BOMBAY STOCK EXCHANGE versus JAYA I. SHAH AND ANR.

Citation: [2003] SUPP. 4 S.C.R. 892 · Decided: 17-10-2003 · Supreme Court of India · Bench: V.N. KHARE · Disposal: Disposed off

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Judgment (excerpt)

A 
BOMBAY STOCK EXCHANGE 
v. 
JAY A I. SHAH AND ANR. 
OCTOBER 17, 2003 
B 
[V.N. KHARE, CJ. AND S.B. SINHA, J.] 
Stock Exchange Rules, Byelaws and Regulations, 1957: 
Defaulters' Committee-Status of-Held: Is not a juristic person but 
C merely an association of persons. 
Bye-Laws 322 and 326-Member Stock Exchange-Declared 
defaulter-Assets of-Vesting-Held: His assets vest in Defaulters' 
Committee for benefit and on account of creditor members-However, such 
D vesting is not absolute-Vestment co-terminus with the satisfaction of the 
members' claim-It comes to an end as soon as the purpose of Bye-law 
326 is satisfied. 
Bye-Laws 248(a) and 282-Arbitration-Between members of Stock 
Exchange and between member and non-member-Distinction between-
E Held: In the case of former, the award need not be filed in court and is 
an appealable one-Whereas in the case of latter, the award must be filed 
in court so as to make it enforceable. 
Rule 18 and Bye-Law 326--Claim of awardees-Satisfaction of....:._ 
F Held: Defaulters' Committee would not be a debtor in relation to 
awardees-The awardees entitled to get their claim on a pro rata basis 
and not in its entirety. 
Rule 16, Bye-Laws 326.and 343(7)-Defaulter member-Assets of-
Method of distribution-To his creditors-Held: To be distributed on a pro 
G rata basis-However, claims to be determined subject to cut-off date 
prescribed by the Governing Board of the Exchange-But attachment of 
claims in the hands of defaulters' Committee not enforceable. 
A registered broker and a member of the appellant-Exchange was 
H declared a defaulter under byelaw No. 316 of the Stock Exchange 
892 
BOMBAY STOCK EXCHANGE v. J.I. SHAH 
893 
Rules, Byelaws and Regulations, 1957 whereupon he ceased A 
to be a member of the appellant-Exchange under Rule 53. The 
Defaulters' Committee constituted in terms of the Rules, Byelaws and 
Regulations took charge of his assets as were within the control of the 
appellant. 
The respondent had certain claims against the said regi~tered B 
broker. An arbitration award was made in her favour, which was made 
a rule of court, and a decre~ in terms thereof was prepared. In 
execution of the said decree, a warrant of attachment was issued for 
attaching the debt owed by the appellant-Exchange to the said registered C 
broker. A Garnishee Notice was also issued by the High Court calling 
upon the appellant to pay to the respondent a certain sum. 
The appellant filed several affidavits disclosing the amount lying 
in its hands. In the first affidavit, it was disclosed that sufficient fund 
was available to meet the claim of the respondent. However, in an D 
additional affidavit the appellant contended that the balance amount 
remaining out of the consideration received by exercising the right of 
nomination of the membership of the said registered broker i.e1 card 
money was required to be applied pro rata in accordance wit~ Rule 
16(ii) and the said amount did not belong to and was not payable to E 
the respondent whether as a debt or otherwise, and was not held by 
the appellant-Exchange on behalf of the respondent. The appellant, 
therefore, contended that the respondent was not entitled to attach any 
part of the said amount. 
The Single Judge rejected the aforementioned contention of the 
appellant-Exchange and made the Garnishee Notice absolute pursuant 
whereto the appellant was directed to pay over to the respondent a 
certain sum. 
F 
The appellant filed an appeal before the Division Bench contending G 
that the Single Judge erred in rejecting and refusing to take on ~ecord 
the appellant's additional affidavit, which was dismissed. Hen¢e the 
appeal. 
Disposing of the appeal, the Court 
H 
894 
SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R. 
A 
HELD : 1.1. The Defaulters' Committee constituted under Rule 
170(a)(ii) of the Stock Exchange Rules, Byelaws and Regulations, 1957 
is not a juristic person. It is merely an association of persons. (915-F] 
1.2. The assets of a defaulter-member shall vest in the Defaulters' 
B · Committee under Byelaw 322 for the benefit and on account of the 
creditor members. However, such vesting is not absolute. The Default~rs' 
Committee is merely a trustee. [915-H, 916-B, 916-F) 
1.3. The Defaulter's Committee takes in its custody the amount 
C realised from other assets not as an owner thereof and the vestment 
thereof would, thus, be co-terminns with the satisfaction of the claim 
of the member. It, as soon as the purpose of B

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