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Stock exchange member was rightly expelled for failing to keep up with adequacy of deposit

November 23, 2020[2020] 121 taxmann.com 252 (SC)
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SEBI : Mere withdrawal of trading facility in stock exchange would not ipso facto absolve a trading member of stock exchange from keeping up with other obligations towards Exchange for continuation of its Membership; where after withdrawal of trading facility in stock exchange, applicant-member failed to keep up with adequacy of deposits, he was rightly expelled

• Appellant-stock broker registered itself as a Trading Member with NSE/Exchange - Interest Free Security Deposit is to be maintained by a stock broker - Appellant failed to maintain there quisite membership margins with Exchange for a long period and refused to make up for shortfalls when called upon to do so by the Exchange - Even after trading facility was withdrawn, appellant failed to keep up with adequacy of deposits - Hence, appellant was expelled -

Held that -

-   Capital adequacy norms are meant both for admission as a member and for continuation as a member.
-   Despite the temporary action of withdrawal of trading facility, a member continues to be a member of the Exchange with all corresponding rights and obligations intact on both sides.
-   Mere withdrawal of trading facility would not ipso facto absolve a trading member from keeping up with other obligations towards Exchange for continuation of its Membership.
-   A member can always resign from the membership of the Exchange and move out of all fiscal obligations after settling his dues, but as long as he opts to retain his membership of the Exchange, his obligation regarding annual charges and margin requirements, as the case may be, was to be fulfilled
-   Appellant acted in contravention of the Byelaws and Rules of the Exchange necessitating unto termination.

[Note: The seminal question about mode of dealing with withheld securities of a defaulting member by NSE/NSCCL consequent to his expulsion was also answered - Ed.]

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