Tulzapurkar, J. - (1.) This appeal by certificate is directed against the judgment and order dated October 14, 1969 of the Delhi High Court dismissing the appellants' Civil Writ Petition (520 of 1969) whereby the appellants sought to quash certain directions issued on June 28, 1969 and two resolutions passed on July 2 and 3, 1969, by the Delhi Stock Exchange, which adversely affected them.
(2.) The Delhi Stock Exchange Association Ltd., New Delhi (the Respondent herein) is a company incorporated under the Indian Companies Act, 1913. It has received recognition from the Central Government under S. 4 of the Securities Contracts (Regulation) Act (XLII) of 1956 for the purpose of the said Act. One Desh Bandhu Gupta (Appellant No. 2) carried on business as a share-broker in the firm name and style of Desh Bandhu Gupta and Co. (Appellant No. 1) and as such was a member of the Respondent. By a notification No. S. O. 2561 dated June 27, 1969, issued under S. 16(1) of the Securities Contracts (Regulation) Act, 1956 the Central Government banned with immediate effect all forward trading in shares at all the stock Exchanges in the country by declaring that "no person, in the territory to which the said Act extends, shall, save with the permission of the Central Government, enter into any contract for the sale or purchase of securities other than such spot delivery contract or contract for cash or hand delivery or special delivery. In any securities as is permissible under the said Act and the rules, bye-laws and regulations of a recognised Stock Exchange", but as regards the forward contracts which remained outstanding as on that date it was directed under the proviso that these could be closed or liquidated in the normal manner. On June 28, 1969 at an emergent meeting held at 10.30 a.m. the Board of Directors of the Respondent considered the abnormal situation arising from the ban imposed under the notification and decided to issue a notice to all its members directing them to submit their lists of outstanding transactions in all the securities on the cleared list and to deposit along with it interim margins to cash or approved shares calculated on the basis of differences between the rates of the last clearing and certain average specified rates fixed by it. Upon receipt of such notice dated June 28, 1969 from the Respondent the appellant No. 2 addressed a letter of even date to the Board of Directors contending that the demand for interim margins was by way of "carry over" of the forward transactions which in view of the ban contained in the notification was illegal and instead of submitting a list of his outstanding transactions on the basis of the rates which had been fixed by the Respondent he enclosed a statement of his outstanding transactions adjusted at the last official closing rates which were higher than the rates fixed by the Respondent,thus suggesting that he was not liable to pay anything but was entitled to receive some amount at the foot of closing out or liquidating his outstanding transactions. By a rejoinder of the same date the Board of Directors of the Respondent reiterated that its action in fixing the interim clearing rates in the concerned securities and demanding interim margins was in order and that the adjustment of outstanding business claimed by appellant No. 2 was utterly wrong and as such appellant No. 2 was called upon to comply with its notice by submitting an amended list in accordance with the directions together with the differences, if any, immediately. By a telegram dated June 30, 1969, which was confirmed by a letter of even date the appellant No. 2 was again called upon to submit his list along with the amount of differences, if any, by July 1, 1969 falling which he was informed that necessary action would be taken against him. As the appellant No. 2 stuck to his stand, the Respondent by its letter dated July 1, 1969 once again stressed that the action of the Board in calling for the list and margin money was in order and in accordance with the rules, bye-laws, regulations, practices, usages and previous resolutions of the Board and gave further opportunity to him to comply with the directions by July 2, 1969 up to 11.00 a.m. failing which further action was threatened. At the meeting of the Board of Directors of the Respondent held on July 2, 1969 at 4.00 p.m. the Board noticed that all members, except appellant No. 2, had complied with its directions and on a consideration of the entire matter came to the conclusion that appellant No. 2 was intentionally evading to comply with its directions and to pay the required amount of margins and, therefore, resolved that appellant No. 2 trading in the name and style of Desh Bandhu Gupta and Co. be declared a defaulter for such failure and a notice in that behalf be pasted on the Notice Board and appellant No.2 was informed about it by a telegram and a letter. The resolution passed on July 2, 1969 declaring appellant No. 2 as a defaulter exposed him under the bye-laws to rigorous inquiry by the Respondent into his financial condition and entailed other disabilities including termination of his membership of the Respondent under Bye-Law 308 read with Article 43(iv) of the Articles of Association. Appellant No. 2 thereupon filed a writ petition (Civil Writ No. 520 of 1969) in Delhi High Court challenging the directions of the Respondent demanding payment of interim margins as also its resolution declaring him to be a defaulter. It appears that after the filing of the petition the Board of Directors of the Respondent at its meeting held on July 3, 1969 passed another resolution calling upon the appellant No. 2 under Art. 29 of the Articles of Association to deposit additional security of Rs. 20,000/- failing which further action was threatened. The writ petition was amended and prayer seeking to quash the second resolution was added. The main contention of the appellant No. 2 was that all his transactions which remained outstanding as on June 27, 1969 were forward contracts pertaining to cleared securities and as such were affected by the Notification which banned all forward contracts, that these had to be adjusted at the last official closing rates, that the action of the Respondent in calling upon him to deposit interim margins calculated on the basis of certain average specified rates fixed by it was not warranted by the proviso therein but in fact amounted to carry over of those transactions which had been prohibited and, therefore illegal and that both the resolution, one dated July 2, 1969 whereby he was declared to be a defaulter and the other dated July 3, 1969 whereby he was called upon to deposit Rs. 20,000/- as additional security were contrary to law and unjust and, therefore, the said action as well as the resolutions were liable to be quashed. The appellant No. 2 further contended that by passing the two resolutions, particularly the first one dated July 2, 1969 in contravention or breach of statutory Bye-laws and Regulations his fundamental right to carry on business under Article 19(1)(f) of the Constitution had been infringed and, therefore, issuance of appropriate writ quashing the directions issued on June 28, 1969 and the two resolutions dated July 2 and 3, 1969 was sought.
(3.) By its reply filed on July 15, 1969 the Respondent raised a preliminary objection to the maintainability of the petition. It was contended that the relationship between appellant No. 2 and the Respondent was contractual resulting from the Memorandum and Articles of Association and the Rules, Bye-laws and Regulations made under the powers given by the Articles of Association, and since the grievance made in the writ petition related to contractual rights and obligations between the parties and no question of enforcement of any statutory right or obligation arose the remedy under writ jurisdiction was not available. On merits it was contended that the construction sought to be placed by the appellants on the proviso contained in the Central Government Notification, which dealt with closing out or liquidating the transactions outstanding as on June 27, 1969 was not correct, that under the said proviso such transactions were permitted to be closed or liquidated in accordance with the rules, bye-laws and regulations of the Respondent and, therefore, the directions issued by its Board of Directors on June 28, 1969 to all its members including appellant No. 2 to submit their lists of outstanding transactions and to pay interim margins on the basis of the average specified rates fixed by it were proper and lawful and both the resolutions were legal and justified. The respondent, therefore, prayed for dismissal of the writ petition.;