JUDGMENT
Dalveer Bhandari, J.
(1) The petitioner who is a registered member of the National Stock Exchange of India Limited, (for short NSE), has preferred this Letters Patent Appeal against the order dated 27.8.97, by which the appellant’s writ petition was dismissed in limini by the learned Single Judge.
(2) The appellant is a registered Trading Member. Trade Members have to abide by the Bye-laws., Rules and Regulations of the Exchange. Clause (2)(a) of the Byelaws of the Nse of India Limited reads as under:- (2)(a) Trading member shall adhere to the Bye Laws, Rules and Regulations of the Exchange and shall comply with such operational parameters, rulings, notices guidelines and instructions of the relevant authority as may be applicable.
(3) Admittedly, the total Base Capital deposited by the appellant with the Exchange and Clearing Corporation is Rs. 70 lakhs and as per the circular of the Exchange NSCCL/CM/C&S/0011 dated 1.10.96, the gross exposure at any time should not exceed Rs. 7 crores, which is 10 times of the Base Capital. According to the Bye-Laws of the N.S.E. any trading member who fails to deposit margin money as provided in Bye-Laws and Regulations shall be required to suspend its business forthwith. In this case the gross exposure limit of the appellant was 7 Crores and the appellant admittedly exceeded to 33 and odd Crores of rupees on 14.1.1997.
(4) Clause (26) of the national Stock Exchange is relevant and the same reads as under:- ” (26) A trading member failing to deposit margin as provided in these Bye Laws and Regulations shall be required by the relevant authority to suspend its business forthwith. A notice of such suspension shall be immediately placed on the trading system and the suspension shall continue until the margin required is duly deposited.”
(5) The trading facility granted to the appellant was withdrawn because of gross exposure on 14.1.97. The appellant has challenged the said order on the ground that no notice or reasonable opportunity was given to him before withdrawing the trading facility. The appellant is also aggrieved by the order dated 1.7.97 by which he was declared a `defaulter’ in accordance with the provisions of Chapter Xii of the Byelaws of the National Stock Exchange. Under Chapter 12, a trading member can be declared a `defaulter’ for failure to fulfill his obligations. In the instant case, the appellant was declared defaulter because he failed to pay Rs. 2,70,69,979.00 towards payment of normal and auction settlements and Rs. 3,23,410.00 is due as on date according to the letter sent to the appellant by the N.S.E. on 7.5.97. The relevant details of outstanding dues as on 7.5.97 are set out as under:- Details of outstanding dues to Nseil as on May 7, 1997
____________________________________________________________________________ No. Description Amount (in Rs.) ____________________________________________________________________________ 1 Shortage in Auction Pay in Settlement No. 1997002 2,70,01,488.00 2 Shortage in Auction Difference Sett. No. 1997002 17,401.00 3 Shortage in Auction Difference Sett. No. 1997008 32,250.00 4 Shortage in Auction Pay in Settlement No. 1997012 18,840.00 ______________ Total 2,70,69,979.00 ____________________________________________________________________________
Details of outstanding dues to Nseil as on May 7, 1997
____________________________________________________________________________ No. Description Amount (in Rs.) ____________________________________________________________________________ 1 Transaction Charges 1,76,009.00 2 Other dues 1,47,401.00 ___________ Total 3,23,410.00 ____________________________________________________________________________
(6) Mr. Mukul Rohtagi, learned Senior counsel appearing for the appellant submitted that the order declaring the appellant as defaulter is illegal and unsustainable. He also submitted that the decision of the respondent dated 14.1.97 by which the trading facilities were withdrawn was also illegal, arbitrary and against the principles of natural justice.
(7) Mr. Rohtagi further submitted that though the appellant had exceeded his limit and the gross exposure increased at 14.52 hrs on 14.1.97 to the tune of Rs. 33,05,96,952.50, but he was not cautioned or warned by the respondents, otherwise, he would have reduced the limits/exposure.
(8) Mr. Rohtagi submitted that the appellant did not receive the letter dated 13.1.97 as submitted by the respondent. On 14.1.97 till 3:05 pm., the appellant did not receive any message or warning asking him to reduce his limits/exposure. It is submitted by the Mr. Rohtagi that on 14.1.97, the respondent permitted him to increase the limit upto Rs. 33 crores and odd and then abruptly at 2.52 P.M. on 14.1.1997 discontinued the trading facility without giving him any warning or reasonable opportunity. Mr. Rohtagi submitted that the letter dated 14.1.1997 was received by the appellant after trading facility was discontinued. He submitted that according to the basic principles of natural justice, the respondent ought to have given the warning and reasonable opportunity to the appellant before abruptly discontinuing the trading facility granted to him.
(9) On the other, hand, Mr. Arun Jaitley, learned senior counsel appearing for the N.S.E. submitted that admittedly the petitioner had paid Rs. 70 lakhs as the Base Capital or margin amount and his maximum trading limit was Rs. 7 crores and in no case, he could have exceeded that limit. The appellant’s exceeding the limit itself was a clear violation of the Nse Byelaws and consequently the Nse was totally justified in withdrawing the facility provided to the appellant Mr. jaitley, also stressed that the National Stock Clearing Corporation had sent a letter to the appellant in which it was clearly mentioned that he had violated the trading limits, the letter of 13.1.97 reads as under;- National securities Clearing Corporation LTD. Ref.No.NSCCL/BNK/3540 January 13, 1997 R.C.Garg & Sons Capital Services Ltd., M-10, Guru Harkrishan Nagar, New Delhi-110041 Kind Attn: Mr. R.C.Garg Dear Sir, We observe from our records that you have violated the gross exposure limits imposed by the Exchange vide circular No. NSCCL/CM/C & S/0011 dated October 1, 1996. As you are aware, your base capital with the Exchange and Clearing Corporation is Rs. 70,00 lakhs in total, and as per the above circular, your gross exposure at any time should not have exceeded Rs. 7.00 crores which is 10 times of your base Capital. But your gross exposure as at end of day on January 13, 1997 was Rs. 12,41,36,452.50 which exceeds the limit on gross exposure imposed by the above-mentioned circular. As you are also aware, if you desire to exceed the gross exposure limit, an additional deposit equivalent to one-tenth of the amount exceeding the gross-exposure limit has to be submitted to the Clearing Corporation in advance, in the form of cash or bank guarantee. Since your gross exposure has reached Rs. 12,41,36,452.50, the additional deposit required words out to Rs. 53.20 lakhs. Since no such deposit has been made with the Clearing Corporation, you have violated the norms laid down by the circular. You are required to pay this amount of Rs. 53.20 lakhs to the Clearing Corporation, latest by January 20, 1997, failing which the trading facility given to you by National Stock Exchange of India Ltd. will be withdrawn without further notice. This deposit when made, will be retained by the Clearing Corporation for a period of three months as intimated vide the abovementioned circular. You are further advised to desist from violating the gross exposure and in trading turnover limits, failing which, the trading facility given to you by National Stock Exchange of India Ltd. will be withdrawn without further notice. Thanking you, Yours faithfully, For National Securities Clearing Corporation of India sd/- Manager”
(10) Mr. Jaitley further submitted that despite a clear warning and cautioning, the appellant on 13.1.97 instead of reducing his trading limits went on grossly exceeding the limit and on 14.1.97 the limit was increased from Rs. 12 crores and odd to Rs. 33 crores and odd.
(11) Mr. Jaitley produced a copy of telephone bill to indicate that on 14.1.1997 on several occasions the appellant was asked to reduce his trading limit by repeated telephone calls from Bombay but the appellant on the contrary went on to increase the limit while altogether ignoring warning given to him on telephone. Mr. Jaitley has also drawn our attention to the letter of 14.1.97 in which it is mentioned that at 12:01 hrs the appellant’s gross exposure was Rs. 12,30,51,822.50. At that time, the appellant was informed on telephone to desist from increasing gross exposure any further Instead of reducing the limit, the appellant increased it sharply to Rs. 25,49,60847.50 at 14:20 hrs., at that time, the appellant was again informed on telephone of the continued violation and was asked to immediately reduce the gross exposure. Admittedly, the gross exposure further increased to Rs. 29,20,16,412.50 at 14:25 hrs. At that stage, the appellant was again informed on telephone at 14:31 hrs to reduce his exposure immediately and in any event not later than 15:00 hrs, the exchange may consider withdrawing trading facilities, and close out his outstanding position without notice. Despite such repeated reminders, the appellant’s gross exposure further increased to Rs. 33,05,96,952.50 at 14:52 hrs. on 14.1.1997. Therefore, in view of the continued violations of the trading facility by the appellant, the respondent Nse was left with no option but, to withdrawn the trading facility.
(12) The appellant by the letter of 14.1.1997 was asked to pay an amount of Rs. 260.60 lakhs to the Clearing Corporation by January 21, 1997. But admittedly, the amount has not been paid till date. He further submitted that in this case there has been no violation or infringement of the principles of natural justice. As a matter of fact, the respondent had cautioned and given warning on several occasions but instead of reducing the limit, the appellant went on increasing it and when it touched the figure of Rs. 33 crores and odd, the respondent had to withdraw the trading facility in the interest of the investors and others.
(13) Mr. Jaitley also contended that in the instant case the appellant had known his limit and deliberately crossed that limit from Rs. 7 crores to Rs. 33 crores. According to him such a deliberate defaulter and violator of financial norms is not entitled to any indulgence from this Court and any indulgence would be at the cost of thousands of investors of the National Stock Exchange. Mr. Jaitley further submitted that in the instant case, the action of withdrawing the trading facility was taken after providing full opportunity to the appellant.
(14) Mr. Jaitley also submitted that opportunity and notice depend on the facts and circumstances of each case. In the facts of the instant case, the question of providing opportunity of weeks or months is not possible, particularly when within few minutes, there can be transactions worth crores of rupees and if the trading members are to checked or stopped right then and there, it may lead to a loss of crores of rupees.
(15) Mr. Jaitley placed reliance on the celebrated Supreme Court judgment in Mohinder Singh Gill and another vs. the Chief Election Commissioner, New Delhi, . In this case, the Court observed that disclosure of the prominent circumstances and asking for an immediate explanation orally or otherwise may, in many cases, be sufficient compliance of natural justice.
(16) The Court also observed in the aforesaid case that an elaborate and sophisticated methodology of a formalised hearing may be injurious to promptitude so essential in an election under way. The Court further observed that there is no invariable standard of fair hearing and each case has to be decided on its own merits. The standards of natural justice vary with situations “contracting into a brief, even post decisional opportunity, or expanding into trial type trappings.
(17) Mr. Jaitley submitted that looking to the peculiar circumstances of the instant case, no better warning, or cautioning or hearing could be given to this appellant. He also placed reliance on another judgment of the Supreme Court in State Bank of Patiala vs. S.K. Sharma, . In this case, the Court has taken the view that the real test is one by which it is to be evaluated what prejudice has been caused to the person concerned.
(18) In Howard v. Borneman, (1974) 3 Wlr 660, while dealing with the principles of natural justice and requirement of notice, the Court held as under:- “NO doctrinaire approach is desirable but the Court must be anxious to salvage the cardinal rule to the extent permissible in a given case. After all, it is not obligatory that Counsel should be allowed to appear nor is it compulsory that oral evidence should be adduced. Indeed, it is not even imperative that written statements should be called for. Disclosure of the prominent circumstances and asking for an immediate explanation orally or otherwise may, in many cases, be sufficient compliance. It is even conceivable that an urgent meeting with the concerned parties summoned at an hour’s notice, or in a crisis, even a telephone call, may suffice. If all that is not possible as in the case of a fleeing person whose passport has to be impounded lest he should evade the course of justice or a dangerous nuisance needs immediate abatement, the action may be taken followed immediately by a hearing for the purpose of sustaining or setting aside the action to the extent feasible.”
(19) Relying on the ratio of aforesaid case Mr. Jaitely submitted that the reasonable opportunity and notice depends on the facts and circumstances of each case, and the opportunity has to be carved out accordingly.
(20) The learned counsel for the respondents also referred to and relied upon Shiv Sagar Tiwari vs. Union of India and others, . In this case, there was a large scale out of turn allotment of Government quarters in Delhi where several thousand people were affected by the order of the Supreme Court. The Court observed that for all the allottees who are adversely affected being in Delhi and being well educated, newspaper publication was definitely sufficient to enable them to know what they have to be informed. Indeed the employees concerned were knowing much aliunde also, and newspaper publication was considered to be sufficient opportunity.
(21) The learned counsel for the respondents also referred to and relied upon Hira Nath Mishra and others vs. The Principal, Rajendra Medical College, Ranchi and another, . In this case, the appellants were the students of Medical College and lived in the College hostel. A confidential complaint was received by the Principal from 36 girls students residing in the girls hostel of the College, alleging that the appellants with some others on a late night had entered into the compound of the girls hostel and walked without clothes on them. It was indeed a very delicate matter and careful handing of the matter was required. The Police could not be called in because if an investigation was started, the female students out of sheer fright and harm to their reputation would not have co-operated with the police. Nor was an enquiry, before a regular tribunal feasible because the girls would not have ventured to make their statements in the presence of the miscreants, because if they did, they would have most certainly exposed themselves to retaliation and harassment thereafter. The college authorities would not have protected the girl students outside the college. Therefore, the authorities had to devise a just and reasonable plan of enquiry which on the one hand would not expose individual girls to harassment by the male students and, on the other, secure reasonable opportunity to the accused to state their case.
(22) For finding out the veracity of the allegations, the Principal instituted an Enquiry Committee consisting of three members of the staff. The Committee first called the girl-complainants and recorded their statements but not in the presence of the appellants. The Committee also obtained photographs of the delinquents and mixed them up with 20 other photographs of students. The girls by and large identified the appellants from the photographs.
(23) The appellants were then called one after the other to appear before the Committee and the contents of the complaint were explained to each one of them with due care being taken not to disclose the names of the girls who made the complaint. The appellants unanimously denied the charges and stated that they were in their hostel at that time.
(24) After making the necessary enquiry and considering the statements of the appellants who did not intimate that they wished to lead any evidence, the Committee came to the unanimous conclusion that the appellants were among the students who had taken part in the raid that night. Consequently in accordance with the recommendations of the Committee, the Principal by an order expelled them from the college for two academic sessions. It was against this order that the appellants filed a writ petition in the High Court contending that the rules of natural justice had not been followed. The High Court having disallowed the petition, the appeal before Supreme Court was preferred.
(25) The Supreme Court held that under the circumstances of the case, the requirements of natural justice were fulfillled because principles of natural justice are not inflexible and may differ in different cases.
(26) The Supreme Court in the judgment of the aforesaid case gave an illustration of the `Goonda Act’ which permit evidence being collected behind the back of the goonda and the goonda being merely asked to represent against the main charges arising out of the evidence collected. Extreme care has to be taken to see that the witnesses who gave statements would not be identified. In such cases, there is no question of the witnesses being called and the goonda being given an opportunity to cross-examine the witnesses the reason is obvious. No witness will come forward to give evidence in the presence of the goonda. However, unsavoury the procedure may appear to a judicial mind, these are facts of life which are to be faced. The Court further observed that the girls who were molested that nigh would not have come forward to give evidence in any regular enquiry and if a strict enquiry like the one conducted in a Court of law was to be imposed in such matters, the girls would have had to go under the constant fear of molestation by the male students who were capable of such indecencies. The Court observed that under the circumstances, the course followed by the Principal was a wise one. The Committee whose integrity could not be impeached, collected and shifted the evidence given by the girls. Thereafter the students definitely named by the girls were informed about the complaint against them and the charge. They were given an opportunity to state their case. According to the Supreme Court, in the facts and circumstances of this case, there has been no violation of rules of natural justice.
(27) In Russel v. Duke of Norfolk, (1949) 1 All England Reports, Page 109, the Court observed:- “THE requirements of natural justice must depend upon the circumstances of the case the nature of inquiry, the rules under which the tribunal is acting, the subject matter that is being dealt with, as so forth.”
(28) In Byrne v. Kinematograph Renters Society Ltd. (1968) 2 All England Reports, Page 579, while dealing with the requirements of natural justice, the Court observed that a person should know the nature of the accusation made: secondly that he should be given an opportunity to state his case; and thirdly, of course that the tribunal should act in good faith. Nothing more than this is required.
(29) There cannot be a strait-jacket formula or fixed norms of providing reasonable opportunity or notice to the concerned person. The notice and reasonable opportunity depend on the facts and circumstances of each case. The rules of natural justice are not rigid norms of unchanging context. The ambit of those rules must change and vary according to the context and facts and circumstances of each case. The rules of natural justice have to be tailored to suit the nature of proceedings in relation to which the particular right is claimed as a component of natural justice. The basic requirement is that there must be fair play in action and the decision must be arrived at in a just and objective manner with regard to the relevance of the materials and reasons.
(30) When the ratio laid down by the leading Indian and English judgments is applied to the facts of this case, then the conclusion becomes irresistible that in the instant case, when the appellant had known his financial limit, he had no business to exceed or transgress the same. Hardly any notice, caution or warning was warranted. Even then the letter of 13.1.96 requiring him to reduce limit was sent to the appellant. Apart from the said letter repeated long distance telephone calls from Bombay were made calling upon the appellant to reduce the limit but instead of reducing the limit, the appellant deliberately went on increasing the same from 12 crores to 33 crores. In these circumstances, it became imperative for the respondent to withdraw the trading facility granted to the appellant in the larger public interest. Failure to act promptly would have led to huge losses running in crores of rupees. We are of the considered opinion that looking to the facts and circumstances of this case reasonable notice and opportunity was given to the appellant before discontinuing trading facility granted to him.
(31) Looking to the totality of facts and circumstances of this case, the appeal is totally devoid of any merits and is accordingly dismissed. The parties are directed to bear their own costs.