Delhi High Court
Shri Hari Om Maheshwari vs Shri Sanjay Kumar Jalan & Anr. on 29 January, 2010
Author: Indermeet Kaur
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment Reserved on: 21.1.2010
% Judgment Delivered on: 29.1.2010
+ CS(OS) No.1278/1995 & C.C.No.2184/1998
SHRI HARI OM MAHESHWARI
...........Plaintiff
Through: Plaintiff in person.
Versus
SHRI SANJAY KUMAR JALAN & ANR.
..............Defendants
Through: None.
CORAM:
HON'BLE MS. JUSTICE INDERMEET KAUR
1. Whether the Reporters of local papers may be allowed to see
the judgment?
2. To be referred to the Reporter or not? Yes
3. Whether the judgment should be reported in the Digest?
Yes
INDERMEET KAUR, J.
1. Present suit has been filed by the plaintiff who is stated to
be a member of Delhi Stock Exchange Association Ltd. i.e.
defendant No.2. His membership number is D-273 and he is
carrying on business of shares and stocks brokers under the name
and style of M/s H. Maheshwari & Co. since 24.4.1990.
2. Defendant No.1 is also a member of the defendant No.2. His
membership code is D-239 and is carrying on business of shares
and stock brokers under the name and style of M/s B.K.Jalan & Co.
which was subsequently taken over by M/s BKJ Securities Ltd.
under the same membership code.
3. Defendant No.2 is a public limited company and is a
recognized stock exchange under the provisions of the Security
Contract (Regulations ) Act, 1956 ( hereinafter referred to as "the
said Act"). This company has been incorporated to facilitate the
business of the stock exchange and provides to its members
facility of a trading hall, clearing house, settlement of members‟
disputes. It is guided by its Articles, Rules, Regulations, Bye-laws
as approved by the Central Government under the provisions of
the said Act. These provisions are applicable and binding on all
members of the defendant No.2.
4. That under Section 14 of the said Act any contract in
shares and securities in contravention of the bye-laws as specified
under Clause(a) of sub-Section 3 of Section 9 shall be void. The
procedure adopted for share transaction pursuant to the Articles,
Rules, Regulations, and Bye-laws of the Stock Exchange have been
detailed.
(a) It is stated that defendant No.2 issues to its members
two books namely the daily transaction book known as a
chopri and the errors corrections book. The pages of the
chopri are numbered and bear the stamp of the executive
director of the defendant no.2. The transaction done in the
trading hall of defendant No.2 are recorded by the members
in the chopri at the end of every trading session and a leaf of
the said chopri containing the day‟s transaction is submitted
to defendant No.2 on the very same day. Only the
transactions entered in the chopri constitute a contract
between the members of the defendant No.2.
(b) The errors correction book is used to correct a
transaction which is already reported to the defendant No.2
during a settlement period through the chopri but for some
reason, the transaction has not matched in the in the records
of the defendant No.2. Unlike the chopri, the pages of the
errors correction book do not bear the stamp of the
executive director nor the pages of this book were
numbered.
(c) On the basis of the transaction reported by the various
members through the daily transactions list, defendant no.2
prepares two sets of list, namely:-
(i) Match list comprising of transactions reported
by both the parties to the transactions and
matched.
(ii) Error list comprising of the transactions
reported by the members but where there is a
discrepancy either in the name or code of the
members or the shares or there is a variation in
quantity or rates etc.
The members are required to get the errors corrected.
Thereafter, a final match list of all the transactions for a
particular settlement is prepared and circulated amongst the
members by defendant No.2.
(d) At the end of each settlement, defendant No.2 fixes rates
for every share on the basis of the rates prevailing at the end
of the trading session. Delivery of the shares between the
members takes place at the rates so fixed by defendant No.2.
Amount of difference due to or due by a member is worked
out by defendant No.2 for each settlement. Payment of the
difference list takes place through clearing house of
defendant No.2, at the scheduled date.
(e) In respect of the transactions between the members of
defendant No.2, no contract note is required to be issued nor
any member raises difference bills between themselves
because all transactions are compulsorily routed through
defendant No.2 who enforces the performance of the
contracts entered into by its members.
(f) In order to facilitate the payments, members are required
to open a current account with the Bank designated by
defendant No.2 and the members are required to maintain
sufficient funds in the account so that the amounts due by
them in a particular settlement can be debited through the
clearing house. In case a member fails to arrange the funds,
defendant No.2 gets the membership card of the defaulting
member auctioned to recover the dues.
(g) Disputes between the members in respect of the
transactions entered in the trading hall of defendant No.2
are settled through the Committees formed by the Board of
Directors of defendant No.2. Under Article 127 of the
Articles of Association as well as Rule 281 of the Bye-laws of
defendant No.2, settlement of disputes between the
members and defendant No.2 is done through the process of
Arbitration; members are specifically debarred from
commencing any legal proceedings against another in terms
of Rule 282 of the Bye-laws without the permission of the
Board of Directors of defendant No.2.
5. That on or about 15.5.1992 defendant No.2 provided a
payment difference list for settlement for the period w.e.f.
7.4.1992 to 08.5.1992. A sum of Rs.14,66,350/- was shown
payable by the plaintiff to defendant No.1 of which Rs.14,40,500/-
was on account of the difference in the alleged purchase of 3000
share of Bindal Agro and 35000 of Oswal Agro by the plaintiff from
the defendant No.1.
6. The amount of Rs.14,40,500/- was worked out as follows :-
Name of Share Quantity Purchase Delivery Difference
Amount Rate Price
--------------- ------------ -------- ----- ---------------
Bindal Agro 3,000 75.00 54.50 61,500.00
Oswal Agro 35,000 126.40 87.00 13,79,000.00
-----------------
Total 14,40,500.00
-----------------
7. It is stated that this purchase was neither recorded on the
chopri of the plaintiff nor any such purchase was reported to
defendant No.2 through the daily transaction list during the said
settlement period or in the previous settlement period.
8. In the consolidated match list for the settlement ending on
8.5.1992 the date of purchase of 3,000 shares of Bindal Agro has
been shown as on 7.5.1992; purchase of 35,000 shares of Oswal
Agro is not appearing in the consolidated match list of transaction
for settlement ending on 08.5.1992. However, in the final list of
transactions for the said settlement, the transaction of 35,000
shares of Oswal Agro is recorded.
9. It is stated that since there was no transaction of the
purchase of 35,000 shares of Oswal Agro and 3,000 shares of
Bindal Agro by the plaintiff from defendant No.1 nor any such
transaction was reported through the daily transaction list;
recording of this transaction by defendant No.2 is violative of the
rules, regulations and bye-laws of defendant No.2 and fraudulent
in nature.
10. That this was brought to the notice of the executive director
of defendant No.2 but they denied the liability. In spite of efforts
defendant No.1 could not be contacted. Plaintiff to save his
membership card and to protect his solvency was left with no
option but to make the payment shown in the difference payment
list for the settlement ending on 08.5.1992.
11. It is stated that on 07.5.1992 when this transaction was
recorded the rate of the share of Bindal Agro was Rs.57 as against
the rate of Rs.75 shown as the rate on which plaintiff had
purchased the shares from the defendant No.1; on 08.5.1992 when
the transaction of 35,000 shares of Oswal Agro were recorded the
prevailing rate was Rs.87 as against the rate of Rs.126.40 as
shown to be the purchase price by the plaintiff from defendant
No.1.
12. Plaintiff to square off the purchase of the aforestated shares
was forced to sell them in the market and bear the difference
between the alleged purchase price and the sale price because
otherwise the plaintiff would have to take delivery of these shares
by making payment of Rs.47 lacs which was not within the means
of the plaintiff. Plaintiff sold 3,000 shares of Bindal Agro and
35,000 shares of Oswal Agro in different lots and at different rates
which averaged at Rs.42 in the case of Bindal Agro and Rs.60 in
the case of Oswal Agro and thus incurred a loss of Rs.24.23 lacs.
13. On 16.10.1992, defendant No.1 had lodged claim against the
plaintiff for non-payment of Rs.1,75,950/- the settlement period
mentioned in this claim was 16.4.1992 to 26.4.1992; 26.4.1992
being a public holiday; this discrepancy itself reflects on the fraud
played by defendant No.2 against the plaintiff.
14. On 2.11.1992 a committee of defendant No.2 approved the
claim of defendant No.1; this was again a fraud played upon the
plaintiff; plaintiff referred the matter to defendant No.2 vide letter
dated 12.1.1993 and raised a claim of Rs.27.70 lacs against
defendant No.1; Rs.25.95 lacs as detailed supra and an amount of
Rs.1,75,950/- which was the fraudulent claim made by defendant
No.1 against the plaintiff. In spite of repeated reminders dated
4.3.1993, 15.4.1993 and 18.5.1993 no action was taken by
defendant No.2.
15. On 9.11.1993, an executive director of defendant No. 2
informed the plaintiff that he has been granted approval to
approach the authority in law to recover his dues from defendant
No.1. This was in violation of Article 127 of the articles of
association and bye-law 281 of defendant No.2. The plaintiff vide
communication dated 17.11.1993 and letter dated 1.5.1995 made
representations to defendant No.2 to re-consider the matter but of
no avail.
16. It is stated that defendant No.2 in yet another instance of
bestowing undue favour to defendant No.1 directed the plaintiff to
pay to defendant no.1 a sum of Rs.2,72,250/- along with interest @
18% per annum which was a time barred claim of defendant No.1.
Plaintiff disputed this claim. His entry was banned in the trading
hall in an illegal manner. Plaintiff filed Suit No.370/93 and Suit
No.543/93 against defendant No.2 which matter is pending in a
revision petition.
17. Plaintiff has been defrauded by defendant No.1 in the sum of
Rs.25,95,450/-. A sum of Rs.14,40,500/- was received by defendant
No.1 through defendant No.2 when there was no transaction of the
alleged 3,000 shares of Bindal Agro and 35,000 shares of Oswal
Agro. A loss of Rs.9,82,500 had been suffered by the plaintiff in
squaring off the aforestated purchases; a sum of Rs.1,72,450/- has
also been claimed which was a fraudulent claim set up by
defendant No.1 against the plaintiff. Plaintiff is also entitled to
interest @ 18% per annum on the aforestated amount of
Rs.25,95,450/-; the interest worked out is of Rs.12,45,816/-.
Decree for a sum of Rs.38,31,266/- has been prayed for. A decree
of mandatory injunction has also been prayed for against the
defendant No.2 directing the defendant No.2 to exercise its lien on
the membership card bearing No.D-239 in the name of M/s BKJ
Securities who had taken over the assets of the firm owned by
defendant No.1.
18. In the context of the last prayer made by the plaintiff i.e. the
prayer for the mandatory injunction against defendant No.2, it is
pointed out by the plaintiff that he is no longer pressing his prayer.
An application i.e. I.A. No.10283/1999 had been filed under Order
39 Rule 1 & 2 & Order 38 Rule 5 CPC seeking this payer, which
had been rejected vide order dated 5.2.2003. That order has since
attained finality. Plaintiff in view thereof is no longer pressing this
alternate prayer.
19. Written statement and counter claim has been filed by
defendant No.1. A preliminary objection has been taken that the
plaintiff is no longer a member of the Delhi Stock Exchange. It is
stated that the membership held by defendant No.1 of the Delhi
Stock Exchange has since been sold to M/s BKJ Securities Limited
and the said membership code of defendant No.1 D-239 stand
transferred to M/s BKJ Securities Limited.
20. On merits, it is stated that the procedure adopted by the
Delhi Stock Exchange is not a correct narration; rules, regulations
and bye-laws of defendant No.2 be looked into for the said
purpose.
21. It is denied that a transaction entered in the chopri alone
constitutes a contract; for instance, one member has reported the
transaction to defendant No.2 and has entered it in his chopri but
the other member accidently, deliberately, bonafidely or malafidely
or for any other ulterior purpose does not enter the transaction in
his own chopri at the relevant date; last transaction between the
two members would be duly recognized by the Delhi Stock
Exchange as a contractual transaction between those members
provided that such a transaction has been matched by both the
members to the said transaction before the settlement date
relating to any particular period.
22. It is stated that if one member had not recorded the
transaction in his chopri and correspondingly other member had
recorded the same transaction in his own chopri then such type of
transaction can be rectified by defendant No.2 through the error
correction list, in case such a transaction is matched by both the
members before the settlement date concerning the relevant close
settlement period. Such a transaction which is rectified through
the error correction list is not a fresh transaction. The final match
list prepared and circulated by defendant No.2 is finalized only
after the process of matching of transactions and the rectification
of the errors is over. If after the final match list there are still
some claims and counter claims among the members, the matter
can be resolved through the process of arbitration of defendant
No.2.
23. It is submitted that the transaction relating to the 3,000
shares of Bindal Agro, 35,000 shares of Oswal Agro and 9,00
shares of M/s J.P.Industries had taken place between the plaintiff
and defendant No.1 on 6.5.1992 whereby the defendant No.1 had
sold all these shares to the plaintiff. All these three transactions
between the plaintiff and the defendant No.1 were reported by
defendant No.1 on the same day when the transaction took place
by the submission of the leaf of his chopri completed on the same
day on the floor of the house of defendant No.2. Plaintiff with a
dishonest intention did not report these transactions in this
manner in his chopri. The transaction pertaining to 3,000 shares
of Bindal Agro, 9,00 shares of M/s J.P.Industries were matched by
plaintiff in the error correction list on the very next date i.e. on
7.5.1992. The transaction of 35,000 shares of Oswal Agro was
matched on the next working day i.e. on 07.5.1992; plaintiff on
that day deliberately showed the purchase of 3,500 shares of
Oswal Agro instead of indicating the number to be 35,000 shares
of Oswal Agro; result was that even on the next working day i.e. on
8.5.1992 the said transaction was shown in the error list; on the
next working day, plaintiff reported the correction of the said error
from 3,500 to 35,000 shares of Oswal Agro to defendant No.2 and
he got the said transaction matched through the regular error
correction list in accordance with the regulations and bye-laws of
defendant No.2 before the date of settlement of account i.e. for the
settlement period 27.4.1992 to 08.5.1992.
24. It is stated that on 06.5.1992, plaintiff had conducted the
transaction of the sale and purchase of 3000 shares of Bindal Agro
@ Rs.75 per share, 35,000 shares of Oswal Agro @ Rs.126.40 per
share and 9,00 shares of M/s J.P.Industries @ Rs.241.50 per share.
All the aforestated transactions between the plaintiff and
defendant No.1 had been shown by defendant No.1 in his chopri of
06.5.1992. However, since the plaintiff had not reported all these
transaction to defendant No.2 in his chopri, these transactions
were shown in the error correction list issued by defendant No.2
on the next working day. The plaintiff came out with his error
correction report to defendant No.2 and through the said error
correction report the plaintiff reported to defendant No.2 about
the correctness of the transaction which had taken place between
the plaintiff and defendant No.1 with regard to 3,000 shares of
Bindal Agro @ Rs.75 per share and the second transaction of 9,00
shares of M/s J.P.Industries @ Rs.241.50 per share. The error
correction report regarding transaction of 35,000 shares of Oswal
Agro were deliberately not recorded by the plaintiff and were in
fact recorded as a transaction of 3,500 shares of @ Rs.126.40 per
share. Net result was, out of these three transactions, the one
transaction of Oswal Agro again appeared in the error correction
list issued by defendant No.2; thereafter plaintiff came out with the
correct reporting of the transaction to be of 35,000 of Oswal Agro
shares @ 126.40 per share.
25. Ultimately all the three transactions between the plaintiff
and the defendant No.1 had been duly matched before defendant
No.2 relating to this aforestated settlement period of 27.4.1992 to
8.5.1992 before the settlement date of 15.5.1992.
26. It is stated that a transaction which is not reported by the
members to defendant No.2 cannot be recorded by defendant No.2
in spite of the fact that the matching has been done by the
corresponding members. The final statement of account with the
final match list is drawn up by defendant No.2 and the final
delivery payment statement is also prepared by defendant No.2
after the errors and corrections are rectified by the concerned
members before the actual date of settlement of account from the
previous settlement period.
27. The contention of the plaintiff that executive director of
defendant No.2 did not listen to the plaintiff is incorrect; plaintiff
even as per his own showing had knowledge about the matching of
the transaction in question and the amount paid to defendant No.1
by middle of May 1992, yet he slept over the matter of so called
fraud for a period of about seven months when all of a sudden,
through his alleged claim for Rs.27,70,000/- against defendant
No.1 he made a representation to Delhi Stock Exchange through
his communication dated 12.1.1993. This was a calculated move to
cause harm and wrongful loss to defendant No.1; this claim is even
otherwise barred by estoppel.
28. It is submitted that at the relevant time the plaintiff had an
obligation to make payment of Rs.14,66,350/- which was due from
the plaintiff to defendant No.1 for the settlement period ending on
8.5.1992. Defendant was bound to discharge this liability. It is
stated that although the rates of opening and closing of transaction
at the floor of defendant No.2 may be different the rates at which
the transaction had actually taken place between the members
during the course of the day; no hard and fast rules of calculation
of difference of the value of a particular day is applicable; this is
because of the fluctuating situation of the rates between the
settlement period and settlement dates as fixed by defendant No.2.
There is no question of any fraud having been played by the
defendants upon the plaintiff. It is stated that the plaintiff is a
chronic litigant and has filed several cases against the defendant
No.2; the imaginary loss set up by the plaintiff as per his own
calculation is wrong and denied.
29. So far as the raising of difference bills by defendant No.1 on
the plaintiff, payment of one bill for Rs.1,72,450/- had been made
but payment in respect of difference bills for Rs.1,75,950/- has not
been made by the plaintiff to defendant No.1. Plaintiff has sold his
membership ticket to some other person without settling the claim
of defendant No.1 which claim is alive and subsisting against the
plaintiff. The plaintiff has no legal right to ask for a refund of
payment of Rs.1,72,450/- made by him to defendant No.1.
30. In the counter claim, it has been submitted that there are
three payments due from the plaintiff i.e. a sum of Rs.2,72,250/-,
Rs.1,75,950/- and an amount of Rs.15,122.50 as also interest
accruing thereon.
31. A sum of Rs.2,72,250/- was collected by the plaintiff from the
defendant No.2 and is duly reflected in the payment of adjustment
list issued by defendant No.2 on 06.4.1992. Thereafter the plaintiff
took the same payment from defendant by means of cheque
No.371123, cleared by the bankers of M/s B.K.Jalan & Co. on
20.9.1992 for which a claim has been lodged against the plaintiff
by defendant no.1 with defendant No.2.
32. The difference bill in the sum of Rs.1,75,950/- dated
27.4.1992 had been lodged by defendant no.1 with defendant No.2
against the plaintiff which matter is also pending.
33. The third amount of Rs.15,122,50/- is payable by the plaintiff
on account of the return of the 50 shares of SIE Ltd. which was
returned to the plaintiff as bad delivery through defendant‟s bill
no.5839 dated 29.10.1992. A total sum of Rs.4,63,322.50 is
payable by the plaintiff to the defendant besides interest @ 18%
per annum calculated at Rs.5,31,000/- is also payable totaling a
sum of Rs.9,94,322.50.
34. Replication to the written statement and written statement to
the said counter claim has been filed by the plaintiff reiterating
and averments made in his plaint while refuting the submission
made by the defendant in the counter claim.
35. On 31.7.1998, the application filed by defendant No.1 under
Section 34 of the Arbitration Act 1940 seeking a stay of the present
suit proceedings was dismissed. Stand of the plaintiff was that
since both the plaintiff and defendant No. 1 have ceased to be
members of Defendant No. 2, no recourse can be taken to
arbitration.
36. On 29.7.2002, the following issues were framed :-
1. Whether the suit is barred by limitation? OPD
2. Whether the plaintiff is entitled to interest, if so, at
what rate and what amount ?OPP
3. Whether the plaintiff is entitled to a decree of
mandatory injunctions against defendant No.2.? OPP
4. Whether the counter claim of defendant No.1 is within
limitation? OPD
5. If the Issue No.4 is answered in affirmative, whether the
defendant No.1 is entitled to recover the amount of counter
claim from the plaintiff? OPD
6. Whether the defendant No.1 is entitled to any interest, if
so, at what rate and what amount ? OPD
7. Relief.
37. On 5.2.2003, on the application filed by the plaintiff under
Order 39 Rule 1 & 2 CPC and Order 38 Rule 5 CPC seeking
attachment before judgment against defendant No.1 and the
alternate prayer against defendant No.2 not to allow any change in
the constitution of its membership was dismissed. In view thereof
counsel for the plaintiff has conceded that issue No.3 no longer
survives and he is not pressing his prayer for a decree of
mandatory injunction against the defendant No.2.
38. Matter was listed for evidence, the plaintiff has examined
two witnesses namely the plaintiff Hari Om Maheshwari as PW-1
and Mr. Vinod Kumar Dua as PW-2. The defendants in spite of
opportunity did not lead any evidence. Evidence of defendant No.1
stood closed on 13.1.2009. Evidence of defendant No.2 was also
closed on the same day and a statement was made on his behalf
that he does not wish to lead any evidence in the case.
39. Arguments have been heard on behalf of the plaintiff; none
has appeared to assist this Court on behalf of the defendants. The
issue-wise findings are as follow:
40. ISSUE NO.1
The onus to discharge this issue was on the defendants. No
evidence has been led by the defendants on this score. No
argument has also been addressed. Under Section 3 of the
Limitation Act, 1963 there is a mandate upon the Court to dismiss
any suit which is barred by the law of limitation even though it has
not been set up as a defence. Onus is thus cast upon the Court to
examine this issue. The cause of action in the instant case has
arisen upon the transactions purported to have been made
between the plaintiff and the defendant No.1 relating to the
purchase of 3,000 shares of Bindal Agro, 35,000 shares of Oswal
Agro for a settlement ending on 08.5.1992. On 15.5.1992, the
defendant No.2 had supplied the statement of account to the
plaintiff for the settlement ending on 08.5.1992.
41. Under Article 14 of the First Schedule of the Limitation Act
1963 for a transaction relating to delivery of goods, the period of
three years has to be computed from the date of the delivery of the
said goods. Shares come within the definition of "goods" as
defined in Section 2(7) of the Sale of Goods Act, 1930 and as held
by the Court in Madho Lal Vs. Official Assignee of Bombay AIR
(37) 1950 FC 21.
42. In the instant case the statement of account had been
delivered to the plaintiff on 15.5.1992 for the settlement period
ending on 8.5.1992. Suit filed on 8.5.1995 is within limitation.
43. Issue No.1 is decided in favour of the plaintiff and against
the defendants.
44. ISSUE NO.4
No evidence has been led by the defendant No.1 on this
score. His counter claim is based on three transactions i.e. a
transaction of Rs.2,72,250/- against a bill dated 4.4.1992. The
claim of Rs.1,75,950/- was the amount claimed on a difference bill
dated 27.4.1992. The amount of Rs.15,122.50 was raised on a bill
dated 29.10.1992. The counter claim of the defendant has been
filed on 28.9.1998. Recovery of the aforestated amount is clearly
beyond the period of three years as stipulated under Article 14 of
the Limitation Act. Counter claim is ex-facie barred by limitation.
Issue No.4 is decided against defendant No.1 and in favour of the
plaintiff.
Both these issues relate to the recovery of amounts based on
the counter claim of defendant No.1 from the plaintiff. This Court
has already held that the counter claim of the defendant No.1 is
barred by limitation. No evidence has also been led by the said
defendant on the merits of his claim. Both these issues are
decided against defendant No.1 and in favour of the plaintiff.
46. ISSUE NO.2
No specific issue has been framed on the principal amount
sought to be claimed by the plaintiff. This issue is related to the
issue of interest, however, this appears to be a technical omission
for which the plaintiff should not suffer and prejudice his claim for
the principal amount.
47. The plaintiff has produced two witnesses in his evidence. He
has himself entered the witness box as PW-1 and has reiterated all
the averments made in the plaint which for the sake of brevity are
not being repeated herein.
48. In his cross-examination PW-1 has admitted that he has filed
several suits against Delhi Stock Exchange of which three suits
have been dismissed as withdrawn and one is still pending. He
has exhibited the chopris from his record as Ex.P-1/1 to Ex.P-1/5.
A chopri as detailed is a leaflet which is given to each member of
defendant No.2 i.e. the Delhi Stock Exchange and the transactions
made by the member on any particular day are entered in their
respective chopri; one copy of which is handed over to defendant
No.2. The chopris of the transacting members are matched by
defendant No.2 and thereafter a match list is prepared; however, if
there are any errors the same are rectified pursuant to the
submission made to defendant No.2 by the said respective
members as per the error correction list and thereafter a final
match list is prepared by defendant No.2.
49. Ex.P-1/2 to Ex.P-1/5 are the chopris of the plaintiff. The case
of the plaintiff is that as per his chopri there was no transaction
entered into with defendant No.1 by the plaintiff on 06.5.1992;
that is why his chopris are silent on the recording of any such
transaction. The corresponding chopris of defendant No.1 have
been proved in the testimony of PW-1 as Ex.D-1/1. The
transactions of 06.5.1992 show that 3,000 share @ Rs.75 per share
have been entered in the chopri of defendant No.1 as having been
sold to the plaintiff; another transaction of 9,00 shares of M/s J. P.
Industries @ Rs.241.50 per share has been shown to have been
transacted by defendant No.1 in favour of plaintiff as also a third
entry of 35,000 shares of Oswal Agro @ Rs.126.40 per share has
been shown to have been transacted by defendant No.1 in favour
of the plaintiff. This document has been admitted by the plaintiff
himself in his testimony. It is not a disputed document.
50. In his cross-examination, PW-1 has admitted that the
bargains are entered in the chopri and the said chopri contains
two leafs; one of which is submitted to the Delhi Stock Exchange
and one is retained by the party. He has further admitted that
Ex.P-1/3 is his chopri which does not contain his signature; if there
is any wrong entry, it is corrected by recording the same in the
error book which is another book provided by defendant no.2. He
has admitted that he has not placed on record the copy of his error
correction book, although the error correction book is maintained
by him. He has further stated that all bargains are made as per
the bargaining procedure provided under the bye-laws of
defendant No.2.
51. PW-2 Vinod Kumar Dua is also a member of the Delhi Stock
Exchange.
52. In his cross-examination, he has stated that Chopri is a book
which is issued by defendant No.2 to its all trading members and
bargains are recorded in this book which is a daily transaction
book; if „Sauda‟ is matched by two brokers then there is no need to
make any entries in the error correction book. After the errors
are corrected in the error correction book the bargain becomes a
contract between the parties.
53. From this evidence which has come on record, it is clear that
both the plaintiff and the defendant No.1 were required to make
their respective entries in their chopris; one leaflet of this chopri
had to be submitted by the plaintiff and defendant No.1 to
defendant No.2. In case there was any error the same has to be
pointed out by the respective person to defendant No.2 after
making entries in the error correction book. Thereafter, a final
match list is prepared by defendant No.2.
54. In the instant case, the plaintiff has stated that his chopri
Ex.P-1/3 did not contain any entry of any transaction dated
06.5.1992. He has, however, admitted that Ex.D-1/1 is the
corresponding chopri of defendant No.1 where the said
transaction of 3,000 shares of Bindal Agro and 35,000 share of
Oswal Agro has been recorded. If this was an error as has been
contended by the plaintiff it was his duty to list this error in the
error correction book and submit it to defendant No.2. PW-1 has
admitted that he was, in fact, maintaining the error correction
book. He has also admitted that he has not filed on record the said
error correction book. Plaintiff has also not summoned the record
of defendant No.2 to show that if any such error was brought to
the notice of defendant No.2 or not.
55. In his cross-examination he has admitted that he had served
a notice upon defendant No.2 for the production of their original
chopri; however, admittedly no steps had been taken thereafter
by the plaintiff to either summon the second leaflet of the chopri of
defendant No.2 which would have reflected the submission sought
to be submitted by the plaintiff that there was no entry of the
transactions alleged of 06.5.1992; the error correction book has
also not been placed on record or proved by the plaintiff.
56. PW-2 has admitted that all bargains are not entered in the
error correction book and it is only a mistake in the chopris which
are corrected in the error correction book; if there was any error
in the transactions of 06.5.1992 it was incumbent upon the
plaintiff to have placed on record the error correction book to
substantiate this submission.
57. Match list of 07.5.1992 and has been placed on record. This
document reflects that it is hand delivered in order that necessary
corrections can be pointed out by the respective parties before the
final match list is prepared. The consolidated/final match list for
the settlement ending on 08.05.1992 prepared by defendant No. 2
has been proved as Ex.P-1/7. This final match list reflected the
two transactions between the plaintiff and M/s B.K.Jalan & Co. i.e.
3,000 shares of Bindal Agro sold @ Rs.75 per share and 35,000
shares of Oswal Agro sold by defendant No.1 to the plaintiff @
Rs.126.40 per share.
58. This is the statement of account for the period ending
8.05.1992 and reflects that an amount of Rs.14,66,550/- is due to
M/s B.K.Jalan & Co. by the plaintiff; membership number of
defendant No.1 being No.239 and membership number of the
plaintiff correctly reflected as No.273.
59. Even as per his own showing and the documents proved by
the plaintiff this transaction/bargain stood complete on 8.5.1992 in
terms of this final match list prepared by defendant No.2 showing
that the aforestated two transactions.
60. Plaintiff has also not been able to cite before this Court any
bye-law or point out any provision either in the articles of
association or regulations of defendant No.2 to substantiate the
submission, as has been ardently argued that a contract is
constituted only when the chopris of both the parties are
correspondingly signed and in the absence of which there could be
no contract. On this count, the plaintiff has admitted that chopri
of defendant No.1 had reflected the transaction of 6.5.1992; this
was an error; the error correction book was maintained by the
plaintiff; the same has not been placed on record; reasons are best
known to the plaintiff himself for not doing the same; the plaintiff
has also not placed before this court the second leaflet of the
chopri which as per procedure had to be submitted by the
respective parties to defendant No.2. The final matching list
prepared by defendant No.2 Ex.P-1/7 clearly shows that this
transaction of 3,000 share of Bindal Agro and 35,000 shares of
Oswal Agro had been sold by defendant No.1 and purchased by
the plaintiff for the settlement ending on 8.5.1992.
61. In 1999 (Supl.) Aub LR 32 (Bombay) the Stock Exchange
Mumbai Vs. Vinay Bubna and others it has been held by the
Division Bench of the High Court of Bombay that the bye-laws of
the Exchange are framed in exercise of the powers conferred
under Section 9 of the Securities Contracts (Regulations) Act; they
are statutory.
62. Chapter VI of the bye-laws of defendant No.2 contains the
procedure for comparison of bargains. Bye-law 74 stipulates that
it shall be the duty of each member with a view to prevent
mistakes to compare each contract in the business day following
the one to which the bargain is made. Bye-law 78 stipulates that a
member‟s failure to compare his contract as herein provided and if
a difference which would have been discovered on such a
comparison is subsequently discovered, the defaulting member
shall not be entitled to call for performance of the contract except
as it appears in the books of the other pending to the transaction.
By the application of these by-laws which have a statutory and
binding force plaintiff is even otherwise estopped from raising any
dispute qua a transaction for which he did not point out the
error/mistake on the following business day i.e. at best by
9.5.1992; the following working day after 8.5.1992.
63. As such the transaction between the plaintiff and defendant
No.1 as recorded on 6.05.1992 was a valid and binding contract
between the parties.
64. Plaintiff has submitted that he was aggrieved by this final
match list but no action was taken by defendant no.2 in this
regard. He has drawn the attention of this Court to the first
communication dated 15.5.1992 mark B addressed by the plaintiff
to the executive director of defendant No.2. This document has
not been proved as per the rules of evidence. It has only been
marked. The proper course would have been to have summoned
the record of defendant No.2 to prove that this letter had in fact
been sent by the plaintiff to defendant No.2. This course has not
been adopted.
65. The second communication relied upon by the plaintiff is
dated 12.1.1993. As per the averments made in the plaint, the
plaintiff had alleged fraud qua defendant No.1. Defendant No.1
had reported this matter to defendant No.2 vide this
communication and had raised a claim of Rs.27.70 lacs against
defendant No.1. Admittedly, this document has neither been
produced nor proved. It has not seen the light of the day.
66. The next communication dated 4.6.1993 Mark D has been
relied upon by the plaintiff as a letter addressed by him to
defendant No.2. This document has also not been proved as per
law. The plaintiff did not take recourse to summoning the record
from the office of defendant No.2 to prove that he had in fact sent
this communication to defendant No.2 wherein he had set up claim
of Rs.27.70 lacs against the defendant No.1. This communication
cannot be looked into.
67. Mark G is a communication dated 27.7.1993 purported to
have been addressed by the executive director of defendant No.2
to the plaintiff. This document has also not been proved. Even
otherwise, it makes a reference to the counter claim of
Rs.2,72,250/- raised by defendant No.1 against the plaintiff; it does
not make any reference to the plaintiff‟s claim against the
defendant No.1.
68. The communication dated 3.8.1993 Mark H purported to
have been addressed by the plaintiff to the executive director of
defendant No.2 has again not been proved as per law. This
document also cannot be looked into.
69. Mark I is a communication dated 4.8.1993 written by
defendant No.2 and addressed to the plaintiff wherein he has been
requested to make the payment in terms of the decision of
defendant No.1; this document has also not been proved as per
law.
70. In the plaint, it has been averred that on 09.11.1993 a letter
was addressed by executive director of defendant No.2 wherein it
has been stated that the Board has considered the matter and
granted approval to the plaintiff to approach the authority in law
to recover his dues from the defendant No.1. This letter has
neither been produced nor proved. This document has been
placed on record along with the reply filed by the plaintiff to the
application of defendant No.1 under Section 34 of the Arbitration
Act but the plaintiff has not cared to prove it in the course of the
evidence.
71. The subsequent theory of this being a fraud played upon the
plaintiff in collusion of defendant No.1 and defendant No.2 has not
in any manner been proved by the plaintiff. The communications
and the claims as sought to be set up by the plaintiff against the
defendant Nos.1 to 2 have not been proved.
72. The subsequent sale of the shares by the plaintiff in the
market were a transaction conducted by the plaintiff for which the
defendant No.1 cannot in any manner be held liable for a loss, if
any, incurred by the plaintiff. The transaction of 06.5.1992 stood
concluded between the plaintiff and the defendant No.1 as per the
settlement date of 8.5.1992.
73. Plaintiff is not entitled to recover any amount. Since the
principal amount is not recoverable by the plaintiff the question of
payment of interest does not arise.
74. Issue No.2 is decided against the plaintiff and in favour of
the defendants.
75. RELIEF:
76. Suit of the plaintiff is dismissed. Counter claim of the
defendant No. 1 is also dismissed. No order as to costs. Decree
sheet be prepared. File be consigned to Record Room
(INDERMEET KAUR)
JANUARY, 29 2010/nandan JUDGE
