Kerala High Court
Cochin Stock Exchange Ltd. P.B.No.3529 vs P.P.Zibi Jose on 8 October, 2018
Equivalent citations: AIRONLINE 2018 KER 1069
Author: P.B.Suresh Kumar
Bench: P.B.Suresh Kumar
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE P.B.SURESH KUMAR
MONDAY ,THE 08TH DAY OF OCTOBER 2018 / 16TH ASWINA, 1940
SA.No. 884 of 1996
AGAINST THE JUDGMENT AND DECREE IN AS 37/1993 of SPL.C SPE/CBI-
IVTH ADDL.DISTRICT COURT,EKM DATED 13-03-1996
AGAINST THE JUDGMENT AND DECREE IN OS 1555/1988 of PRL.MUNSIFF'S
COURT.,ERNAKULAM DATED 10-08-1992
APPELLANT/RESPONDENT/DEFENDANT:
COCHIN STOCK EXCHANGE LTD. P.B.NO.3529, 38/1431,
KALOOR ROAD EXTENSION, COCHIN-682035 REPRESENTED BY
ITS PRESIDENT. *CORRECTED
NAME OF THE APPELLANT COMPANY CHANGED FROM M/S.COCHIN
STOCK EXCHANGE LIMITED TO M/S.OUR INVESTMENTS
ENTERPRISE LIMITED AS PER ORDER DATED 17-8-16 IN
IA.1590/16
BY ADV. SRI.GEORGE ZACHARIAH ERUTHICKEL
RESPONDENT/APPELLANT/PLAINTIFF:
P.P.ZIBI JOSE, AGED 42, PROPRIETOR, P.P.ZIBI JOSE &
CO., SHARE AND STOCK BROKERS, RAVIPURAM, M.G.ROAD,
ERNAKULAM, KOCHI-16
BY ADVS.
SRI.C.T.JOSEPH
THIS SECOND APPEAL HAVING BEEN FINALLY HEARD ON 08.10.2018, THE
COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
2
SA.No. 884 of 1996
C.R
JUDGMENT
The defendant in the suit is the appellant. They are a recognized Stock Exchange under the Securities Contracts (Regulation) Act, 1956 (the Act). The plaintiff was a member of the defendant. The suit was essentially one challenging the decision of the defendant declaring the plaintiff as a defaulter and debarring him from carrying on business as a share and stock broker on the floor of the defendant. Though the suit was dismissed by the trial court initially, the appellate court interfered with the decision of the trial court and remitted the suit for fresh disposal. The suit was dismissed by the trial court even thereafter. This time, the appellate court reversed the decision of the trial court and decreed the suit. Though this Court reversed the decision of the appellate court and restored the decision of the trial court in this second appeal, the Apex Court set aside the decision of this Court in Civil Appeal No.2981/2012 and remitted the second appeal for fresh disposal holding that it was impermissible for this Court to reverse the decision of the appellate court on facts without formulating and deciding the substantial question of law involved in the matter in 3 SA.No. 884 of 1996 favour of the appellant. It is in this background that the matter has come up for hearing again.
2. Now, I shall refer to the relevant facts. The plaintiff is a member of the defendant since 1986 and he was, accordingly, carrying on business as a share and stock broker on the floor of the defendant. Ext.A1 is the bye-laws of the defendant. On 21/12/1987, the Council of Management of the defendant declared the plaintiff as a defaulter in purported exercise of its power under bye-law 312 of Ext.A1 bye-laws. Ext.B3 is the decision taken by the Council of Management of the defendant in this connection and the same was communicated to the plaintiff on 23/12/1987. A member, who is declared as a defaulter under bye-law 312 of Ext.A1 bye-laws, would cease to be a member of the defendant and he cannot do any more business as a share and stock broker on the floor of the defendant in terms of Ext.A1 bye-laws. The suit was instituted by the plaintiff in the above circumstances seeking a declaration that Ext.B3 decision of the Council of Management of the defendant is null and void and a decree of mandatory injunction directing the defendant to restore the membership of the plaintiff. The defendant contested the suit contending that Ext.B3 is a decision taken in accordance with Ext.A1 bye-laws and in good faith and, 4 SA.No. 884 of 1996 therefore, the suit is barred under Section 29 of the Act.
3. As noted, the trial court accepted the said case of the defendant and dismissed the suit initially as barred under Section 29 of the Act. The appellate court, however, set aside the said decision of the trial court on the ground that the bar under Section 29 of the Act does not apply, if the decision is not one taken in good faith. The suit was accordingly remitted by the appellate court for fresh disposal. The trial court thereupon found that the impugned decision is one taken in good faith and dismissed the suit again. The plaintiff challenged the said decision of the trial court in appeal. This time, as noted, the appellate court found that Ext.B3 decision is void insofar as the same was one taken without affording the plaintiff an opportunity of being heard. The appellate court also found that Ext.B3 decision is one taken contrary to Ext.A1 bye- laws. Consequently, the appellate court reversed the decision of the trial court and decreed the suit, declaring that Ext.B3 decision is void and directing the defendant to restore the membership of the plaintiff. The defendant is aggrieved by the said decision of the appellate court.
4. Heard the learned counsel for the appellant as also the learned counsel for the respondent.
5SA.No. 884 of 1996
5. The learned counsel for the appellant, placing reliance on Section 29 of the Act, vehemently contended that there is nothing on record to indicate that Ext.B3 decision is not one taken in good faith and as such, the suit is barred under Section 29 of the Act. According to the learned counsel, in so far as Ext.B3 decision is one taken in good faith, the same cannot be challenged before a civil court on any grounds whatsoever including non-compliance of principles of natural justice.
6. Per contra, the learned counsel for the respondent contended that the finding of the appellate court that Ext.B3 is a decision taken without affording the plaintiff an opportunity of being heard, is not seen challenged by the defendant in the second appeal. According to the learned counsel, in so far as the defendant does not dispute the fact that Ext.B3 is a decision taken violating the principles of natural justice, the bar under Section 29 of the Act does not apply and the decision of the appellate court is perfectly in order.
7. I have given my thoughtful consideration to the arguments advanced by the learned counsel on either side and the following substantial question of law is framed accordingly for decision in the second appeal:
6SA.No. 884 of 1996
"Does Section 29 of the Act bar suits challenging decisions of stock exchanges governed by the Act on grounds of non-compliance of the principles of natural justice?"
8. The appellate court noticed that although a member of the defendant who has been declared as a defaulter can seek re- admission as a member , the Council of Management of the defendant can refuse readmission in its discretion. It was also noticed by the appellate court that even if a member who is declared as a defaulter is re-admitted as a member, he is permanently disqualified from being elected as an office bearer of the defendant. The appellate court consequently found that a decision of the Council of Management of the defendant declaring a member as a defaulter is a decision involving serious civil consequences and that such decisions cannot, therefore, be taken without affording the member an opportunity of being heard. It was also found by the appellate court that eleven grounds are stated in Ext.B3 decision to support the decision to declare the plaintiff a defaulter and the plaintiff was put to notice prior to the said decision only on one of the said grounds. Ext.A14 is the notice issued by the defendant to the plaintiff in this connection. It is 7 SA.No. 884 of 1996 seen that even Ext.A14 notice was not one calling upon the plaintiff to show cause why he shall not be declared as a defaulter. Instead, it was only a notice calling upon the plaintiff to deliver the shares referred to therein and informing him that if he does not comply with the said demand, disciplinary action will be taken against him. It is in the aforesaid circumstances that the appellate court found that Ext.B3 is vitiated for non-compliance of the principles of natural justice.
9. The appellant does not dispute the fact that the decision impugned by the plaintiff in the suit is one involving serious civil consequences as far as the plaintiff is concerned. The appellant does not also seem to challenge the finding of the appellate court that the impugned decision is one taken without giving the plaintiff an opportunity of being heard, for, no ground is seen raised in the second appeal challenging the said finding of the appellate court. No question is also seen framed in the second appeal for reversal of the said finding on any ground whatsoever. In the said circumstances, the findings rendered by the appellate court that Ext.B3 is a decision involving serious civil consequences as far as the plaintiff is concerned and that the same is vitiated for non- compliance of the principles of natural justice, are perfectly in order. 8 SA.No. 884 of 1996
10. It is beyond dispute that Ext.B3 is a decision taken by the defendant in purported exercise of the power conferred on it under bye-law 312 of its bye-laws. As rightly contended by the learned counsel for the appellant, the materials on record do not indicate that Ext.B3 is not a decision taken in good faith. Section 29 of the Act reads thus:
"29. Protection of action taken in good faith.
-No suit, prosecution or other legal proceeding whatsoever shall lie in any court against the governing body or any member, office bearer or servant of any recognised stock exchange or against any person or persons appointed under sub-section (1) of section 11 for anything which is in good faith done or intended to be done in pursuance of this Act or of any rules or bye-laws made there under."
No doubt, Section 29 of the Act, prohibits suits against the defendant in respect of decisions taken in good faith under its bye- laws. The question, therefore, is as to whether a suit against the defendant in respect of a decision taken in good faith would lie on the ground of non-compliance of the principles of natural justice.
11. As regards the decisions taken by bodies in the nature of the defendant, especially relating to expulsion of its members, the Apex Court held in T.P.Daver v. Lodge Victoria 9 SA.No. 884 of 1996 No.363, S.C.Belgaum and Others [AIR 1963 SC 1144] that the jurisdiction of civil court is limited and it cannot sit as a court of appeal from decisions of such bodies. It was held by the Apex Court in the said case that civil court can set aside the orders of such bodies, only if such bodies act without jurisdiction or does not act in good faith or act in violation of the principles of natural justice. The relevant passage in the judgment of the Apex Court dealing with the said proposition reads thus:
"The jurisdiction of a civil court is rather limited; it cannot obviously sit as court of appeal from decisions of such a body; it can set aside the order of such a body, if the said body acts without jurisdiction or does not act in good faith or acts in violation of the principles of natural justice as explained in the decisions cited supra. "
Section 29 of the Act only embodies in it the principle that the jurisdiction of the civil court can be availed of by persons aggrieved by the decisions of bodies like the defendant if they do not act in good faith. That does not mean that civil courts will not have jurisdiction, if such bodies act without jurisdiction or in violation of the principles of natural justice. Where a statute confers upon an administrative body functions which involve decision making 10 SA.No. 884 of 1996 affecting to their detriment the rights of other persons, there is a presumption that the legislature intended the administrative body to act fairly towards those persons who will be affected by their decision. [See Hillingdon London Borough Council v. Commission for Racial Equality ((1982) A.C. 779)]. Fairness demands, no doubt, an opportunity of being heard before an adverse decision is taken. The rule 'audi alteram partem', 'hear the other side' is so fundamental to any civilized legal system and in the case of statutory decisions, it is presumed that the legislature intended that a failure to observe it should render null and void any decision reached in breach of this requirement. It is so held in O'Reilly and Others v. Mackman and Others [(1983) 2 A.C. 237]. The relevant passage of the said judgment reads thus:-
"But the requirement that a person who is charged with having done something which, if proved to the satisfaction of a statutory tribunal, has consequences that will, or may, affect him adversely, should be given a fair opportunity of hearing what is alleged against him and of presenting his own case, is so fundamental to any civilised legal system that it is to be presumed that Parliament intended that a failure to observe it should render null and void any decision reached in breach of this requirement."11 SA.No. 884 of 1996
Above all, the principles of natural justice being an integral part of the guarantee of equality under Article 14 of the Constitution, the same are inbuilt in every statute and every decision of the competent authority, whether it is a administrative or statutory, shall conform to the said requirement. [See Delhi Transport Corporation v. D. T. C. Mazdoor Congress and others (AIR 1991 SC 101)]. There is, therefore, no difficulty at all in arriving at the conclusion that even if the decision is one taken in good faith, it will still be invalid if the same is taken violating the principles of natural justice. Viewed from this angle, even though it was unnecessary for the appellate court to examine the legality of Ext.B3 decision, its conclusion has to be confirmed, for, the same is one taken violating the principles of natural justice. The question formulated for decision is thus answered in favour of the respondent.
The second appeal, therefore, fails and the same is, accordingly, dismissed.
Sd/-
P.B.SURESH KUMAR JUDGE