Stock exchange investor fund claims must be decided under the governing bye-laws and guidelines in force when the claim arose.

A writ petition against a stock exchange and its trust was maintainable because the investor protection fund claims arose from a public function under a statutory bye-law scheme, not a purely private contract. The claims were governed by the 1996 Guidelines and 2000 Bye-laws in force when they were lodged, and the 2002 Guidelines operated prospectively only. Compensation was available for losses caused by the defaulting trading member, subject to deduction of amounts already received and the prescribed ceiling; rejection based on NEAT-matching and later guidelines was unsustainable.

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Issues: (i) Whether the writ petition was maintainable against the stock exchange and its trust in relation to claims for compensation from the investor protection fund; (ii) whether the claims were governed by the 1996 Guidelines and the 2000 Bye-laws or by the 2002 Guidelines; and (iii) whether the petitioners were entitled to compensation for losses caused by the defaulting trading member.

Issue (i): Whether the writ petition was maintainable against the stock exchange and its trust in relation to claims for compensation from the investor protection fund.

Analysis: The stock exchange performed a public function in a regulated statutory framework and the dispute concerned enforcement of obligations arising from the bye-laws governing the investor protection fund. The challenge was not to a purely private contract, but to the manner in which claims under a statutory and bye-law based scheme were processed and rejected. A writ remedy was therefore available.

Conclusion: The writ petition was maintainable.

Issue (ii): Whether the claims were governed by the 1996 Guidelines and the 2000 Bye-laws or by the 2002 Guidelines.

Analysis: The claims were lodged and processed when the 1996 Guidelines and the 2000 Bye-laws were in force. The 2002 Guidelines contained no express or implied retrospective operation. The governing scheme required claims to be tested under the then-existing bye-laws and guidelines, and the later guidelines could not be used to disqualify accrued claims.

Conclusion: The claims were governed by the 1996 Guidelines and the 2000 Bye-laws, and the 2002 Guidelines had only prospective operation.

Issue (iii): Whether the petitioners were entitled to compensation for losses caused by the defaulting trading member.

Analysis: Chapter XIII of the bye-laws contemplated compensation to persons suffering loss from a trading member being declared a defaulter, limited to actual loss after deducting amounts already received. The 1996 Guidelines specifically covered money in the hands of the trading member pending investment or improperly dealt with money, and did not require that the transaction must be reflected in the NEAT system. The exclusion clauses relating to loans, deposits, or speculative transactions were not attracted on the facts. The rejection of claims on the basis of NEAT-matching and the later guidelines was unsustainable.

Conclusion: The petitioners were entitled to compensation, subject to deduction of amounts already received and subject to the prescribed ceiling.

Final Conclusion: The impugned rejection letters were quashed, and the stock exchange was directed to compensate the petitioners in accordance with the governing bye-laws and 1996 Guidelines.

Ratio Decidendi: Where a statutory compensation scheme under stock exchange bye-laws has accrued and a claim is made while the governing guidelines are in force, a later guideline without retrospective effect cannot be invoked to defeat the claim; compensation must be decided under the operative bye-laws and guidelines applicable when the claim arose.

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