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CHAPTER XVIII

DEFAULT

Declaration of Default in case of Failure to Fulfil Obligations to Members

304. The Committee shall have the power to declare a member defaulter –

  • if he is unable to fulfil his engagements; or
  • if he admits or discloses his inability to fulfil or discharge his engagements, obligations and liability; or
  • if he fails to comply with the provisions of bye-laws and regulations for the time being in force, relating to settlement of contracts through the Clearing House; or
  • if he fails or is unable to pay within the specified time the damages and the money difference due on a closing out effected against him under these provisions; or
  • if he fails to pay or deliver to the Defaulters Sub-committee all moneys, securities and other assets due to a member who has been declared a defaulter within such time of declaration of default of such member as the Committee or the President may direct.

Failure to Fulfil Obligations to Non-members

305. The Committee may order a member to be declared a defaulter if he fails to meet an obligation to a non-member arising out of an award given by the Stock Exchange in favour of such non-member.

Insolvent a Defaulter

306. A member who has been adjudicated an insolvent shall be ipso facto declared a defaulter although he may not be at the same time a defaulter on the Exchange and shall be forthwith expelled from membership.

Compromise Forbidden

307. A member guilty of accepting from any member anything less than a full and bonafide money payment in settlement of a debt arising out of a transaction in securities shall be suspended for such period as the Committee may determine.

Notice of Declaration of Default

308. On a member being declared a defaulter a notice to that effect shall be posted forthwith on the Notice Board.

Defaulter’s Assets

309. The Defaulters Sub-committee constituted for the purpose by the Committee shall call in and recover all moneys, securities and other assets due, payable and deliverable to the defaulter by any other member in respect of any transaction or dealing made subject to articles, bye-laws and regulations for the benefit and account of the creditor-members.

Payment on Defaulter’s Account

310. All monies, securities and other assets due, payable or deliverable to the defaulter must be paid or delivered to the Exchange within such time of the declaration of default as the Committee or President may direct. A member violating this provision shall be declared a defaulter.

Fraudulent Preference

311. A member who shall have received a difference on an account or shall have received any consideration in any transaction prior to the date fixed for settling such account or transaction shall in the event of the member from whom he receives such difference or consideration being declared a defaulter refund the same to the Exchange for the benefit and on account of the creditor-members. Any member who shall have paid or given such difference or consideration to any other member prior to such settlement day shall again pay or give the same to the Exchange for the benefit and on account of the creditor-members in the event of the default of such other member.

Distribution

312. The Committee shall distribute all assets realised as soon as possible pro rata upto sixteen annas in the rupee but without interest among the creditor-members whose claims are admitted in accordance with these provisions.

Alteration of Making-up Price in Case of Default

313. On a member being declared a defaulter the Committee shall fix prices in respect of current clearing in which the member was declared a defaulter which may be the same or different to the making-up price declared by the Committee in respect of that Clearing according to the discretion of the said Committee.

Adjustment at Confirmed or Altered Making-up Price

314. Members having transactions with the defaulter in the current clearing in which his default was declared shall adjust their accounts at the confirmed or altered marking-up price.

Closing-out in Open Market

315. Members having open transaction with the defaulter in non-cleared Securities shall close-out such transactions according to the direction of the Committee in the open market after the declaration of default.

Adjustment of Accounts with Defaulter

316. Members having transactions with the defaulter shall adjust their accounts with the defaulter at the confirmed or altered making-up prices and closing-out prices as provided herein. The difference arising from such adjustment shall, as the case may be, either be claimed from the defaulter or paid to the Exchange for the benefit of members who are creditors of the defaulter.

Penalty for Failure to Submit Statement of Accounts with the Defaulters Before the Defaulters Sub-Committee

317. The Committee may fine, suspend or expel any member who fails to submit a statement of his account with the defaulter or a declaration that he has no such account within such time as may be prescribed by the Committee.

Misleading Statement

318. The Committee may fine, suspend or expel a member if its is satisfied that any comparison, statement or certificate relating to a defaulter sent by such member was false or mis-leading.

Inspection of Accounts

319. All accounts kept by the Exchange in respect of a defaulter or moneys realised for assets collected shall be open to inspection by any creditor-member of the defaulter.

Scale of Charges

320. The Committee may, if it deems fit, from time to time, determine the scale of charges to be paid to the Exchange on the assets collected of the defaulting member.

Application of Assets

321. The Committee shall direct that the net assets remaining in its hands after defraying all such costs charges and expenses as are allowable under these provisions be applied in satisfying first the claims of the Exchange and the Clearing House and then rateably such admitted claims of members against the defaulter arising out of contracts entered into in the market in accordance with the provisions of the articles, bye-laws and regulations of the Exchange.

Certain Claims Not to be Entertained

322. The Defaulters Sub-committee shall not entertain any claim against a defaulter –

  • which arises out of a contract in securities, dealings in which are not permitted or which are not made subject to the articles, bye-laws and regulations of the Exchange "or in which the claimant has either not paid himself or colluded with the defaulter in the evasion of marging payable on bargains in any security";
  • which arises out of contract in respect of which comparison has not been made in the manner prescribed in these provisions or when there has been no comparison if a contract memo in respect of such contract has not been exchanged as provided in these bye-laws and regulations;
  • which arises from bargains not settled by delivery and payment within the time prescribed by these bye-laws and regulations;
  • which arises from any arrangement for settlement of claims in lieu of bonafide money payment in full on the day when such claims become due;
  • which arises from any outstanding balance or any outstanding difference upon previous transactions which has not been claimed at the proper time and in the manner prescribed in these bye-laws and regulations;
  • which is in respect of a loan with or without security;
  • which is not filed with the Defaulters Sub-committee within such time of the date of declaration of default as may be prescribed by the Committee.

Differences Due

323. Any difference due to or from a defaulter in the current clearing shall be allowed to be set-of against that due in the ensuing clearing.

Claims of Defaulters Sub-Committee

324. A claim of one defaulter whose estate is represented by the Defaulters Sub-Committee against another defaulter shall not have any priority over the claims of other creditor-members but shall rank with other claims.

Assignment of Claims on defaulters’ Assets

325. A member being a creditor of defaulter shall not sell, assign or pledge his claim on the estate of such defaulter without the consent of the Committee.

Payment to Exchange all Moneys Recovered by a Creditor-member Through a Court of Law

326. If any member takes any proceedings in a Court of Law against a defaulter whether during the period of his default or subsequent to his re-admission to enforce any claim against the defaulter’s estate arising out of any transaction or dealing in the market made subject to the articles, bye-laws and regulations of the Exchange before he was declared a defaulter and obtains a decree and recovers any sum of money thereon he shall pay such amount or any portion thereof as may be fixed by the Committee to the Exchange for the benefit and on account of the creditor-members having claims against such defaulter.

General Notice of Dividend

327. A notice of any dividend declared by the Defaulters Sub-committee shall be posted on the Notice Board.

Payment of Dividend

328. Dividends declared shall be paid to each creditor-member either by crediting his account with the Clearing House or in such other manner as the Committee or the President directs.

Un-claimed Dividend in respect of Defaulting Member’s Assets

329. If any dividend which has been declared on claims admitted by the Defaulters Sub-committee but which the member entitled (except in the case of a member who shall have died ) has failed or neglected to claim remains with the Defaulters Sub-committee un-claimed for more than one year or where after paying a final dividend any assets of the defaulter remain un-claimed or un-distributed the same shall be dealt with or disposed of by the Committee on behalf of the creditor-members.

Deceased Creditors

330. If a member who is creditor of a defaulter be dead, the dividend due to such member shall be paid to his legal representatives or heirs on application even when the right of nomination has been exercised in respect of such deceased creditor-member. But if such deceased creditor be himself a defaulter, the dividend due shall be paid to the Defaulters Sub-committee for the benefit and on account of the creditor-members.

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