CALCUTTA, January 30: Justice Ajoy Nath Ray of the Calcutta High Court has passed an ad interim order restraining the Magadh Stock Exchange and SEBI, among others, from transferring, dealing with, encumbering, hypothecating or disposing of membership cards of certain Magadh exchange brokers and their security deposits lying with it until further orders.The order was passed on a petition filed by Ratanlal Agarwala, a Calcutta-based stockbroker, who has claimed that between April 1996 and May 1997, a total of 38,144 shares worth Rs 47.07 lakh sold by a Magadh exchange broker turned out to be bad delivery shares.
In his petition, the aggrieved broker has stated that the 37 respondents "in connivance and/or in collusion with each other have purposely and deliberately united themselves to deprive the petitioner of his valuable goods being the shares in question and also thus to deprive him of the consideration money that he had paid at the time of purchase."
The petition adds that the respondents havecaused "actionable wrong to the petitioner for which he is entitled to claim damages over and above the consideration money for his loss of business, loss of face and also degeneration of his business in the share market."
In a letter dated November 22, 1997, the Magadh Stock Exchange admitted the petitioner's claim of Rs 35.39 lakh on account of bad delivery shares between October 3, 1996, and October 22, 1997, and confirmed that shares worth Rs 35.39 lakh had been closed out.
In addition, the petitioner has claimed that bad delivery shares worth about Rs 11.68 lakh are yet to be accounted for and has sought all "due benefits and interest thereon".
The petitioner has also submitted that respondent no 4 to 37 have been made party to the suit because "they have tried/are trying to avoid their respective liability towards the petitioner as per the SEBI guideline to make good the bad shares delivered and/or repaying the consideration money".
The bourse plans to file a counter affidavit next week, Sinhasaid. However, he pointed out that section 23 of the SEBI Act specifies "protection of action taken in good faith".
Penny-wise, pound-foolish
The petitioner gives an interesting insight to the bad delivery drama and the functioning of the Magadh Stock Exchange, which has since been superseded by SEBI with the installation of a SEBI-appointed administrator.
Around July 4, 1995, the petitioner sold around 375 shares of Reliance to Magadh exchange member Sandeep Kumar Jalan (respondent no 1). Out of these, 25 shares turned out to be bad. These shares were received by the petitioner on October 7, 1996, and replaced by October 17, 1996.
Despite settlement of the claim of the buying broker (Sandeep K Jalan), the Magadh exchange authorities told the petitioner (in letters dated February 7 and March 6, 1997) to furnish in detail within 10 days all documentary evidence, proof of payment, client's identification together with address, telephone numbers, income tax account number, bank account number etc.The Magadh exchange also warned the petitioner that, in the event of failure to furnish the necessary information, criminal action would be initiated in respect of the 25 bad delivery shares.
The petitioner has expressed surprise that the Magadh exchange glossed over his loss and harassment caused by bad deliveries worth about Rs 47 lakh, while showing concern for claims made for 25 shares which have been satisfactorily settled within the SEBI stipulated time.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
