TaxTMI 
TaxTMI 
TaxTMI 
2006 (1) TMI 262
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....inal defendant. The suit filed by the plaintiff was for recovery of amount of Rs. 23 lakhs and the contention of the present petitioner was that the said amount was handed over to the present respondent for purchase of shares of State Bank of India, TISCO etc. The petitioners contend that they on various occasions demanded the delivery of shares, but the respondent did not deliver the same and kept on assuring about its delivery. Ultimately the suit as mentioned above came to be filed for refund of Rs. 23 lakhs, paid by the petitioners to the respondent for purchase of shares with 18 per cent interest per annum. The present respondent appeared in the said Special Civil Suit No. 236/1998, before the Joint Civil Judge, Senior Division, Wardha and raised preliminary objection contending inter alia that the Civil Court could not take cognizance of the matter in view of the bye-law No. 248(a) to (d) and Rule 2(c ) of the Rules/Bye-laws and Regulation of Stock Exchange of Bombay framed in 1997. They contended that the dispute between the petitioners and the respondent is covered therein and is to be adjudicated only by Arbitrator. It appears that after filing this preliminary objection, ....
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.... "2. In this Act, unless the context otherwise requires,- (a)'contract' means a contract for or relating to the purchase or sale of securities; (b)'Government Security' means a security created and issued, whether before or after the commencement of this Act, by the Central Government or a State Government for the purpose of raising a public loan and having one of the forms specified in clause (2) of section 2 of the Public Debt Act, 1944 (18 of 1944); (c)'member' means a member of a recognized stock exchange; (d)'option in securities' means a contract for the purchase or sale of a right to buy or sell, or a right to buy and sell, securities in future, and includes a teji, a mandi, a teji mandi a galli, a put, a call or a put and call in securities; (e )'prescribed' means prescribed by rules made under this Act; (f )'recognized stock exchange' means a stock exchange which is for the time being recognized by the Central Government under section 4; (g )'rules', with reference to the rules relating to general to the constitution and management of a stock exchange, includes, in the case of stock exchange which is an incorporated association, its memorandum and articles of associ....
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....nt of person who deals with securities and induces any person to believe that contract can be entered into or performed under this Act (1956 Act), through him though he is not a member of the recognised Stock Exchange, not being a member canvasses, advertises, or touts in any manner for any business, it is in contravention of the provisions of 1956 Act. It is thus to be noted that a phrase 'non-member' has not been defined in 1956 Act. The provisions of bye-law/regulation, thereafter need to be seen. Bye-law No. 226 deals with rights and liabilities of members and constituents. The same reads as under : "226. All contracts subject to Rules, Bye-laws and Regulations.-( a) All contracts made by a member for or with a non-member for the purchase or sale of securities in which dealings are permitted on the Exchange shall in all cases be deemed made subject to the Rules, Bye-laws, Regulations and Usage of the Exchange which shall be a part of the terms and conditions of all such contracts and they shall be subject to the exercise by the Governing Board and the President of the powers with respect thereto vested in it or him by the Rules, Bye-laws and Regulations of the Exchange. Perfo....
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....any other person with whom the member shares brokerage) arising out of or in relation to dealings, transactions and contracts made subject to the Rules, bye-laws and regulations of the Exchange or with reference to anything incidental thereto or in pursuance thereof or relating to their construction, fulfilment or validity or in relation to the rights, obligations and liabilities of remisiers, authorised clerks, sub-brokers, constituents, employees or any other persons with whom the member shares brokerage in relation to such dealings, transactions and contracts shall be referred to and decided by arbitration as provided in the Rules, Bye-laws and Regulations of the exchange. Contract Constitutes Arbitration Agreement. (b) An acceptance whether express or implied of a contract subject to arbitration as provided in sub-clause (a) and with this provision for arbitration incorporated therein shall constitute and shall be deemed to constitute an agreement between the member and the non-member or non-members concerned that all claims (whether admitted or not), differences and disputes of the nature referred to a sub-clause (a), in respect of all dealings, transactions and contracts of....
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....6(a) and 226(c) and para Nos. 18 and 19 thereof are important. The said paragraphs reads as under : "I am unable to accept even these submissions. Bye-law 226(a) provides that all contracts made by a member for or with a non-member for the purchase or sale of securities in which dealings are permitted on the exchange, shall in all cases be deemed to be made subject to the Rules, Bye-laws, Regulations and Usage of the Exchange. The said Bye-law also provides that all such contracts shall be subject to the exercise by the Governing Board and the President of the powers with respect thereto vested in it or him by the Rules, Bye-laws and Regulations of the Exchange. Further bye-law 226(c) provides that in cases of all claims (whether admitted or not), differences and disputes arising out of or in relation to all contracts referred to in sub-clause (a) the parties concerned shall be deemed to have agreed and acknowledged that such contracts have been entered into and are to be performed within the City of Bombay, that they are subject to Arbitration in accordance with the provisions relating to Arbitration contained in these bye-laws and Regulations. Thus bye-laws 226(a) and 226(c ) m....