# DESH BANDHU GUPTA & CO. & ORS v. DELHI STOCK EXCHANGE ASSN. LTD

- **Citation:** [1979] 3 S.C.R. 373
- **Court:** Supreme Court of India
- **Decided:** 1979-02-23
- **Case number:** Civil Appeal No. 2458 of 1969
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/desh-bandhu-gupta-co-ors-v-delhi-stock-exchange-assn-ltd-7799
- **Pages:** 12

## Headnote

DESH BANDHU GUPTA & CO. & ORS.
v.
DELHI STOCK EXCHANGE ASSN. LTD.
February 23, 1979
[R. S. SARKARIA, V. D. TULZAPURKAR AND A. P. SEN, .fJ.]
373
A
Securities Contracts (Regulation) Act, 1956-Ss. 4 & 16-Notification is.sued
-B
'fl!
thereunder-Scope of.
•
Interpretation of statutes-Press Note issued by Gorern1ne11t arid letter of
,. .
•
1
Ministry of Finance-I/ could be used for interpreting the notifil:ation.
By a notification issued on the 27th June, 1969, under '· 16( I) of the
.)ecurities Contracts (Regulation) Act 1956 the Central Govcrnme•t banned
with immediate effect all forward trading in
~hares on
recognised
~tock
exchanges in the country.
The proviso to the notification, "Which dealt with
bow all existing contracts remaining outstanding as on the date of the notification
should be closed or liquidated, contained a direction to the effect that "a
contract other than a spot delivery contract or contract for cash
or hand
delivery or special delivery may be entered into between it~ members or th1ough
or with any such member for the purpose of closing out or liquidating all
existing
tontrac~ ren1aining to bei performed after that date." It further
provided that "such contracts !hall be subject to the rules, bye-laws and regulations of the recognised stock exchange" that con1e into force when
further
new deall.n~ arei prohibited and subject also to such term~ and conditions as
the Cential Government may impose.
In tel'l!ns of the notification the re!pondent called upon all its rr1cmbers
,o subntit a list of outstanding transa-ctions in all securitie~ on the cleared list
and to deposit along with it, interim margins in cash or approved shares
.;alcUlated on the basi& of differences between the rates of the last clearing and
certain average specified r1'.te! fixed by it.
Appellant no. 2 'vho was a partner
flf appellant no. 1, contended that the demand for interim margins was by 'vay
r)f "carry over" of the forward transactions which, in view of the ban contained
in the notification, was illegal. Instead of submitting a list of his outstanding
transactions on the basis of the rates fixed by the respondent, he enclosed
n statement of
his
outstanding transactions adjusted
at
the last official
closing rates which \'\'ere higher than the rates fixed by the respondent.
t1uggesting thereby that he WM not liable to pay anything. The respondent
rejected the appellant'& contention and again called upon him
to
comply
with its earlier notice. Eventually since the
appellant
did
JiOt
comply
with the notice the respondent by a resolution declared him a defaulter
\Vbich exposed him under the bye la\'\'S to a rigorous enquiry into hi! financial
condition and entailed other disabilitie! including termination of membership.
By another resolution the appellant was called upon to deposit additional security
of Rs. 20,000 / •·
In his writ· petition before the High Court, challenging the resolutions, the
appellant contended that all his transoction! which remained outstanding on
June 27, 1969 were forward contracts pertaining to cleared securities and aiJ
such were affected by the notification which banned all for¥.'ard contracts, that
these had to be adjusted at the last official closing rates, and thererore, the
respondent's action in calling upon him to deposit interim margins calculated
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SUPREME COURT REPORTS
[1979] 3 s.c.R.
A
on the basis of certain ave;rage specified rates fixed by it was not warranted
by the proviso of the notification and was illegal. The I-ligh Court <lis1nissed
the petition.
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Dismissing the appeal,
HELD
The directions issued by the respondent were proper and
legal.
[383 Hl
The proviso clearly permitted the closing out or liquidation of all out~
standing transactions in the normal manner by entering into a forward contract
(which would include "carry over") in accordance with the rules, bye-laws and
regulations of the respondent.
There was no warrant for the stand taken by
appellant no. 2 that a

## Text

DESH BANDHU GUPTA & CO. & ORS.
v.
DELHI STOCK EXCHANGE ASSN. LTD.
February 23, 1979
[R. S. SARKARIA, V. D. TULZAPURKAR AND A. P. SEN, .fJ.]
373
A
Securities Contracts (Regulation) Act, 1956-Ss. 4 & 16-Notification is.sued
-B
'fl!
thereunder-Scope of.
•
Interpretation of statutes-Press Note issued by Gorern1ne11t arid letter of
,. .
•
1
Ministry of Finance-I/ could be used for interpreting the notifil:ation.
By a notification issued on the 27th June, 1969, under '· 16( I) of the
.)ecurities Contracts (Regulation) Act 1956 the Central Govcrnme•t banned
with immediate effect all forward trading in
~hares on
recognised
~tock
exchanges in the country.
The proviso to the notification, "Which dealt with
bow all existing contracts remaining outstanding as on the date of the notification
should be closed or liquidated, contained a direction to the effect that "a
contract other than a spot delivery contract or contract for cash
or hand
delivery or special delivery may be entered into between it~ members or th1ough
or with any such member for the purpose of closing out or liquidating all
existing
tontrac~ ren1aining to bei performed after that date." It further
provided that "such contracts !hall be subject to the rules, bye-laws and regulations of the recognised stock exchange" that con1e into force when
further
new deall.n~ arei prohibited and subject also to such term~ and conditions as
the Cential Government may impose.
In tel'l!ns of the notification the re!pondent called upon all its rr1cmbers
,o subntit a list of outstanding transa-ctions in all securitie~ on the cleared list
and to deposit along with it, interim margins in cash or approved shares
.;alcUlated on the basi& of differences between the rates of the last clearing and
certain average specified r1'.te! fixed by it.
Appellant no. 2 'vho was a partner
flf appellant no. 1, contended that the demand for interim margins was by 'vay
r)f "carry over" of the forward transactions which, in view of the ban contained
in the notification, was illegal. Instead of submitting a list of his outstanding
transactions on the basis of the rates fixed by the respondent, he enclosed
n statement of
his
outstanding transactions adjusted
at
the last official
closing rates which \'\'ere higher than the rates fixed by the respondent.
t1uggesting thereby that he WM not liable to pay anything. The respondent
rejected the appellant'& contention and again called upon him
to
comply
with its earlier notice. Eventually since the
appellant
did
JiOt
comply
with the notice the respondent by a resolution declared him a defaulter
\Vbich exposed him under the bye la\'\'S to a rigorous enquiry into hi! financial
condition and entailed other disabilitie! including termination of membership.
By another resolution the appellant was called upon to deposit additional security
of Rs. 20,000 / •·
In his writ· petition before the High Court, challenging the resolutions, the
appellant contended that all his transoction! which remained outstanding on
June 27, 1969 were forward contracts pertaining to cleared securities and aiJ
such were affected by the notification which banned all for¥.'ard contracts, that
these had to be adjusted at the last official closing rates, and thererore, the
respondent's action in calling upon him to deposit interim margins calculated
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SUPREME COURT REPORTS
[1979] 3 s.c.R.
A
on the basis of certain ave;rage specified rates fixed by it was not warranted
by the proviso of the notification and was illegal. The I-ligh Court <lis1nissed
the petition.
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Dismissing the appeal,
HELD
The directions issued by the respondent were proper and
legal.
[383 Hl
The proviso clearly permitted the closing out or liquidation of all out~
standing transactions in the normal manner by entering into a forward contract
(which would include "carry over") in accordance with the rules, bye-laws and
regulations of the respondent.
There was no warrant for the stand taken by
appellant no. 2 that all outstanding transactions had to be or coilld be adjusted
on the basis of "previous official closing." {381F]
1. For the purpose of closing or liquidating existing outstanding transactions
a forward contract was permitted to be entered into. ·rhe expression "such
contracts" occurring in the last part of the notification meant those as were
referred to in the first part of the notification, the making of which was banned
after June 27, 1969. The expression "such contracts" was not referable to the
existing outstanding "contracts nor to 'a contract' that could be entered into
for closing or liquidating the existing outstanding contracts. The last part of
the notifica-tion has nothing to do with the existing outstanding contracts, the
closing or liquidating of which was independently provided for by the proviso.
[381C-DJ
2. Moreover the letter of the Joint Director Ministry of Finance addressed
to the President of the respondent and the Press Note, issued by the Ministry
of Finance clearly brought out that as per the notification itself all outslanding
contracts. were permitted to be liquidated in accordance with the releva~r; rules,
bye-laws and regulations of a recognised stock exchange and secondly no :;pecific
period was mentioned in the notification for liquidation of outstanding business
but that the members operating on a recognised stock exchange \Vere expected
to clear the outsta-ndings in a smooth and orderly manner within a rea'ionable
period.
[382G-H]
3. The two documents which came into existence a-lmost simultaueously
with the issue of the notification, could be looked at for finding out the true
intention of the
Government in issuing the notification. The principle of
conten1poranea expositio can be invoked, though the same will not al"'ays be
decisive on the question of construction.
In construing a statute courts will
give much weight to the interpretation put upon it at the time of its enactment
and by th~ whose duty it has been to construe, execute and apply it. C-ontem-..
poraoncous construction placed by administrative or eixecutive officers charged
with executing a statute, although not controlling, is nevertheless entitled to
considerable \\'eight; it is highly persuasive.
[383A-B]
Baleshwar Bagarti v. Bhagirathi Dass, ILR 35 Cal. 701 at 713; .'\fathura
Mohan Saha v. Ram Kumar Saha, ILR 43 Cal. 790; approved.
CIVIL APPELLATE
JURISDICTION : Civil Appeal No. 2458
of
1969.
From the Judgment and Order dated 14-10-1969 of the Delhi High
Court in Civil Writ No. 520/69.
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JD. B. GUPTA & co. v. ':EXCHANGE ASSOCIATION (Tulzapurkar, 1.) 375
Desh Bandhu Gupta (for Appe)lant No. 2 for self and on behalf
of appellants 1 and 3.)
F. S. Nariman, Bi~hamber Lal, Manoj Swarup, Miss LaUta Kohli
and Miss Manish Gupta for the Respondents .
The Judgment of the Court was delivered by
TULZAPURKAR, J.~This appeal by certificate is directed against the
judgment and order d~ted October 14, 1969 of the Delhi High Court
·dismissing the appellants' Civil Writ Petition (520 of 1969) whereby
the appellants sought to quash certain directions issued on June 28,
1969 and two resolutiqns passed on July 2 and 3, 1969, by the Delhi
Stock Exchange, which adversely affected them.
The Delhi Stock
Exchange Association
Ltd.,
New
Delhi
(the
Respondent
herein)
is
a
company
incorporated
under
the Indian Companies Act,
1913. It has
received
recognition from the
Centr~l Government under s. 4 of the Securi·
ties
Contracts Regulation)
Act
(XLII) of 1956 for the purpose of the said Act.
One Desh Bandhu Gupta (Appellant No. 2)
carried on business as a share-broker in the firm name and style of
Desh Bandhu Gupta & Co. (Appellant No. 1) and as such was a
member of the Respondent.
By a notification No. S.0. 2561 dated
June 27, 1969 issued under s. 16(1) of the Securities Contracts (Regulation) Act, 1956 the Central Government banned with immediate
effect all forward trading in shares at all the Stock Exchanges in the
country by declaring that "no person, in the territory to which the said
Act extends, 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 contract 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 recongnised Stock
Exchange", but as regards the forward contracts which remained outstanding as on that date it was directed under the proviso that these
could be closed or liquidated in the normal manner.
On June 28, 1969
at an emergent meeting held at I 0.30 a.m. the Board of Directors of
the Respondent considered the abnormal situation arising from the ban·
imposed under the notification and decided to issue notice to all its
memb~rs directing them to submit their lists of outstanding transactions
in all the securities on the cleared list and to deposit alongwith it interim margins in cash or approved shares calculated on the basis of
differences between the rates of the last clearing and certain average
·specified rates fixed by it: Upon receipt of such notice dated June 28,
1969 from the Respondent the appellant No. 2 addressed a letter of
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SUPREME COURT REPORTS
[1979] 3 s.c.R.
even date to the Board of Directors contending that the demand for
interim margins was by way of "carry over" of the forward transactions which in view of the ban contained in the notification was illegal and instead of submitting a list of his outstanding transactions on
the basis of the rates which had been fixed by the Respondent he enclosed a statement of his outstanding transactions adjusted at the last
official closing rates which were higher than the rates fixed by the
Respondent, thus suggesting that he was not liable to pay any thing
but was entitled to receive some amount at the foot of closing out or
liquidating his outstanding transactions.
By a rejoinder of the same
date the Board of Directors of the Respondent reiterated that its action
in fixing the interim clearing rates in the concenied
securities
and
demanding interim margins was in order and that the adjustment of
outstanding business claimed by appellant No. 2 wa~ utterly wrong
and as snch appellant No. 2 was called upon to comply with its notice
by submitting an amended list in accordance with the directions together
with the differences, if any, immediately.
By a telegram dated June
30, 1969, which was confirmed by a letter of even date the appellant
No. 2 was again called upon to submit his list alongwith the amount of
differences, if any, by July 1, 1969 failing which he was informed that
necessary action would be taken against him. As the appellant No. 2·
stuck to his stand, the Respondent by its letter dated July 1, 1969 once
again stressed that the action of the Board in calling for the list and
margin money was in order and in accordance with the rules,
byelaws, regulations, practices usages and previous resolutions
of the
Board and gave further opportunity to him to comply with the directions by July 2, 1969 upto 11.00 a.m. failing which further action was
threatened. At the meeting of the Board of Directors of the Respondent held on July 2, 1969 at 4.00 P.M. the Board noticed that all
!'1embers, except appellant No. 2, had complied with its directions and
on a consideration of the entire matter came to the conclusion that
appellant No. 2 was intentionally evading to comply with its direction
and to pay the required amount of margins and, therefore, resolved
that appellant No. 2 trading in the name and style of Desh Bandhu
G
Gupta & Co. be declared a defaulter for such failure and a notice in
• that behalf be pasted on the Notice Board and appellant No.
2 was
informed about it by a telegram and a letter. The resolution passed on
July 2, 1969 declaring appellant No. 2 as a defaulter exposed him
under the bye-Jaws to a rigorous inquiry by the Respondent into his
financial condition and entailed other disabilities including termination
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of his membership of the Respondent under Bye-law 308 read with
Article 43 (iv) of the Articles of Association. Appellant No. 2 thereupon filed a writ petition (Civil Writ No. 520 of 1969) in Delhi High
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D. B. GUPTA & co. v. EXCHANGE ASSOCIATION (Tulzapurkar, J.) 377
Court challenging the directions of the Respondent demanding payment of interim margins as also its resolution declaring him to be a
defaulter. It appears that after the filing of the petition the Board of
Directors of the Respondent at its meeting held on July 3, 1969 passed
another resolution calling upon the appellant No. 2 under Article 29
of the Articles of Association
to deposit
additional security of
Rs. 20,000/- failing which further action was thereatened. The writ
petition was amended and a prayer seeking to quash the second resolution was added. The main contention of the appellant No. 2 was that
all his transactions which remained outstanding as on June 27, 1969
were forward contracts pertaining to cleared securities and as such
were affected by the Notification which banned all forward contracts,
that these had to be adjusted at the last official closing rates, that the
action of the Respondent in calling upon him to deposit interim margins
calculated on the basis of certain average specified rates fixed by
it
was not warranted by the proviso therein but in fact amounted to carry
over of those transactions which had been prohibited and, therefore,
illegal and that both the resolutions, one dated July 2, 1969 whereby
he was declared to be a defaulter and the other dated July 3, 1969
whereby he was called upon to deposit Rs. 20,000/- as additional
security were contrary to law and unjust and, therefore, the said
action as well as the resolutions were liable to be quashed.
The
appellant No. 2 further contended that by passing the two resolutions,
particularly the first one dated July 2, 1969 in contravention or breach
of statutory Bye-laws and Regnlations his fundamental right to carry
on business under Article 19 (1 )(f) of the Constitution had been infringed and, therefore, issuance of appropriate writ
quashing the
directions issued on June 28, 1969 and the two resolutions dated July
2 and 3, 1969 was sought.
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By its reply filed on July 15, 1969 the Respondent raised a preliminary objection to the maintainability of the petition. It was contended that the relationship between appellant No. 2 and the Respondent was contractual resulting from the Memorandum & Articles of
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Association and the Rules, Bye-laws and Regnlations made under
the powers given by the Articles of Association, and since the grievance made in the writ petition related to contractual rights and obligations between the parties and no question of enforcement of any
statutory right or obligation arose the remedy under writ jurisdicti~n
was not available.
On merits it was contended that the e~nstruetion
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sought to be placed by the appellants on the proviso contained iu the
Central Government Notification, which dealt with closing out or liqui·
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SUPREME COURT REPORTS
[1979] 3 s.c.R.
dating the transactions outstanding as on June 27, 1969 was not correct, that under the said proviso such transactions were permitted to
be closed or liquidated in accordance with the rules, bye-laws and
regulations of the Respondent and, therefore, the directions issued by
its Board of Directors on June 28, 1969 to all its members including appellant No. 2 to submit their lists of outstanding transactions
and.to pay interim margins on the basis of the average specified rates
fixed by it were proper and lawful and both the resolutions were legal
and justified.
The respondent, therefore, prayed for dismissal
of
the writ petition.
On .i consideration of the rival submissions made before it by
counsel for the parties, the High Court upheld both the contentions
of the Respondent and dismissed the petition with costs.
The High
Court's view on both the points is challenged by the appellant before
us in this appeal.
In the view which we are taking on the merits of the case after
giving our anxious consideration to the rival submissions thereon, we
feel lhat it would be unnecessary to go into and decide the preliminary objection raised by the respondent to the maintainability of the
writ petition.
We, therefore, propose to dispose of the appeal on
merits.
On merits the question that arises for our determination is what
on proper construction is the scope and ambit of the proviso contained in the notification ? Whether, after the imposition of the ban on
all forward trading in shares with effect from the close of June 27,
1969, the outstanding contracts that had remained to be performed
as on that date were permitted to be closed or liquidated under the
proviso in accordance with the rules, bye-laws and regulations of the
Respondent or not? On the one hand counsel for the appellants
contended that by reason of the ban imposed on all forward trading
in shares with effect from the close of June 27, 1969 the action of
the respondent in making the demand for interim margins calculated
on the basis of the difference between the rates of the last clearing and
certain average rates fixed by it in respect of their forward outstanding
transactions, which amounted to "carry over" of those transactions, was
illegal; in other words the proviso did not permit the closing out or
liquidation of the existing outstanding transactions by way of "carry
over".
On the other hand, counsel for the respondent contended that
notwithstanding the ban imposed, which prohibited all future forward
trading in shares, the existing forward transactions that remained outstanding on that date were permitted to be closed or liquidaied in the
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D. B. GUPTA & co. v. EX¢HANGE ASSOCIATION (Tulzapurkar, !.) 379
normal manner under its rules, bye-laws and regulations and, therefore, the directions issued, by the respondent on June 28, 1969 were
in accordance with the n~tification. It was pointed out that at the
close of June 27, 1969, the appellant No. 2 had certain outstanding
contracts in Cleared Securities for the then current clearing of July 8,
1969 which had to be completed and performed for the said clearing
in the manner laid down '.in Regulation 8 and Bye-law 52 ( e) which
meant that he could either.make cross contracts to close his outstanding purchases or sales for that clearing or to make carry over contracts so as to close the contracts of the current clearing and to make
contracts for the ensuing clearing and such contracts could be made
upto the last business day prescribed for that clearing by the Respondent; and so much was permitted by the proviso contained in the notification.
Moreover, in vie\v of the crisis created by the Notification
the Board of Directors of the Respondent issued the directions on June
28, 1969 having regard to Bye-law 73, which were in order and the
further action taken by the respondent against the appellant No. 2 consequent upon his failure to comply with the directions was proper and
justified under Bye-law 308 read with Article 43 (iv) of the Articles
of Association o( the respondent. Since the question depends upon
proper construction of the notification dated June 27, 1969, it will be
desirable to set out the said notification in extenso which ran thus :-
"New Delhi, the 27th June 1969.
NOTIFlCATION
S.O. 2561. In exercise of the powers conferred by subsection ( 1) of section 16 of the Securities Contracts (Regulation) Act 1956 ( 42 of 1956) the Central Government,
being of opinion that it is necessary to prevent undesirable
speculation in securities in the whole of India, hereby declares that no person, in the territory to which the said Act
exterids, 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 contract or contracts 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:
Provided that a contract other than a spot delivery con-
~act or cont;~cts for cash or hand delivery cir special delivery
m any secunties on the Qeared Securities List of a recognised stock exchange may be entered into between: its members
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or through or wit)l any such member for the purpose of closing out or liquidating all existing contracts entered into upto
the date of this notification and remaining to be performed
after the said date, but such contracts shall be subject to
the rules, bye-laws and regulations of the recognised stock
exchange that come into force when further new dealings are
prohibited in any securities on the Cleared Securities List
and subject also to such terms and conditions, if any, as the
Central Government may from time to time impose."
Counsel for the appellants did not dispute that the proviso in the
aforesaid notification dealt with the topic of closing out or liquidating
all existing forward contracts entered into up to the date of the notification and which remained to be performed or outstanding as on that
date but contended that it did not permit the closing or liquidating
all such outstanding transactions in the normal
manner under the
rules, bye4aw or regulations of the respondent, but such outstanding
transactions were declared to be "subject to the rules, bye-laws and
regulations of the rcc0gnised Stock Exchange that come irto force
when further new dealings are prohibited in any securities on the Cleared Securities List and subject also to such tenns and conditions, if
any as the Central Government may from time to time impose." In
other words, according to counsel, the words "but such contracts"
occurring in the last part of the notification referred to the outstanding
contracts that remained to be performed at the close of June 27, 1969
and it is this last portion of the notification which indicated the manner
in which such outstanding transactions were required to be closed or
liquidated. The Respondent's counsel disputed this and urged that the
last portion had nothing to do with such outstanding transactions, the
closing or liquidating of which was fully dealt with by the proviso. It
cannot be disputed that the drafting of the notification in question has
been far from happy but even so on a fair reading of the notification it
is difficult to accept the construction sought to be placed thereon by
counsel for the appellants. In our view, the notification was in three
parts. By the first part the Central Government put a ban on all forward trading in shares 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 contract 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 dealt
fully with how all existing contracts remaining outstanding as on the
date of tho notification should be closed or liquidated, and the direction
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D. B. GUPTA & co. v. EXCHANGE ASSOCIATION (Tulzapurkar, J.) 381
-contained therein in that behalf was to the effect that "a contract other
than a spot delivery 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 were 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 the
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 contracts.
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 transactions 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 th~ 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 outstand·ing 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, perA
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SUPREME COURT REPORTS
[1979] 3 S.C.Rmilted 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 of 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 that 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}
It may be stated that in one of his earlier conununications 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 provi'So.
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D. B. GUPTA & co. v. EXCHANGE ASSOCIATION (T11lzap11rkar, 1.) 383
It may be stated that it was not disputed before us that these two
dccuments 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 question 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 <1dministrative 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 constructioo, 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(') the
principle, which was reiterated in Mathura Mohan Saha v. Ram Kumar
Saha(') hM been stated by Mukerje<> 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
A
B
c
D
it. I do not suggest for a moment that such interpretatioo
E
has by any means· a controlling effect upon the Courts; such
interpretation may, if occasion arises, have to be disreg;irded
for cogent and persuasive reasons, and in a clear case of error,
a Court would without hesitation refuse to follow such construction." •
Of course, even without the aid of these two documents which contain
a contemporaneous exposition of the Government's· intention, we have
come to the conclusion that on a plain construction of the Notification
the proviso permitted the closing out or liquidation of al! outstanding
transactions by entering into a forward contract in accordance with the
rules, bye-laws and regulations of the respondent.
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 transactious as at the close of June 27, 1969 were proper and
(I) I.L.R. 35 Cal. 701 al 713.
(2l I.LR. 43 Cat 790.
S-2S3SCI/19
F
G
A
B
c
384
StJP!U!ME COURT REPORTS
[1979] 3 s.c.R.
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, 11s stated at the commencement
of the judgment, renders unneceiiary the determination of the preliminary objection.
In th= result the appeal fails and is dismissed with costs.
P.B.R.
A'ppeal dismissed.
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