KANTILAL MANILAL PAREKH Vs. RANCHHODDAS K BHATT

JUDGEMENT

(1.) This was a suit filed by a constituent against a sharebroker claiming a certain sum of money as due from the share broker in respect of transactions effected by the broker on behalf of the plaintiff on the Bombay Stock Exchange. The defendant put in a counter-claim claiming a large sum of money as due to him and stating that the plaintiff had merely forestalled him by filing a suit. As the claim in the suit was below Rs. 10,000, I had no jurisdiction to deal with it and the suit stands transferred to the City Civil Court. As, however, the counterclaim exceeds that amount, I have jurisdiction to deal with it and have proceeded to do so.

(2.) Now, the question that arises in this counter-claim (and also in several other suits which are on my board and which have been filed by brokers against their constituents) is whether, assuming that the contracts entered into by the brokers on behalf of their constituents were void, the brokers are entitled to an indemnity from their constituents.

(3.) Now, the contracts in suit were effected under a set of rules entitled "Additional Rules for Heady Delivery Contracts" which were made by the Native Share and Stock Brokers' Association and came into force on October 4, 1946. At that date there were in existence a set of rules for forward contracts which had been duly sanctioned by the Local Government; but the Association by a new rule (Rule 359) provided that contracts other than ready delivery contracts shall not be made within or without the ring, with the result that so far as the association was concerned, rules for forward delivery contracts were suspended or kept in abeyance for the time being; and the only transactions that were authorised were the so called ready delivery contracts under the rules which came into force on October 4, 1946. In a judgment of a Division Bench of this High Court, to which I was a party, in -- 'Goolbai Hormasji v. Jugalkishore', 53 Bom LR 870, it was held that the contracts which were described as ready Kantilal Manilal Parekh vs. Ranchhoddas K. Bhatt (20.07.1951 -BOMHC) Page 3 of 6 (20.07.1951 -BOMHC) Page 3 of 6 delivery contracts under these rules were in fact forward contracts, and as they had not been made in accordance with the rules for forward contracts sanctioned by the Local Government, they were void. We were then dealing with an arbitration clause in a contract note rendered by a broker to a constituent; and we also held that the contract note the form for which was prescribed by the new rules was itself invalid inasmuch as the contract note should have been in the form prescribed for the forward delivery contract. All the contracts in the counterclaim before me are contracts which have been effected under the ready delivery contract rules. Therefore, by virtue of the decision of the Division Bench they are all void contracts. The only question that survives for determination is whether the broker is nonetheless entitled to an indemnity from his constituent.