TMI Blog2001 (3) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... uashed - CIVIL APPEAL NOS. 1727 (NT) OF 1998 AND 7571 OF 1999 - - - Dated:- 2-3-2001 - Judge(s) : S. P. BHARUCHA., N. SANTOSH HEGDE. and Y. K. SABHARWAL. JUDGMENT The judgment of the court was delivered by Y. K. SABHARWAL J .--The Stock Exchange, Ahmedabad, the appellant, admitted Rajesh Shah as its member on February 19, 1988. He died on February 7, 1994. On February 12, 1994, the heirs and legal representatives of Rajesh Shah wrote to the stock exchange that they were unable to meet the liabilities of the deceased. The Governing Board of the stock exchange is said to have passed a resolution dated February 12, 1994, declaring Rajesh Shah, the deceased member, as a deemed defaulter and further resolving that his membership ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Act, 1961, in the sum of Rs. 12,24,887 was also issued to the executive director, Stock Exchange by the respondent. In reply thereto, the stock exchange reiterated the stand that no amount was due from it to Rajesh Shah or his legal heirs and the exchange does not hold any money for and on behalf of Rajesh Shah or his legal heirs. The plea of the stock exchange was not acceptable to the respondent. Under the aforesaid circumstances, the appellant-stock exchange filed a writ petition in the High Court challenging the orders of provisional attachment and the garnishee notice. The writ petition has been dismissed by the High Court. (see [1998] 231 ITR 906) which judgment is under challenge in this appeal. Under section 281B, p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial honour and integrity. Rule 5 provides that the membership shall constitute a personal permission from the exchange to exercise the rights and privileges attached thereto subject to the rules, bye-laws and regulations. Rule 6 provides that right of membership is inalienable. Subject to the provisions of the rules, under rule 7 the right of nomination has been given to a member which right is personal and non-transferable. Rule 11 provides that a member of not less than seven years' standing who desires to resign may nominate a person eligible under the rules for admission in his place. Under a proviso to rule 11(a), a member of less than seven years' standing who desires to resign may with the sanction of the Governing Board nominate hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -C or any other person on his behalf shall have paid and satisfied in full the dues of the exchange and liabilities relating to contracts. Rule 16 comes into play when the Governing Board exercises the right of nomination in respect of a membership vesting in the exchange. It provides that in such a case 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; Lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d satisfy his dues, debts, liabilities, obligations and claims as provided in the rules, bye-laws and regulations of the exchange, the Governing Board shall exercise the right of nomination in respect of such membership and the consideration received therefor shall be applied in the manner provided in the rules. Rule 53 stipulates that a member who is declared a defaulter shall at once cease to be a member of the exchange and as such cease to enjoy any of the rights and privileges of membership but the rights of his creditor members against him shall remain unimpaired and under rule 54 a member's right of membership shall lapse to and vest in the exchange immediately be is declared a defaulter. The stock exchange rules, bye-laws and regul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urged on behalf of the respondent that Rajesh Shah could not be declared a defaulter after his death and, therefore, on his purported default the question of membership vesting in the stock exchange would not arise need not be gone into in the present case, for that, rule 9 stipulates that both in case of death or default of a member his right of nomination shall cease and vest in the exchange. In the case in hand, on the death of Rajesh Shah his right of nomination ceased and vested in the exchange and his legal representatives and heirs did not exercise the right of nomination by expressing their inability to meet the liabilities of the deceased. In Vinay Bubna v. Stock Exchange [1999] 97 Comp Cas 874 (SC), on consideration of similar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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