1 IN IN IN THE HIGH COURT OF JUDICATURE OF BOMBAY THE HIGH COURT OF JUDICATURE OF BOMBAY THE HIGH COURT OF JUDICATURE OF BOMBAY ORDINARY ORDINARY ORDINARY ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION COMPANY PETITION NO.376 OF 2008 Jashnani Leasing & Finance Ltd. ..Petitioner V/s. M/s.Networth Stock Broking Ltd. ..Respondent. Mr.J.P.Sen with Nita Solanki for Petitioner. Mr.J.Bhatt for respondent. CORAM: CORAM: CORAM: A.M.KHANWILKAR,J A.M.KHANWILKAR,J A.M.KHANWILKAR,J DATE DATE DATE : OCTOBER 3, 2008. : OCTOBER 3, 2008. : OCTOBER 3, 2008. P.C. P.C. P.C. : : : 1. Heard Counsel for the parties. 2. The fact that the Petitioner has made over shares referred to in Exh. A-1 at page 23 is not in dispute. As a matter of fact, the Respondent Company in its communication at page 65 Exh.C has given the break-up of shares held by the Respondent belonging to the Petitioner as on 3rd January, 2008. The Respondent is not disputing that position at all. The stand of the Respondent Company however, is that, since the Petitioner is a sub-broker and because of the conduct of the Directors of the Petitioner company, the Respondent Company has thought it appropriate to retain the said shares instead of returning it to the Petitioner. 2 3. To make good this submission, Counsel for the Respondent relied on SEBI(Stock Brokers & Sub-Brokers) Regulations, 1992, which provides that the Stock Brokers should abide by the Code of Conduct. Assuming that the stock broker was to commit breach of any of the Code of Conduct, the question is whether the principal broker can continue to retain the shares of a sub-broker on that count. There is no provision in the regulation or any of the enactment brought to my notice, which would permit the principal broker to resort to that mechanism. 4. In the circumstances, suffice it to observe that the assumption of the Respondent-Company for retaining shares owned by the Petitioner is misplaced. In the circumstances, the Respondent company is liable to forthwith return the shares specified in communication at page 65 to the Petitioner. 5. Counsel for the Respondent however, submits that in that case the Respondent may be permitted to deposit the said shares in this Court. The question is whether it is open to the Respondent to assert that the shares, which belonged to the Petitioner, shall not be returned to the Petitioner because of 3 the alleged misconduct of the Directors of the Petitioner company. The answer is an emphatic ‘no’. In that case, the only appropriate order that needs to be passed is that the Respondent Company shall forthwith return the shares referred to in its communication at page-65 alongwith bonus share, if any, in any case, not later than two weeks from today, failing which the present Petition shall stand admitted without further reference to the Court. However, if the Respondent files affidavit in this Court within two weeks from today that the shares have been duly returned to the Petitioners by Demat mode and proof thereof is produced alongwith affidavit, the Petition shall stand disposed of. 6. It is made clear that this order is not an expression of opinion on any of the other aspects referred to in the Petition or for that matter about alleged misconduct of the Directors of the Petitioner-company. Those aspects will have to be addressed in appropriate proceedings on its own merits in accordance with the law. 7. Ordered accordingly. (A.M.KHANWILKAR,J) (A.M.KHANWILKAR,J) (A.M.KHANWILKAR,J)