Bombay High Court
Hemendra V. Shah vs Stock Exchange, Bombay, And Others on 14 July, 1995
Equivalent citations: 1996(1)BOMCR270, (1995)97BOMLR737, [1996]87COMPCAS258(BOM), 1995(2)MHLJ770
Author: S.N. Variava
Bench: S.N. Variava
JUDGMENT S.N. Variava, J.
1. This petition is filed for a declaration that there is no valid and subsisting or binding arbitration agreement between the petitioner and the sixth respondent. A declaration is sought that the third respondent is not entitled to fill in the vacancy caused by resignation of one Mr. G. B. Desai, and that the purported appointment of one Mr. J. B. Bhatt is illegal, invalid, inoperative and of no effect. A further declaration is sought that the award, if any, passed would be illegal and invalid.
2. Briefly stated the facts are that the petitioner was the clerk of the sixth respondent. The sixth respondent was a member of the Bombay Stock Exchange. The petitioner applied for membership in the year 1988. It is claimed that the sixth respondent gave his no-objection and also stood as a guarantor. On April 13, 1989, the petitioner was enrolled as a member.
3. The sixth respondent claimed that the petitioner was the proprietor of one R. Dalal and Co. The sixth respondent filed before the Bombay Stock Exchange, a claim in a sum of Rs. 2.18 crores against the petitioner. The claim was in respect of transactions in "A" group shares during the period November 5, 1986, to April 18, 1989, and in respect of transactions in "B" group shares from November 27, 1986, to September 14, 1989. Arbitration under the rules, bye-laws and regulations of the Bombay Stock Exchange was invoked. The Bombay Stock Exchange appointed one Mr. G. V. Desai as an arbitrator. On September 13, 1991, the petitioner appointed one Mr. H. K. Shah as his arbitrator. This was done without prejudice to his contention.
4. Mr. G. V. Desai resigned on October 16, 1991. The Bombay Stock Exchange appointed one Mr. Ashok Khandwalla in place and stead of Mr. G. V. Desai. The petitioner objected to the appointment of Mr. Ashok Khandwalla. The petitioner, therefore, filed a petition bearing No. 216 of 1991. In this petition basically the same reliefs as claimed herein were asked for. On January 13, 1992, a consent order in terms of the minutes was taken in this petition. The order read as under :
"1. Parties have already appointed Mr. G. V. Desai and Mr. V. K. Shah, as arbitrators, under Chapter II of the Arbitration Act, 1940. The arbitration shall proceed in accordance with the consent minutes filed under Chapter II of the said Act. Accordingly no order of reference through the court is necessary.
2. In view of arbitration of disputes and differences in accordance with the consent minutes taken on record, no order on the petition. No order as to costs.
3. On the request of both sides, it is clarified that neither of the parties has given up any of their claims and contentions.
4. Consent minutes marked 'X'.
5. Issue of certified copy is expedited."
The consent minutes read as follows :
"1. We, the applicant and the respondent by consent appoint Mr. G. B. Desai and Mr. V. K. Shah, as arbitrators, and submit to the arbitration in respect of all claims, disputes and differences between us in accordance with the rules, bye-laws and regulations of the Bombay Stock Exchange.
2. The parties will be at liberty to raise all pleas, legal as well as factual for determination by the arbitrators.
3. The learned arbitrators will proceed with the matter as expeditiously as possible.
4. The award given by the arbitrators shall be binding on the parties and shall not be challenged in any court of law.
5. All the cases pending in any court shall be withdrawn forthwith."
Thus, it is to be seen that Mr. G. V. Desai is continued as an arbitrator. However, in place of Mr. H. K. Shah, one Mr. V. K. Shah is appointed.
5. Mr. G. V. Desai thereafter again resigned. The Bombay Stock Exchange by its letter dated June 18, 1994, informed the petitioner of such resignation. The Bombay Stock Exchange also informed the petitioner that the executive director would appoint some other member. This was objected to by the petitioner by his letter dated July 7, 1994. The Bombay Stock Exchange by its letter dated September 12, 1994, appointed the fifth respondent as an arbitrator in the place and instead of Mr. G. V. Desai. This petition has, therefore, been filed for the above mentioned reliefs.
6. It is urged that the claim is in respect of transactions for the period November 5, 1986, to April 8, 1989, in respect of "A" group shares and for the period November 26, 1986, to September 14, 1989, in respect of "B" group shares. It is urged that most of these claims are time barred. It is urged that arbitration proceedings and adjudication thereof is also barred inasmuch as no award has been passed within a period of four months. It is submitted that the Bombay Stock Exchange has not extended time. It is urged that for this reason itself, the proceedings cannot continue.
7. In support of this, reliance was placed upon bye-laws Nos. 254 and 261 which read as follows :
"254. The arbitrators shall make their award within four months after entering on the reference or after having been called upon to act by notice in writing from any party or within such extended time as the arbitrators may fix with the consent of the parties to the reference or as the governing board or the president may allow.
261. The governing board or the president may if deemed fit whether the time for making the award has expired or not and whether the award has been made or not extend from time to time, the time for making the award by a period not exceeding one month at a time from the due date or extended due date of the award."
8. Reliance was also placed upon section 37 of the Arbitration Act. It was submitted that all provisions of the Limitation Act apply to arbitration proceedings.
9. Very fairly Mr. Shah also drew the attention of this court to section 46 of the Arbitration Act, which reads as follows :
"The provisions of this Act, except sub-section (1) of section 6 and sections 7, 12, 36 and 37, shall apply to every arbitration under any other enactment for the time being in force, as if the arbitration were pursuant to an arbitration agreement and as if that other enactment were an arbitration agreement, except in so far as this Act is inconsistent with that other enactment or with any rules made thereunder."
10. Mr. Shah submitted that section 46 can only apply to an arbitration which is carried on under an enactment. He submitted that arbitration under the rules, bye-laws and regulations of the Bombay Stock Exchange is not an arbitration carried on under an enactment. He submitted that, therefore, section 46 would not apply to such an arbitration. He submitted that section 37 would apply to arbitration under the rules, bye-laws and regulations of the Bombay Stock Exchange.
10. Mr. Shah also fairly pointed out an authority of this court in the case of Shivchandrai Jhunjhunwalla v. Mt. Panno Bibi, AIR 1943 Bom 197. In this case, it has been held that an arbitration under the Bombay Cotton Contracts Act is a statutory arbitration as covered by section 46 of the Arbitration Act. Mr. Shah submitted that this judgment is in respect of an arbitration under the Bombay Cotton Contracts Act. He submitted that the principles laid down in this judgment would not apply to an arbitration under the rules, bye-laws and regulations of the Bombay Stock Exchange. He also submitted that in any event the judgment does not consider the fact that section 46 uses the word "enactment". He submits that the effect of the term "enactment" being used has not been considered by this judgment.
11. Mr. Cooper points out that by the judgment in Vijay Kumar H. Bohra v. Union of India (Arbitration Petition No. 199 of 1991, dated December 10, 1992), it has already been held that an arbitration bye-law 248 of the bye-laws of the Bombay Stock Exchange, is framed in exercise of the powers under section 9 of the Securities Contracts (Regulation) Act, 1956. It is held that these bye-laws are statutory in character and that such arbitration would be covered by section 46 of the Arbitration Act.
12. Mr. Shah submits that even in this judgment the term "enactment" has not been considered. He submits that, therefore, this judgment also does not deal with the point raised by him.
13. I am unable to accept these submissions. In my view, the judgment dated December 10, 1991, in Arbitration Petition No. 199 of 1991 clearly covers the submissions made by Mr. Shah. This judgment is binding on this court.
14. As is seen above, under bye-law 261, the governing body can extend time, from time to time. This even though the period may have expired. Mr. Tulzapurkar stated that even if time has not yet been extended, the governing body or the president will be extending time to make the award. Thus there is no substance in the submission that the arbitration proceedings and adjudication are time barred. There is also no substance in the submission that most of the claims are time barred. Section 37 of the Arbitration Act does not apply to an arbitration under the rules, bye-laws and regulations of the Bombay Stock Exchange.
15. It is next urged that this arbitration is not under the rules, bye-laws and regulations of the Bombay Stock Exchange. It is urged that under the order dated January 13, 1992, the appointment of the arbitrator is under Chapter II of the Arbitration Act, 1940. It is urged that the appointment being under Chapter II of the Arbitration Act, the governing body or the president of the Bombay Stock Exchange cannot appoint an arbitrator in place and stead of Mr. G. B. Desai. It is urged that now only the court can appoint another arbitrator.
16. I am unable to accept this submission also. If the consent minutes are seen it is clear that, under clause 1 thereof, the arbitrators were appointed by consent and the parties have submitted to arbitration in respect of claims, disputes and differences between them in accordance with the rules, bye-laws and regulations of the Bombay Stock Exchange. There can be no doubt that this is an arbitration as per the rules, bye-laws and regulations of the Bombay Stock Exchange. If that be so, then under the rules, bye-laws and regulations of the Bombay Stock Exchange, the governing body or the president is entitled to appoint some other arbitrator in place and stead of the arbitrator who has resigned. Also the order itself clarifies that the arbitrators are appointed under Chapter II of the Arbitration Act. Chapter II deals with cases of arbitration without intervention of court.
17. It is next submitted that the arbitration is in respect of the claims for the period 1986 to 1989. It is urged that during that period, admittedly the petitioner was not a member of the Bombay Stock Exchange. It is urged that an arbitration under the rules, bye-laws and regulations of the Bombay Stock Exchange can only take place provided there are contract notes between the parties. It is urged that in this case, admittedly there are no contract notes between the parties. It is urged that, the arbitration is only in respect of dealings between the parties. It is urged that in the absence of any contract notes, there can be no arbitration under the rules, bye-laws and regulations of the Bombay Stock Exchange. It is urged that there is no written contract which makes the rules, bye-laws and regulations of the Bombay Stock Exchange applicable to these dealings.
18. I am unable to accept even these submissions. Bye-law 226(a) provides that all contracts made by a member for or with a non-member, for the purchase or sale of the securities in which dealings are permitted on the exchange, shall in all cases be deemed to be made subject to these rules, bye-laws, regulations and usage of the exchange. The said bye-law also provides that all such contracts shall be subject to the exercise by the governing board and the president of the powers with respect thereto vested in it or by him the rules, bye-laws and regulations of the exchange.
19. Further bye-law 226(c) provides that in cases of all claims (whether admitted or not), differences and disputes arising out of or in relation to all the contracts referred to in sub-clause (a) the parties concerned shall be deemed to have agreed and acknowledged that such contracts have been entered into and are to be performed within the City of Bombay, that they are subject to arbitration in accordance with the provisions relating to arbitration contained in these bye-laws and regulations. Thus bye-law 226(a) and 226(c) make it very clear that all such contracts or dealings, irrespective of the fact that there may be no contract notes, are deemed to be subject to these rules, bye-laws and regulations. It is clear that these rules, bye-laws and regulations will govern such contracts and dealings. Such contracts and dealings are also subject to arbitration in accordance with these rules, bye-laws and regulations.
20. Accordingly the petition stands dismissed. There will be no order as to costs.
21. Certified copy expedited.