these funds, and, therefore, while calculating the balance surplus, these debits have also been taken into account. Mr. Dastur next contended that the bye-laws, rules and regulations of the stock exchange have been approved by the Central Government. That, they have been approved under the Securities Contracts (Regulation) Act. That, they have a force of law in Hemendra V. Shah v. Stock Exchange [1996] 87 Comp Cas 258 ; [1995] 2 Mah LJ 770. He contended that the stock exchange has a paramount lien and, therefore, the priority of the State cannot rank against the stock exchange so as to deprive it of this paramount lien. In this connection, Mr. Dastur placed reliance on the judgment of the Gujarat High Court in the case of P. I. Shukla v. Tribhovandas Hargovandas [1988] 173 ITR 624. He contended that this paramount lien i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... membership is inalienable. Under rule 7, a member has a right of nomination which is personal and non-transferable. Under rule 8, the right of nomination is not exercisable by a former member who has been expelled or who has ceased to be a member under any rule, bye-law or regulation. Under rule 9, on death or default of a member, his right of nomination shall cease and vest in the exchange. Under rule 10, when a right of membership is forfeited or vested in the BSE, such right shall belong absolutely to the exchange free of all rights, claims or interest of such member or any person claiming through such member and the governing board shall be entitled to deal with or dispose of such right of membership as it may think fit. Rule 16 deals with allocation in order of priority. It lays down that in cases where the governing board has exercised the right of nomination in respect of a membership vesting in the exchange, the consideration received therefor shall be applied in the following order of priority, namely, (a) dues of exchange and clearing house, (b) liabilities relating to contracts, and (c) surplus. In the matter of payment of the surplus, if any, accruing to the funds of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets and other amounts. It lays down that the defaulters' committee shall realise and apply all the money, rights and assets of the defaulter which have vested in the defaulters' committee for the following purposes and in the order of priority mentioned therein. Sub-clause (ix) of bye-law No. 400 states that surplus, if any, shall be paid to the defaulter. It is clarified that bye-law No. 400 does not apply to the amount paid by the governing board to the defaulters' committee under rule 16A in respect of consideration received by the governing board for exercising the right of nomination in respect of the defaulters' erstwhile right of membership as the same does not belong to the defaulter and as the defaulter has no claim right, title or interest therein. Under bye-law No. 401, it is laid down that in the event of the defaulters' assets and other amounts mentioned in bye-law No. 400 being insufficient to pay the amounts mentioned in bye-law No. 400 then the amount paid to the defaulters' committee under rule 16A in respect of the defaulters' erstwhile right of membership shall be applied by the defaulters' committee for the purposes and in the order of priority mentioned in cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontracts entered into by the members on the stock exchange. Under bye-law No. 316, grounds are given for declaring a member a defaulter. Under bye-law No. 326, the defaulters' committee is empowered to call for and realise the security and margin money and securities deposited by the defaulter. The defaulters' committee is also empowered to recover all monies, securities and other assets due, payable or deliverable to the defaulter by any other member of the stock exchange in respect of the transactions or dealings carried out on the floor of the stock exchange. Under bye-law No. 326, it is further provided that all such assets of the broker shall vest in the defaulters' committee for the benefit of creditor-members. We have already discussed the remaining bye-laws Nos. 338, 342, 342A, 400 and 401. The important thing which is required to be noted is rule 16 on the one hand and rule 43 and rule 44 on the other hand. According to the petitioners, rule 16 deals with sale and distribution of the defaulter's membership card and proceeds therefrom whereas, rule 43 and rule 44 deal with other securities given by the member at the time of admission. According to the petitioners, in cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which, money is likely to come in the hands of the garnishee for and on behalf of the assessee. Under section 226(3)(x) if the garnishee fails to pay to the Tax Recovery Officer/Assessing Officer, the garnishee shall be deemed to be an assessee-in-default and further proceedings may be taken against him for the realisation of the amount in the manner provided in sections 222 to 225 and the notice under section 226(3)(x) shall constitute attachment of a debt by the Tax Recovery Officer under section 222 of the Income-tax Act. By reason of section 226(3)(x) read with section 222, the provisions of rule 26 of Schedule II to the Income-tax Act stand attracted. Rule 23 of Schedule II to the Income-tax Act provides for attachment and sale of movables in the possession of the defaulter, whereas rule 26 deals with attachment and sale of movables in the possession of some other person. Rule 26(1), inter alia, states that in the case of a debt, not secured by a negotiable instrument, the attachment shall be by a written order, prohibiting the garnishee from making payment to its creditor (see rule 26(1)(a)), whereas rule 26(1) refers to attachment of other movable property, not in the posses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 73(3) of the Civil Procedure Code. Issues : Two main issues arise for determination in this petition. They are as follows : (A) Whether, on the facts and circumstances of this case, the Tax Recovery Officer was right in attaching the sale proceeds of the nomination rights of the defaulter-member. If not, whether the Tax Recovery Officer was entitled to attach under rule 26(1) of Schedule 11 to the Income-tax Act, the balance surplus amount lying with BSE out of the sale proceeds of the nomination rights of the defaulter-member under rule 16(1)(iii) framed by the BSE read with the resolution of the general body of BSE, dated October 13, 1999 ? (B) Whether deposits made by the defaulting member under various heads such as security deposit, margin money, securities deposited by the members and others are attachable under section 226(3)(i), (x) read with rule 26(l)(a), (c) of Schedule II to the Income-tax Act ? Findings on issue No. 1 At the outset, we may point out that in this case, we are concerned with two assets, viz., membership card of a broker and other assets such as security, margin money, securities deposited by the defaulter and receivables which is termed as defa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made. In view of the above two judgments, we hold that the sale proceeds from the auction of the nomination rights of the defaulter-member vested in the defaulters' committee of the BSE and such sale proceeds became distributable under rule 16 of the BSE rules. However, in this case, a garnishee notice has been issued by the Tax Recovery Officer under section 226(3)(i). As stated above, the requisite condition for serving the garnishee notice is that there must be subsisting an ascertained debt in the hands of the BSE due to the assessee (defaulting-broker) or there should be some contractual relationship, as a consequence of which, money is likely to come in the hands of the BSE (garnishee) for and on behalf of the assessee-broker. Therefore, either of the two conditions, if satisfied, would attract section 226(3)(i), which is one of the modes of recovery prescribed under the Income-tax Act. Now, in the present case, there existed a contractual relationship between the broker and the BSE. However, on June 29, 1994, the broker was declared a defaulter under the rules of the BSE and his right of membership stood vested in the exchange on his being declared a defaulter. Under i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd other members. This is indicated by bye-law No. 326 read with bye-law No. 400. It is also indicated by the manner in which the defaulter's account is maintained in the books of the BSE. These rules and accounts show that what is called in are the assets of the broker, which is applied to discharge his liabilities. In our view, therefore, such other assets are of the defaulters and they vest in the committee only to enable the committee to administer, distribute and apply the same in the order of priority in bye-law No. 400. In this case, we are concerned with attachment and recovery of income-tax dues. The question posed before us is : whether the Tax Recovery Officer is entitled to attach, vide prohibitory order, such other assets of the defaulting member-broker. In order to answer this question we may also mention that every broker of the BSE maintains various accounts in the books of the BSE. They are clearing house account; security account; membership security deposit account (securities), membership security deposit account (cash), etc. In this case, the Tax Recovery Officer has sought to attach credit balances in these accounts on May 10, 1996. On behalf of the BSE, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to the said sum of Rs. 34,06,680, the other assets lying in the account of the defaulter are to the tune of Rs. 2,64,758.10 as mentioned in para. 4(D) of the affidavit filed on behalf of the BSE, dated February 25, 2003, pursuant to the directions of this court, dated February 15, 2003. Therefore, in all, an amount of Rs. 35,60,218 plus the realised value of the securities in membership security deposit account is claimed by the Tax Recovery Officer from the BSE. In this case, an issue of importance arises. As stated above, broadly, we are concerned with two assets, viz., the membership card and other assets. The short point which arises for determination under Issue No. 2 is whether such other assets were attachable and whether the proceeds thereof have to be applied under bye-law No. 400, subject to payment of income-tax dues. According to the BSE, in the matter of attachment, there is no difference between a membership card and other assets. According to the BSE, the issue is no more res integra. According to the BSE, the issue is covered by the judgment of the Supreme Court in the case of Stock Exchange, Ahmedabad [2001] 248 ITR 209. According to the BSE, both these asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this connection, we may point out that under the rules/bye-laws, when a broker is declared a defaulter, there is an assignment of such other assets in favour of the defaulters' committee. The question before this court is whether such assignment overrides section 73(3) of the Civil Procedure Code. Section 73(3) of the Civil Procedure Code is in the nature of a proviso to section 73 of the Civil Procedure Code. It recognises the English common law doctrine that Crown debts are entitled to priority and that the State is not relegated to rateable distribution along with other decree-holders and the State can claim priority over them. In fact, under section 73 of the Civil Procedure Code, the court will refuse to make an order for rateable distribution if it is brought to its notice that certain Government dues are outstanding against the judgment debtor. Under the rules and bye-laws of the BSE, the liability of the broker to the BSE and the clearing house is required to be discharged, first in point of time, and if there is no surplus remaining thereafter to meet the liability of other members in seriatim, then the rules provide for rateable distribution. In our view, the rules and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind any merit in the argument of the BSE that on a broker being declared a defaulter, such other assets cease to be defaulter's assets and they become the assets of the BSE. If that was so, then such other assets could not have been applied to discharge the liabilities of a defaulting-broker. Such other assets vest in the defaulters' committee only to enable the committee to liquidate the liability of the defaulting-broker under the rules. However, such other assets continue to belong to the defaulter and they are used to discharge his liabilities to the BSE, the clearing house and other creditor-members. Therefore, such other assets are attachable under section 226(3) read with rule 26(1) of Schedule II to the Income-tax Act. This is also borne out by the defaulters' account which the stock exchange is required to maintain (see affidavit of the BSE, dated February 25, 2003, in which the defaulter ledger account-Mukesh Kothari is reproduced). Therefore, the Government dues will have to override all other dues. It was, however, urged on behalf of the BSE that such other assets are under lien in favour of the BSE and the purpose of creation of lien in favour of the BSE is to see tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or to the clearing house have first to be met before the balance amount can be utilised for payment of debts, liabilities, obligations, etc., arising out of the contracts made by the former member and if the amount available was insufficient then the payment was to be made pro rata. That, if, however, any surplus remained, the same was to be disposed of in such manner as the exchange may decide. This judgment is entirely concerning issue No. 1 in this case. This judgment does not cover the point which arises under Issue No. 2 in this case, viz., application of defaulter's other assets as per the order of priority under bye-law No. 400. The judgment does not deal with rule 36 to rule 44 of the BSE, which refer to membership security. None of the judgments cited on behalf of the BSE, therefore, apply to the facts of this case. Reliance is also placed on the judgment of the Gujarat High Court in the case of P. I. Shukla v. Tribhovandas Hargovandas [1988] 173 ITR 624. In that matter, the facts were as follows. The judgment-creditors were trustees of a trust. They filed a suit for recovery of an amount and for enforcing an equitable mortgage. According to the final decree in the suit, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. For example, securities under the membership security deposit account which has been valued at Rs. 1,11,220 as on February 7, 2003 ; credit balance with the clearing house on May 10, 1996, when the prohibitory order was issued ; cash in members security deposit and others which fall in the category of other assets. These have got to be appropriated and applied to liquidate the Crown debts first in priority and the balance, if any, can be applied to meet the defaulter's liability to the BSE, the clearing house and other creditor-members in the manner indicated under bye-law No. 400. Conclusion : To sum up, we hereby declare : (a) That, the other assets (as described hereinabove) are attachable and recoverable under the provisions of section 226(3)(i), (x) read with rule 26(1)(a), (c) of Schedule II to the Income-tax Act. (b) That, the Government and other creditors such as BSE, the clearing house and other creditor-members under the rules and bye-laws of the stock exchange are creditors of equal degree and under section 73(3) of the Civil Procedure Code, the Government dues shall have priority over other such creditors. (c) That, in the matter of application of the defaulter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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