Case: Naresh K. Aggarwala &amp; Co Vs. Canbank Financial Services Ltd.

Delhi Stock Exchange rules, bye-laws and regulations." In the face of such an admission, the Special Court, in our opinion, has correctly concluded, as noticed above. In our opinion the view expressed by the Special Court does not call for any interference. 20. The contention that the circular did not apply to unlisted securities was duly considered and rejected by the Special Court. The Special Court thoroughly considered the term `securities as defined in Section 2(h) of the Act. It reads as under:- "2(h) Securities include-(i) shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate;(ia) derivative;(ib) units or any other instrument issued by any collective investment scheme to the investors in such schemes.(ii) Government securities;(iia) such other instruments as may be declared by the central Government to be securities; and(iii) rights or interests in securities; " Perusal of the above quoted definition shows that it does not make any distinction between listed securities and unlisted securities and therefore it is clear that the Circular will apply to the securities which are not listed on the Stock Exchange. Admittedly the contract note issued in relation to this transaction by the appellant does not show that it was a spot delivery contract, therefore the transaction was clearly contrary to the circular. Consequently in terms of the provisions of Sub-section(2) of Section 16 the transaction was illegal and is not capable of being enforced. 21. With regard to issues no 1,8 & 9, it was correctly observed by the Special Court that the Plaintiff i.e. Appellant herein is not entitled to make any claim either in relation to the Reliance Industries Shares nor in relation to contract for SAIL shares. Further as the appellant is not entitled to claim any amount from the respondent on account of the aforesaid transactions, there is no question of the appellant being entitled to any interest. 22. On Issue No.10, Mr.Suri has submitted that the Special Court has illegally allowed the counter claim of respondent No.1. It was submitted that the Special Court has come to a contrary conclusion even though the fact situation was identical in the claim put forward by both the parties. We are unable to accept the submissions made by the learned senior counsel. Once it is concluded that the appellant is not entitled to claim any amount from respondent No.1 in relation to the aforesaid three transactions i.e. contract dated 14.2.1992, contract dated 23.3.1992 for one lakh RIL shares each and contract dated 27.2.1992 relating to one lakh SAIL share. It needed to be determined as to whether the appellant in fact needed to compensate respondent No.1. In the counter claim, the respondent No.1 clearly stated that the appellant had agreed to purchase one lakh shares of RIL on 14.2.1992 @ Rs.154/- per share, but this contract was cancelled by the appellant on the very same date. Thereafter, the appellant had intimated about another contract for purchase of one lakh shares of RIL on 23.3.1992 @ Rs.375/- per share. Against the aforesaid contract, the delivery of one lakh shares was made by the respondent No.1 to the appellant on 22.4.1992. After the receipt of a letter dated 15.9.1992 when the Management of respondent No.1 had changed, the appellant started claiming that the delivery of one lakh shares on 22.4.1992 had been adjusted against the cancelled contract dated 14.2.1992. The respondent No.1 had based the counter claim on the difference of price in shares between two periods of contract i.e. 14.2.1992 and 23.3.1992. The difference of amount of Rs.2,21,00,000/- was claimed as the amount due from the appellant to the respondent No.1. A perusal of the letter dated 27.5.1993, which contains a statement of account with the subject "settlement of outstanding" clearly shows that the respondent No.1 is claiming a sum of Rs.2,56,25,000/- as outstanding against the appellant from various transactions as per the details given therein. Against the entry dated 4.3.1992, there is a clear entry with regard to the sale of one lakh RIL shares @ Rs.375/- per share given a total consideration of Rs.3,75,00,000/-. The respondent No.1 had clearly requested the appellant to settle account by paying Rs.2,56,25,000/- immediately. In the letter dated 14.6.1993, the appellant offered its comment on the statement of account for payment by respondent No.1 on 27.5.1993. Herein, the appellant states that the credit claimed by the respondent No.1 should be Rs.2,21,00,000/- instead of Rs.2,56,25,000/-. This balance was claimed by the appellant on the ground that the credit claimed by respondent No.1 of Rs.3,75,00,000/- has to be reduced by Rs.1,56,00,000/- i.e. the difference in price of shares of the two contracts dated 14.2.1992 and 23.3.1992. The appellant also claimed that a sum of Rs.2,95,00,000/- was also required to be adjusted in respect of SAIL shares. The appellant had claimed the difference in contract price of shares of SAIL @ Rs.51/- per share against the official quotation of the Delhi Stock Exchange @ Rs.110/- per share. Thus he had claimed that respondent No.1 was liable to pay for the difference of Rs.59/- per share (Rs.110/-Rs.51/- per share amounting to Rs.2,95,00,000). It was held by the Special Court, which finding has been affirmed by us, that the contract with regard to SAIL shares being contrary to law was void ab initio. Therefore, the appellant could not possibly claim anything against the aforesaid SAIL shares on account of any difference in the contracted rate and the rate when the same were listed on the Delhi Stock Exchange. Therefore, the irresistible conclusion was that the appellant was liable to pay to respondent No.1 for the RIL Shares @ Rs.375/- per share, the contract dated 14.2.1992 having been cancelled. Thus the Special Court, in our opinion, correctly concluded that the appellant was liable to pay to the respondent No.1 the amount of Rs.2,53,75,000/-. In view of the above, we find no reason to interfere with the findings of the Special Court on Issue No.10 also.

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

Explanation:
0[ds]15. Upon consideration of the submissions made by the learned counsel for the parties we have examined the material on the record. It is not disputed before us that there were, in fact, two transactions with regard to RIL shares dated 14.2.1992 and 23.3.1992. The Special Court notices that the appellant claims to have adjusted the delivery of one lakh shares of RIL against the contract dated 14.2.1992 which is said to have been cancelled by respondent No.1. The Special Court also notices that if the case of the appellant that the contract dated 14.2.1992 was alive is accepted, then the transaction will remain incomplete and unfulfilled.In the face of these averments, we find it a little difficult to appreciate the submission of Mr. Suri that the findings on these issues are erroneous or not supported by any evidence. The Special Court also notices that the appellant had, in fact, adjusted the delivery of shares towards the contract dated 23.3.1992. It is true that in theappellant had stated that he had made the claim against respondent No.1 on the basis of difference in price of Reliance shares as on 14.2.1992 and as on 23.3.1992, i.e.,for one lakh shares. In our opinion, the Special Court has correctly observed that in the absence of pleadings the statement made by the appellant had to be ignored. We are also unable to accept the criticism of Mr. Suri that the burden of proving the continuance of the contract dated 14.2.1992 was not on the appellant. We may notice here that respondent No.1 had taken a categorical plea that contract dated 14.2.1992 was cancelled by appellant on the same day. The conduct of the appellant showing delivery made on 22.4.1992 as delivery against the contract dated 23.31992 indicated that he was also treating the contract dated 14.2.1992 to be cancelled. Had that not been so, he would have made entries in the books of account to show that the delivery of shares were against the contract dated 14.2.1992. In our opinion Mr. Bhusan, has rightly pointed out that till 27.7.1992, the reliance shares were not in issue. The letter written by the appellant to the Respondent No 1 talks only of the SAIL shares. Therefore it was for the appellant to produce documentary evidence to show that in his books of accounts the contract had been shown asour opinion the view expressed by the special Court is an acceptable view, and does not call for any interference.18. With regard to issues no 6 & 7, we again do not find any merit in the submissions of Mr. Suri. Admitted position is that on the date when the contract with regard to the SAIL shares was entered into, the shares were unlisted. It is also the admitted position that on that day, the circular dated 27.6.1969 issued under Section 16 of the Securities Contract Regulation Act 1956 was in existence and in force.On Issue No.10, Mr.Suri has submitted that the Special Court has illegally allowed the counter claim of respondent No.1. It was submitted that the Special Court has come to a contrary conclusion even though the fact situation was identical in the claim put forward by both the parties. We are unable to accept the submissions made by the learned senior counsel. Once it is concluded that the appellant is not entitled to claim any amount from respondent No.1 in relation to the aforesaid three transactions i.e. contract dated 14.2.1992, contract dated 23.3.1992 for one lakh RIL shares each and contract dated 27.2.1992 relating to one lakh SAIL share. It needed to be determined as to whether the appellant in fact needed to compensate respondent No.1. In the counter claim, the respondent No.1 clearly stated that the appellant had agreed to purchase one lakh shares of RIL on 14.2.1992 @ Rs.154/per share, but this contract was cancelled by the appellant on the very same date. Thereafter, the appellant had intimated about another contract for purchase of one lakh shares of RIL on 23.3.1992 @ Rs.375/per share. Against the aforesaid contract, the delivery of one lakh shares was made by the respondent No.1 to the appellant on 22.4.1992. After the receipt of a letter dated 15.9.1992 when the Management of respondent No.1 had changed, the appellant started claiming that the delivery of one lakh shares on 22.4.1992 had been adjusted against the cancelled contract dated 14.2.1992. The respondent No.1 had based the counter claim on the difference of price in shares between two periods of contract i.e. 14.2.1992 and 23.3.1992. The difference of amount of Rs.2,21,00,000/was claimed as the amount due from the appellant to the respondent No.1. A perusal of the letter dated 27.5.1993, which contains a statement of account with the subject "settlement of outstanding" clearly shows that the respondent No.1 is claiming a sum of Rs.2,56,25,000/as outstanding against the appellant from various transactions as per the details given therein. Against the entry dated 4.3.1992, there is a clear entry with regard to the sale of one lakh RIL shares @ Rs.375/per share given a total consideration of Rs.The respondent No.1 had clearly requested the appellant to settle account by paying Rs.2,56,25,000/immediately. In the letter dated 14.6.1993, the appellant offered its comment on the statement of account for payment by respondent No.1 on 27.5.1993. Herein, the appellant states that the credit claimed by the respondent No.1 should be Rs.2,21,00,000/This balance was claimed by the appellant on the ground that the credit claimed by respondent No.1 of Rs.3,75,00,000/i.e. the difference in price of shares of the two contracts dated 14.2.1992 and 23.3.1992. The appellant also claimed that a sum of Rs.2,95,00,000/was also required to be adjusted in respect of SAIL shares. The appellant had claimed the difference in contract price of shares of SAIL @ Rs.51/per share against the official quotation of the Delhi Stock Exchange @ Rs.110/per share. Thus he had claimed that respondent No.1 was liable to pay for the difference of Rs.59/per share amounting to Rs.2,95,00,000). It was held by the Special Court, which finding has been affirmed by us, that the contract with regard to SAIL shares being contrary to law was void ab initio. Therefore, the appellant could not possibly claim anything against the aforesaid SAIL shares on account of any difference in the contracted rate and the rate when the same were listed on the Delhi Stock Exchange. Therefore, the irresistible conclusion was that the appellant was liable to pay to respondent No.1 for the RIL Shares @ Rs.375/per share, the contract dated 14.2.1992 having been cancelled. Thus the Special Court, in our opinion, correctly concluded that the appellant was liable to pay to the respondent No.1 the amount of Rs.In view of the above, we find no reason to interfere with the findings of the Special Court on Issue No.10 also.