TaxTMI 
TaxTMI 
TaxTMI 
1990 (4) TMI 199
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion. Her application was seconded by two members of the stock exchange as per requisite rules. On March 2, 1989, the stock exchange addressed a letter to petitioner No. 1 enquiring whether late Pradip Harkisondas Dalai had made any payment in respect of the outstanding liabilities of Harkisondas Laxmidas. The letter also sought details regarding the constitution of the firm of Harakshah v/hich was a client of Harkisondas Laxmidas and whether dues were required to be paid by Harakshah to Harkisondas Laxmidas. It seems that Harkisondas Laxmidas was a firm of long standing. The operations of this firm, however, from the beginning of 1970 had become highly speculative. The speculative dealings were being conducted in the name of another firm, Harakshah and Co., which is said to have been promoted by the firm of Harkisondas Laxmidas. Originally, in the firm of Harkisondas Laxmidas, there were two partners, Harkisondas Laxmidas (father of Pradip) and his brother, Manharkant Laxmidas. After the death of Harkisondas Laxmidas in 1957 or thereabouts, the son of Harkisondas, Mukul Harkisondas, who is the brother of Pradip, became a partner along with Manharkant Laxmidas. In the firm of Hara....
X X X X Extracts X X X X
X X X X Extracts X X X X
....89, one of the items on the agenda was to consider the membership application of the first petitioner. Annexure 5 of the agenda note for this meeting sets out that the stock exchange has on their record claims of members in the capacity of creditors admitted against Harkisondas Laxmidas involving an amount of Rs. 32,34,900 as per the enclosed list as on October 30, 1982. At the meeting of the governing board of the stock exchange, Bombay, held on May 19, 1989, the application of the first petitioner for transfer of membership of late Pradip Harkisondas in favour of the first petitioner in pursuance of the nomination made by petitioners Nos. 2, 3 and 4 in her favour, was considered. As required by rule 28 of the Rules of the stock exchange, a ballot was taken in which two members of the governing board voted in favour of admitting the first petitioner as a member while 15 members voted against admitting the first petitioner as a member. As a result, it was decided by a majority of 15 : 2 not to admit the first petitioner as a member of the stock exchange. By a letter dated May 24, 1989, the first respondent informed the first petitioner about the rejection of her application by the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to ensure fair dealing and to protect investors. It has also to consider whether it would be in the interest of the trade as also in the public interest to grant recognition to the stock exchange. The first respondent has been recognised by the Central Government under this Act and a notification to that effect being Notification No. SRO 27828, dated August 31, 1957, has been published in the Gazette of India, Extraordinary, Part II, section 3, dated August 31, 1957. The first respondent is, therefore, a statutory body and the Central Government is vested with supervisory powers under the said Act over the functioning of the first respondent. The stock exchange is, inter alia, established to assist, regulate and control dealings in securities and to ensure fair dealings. These are objects of public interest. Therefore, looking to the wide interpretation given to article 226 of the Constitution, the first respondent can be considered, for the purpose of this petition, as amenable to the jurisdiction of the High Court under article 226 of the Constitution. It is submitted by the petitioners that, by denying membership to the 1st petitioner, the stock exchange has violated the right ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....case of a deceased member, under rule 9, on his death, his right of nomination ceases and vests in the exchange. There is, therefore, no property in membership. Under rule 11(b), however, "the legal representatives of a deceased member or his heirs or the persons mentioned in Appendix C to these rules may, with the sanction of the governing board, nominate any person eligible under these rules for admission to membership of the exchange as a candidate for admission in the place of the deceased member". The nomination does not, however, automatically secure membership of the stock exchange. Rule 28 provides "the election of all new members (whether they shall have been nominated or not) shall be by ballot and a candidate shall be deemed duly elected if approved by a majority of not less than two-thirds of the votes cast at a meeting of the governing board at which not less than one-half of the total number of the members of the governing board are present in addition to the Government nominee (if any) attending the meeting" Rule 28, therefore, makes it clear that even persons who have been nominated as per the prescribed rules will have to be elected by the governing board by the r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ging suitability may be left by members to the mature and experienced judgment of respected members of the profession such as those constituting its governing board or managing committee. The members may consider these persons as the best and most qualified to decide on the suitability of a new candidate for membership. If a governing board, in exercise of its discretion, decides that the person is unsuitable, its decision cannot be labelled as arbitrary or unreasonable simply because it is in the exercise of its discretion. It would also be incorrect to call such discretion unguided. Such discretion is required to be exercised bearing in mind the aims and objects of the organisation. Of course, if the decision is not bona fide, or is based on ill-informed prejudice, it can be challenged as a mala fide exercise of discretion. In the absence of any material which points to a mala fide exercise of discretion, the exercise of discretion is not per se bad in law. A decision of the governing board arrived at bona fide not to grant membership to a candidate is not violative of article 19(1)(g). The right to regulate admission to a professional body including a right to reject unsuitable ....