TMI Blog1999 (7) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... ion against the said share broker before the Bombay High Court. In the said proceedings an application was filed for appointing a court receiver. The court did not grant to the appellant any relief in respect of the membership card of the share broker whereupon an appeal was filed and it was contended that a court receiver should be appointed in respect of the said membership card. This appeal was disposed of after a statement on behalf of the Stock Exchange was recorded to the effect that it "shall not apply any amount received by it as consideration on nomination of the membership to any person falling in the same category for the purpose of priority as the appellant under Rule 16 of the Stock Exchange Rules till the award of the arbitration was received". It may here be stated that in view of the default having been committed by the share broker he was, on 10th December 1996, declared defaulter by the Stock Exchange and thereafter he ceased to be it's member. The appellant wanted Rules 16 and 43 of the Stock Exchange to be amended. Letters were written by him to SEBI and other authorities including the Stock Exchange. When efforts in this behalf failed a writ petition was fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of persons and is recognised under the Securities Contracts (Regulations) Act, 1957. According to its constitution, rules and bye-laws the Exchange, from time to time, admits members, popularly referred to as stock or share brokers. It is they who constitute the Exchange as per Rule 2 of the said rules. The Exchange is established, as per Rule 4, with the object, inter alia, to support and protect, in the public interest, the character and status of brokers and dealers and to further their interests and to maintain high standards of commercial honour and integrity. Rule 5 provides that the membership of the Exchange shall constitute a personal permission from the Exchange to exercise the rights and privileges attached thereto but this is subject to the Rules, Bye-laws and Regulations of the Exchange. Rule 6 provides, inter alia, that the right of membership is inalienable. As per Rule 7, subject to the provisions of the Rules, a member shall have a right of nomination which shall be personal and non-transferable. Rule 9 stipulates that "on the death or default of a member his right of nomination shall cease and vest in the Exchange." Rule 11 deals with nomination by members. With r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 16 which reads as follows: "16. ALLOCATION IN ORDER OF PRIORITY - When as provided in these Rules 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 to the following purposes and in the following order of priority namely - Dues of Exchange and Clearing House [i] first- the payment of such subscriptions, debts, fines, fees, charges and other monies as shall have been determined by the Governing Board to be due to the Exchange or to the Clearing House by the former member whose right of membership vests in the Exchange; Liabilities relating to Contracts [ii] second - the payment of such debts, liabilities, obligations and claims arising out of any contracts made by such former member subject to the Rules, Bye-laws and Regulations of the Exchange as shall have been admitted by the Governing Board: provided that if the amount available be insufficient to pay and satisfy all such debts, liabilities, obligations and claims in full they shall be paid and satisfied pro rata; and Surplus [iii] third- the payment of the surplus if any to the funds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ows: "But although the rules are badly drawn and not in uniform phraseology their result in the case of a member who has lost his membership for being a defaulter clearly enough is that he loses all interest both in the property of the Association and in his card. In such a case no interest is reserved in the defaulter's card except to members of the Association who have suffered by his lapse - in the rules sometimes called his creditors - or to the Association itself. This seems to their Lordships to be the result of R. 18, 56, 57 and 62. The defaulting member himself has no interest in the result of the sale provided for under these rules nor can he require a sale to be made. The rules are there for the benefit of his "exchange creditors" and are doubtless enforceable at their instance." In that case also a contention was sought to be raised that if the proceeds of the sale of the insolvent's card are not given to the official assignee the same would be regarded as being contrary to the law of insolvency. It was rightly observed that when the defaulting member is expelled from the Exchange no interest in his membership card remains in himself and none can pass to his assi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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