Pratapray Manmohandas Vs. Bombay
Bullion Association Ltd.  INSC 80 (2 March 1962)
GUPTA, K.C. DAS DAYAL, RAGHUBAR
CITATION: 1963 AIR 462 1962 SCR Supl. (3) 541
Bullion Association--Member owing amount to creditor--Failure
to submit Kapli (voucher) for amount-Committee-declaring him a
defaulter--Legality of--Giving of opportunity to submit Kapli if denied--Bombay
Bullion Association Bye Laws 155 (4).
The appellant was a member of the Bombay Bullion
Association Ltd. He entered into certain forward transactions with certain
other persons. According to the bye-laws of the Association the appellant had
to submit a balance sheet and to give kapli (vouchers) for the amounts due from
him, but the appellant did not include the amounts due from him in the balance
sheet nor did he give the kaplis on the ground that these transactions were
fictitious and illegal. On the settlement day the Clearance House committee
called upon the appellant to appear before them. Before the Committee the
appellant took the stand that they had no jurisdiction to proceed with the
matter as he was claiming, arbitration.
The committee passed a resolution declaring
him a defaulters The appellant filed a suit challenging the resolution, inter
alia. on the ground that the Committee, after its decision, was bound, under
bye-law.155 (4) to give him an Opportunity to give the kaplis before it could
declare him a defaulter.
The bye-law provided:542 "If any member
does not submit a kapli in the prescribed form in respect of the amount found
claimable from him to his party (creditor), the Clearing House committee shall
call him and demand an explanation from him and can thereafter, if such a kapli
is not submitted the Clearing House Committee can declare him a
defaulter." Held, that the resolution declaring the appellant a defaulter
was validly Bye-law declaring (4) provide that if a member did not submit a
kapli found claimable from him, the Committee shall call him and demand an
explanation from him and can thereafter if such kapli is not submitted declare
him a defaulter. Under this byelaw first the explanation is called and after if
is giver. and some decision is arrived at, the person complained against can
file the kapli but no specific period is 'prescribed for doing so nor is the
Committee required to call him for this purpose. the period of time depends
upon the circumstances in each case. In the present case since the appellant
had made it clear before the Committee that he was not going to make the
payment, the giving of time was wholly unnecessary.
It is not a requirement of the bye-law that
the clearing House Committee should call the person defaulting by telephone or
by letter or by giving him notice.
CIVIL APPELLATE JURISDICTION : Civil Appeal
Appeal by special leave from the judgment and
decree dated July 12, 1957, of the Bombay High Court in Appeal No. 71 of 1956.
C.K. Daphtary, Solicitor, General of India,
G. Patwardhan and Naunit Lal, or the, appellant.
A.V Viswanatha Sastri, N. P. Nathwani and
K.L. Hathi, for respondent No. 1.
1962. March 2. The Judgment of the Court was
delivered by KAPUR. J.-This is an appeal against the judgment and decree of the
High Court of Bombay confirming the decree passed in its original jurisdiction.
The appellant, who was the plaintiff in the suit, was trading under the name
and style of 543 Messrs. Pratapray Manmohandas as a bullion merchant and trader
in Bombay. He was a member of the Bombay Bullion Association Ltd., which was
defendant No. 1 in the suit and is respondent No. 1 in the appeal. Respondents
2 to 7 defendants 2 to 7 and at all material times were members of the Clearing
House Committee appointed under the Bye-laws of the 1st respondent. The
appellant had also added as parties in the suit defendants 8 to 12 but they are
no longer parties as their names were struck off in the trial count.
The appellant entered into certain forward
transactionswith defendants 8 to 12 during the period from May 30, 1949 to June
30, 1949. On June 13, the Hawala rate of these transactions was fixed and on
June 14, 1949, the applicant I admitted a clearance sheet under bye-law 131 of'
the bye-laws of 1st. respondent in which outstanding transactions for the Valan
day" (settlement) were entered.
They included the transactions which had been
entered into with defendants 8 to 12. All these transactions were Rajued
(tallied) on the following day. According to the bye-laws of the respondent
Association lie balance sheet, had to be submitted and money Kiplis (vouchers)
had to be given. In this balance sheet which was submitted the appellant did
not include the amounts which were due to defendants Nos. 8 to 12 or the
transactions he had entered into on the ground that he disputed the transactions
entered into with those defendants as they were fictitious and illegal. On June
21, 1994), which was the Valan day (settlement day) the appellant claimed
reference to arbitration in regard to those items under bye-law 38. On that day
defendants 8 to 12 complained to the respondent Association that the appellant
had not issued the necessary kaplis (vouchers). At 3 p. m. on the same day the
appellant received a notice from the Clearing House 544 Committee, respondents
2 to 7 calling upon him to appear before them. The appellant appeared with his
solicitor and counsel, and his contention before the Clearing House Committee
was that it had no jurisdiction to proceed with the matter because he was
claiming arbitration and the dispute between him and defendants 8 to 12 had to
be settled by the arbitrators. The Committee heard the explanation and passed a
resolution under byelaw 155 (4) declaring the plaintiff a defaulter and it is
this resolution which is the matter in controversy between the parties, On June.
20, 1952, the appellant brought a suit for declaration that the resolution in
dispute dated June 21, 1949, was bad in law, inoperative, ultra vires and not
binding on the appellant and also for damages against the respondents. He also
prayed for reinstatement as a member of the respondent Association.
The plea taken by the respondent was that the
transactions in dispute were not phatak (fictitious and inoperative);
that at the meeting on June 21, 1919.
defendants 8 to 12 had complained that amounts of money had become payable to
them from the appellant; that at the said meeting the appellant had made it
clear that he would not give any kaplis (vouchers) and had therefore defaulted
and they were therefore entitled to declare him defaulter under bye law 155 (4)
of the respondent Association.
The suit was tried by Tendolkar J. Several
issues were raised but the appellant led no evidence and respondents 1 to 8
examined Mr. Trikamdas Dwarkadas a solicitor of Bombay, who was present at the
meeting of the Clearing House Committee oil June 21, 1949. On June 6, 1956, the
suit was dismissed and an appeal was taken to the Appeal Court which was also
dismissed and the appellant has come in appeal by Special Leave.
545 The trial court had held that the plea
taken by the appellant that after he and his counsel were heard they were made
to leave the meeting and the hearing proceeded in their absence was not
established; that for bye-law 38 relating to arbitration becoming operative, it
was necessary to have a genuine dispute between the parties and mere presence
of a dispute in order to evade or postpone the liability on the Valan Day is
not sufficient, that where the defaulter appears before the Clearing House
Committee and denies liability on some flimsy pretexts and thereby makes it
abundantly plain that he does not wish to give a kapli giving him an
opportunity for giving a kapti was a mere formality the failure to observe
which does not lead to the conclusion that the decision of the Clearing House
Committee is void. Considering the evidence of Mr. Trikamdas Dwarkadas it was
clear that the appellant had no intention of admitting the liability or
discharging it. He also held:
"Moreover, it is not the plaintiff's
case that if time had been given he would have given the kaplis and therefore
assuming that it is necessary under bye-law 155 (4)-a point which I did not
wish to decide in this case in the present case to give such time would have
been perfectly futile and therefore failure to give such time does not invalidate
the action which was taken by the Clearing House Committee" The Appeal
Court concurred in dismissing the appeal. It held that on a proper
interpretation of bye-law 155(4) it was necessary for the Clearing House
Committee to give an opportunity to the appellant to submit his kaplis because
that was the meaning of the words "'and can thereafter, if such a kapli is
not submitted, the Clearing House Committee can declare him a defaulter".
In other 546 words the Committee had to give the member a locus penitentiae and
that after giving his explanation a member could still submit a kapli, and
escape the penalty of being, a defaulter. From the conduct of the appellant his
counselhowever it appeared quite clearly that having challenged the
jurisdiction of the Committee and having told them that they could not proceed
in the, absence of reference to arbitration the appellent had no intention of
giving the kaplis.
Two questions have been raised in this
appeal, (1) the question of interpretation and (2) that no opportunity was
given after the decision was made against the appellant to give the kaplis. The
submission of the respondents on the other hand was that the appellant had
deliberately made a false allegation that after be made a submission he its
asked to leave. This was to buttersay his plea that the matter was decided in
his absence. The court below have found that whether an opportunity held been
given to the appellant or not, he had no interim of giving him kapli's.
issue No. 5 was specific on this point. That
issue was "whether the appellant and his legal advisers voluntarily left
the meeting after indicating that the appellant was not going to give the
kaplis" and that was the, principal question which has been raised
throughout the course of these proceedings. 'Even in the statement of the
appellant's case he as put in the forefront of the question for decision the
question whether the appellant left the meeting dated June 21, 1949,
voluntarily after indicating his unwillingness to submit the kaplis. finding of
both the courts, on this question was against the appellant. In our opinion
that is fully justified by the evidence on the record. According to the
evidence days were fixed by Association for the settlement of all transaction
which had been entered into for that period.
547 According to the chart of Bombay Bullion
exchange settlement had to be made, i.e. the monies had to be paid by 3-30 p.m.
on June 21, 1949. The appellant made it
clear, however, that he was not going to make the payment in accordance with
the requirements of the Valan day; on the other hand he stated that he will pay
after the arbitration award was made. The evidence produced by the respondents
makes it abundantly clear that the contention of the appellant was that no
action should be taken unless the arbitration which he had asked for had been
disposed of and after saying that he went away. This is clear from the
Attendance Book of Mr.
Trikamdas Dwarkadas solicitor. The respondent
Association was therefore justified in taking the action that it did.
The minutes of the proceedings of the
Clearing House Committee dated June 21, 1949, also show that the appellant and
his legal advisers stated that they wanted to go to arbitration and that no
action should be taken against them until the arbitrators had given their
award. It is stated therein that the appellant admitted that the transactions
which his solicitor said were fictitious were entered in his books and they had
been rajued (tallied) and that lie had shown the transaction his "olia
" (clearance sheet). All this indicated that the conventions raised by the
appellant were false and had been raised in order to gain time. In these
circumstances it cannot be said that the respondent Committee acted without
giving due consideration to the facts of the case or in any precipitate manner.
Bye-law 155(4) reads:
"If any member does not submit a kapli
in the prescribed form in respect of the amount found claimable from him to his
party (creditor), the Clearing House Committee shall call him and demand an
explanation from him and can thereafter, if such a kapli is not submitted the
Clearing House Committee can declare him a defaulter".
548 That clause requires that in the event of
default of submission of a kapli the Clearing House Committee shall call the
defaulter and demand an explanation and thereafter, if such kapli is not
submitted, declare him a defaulter. It was contended that the meaning of this
is that first the Clearing House Committee is to demand an explanation and
after such an explanation is given,. time has to be given for the purpose of
enabling the person not giving the kapli to. submit his kaplis. In our opinion
the interpretation of the learned Chief Justice of the High Court is in
consonance with the language used. i. e. first the explanation is called and
after explanation is given and some decision is arrived at in regard to the
validity of the reasons for not giving the kaplis then the person complained
against can file the kapli but it does not mean that the time to be given has
to be one or half an hour or any other specific period.
As we have said above the appellant had made
it clear that he was not going to make the payment and had just left after
making his submissions. It is not a requirement of the byelaw that the Clearing
House Committee should call the person defaulting either by telephone or by
letter or by giving him a notice and considering the promptitude with which the
payments have to be made and the dates fixed for the finishing of all the
transactions it will be unreasonable to hold that such is the procedure
contemplated by cl.(4) of bye-law 155. The period of time, must, in each case,
depend upon the circumstances, but where it is made absolutely clear that no
payment is going to be made the giving of time is wholly without utility.
In our view the High Court has given a
correct decision and we therefore dismiss this appeal with costs.