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TMI Blog1999 (7) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 filed in the Bombay High Court by the appellant with a prayer that Rules 16 and 43 of the Stock Exchange Rules, Bye-laws and Regulations 1957 should be declared as illegal, bad in law and ultra vires the Constitution of India. It was also prayed that the Stock Exchange be directed to amend/alter Rules 16 and 43 of the Stock Exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... change 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 regard to nomination in case of defaulter sub-rule (c) provides as under: Nomination in case of Defaulter "The forfeited right of membership of a defaulter shall be restored to him if he be re- admitted as a member within six months from the date of default but if an application by a defaulter f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing 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 the Exchange: provided that the Exchange in general meeting may at its absolute discretion direct that such surplus be disposed of or applied in such other manner as it may deem fit. The order of priority laid down by the aforesaid Rule 16 ensures ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ociation 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 assignee. Once the membership card ceases to be an asset of the share broker the question of Rule 16 being contrary to the insolvency law does not arise. As we see it not only is Rule 16 not illegal, arbitrary or unjust but the same is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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