ESQUIRE MONEY GUARANTEES LIMITED vs. BANGALORE STOCK EXCHANGE

1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 2ND DAY OF AUGUST, 2012 PRESENT THE HON’BLE MR. JUSTICE K.L. MANJUNATH AND THE HON’BLE MR. JUSTICE V. SURI APPA RAO WRIT APPEAL No.1614/2008 (GM-RES) BETWEEN: ESQUIRE MONEY GUARANTEES LTD. 4F2, Court Chambers, 35 New Marine Lines, Mumbai. R/by authorized Signatory .. APPELLANT (By Advocate Sri.G.Krishnamurthy) AND: 1. Bangalore Stock Exchange, Stock Exchange Towers, 51, 1st Cross, J.C.Road, Bangalore. R/by General Manager. 2. The Securities & Exchange Board of India, 3rd Floor, D’Monte Building, 32, D’Monte Colony, TTK Road, Alwarpet, Chennai. R/by Executive Director.

2 3. The Union of India, R/by its Secretary, Dept. of Economic Affairs, Ministry of Finance, North Block, New Delhi. .. RESPONDENTS (Advocate M/s Holla & Holla for R-1) (M/s King & Partridge for R-2) (Sri.S.Kalyan Basavaraj, ASG for R-3) - - - - - This WA is filed under Sec.4 of The Karnataka High Court Act to set aside the order passed in WP No.6984/2008 dated 4.9.2008. This Appeal is coming on for final hearing this day, MANJUNATH J. delivered the following: J U D G M E N T The legality and correctness of the order passed in WP No.6984/2006 dated 4.9.2008 is called in question in this appeal. 2. The questions that arise for our consideration in this appeal are: 1. Whether the expulsion of the appellant from the membership of R-1 based on the expulsion order passed by the National Exchange Board of India removing the appellant from its membership is just and proper?

3 2. Whether the appellant is entitled for refund of membership fee paid by him on account of his expulsion from R-1 which amount has been forfeited? 3. On account of the removal of the appellant by the National Stock Exchange Board of India due to non-payment of income tax dues for which car of the appellant was attached and based on the expulsion order of the National Stock Exchange Board of India R-1 has also expelled him from the membership, In the circumstances, appellant filed writ petition to quash the norms relating to multiple stock exchange dated 12.8.1991 and the expulsion order passed by R-1 as per Annexure-Q dated 30.12.2003 and consequently to restore the membership of the appellant or in the alternative to direct R-1 to refund a sum of Rs.30,10,250/- which was collected by R-1 at the time of enrolling the appellant as its member. Learned single Judge after hearing the matter dismissed the writ

4 petition relying upon the judgment of Division Bench of this court in C.R. GOPALASWAMY Vs. UNION OF INDIA AND OTHERS (2000 (3) K.L.J.-1). Therefore, present appeal is filed. 4. Having heard the counsel for the parties, we do not see any merit in this appeal for the following reasons: Appellant was admitted as member of R-1, he was also a member of National Exchange Board of India and that appellant was entitled to become a member of different Exchange Boards known as Multiple Membership. Regulation of 1991 clearly shows that if a member is expelled by any one of the stock exchanges, the remaining stock exchanges can also expel such member automati- cally. Based on the Regulations of 1991, as the appellant was expelled by the National Exchange Board of India, R-1 by issuing a show cause notice passed an order as per Annexure-Q. The appellant who had become member having known the

5 terms and conditions of Regulations of 1991, cannot be permitted to challenge the same by filing a writ petition in 2006 after he was expelled by R-1. Members of the National Exchange Board are governed by the Regulations. Therefore, we do not see any merits in the contention of the appellant that Regulations of 1991 as null and void and does not bind the appellant. 5.

So far as Annexure-Q is concerned, admittedly a show cause notice was issued by R-1 to the appellant. Appellant has also sent a reply. Thereafter an order is passed. In such circumstances, whether the appellant has a right of hearing.

When the Regulation clearly envisages for removal of membership of the appellant automatically on account of the expulsion of him by any one of the Board of Exchanges, there was no necessity for R-1 to give a right of audience before passing the

6 impugned order as per Annexure-Q where R-1 has considered the reply of the appellant. Accordingly, we cannot find fault with the order of expulsion passed by R-1. 6. So far as the alternative prayer is concerned, appellant by paying Rs.30,10,250-00 has enrolled as member of R-1. Membership fee paid by the appellant cannot be refunded under any circumstances. More particularly when he has been expelled on account of the mis-conduct, therefore we are of the view that appellant is not entitled for alternative prayer of refund of Rs.30,10,250/- which was paid as membership fee. Membership fee paid by a member would automatically stands forfeited on account of the expulsion. In the circumstances, we do not see any merits in this appeal.

7 7. Accordingly, the appeal is dismissed. Sd/- JUDGE.

Sd/-

JUDGE. R/030812