TMI Blog1957 (1) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... any registered under the Hyderabad Companies Act (IV of 1320 P.). In this latter capacity they carry on business in stocks and shares of the approved companies according to the rules regulating such business. 3. The Hyderabad Stock Exchange, hereinafter to be referred to as the Exchange, received a complaint dated 7th July 1947 from the defendants 2 and 3 N.S. Sardeshmukh and Chunilal D. Agarwal charging the plaintiff with serious misconduct. A verbatim quotation of the complaint read as follows. It is no secret now that Mr. Ranganath Rathi partner of Messrs. Ranganath Rathi Co., members of the Hyderabad Exchange Ltd., had taken duplicate shares from the Mahboob Shahi Mills Ltd., on the plea that the transfer receipts in respect of the original shares were lost some time in November 1945. It is very strange that Mr. Ranganath Rathi should mortgage both these very original and duplicate shares with two different bankers. The matter subsequently came to the notice of the Company some time in April and August 1946. The listed Bank and the listed Company also doing banking business with whom the said original and duplicate shares were mortgaged must have informed about such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anners with whom and the amount for which they are mortgaged. As long as these and other details with regard to the matter complained of is (are) not made definitely clear, it is impossible to prepare a reply or keep the evidence etc.. ready to meet the charges. Your notice of the said date says that a prima facie case has been made out to you. I don't know what material was placed before the Board on which this prima facie case was made out. Kindly let me know that or allow me to inspect the same and obtain the copies of the same so that I can defend the case in my reply. It is also not clear from the complaint that what disreputable or fraudulent act is alleged to have (been) committed by me in my dealings with or (in) relation to either the Exchange or any member or members of the Exchange. Evidently, Mr. Deshmukh is not a member and Mr. Chunnilal has not revealed his relation with the alleged conduct. The section mentioned in your notice appears to be incorrect as there is no No. 9(2) in the Rules and Regulations of the Stock Exchange . Kindly correct and let me know the exact section and the clause under which you propose to assume the jurisdiction to investigate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulted in a dispute between the parties to the transaction. The Board of Directors of the Exchange took cognizance of the dispute and disposed it off not in conformity with the rules but in contravention of law. The plaintiffs thereupon filed a suit, being O. S. No. 15/1 of 1356 F., on the file of the Original Side of the High Court of Hyderabad. In the suit they prayed that the resolution passed by the Exchange be declared null and ultra vires, and that that body be restrained from enforcing its decision by compelling the plaintiffs to comply with the terms thereof. During the initial stages of the said suit, they applied for an interlocutory injunction which was on appeal granted by the then Judicial Committee of Hyderabad in the month of August, 1947. 8. The plaintiffs also made a reference to another suit being O. S. 8/1 of 1355 F,- on the file of the Nazim, Sadar Adalat, Secunderabad, in which Rangnath Rathi by his plaint dated 13th April 1946 had prayed against the Hyderabad Bullion Exchange, an incorporated company, for a declaration that the resolution passed on 23rd Jan. 1946 and the two notices issued to the plaintiff by the Secretary by order of the Board were incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t ultra vires. 14. On these pleadings, the condensed version of which has been given in the foregoing lines, the following issues were adjusted on 27th June 1948 : 1. Whether the facts mentioned in para 11 of the plaint are true in part or whole. 2. Whether R. 9 of the Stock Exchange Rules is void and not according to law, 3. Whether the Stock Exchange has no authority to inquire into the complaint dated 7th July, 1947 made by the defendants 2 and 3, 4. Whether is view of bad relations alleged to be existing between the plaintiffs and the Directors of the defendant 1, is it proper to restrain the latter from inquiry into the complaint of 7th July, 1947, 5. What is the effect of the admission of claim made by the defendant 2. of these issues the learned Trial Judge took up for decision issues Nos. 2. 3 and 5 on 5th December, 1948. The advocate for the plaintiff did not advance any argument in support of the second issue. The learned Judge held that as the Rules had been assented to by the H.E.H. The Nizam on 9th Meher 1355 F., and were published in the Official Gazette No. 2 dated 14th Meher 1355 P., the validity of the Rules could not be challenged as being ult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontention and awarded a decree, perpetually restraining the Exchange from inquiring into the complaint, contained in the letter dated 7th July, 1947. 15. Lengthy arguments were addressed to us on behalf of the contestants on different questions of law and fact involved in this appeal. But before I advert to all of them, if necessary, I would like to be clear in my mind as to the provisions under which the decree for perpetual injunction has been granted. At the time of the institution of the instant suit and on the date of the delivery of the judgment appealed against, the Hyderabad Specific Relief Act was in force. The provisions of this Act are practically in pari materia with the provisions of the Indian Specific Relief Act. I would therefore refer in my judgment to the provisions of the Indian Act. Now part II of S. 53 provides that a perpetual injunction can only be granted by the decree made at the hearing and upon the merits of the suit: the defendant is thereby perpetually enjoined to refrain from the assertion of a right or from the commission of an act which would be contrary to the rights of the plaintiffs. Section 54 lays down that subject to the other provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame to the Court which fact prima facie smacks of being an after-thought. 20. Let me for the present ignore this aspect of the case. Can it then be said that there was a certainty or high probability that the Directors would deprive the plaintiff concerned of the membership of the Exchange by adopting a high-handed, capricious or partial attitude towards the plaintiff. Merely by reason of the fact that the Directors called upon them to answer the complaint it cannot be inferred that they would of necessity give an adverse finding. On the other hand, there was an equal chance of the Directors, absolving them of every liability on being furnished with a cogent explanation. The charge of want of impartiality on the part of the Directors who issued the initial notice to the plaintiff has lost its importance in view of the admitted fact that with the exception of P.B. Afzalpurkar new Directors are now in charge of the Exchange. 21. The next question to be determined is whether there exists an obligation in favour of the plaintiffs as against the Exchange not to be called upon to answer the complaint or avoid answering the complaint lodged against them. The expression Obligation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paramount chief. The plaintiff instead of appearing and pleading that he had not contravened Sec. 28 raised an action in the Divisional Court in which he craved a declaration that the issue of the summons was ultra vires and oppressive and asked for an injunction against the President from proceeding further with the case in the Native Court. The suit was dismissed on the ground that there was no cause of action. In the appeal filed by the plaintiff their Lordships of the Judicial Committee held that the plaintiff was not entitled to have the case against him stopped by raising a case in another court and eraving by means of a declaration to make' good what was really the defence to the original action simply by saying that the bringing of the case was malicious. It was further held that what could be ultra vires was not the action of the president but the clause of the ordinance and that point, if it were to be taken, must be taken in the Native Court. 25. The ratio of this authority pre-eminently applies to the facts of this case and I am of opinion that the Board of Directors have done nothing to provide the plaintiffs with a good cause of action. 26. The Court bel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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