Case: Desh Bandhu Gupta and Company and Others Vs. Delhi Stock Exchange Assn. Limited

Respondent rightly invited our attention to two documents on record which had come into existence almost simultaneously with the issuance of the notification explaining the manner in which outstanding transactions were intended to be closed or liquidated. In a Press Statement or Press Note issued by the Finance Ministry immediately upon the issuance of the notification it was stated thus:"The existing contracts entered into upto the date of the notification and remaining to be performed are, however, permitted by the same notification to be liquidated in accordance with the rules, bye-laws and regulations of the Stock Exchange concerned."Further it appears that in response to a query made by the President of the respondent, Shri Maitra, Joint Director (S.E.) Ministry of Finance, Department of Economic Affairs, addressed a communication dated June 28, 1969 to the President in which he stated thus:"As stated in the notification itself, all outstanding contracts which were not liquidated till the date o f notification, will have to be liquidated in accordance with the relevant rules, bye-laws and regulations of your exchange in that regard. No fresh forward transactions in any cleared security, however, is permissible.A statement of outstanding position in each of the cleared securities on your Exchange, as on the date of the notification may please be forwarded to us as early as possible and thereafter at each settlement so as to enable Government to know the reduction in the outstanding business effected from time to time. As will be seen, no specific period has been mentioned in the notification for liquidation of the outstandings. It is, however, hoped t hat you will issue suitable instruction to your members to ensure that the outstandings are cleared in a smooth and orderly manner within a reasonable period." (Emphasis supplied)8. It may be stated that in one of his earlier communications appellant No. 2 himself had requested the respondent to seek clarification from the Government on the points raised by him in regard to the outstanding transactions. The letter dated June 28, 1969 addressed by the Joint Director to the President of the Respondent clearly brings out two aspects: first, that as per the notification itself all outstanding contracts were permitted to be liquidated in accordance with the relevant rules, bye-laws and regulations of the respondent and secondly, no specific period was mentioned in the notification for liquidation of the outstanding business but the members operating on a recognised Stock Exchange were expected to clear the outstandings in a smooth and orderly manner within a reasonable period and, in fact, the Government desired the respondent to forward to it a statement at each settlement indicating the reduction in outstanding business effected from time to time. The exposition in these two documents, therefore, conforms to our interpretation of the proviso.9. It may be stated that it was not disputed before us that these two documents which came into existence almost simultaneously with the issuance of the notification could be looked at for finding out the true intention of the Government in issuing the notification in question, particularly in regard to the manner in which outstanding transactions were to be closed or liquidated. The principle of contemporanea expositio (interpreting a statute or any other document by reference to the exposition it has received from contemporary authority) can be invoked though the same will not always be decisive of the quest ion of construction. (Maxwell 12th Edn. p. 268). In Crawford on Statutory Construction (1940 Edn.) in para 219 (at pp. 393- 395) it has been stated that administrative construction (i.e. contemporaneous construction placed by administrative or executive officers charged with executing a statute) generally should be clearly wrong before it is overturned; such a construction, commonly referred to as practical construction, although not controlling, is nevertheless entitled to considerable weight; it is highly persuasive. In Baleshwar Bagarti v. Bhagirathi Dass(1) the principle, which was reiterated in Mathura Mohan Saha v. Ram Kumar Saha(2) has been stated by Mukerjee J. thus:"It is a well-settled principle of construction that courts in construing a statute will give much weight to the interpretation put upon it, at the time of its enactment and since, by those whose duty it has been to construe, execute and apply it. I do not suggest for a moment that such interpretation has by any means a controlling effect upon the Courts; such interpretation may, if occasion arises, have to be disregarded for cogent and persuasive reasons, and in a clear case of error, a Court would without hesitation refuse to follow such construction."10. Of course, even without the aid of these two documents which contain a contemporaneous exposition of the Governments intention, we have come to the conclusion t hat on a plain construction of the Notification the proviso permitted the closing out or liquidation of all outstanding transactions by entering into a forward contract in accordance with the rules, bye-laws and regulations of the respondent.11. Having regard to the above construction which appears to us to be the true and proper construction of the notification in question it will be clear that the directions issued by the respondent to all its members including appellant No. 2 on June 28, 1969 in regard to their outstanding transactions as at the close of June 27, 1969 were proper and legal and the appellants stand was clearly erroneous. It cannot be disputed that ample opportunity was given to appellant No. 2 to comply with the directions but the appellant persisted in his erroneous contention, and failed to comply with those directions with the result that the respondent had no alternative but to declare him a defaulter. In our view, the directions dated June 28, 1969 as well as the two resolutions passed by the respondent on July 2 and July 3, 1969 were proper and justified and the appellants case on merits was rightly rejected by the High Court. This conclusion of ours, as stated at the commencement of the judgment, renders unnecessary the determination of the preliminary objection.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]In our view, the notification was in three parts. By the first part the Central Government put a ban on all forward trading in sha res through the Stock Exchanges in the country by declaring that "no person.. shall, save with the permission of the Central Government, enter into any contract for the sale or purchase of securities other than such spot delivery con tract or contract for cash or hand delivery or special delivery in any securities as is permissible under the said Act, and the rules, bye-laws and regulations of a recognised stock exchange."The second part consisted of the proviso and it de alt fully with how all existing contracts remaining outstanding as on the date of the notification should be closed or liquidated, and the direction contained therein in that behalf was to the effect that "a contract other than a spot deli very contract or contract for cash or hand delivery or special delivery (meaning thereby a forward contract).......may be entered into between its members or through or with any such member for the purpose of closing out or liquidating all existing contracts.... remaining to be performed after that date."In other words, for the purpose of closing or liquidating existing outstanding transactions a forward contract (which would include a carry over) was permitted to be entered into. Then follows the third or the last part of the notification which commences with the words "but such contracts shall be subject to ....... " The expression "such contracts" occurring in this last part of the notification meant those as wer e referred to in the first part of the notification the making of which was banned after June 27, 1969 and the last portion provided that such forward contracts that had been banned "shall be subject to the rules, bye-laws or regulations of th e recognised Stock Exchange that come into force (i.e. become applicable) when further new dealings are prohibited ........ and subject also to such terms and conditions as the Central Government may from time to time impose." In our view the expression "such contracts" occurring in the last part of the notification were not referable to the existing outstanding contracts nor to a contract that could be entered into for closing or liquidating the existing outstanding con tracts. In other words, the third part of the notification on which reliance has been placed by the counsel for the appellants, in our view, has nothing to do with the existing outstanding contracts, the closing or liquidating of which was independently provided for by the proviso. It will thus appear clear that on a proper construction of the notification in question the proviso clearly permitted the closing or liquidating of the existing outstanding trans actions in the normal manner by entering into a forward contract (which would include a "carry over") in accordance with the rules, bye-laws and regulations of the Respondent. There was no warrant for the stand taken by the appellant No. 2 that all outstanding transactions had to be or could be adjusted on the basis of "previous official closing".On the construction of the proviso counsel for the Respondent rightly invited our attention to two documents on record which had come into existence almost simultaneously with the issuance of the notification explaining the manner in which outstanding transactions were intended to be closed orcourse, even without the aid of these two documents which contain a contemporaneous exposition of the Governments intention, we have come to the conclusion t hat on a plain construction of the Notification the proviso permitted the closing out or liquidation of all outstanding transactions by entering into a forward contract in accordance with the rules, bye-laws and regulations of theregard to the above construction which appears to us to be the true and proper construction of the notification in question it will be clear that the directions issued by the respondent to all its members including appellant No. 2 on June 28, 1969 in regard to their outstanding transactions as at the close of June 27, 1969 were proper and legal and the appellants stand was clearly erroneous. It cannot be disputed that ample opportunity was given to appellant No. 2 to comply with the directions but the appellant persisted in his erroneous contention, and failed to comply with those directions with the result that the respondent had no alternative but to declare him a defaulter. In our view, the directions dated June 28, 1969 as well as the two resolutions passed by the respondent on July 2 and July 3, 1969 were proper and justified and the appellants case on merits was rightly rejected by the High Court. This conclusion of ours, as stated at the commencement of the judgment, renders unnecessary the determination of the preliminary objection.