DESH BANDHU GUPTA & CO. & ORS. versus DELHI STOCK EXCHANGE ASSN. LTD.

Citation: [1979] 3 S.C.R. 373 · Decided: 23-02-1979 · Supreme Court of India · Bench: R.S. SARKARIA · Disposal: Dismissed

Cited by 11 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

DESH BANDHU GUPTA & CO. & ORS. 
v. 
DELHI STOCK EXCHANGE ASSN. LTD. 
February 23, 1979 
[R. S. SARKARIA, V. D. TULZAPURKAR AND A. P. SEN, .fJ.] 
373 
A 
Securities Contracts (Regulation) Act, 1956-Ss. 4 & 16-Notification is.sued 
-B 
'fl! 
thereunder-Scope of. 
• 
Interpretation of statutes-Press Note issued by Gorern1ne11t arid letter of 
,. . 
• 
1 
Ministry of Finance-I/ could be used for interpreting the notifil:ation. 
By a notification issued on the 27th June, 1969, under '· 16( I) of the 
.)ecurities Contracts (Regulation) Act 1956 the Central Govcrnme•t banned 
with immediate effect all forward trading in 
~hares on 
recognised 
~tock 
exchanges in the country. 
The proviso to the notification, "Which dealt with 
bow all existing contracts remaining outstanding as on the date of the notification 
should be closed or liquidated, contained a direction to the effect that "a 
contract other than a spot delivery contract or contract for cash 
or hand 
delivery or special delivery may be entered into between it~ members or th1ough 
or with any such member for the purpose of closing out or liquidating all 
existing 
tontrac~ ren1aining to bei performed after that date." It further 
provided that "such contracts !hall be subject to the rules, bye-laws and regula-
tions of the recognised stock exchange" that con1e into force when 
further 
new deall.n~ arei prohibited and subject also to such term~ and conditions as 
the Cential Government may impose. 
In tel'l!ns of the notification the re!pondent called upon all its rr1cmbers 
,o subntit a list of outstanding transa-ctions in all securitie~ on the cleared list 
and to deposit along with it, interim margins in cash or approved shares 
.;alcUlated on the basi& of differences between the rates of the last clearing and 
certain average specified r1'.te! fixed by it. 
Appellant no. 2 'vho was a partner 
flf appellant no. 1, contended that the demand for interim margins was by 'vay 
r)f "carry over" of the forward transactions which, in view of the ban contained 
in the notification, was illegal. Instead of submitting a list of his outstanding 
transactions on the basis of the rates fixed by the respondent, he enclosed 
n statement of 
his 
outstanding transactions adjusted 
at 
the last official 
closing rates which \'\'ere higher than the rates fixed by the respondent. 
t1uggesting thereby that he WM not liable to pay anything. The respondent 
rejected the appellant'& contention and again called upon him 
to 
comply 
with its earlier notice. Eventually since the 
appellant 
did 
JiOt 
comply 
with the notice the respondent by a resolution declared him a defaulter 
\Vbich exposed him under the bye la\'\'S to a rigorous enquiry into hi! financial 
condition and entailed other disabilitie! including termination of membership. 
By another resolution the appellant was called upon to deposit additional security 
of Rs. 20,000 / •· 
In his writ· petition before the High Court, challenging the resolutions, the 
appellant contended that all his transoction! which remained outstanding on 
June 27, 1969 were forward contracts pertaining to cleared securities and aiJ 
such were affected by the notification which banned all for¥.'ard contracts, that 
these had to be adjusted at the last official closing rates, and thererore, the 
respondent's action in calling upon him to deposit interim margins calculated 
c 
D 
E 
F 
G 
H 
374 
SUPREME COURT REPORTS 
[1979] 3 s.c.R. 
A 
on the basis of certain ave;rage specified rates fixed by it was not warranted 
by the proviso of the notification and was illegal. The I-ligh Court <lis1nissed 
the petition. 
n 
c 
D 
E 
F 
G 
ff 
Dismissing the appeal, 
HELD 
The directions issued by the respondent were proper and 
legal. 
[383 Hl 
The proviso clearly permitted the closing out or liquidation of all out~ 
standing transactions in the normal manner by entering into a forward contract 
(which would include "carry over") in accordance with the rules, bye-laws and 
regulations of the respondent. 
There was no warrant for the stand taken by 
appellant no. 2 that all outstanding transactions had to be or coilld be adjusted 
on the basis of "previous official closing." {381F] 
1. For the purpose of closing or liquidating existing outstanding transactions 
a forward contract was permitted to be entered into. ·rhe expression "such 
contracts" occurring in the last part of the notification meant those as were 
referred to in the first part of the notificat

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