Bombay High Court
Power Of Attorney Munish M. Bumb vs M/S. Joindre Capital Services Ltd on 25 September, 2012
Author: R.D. Dhanuka
Bench: R.D. Dhanuka
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO. 313 OF 2012
Kalpana Munish Bumb,
Age about 40 years, Occupation : Housewife,
R/at Suraj Bhavan, Bank Road, A/P Kopargaon,
Ahmednagar 423 601 through her
Power of Attorney Munish M. Bumb ... Petitioner
Versus
1. M/s. Joindre Capital Services Ltd.
Company registered under the Companies Act,
1956 and having htier registered office at
32, Raja Bahadur Mansion, Opp. Bank of
Maharashtra, Fort, Mumbai.
2. Bombay Stock exchange Limited,
through their Arbitration Department,
Floor 25, P.J. Towers, Dalal Street,
Mumbai 400 001. ... Respondents
ALONGWITH
ARBITRATION PETITION NO. 428 OF 2012
Kalpana Munish Bumb,
Age about 40 years, Occupation : Housewife,
R/at Suraj Bhavan, Bank Road, A/P Kopargaon,
Ahmednagar 423 601 through her
Power of Attorney Munish M. Bumb ... Petitioner
Versus
1. M/s. Joindre Capital Services Ltd.
Company registered under the Companies Act,
1956 and having htier registered office at
32, Raja Bahadur Mansion, Opp. Bank of
Maharashtra, Fort, Mumbai.
2. National Stock Exchange Limited,
through their Managing Director/Executive Director,
having its office at exchange Plaza, Bandra Kurla
Complex, Bandra (E), Mumbai 400 051. ... Respondents
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ALONGWITH
ARBITRATION PETITION NO. 554 OF 2012
Kalpana Munish Bumb,
Age about 40 years, Occupation : Housewife,
R/at Suraj Bhavan, Bank Road, A/P Kopargaon,
Ahmednagar 423 601 through her
Power of Attorney Munish M. Bumb ... Petitioner
Versus
1. M/s. Joindre Capital Services Ltd.
Company registered under the Companies Act,
1956 and having htier registered office at
32, Raja Bahadur Mansion, Opp. Bank of
Maharashtra, Fort, Mumbai.
2. National Stock Exchange Limited,
through their Managing Director/Executive Director,
having its office at exchange Plaza, Bandra Kurla
Complex, Bandra (E), Mumbai 400 051. ... Respondents
Ms. Arti Bhide for the petitioners.
Mr. Ajay Khandar for respondent no. 1.
Ms. Ruchita Ramani along with Ms. Amrita Joshi i/by M/s. Law Point for
respondent no. 2.
CORAM : R.D. DHANUKA, J.
DATE : 25th SEPTEMBER, 2012.
ORAL JUDGMENT :
1. These three petitions are filed under Section 34 of the Arbitration & Conciliation Act, 1996 (For short Arbitration Act). Since the facts and submissions in all three petitions are identical, were heard together and are being disposed of by a common order.
FACTS IN ARBITRATION PETITION NO. 313 OF 2012 :
2. It is not in dispute that the respondent is a trading member of the Stock Exchange. The Petitioner was a constituent of the respondent. A member client ::: Downloaded on - 09/06/2013 19:09:45 ::: hvn 3 ARBP313-428-554.12 agreement has been entered into between the petitioner and respondent. It is not in dispute that the last transaction between the parties had taken place in the month of March, 2008. The dispute arose between the parties. The first respondent invoked arbitration clause as per Regulations framed by the Exchange. Statement of case was filed on 20th December, 2010. Prior to the issuance of circular dated 11.10.2010, the bye-laws governing the period of limitation i.e. Regulation 252(2) of the Bombay Stock Exchange provides as under :
"The Arbitrators shall not take cognizance of any claim, complaint, difference or dispute unless the same has been received by the concerned Regional Arbitration Center of the exchange within six months from the date of the transaction or from the date on which the client claims to have given the instruction/order to buy or sell and security or from the date on which the client claims to have paid money or given a security, whichever is earlier. Any dispute as to whether a claim, complaint, difference or dispute falls within the ambit of these clauses shall be decided by the Arbitrators. "
3. On 11th August, 2010 the Securities and Exchange Board of India (Fort short 'SEBI") issued a circular in exercise of powers conferred on it under section 11 (1) of the Securities and exchange Board of India Act, 1992 read with Section 10 of the Securities Contracts (Regulation) Act, 1956 with a view to protect the interest of the investors in securities and to promote the development of, and to regulate the securities market and made it effective from 1st September, 2010. Clause 1 of that circular provided that in consultation with the stock exchanges, it has been decided to streamline the arbitration mechanism available at stock exchanges for arbitration of disputes (claims, complaints, differences etc) arising between a client and a member (Stock Broker, Trading Member and Clearing Member) across ::: Downloaded on - 09/06/2013 19:09:45 ::: hvn 4 ARBP313-428-554.12 various market segments. Clause 5 of the said regulation provided that the limitation period for filing an arbitration reference shall be governed by the law of limitation i.e. Limitation Act, 1963.
4. On 9th February, 2011 SEBI issued another circular in continuation of its earlier circular dated 11th August, 2010 by which certain clarifications came to be issued. The said circular provided that upon consideration of various representations received by the SEBI and pursuant to the discussions held with the representatives of the stock exchanges, it has been decided that the limitation period is modified to three years in terms of the Limitation Act, 1963 shall be applicable to cover the following cases :
"(i) Where three years have not yet elapsed and the parties have not filed for arbitration with the stock exchange, or
(ii) where the arbitration application was filed but was rejected solely on the ground of delay in filing within the earlier limitation period of six months; and three years have not yet elapsed. "
Clause (4) of the said circular provided as under :
"4. The recognized stock exchanges are advised to :
(i) make necessary amendments to the relevant rules/bye-laws/regulations for the implementation of the above decision immediately;
(ii) bring the provisions of this circular to the notice of the members of the stock exchange and also to disseminate the same through their website;
and
(iii) communicate to SEBI, the status of implementation of the provisions ::: Downloaded on - 09/06/2013 19:09:45 ::: hvn 5 ARBP313-428-554.12 of this circular in the monthly Development Reports to SEBI."
Clause (vi) provided that the said circular was issued in exercise of powers conferred under section 11(1) of the Securities and Exchange Board of India Act, 1992 read with Section 10 of the Securities Contracts (Regulation) Act, 1956, with a view to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and shall come into effect immediately.
5. Being aggrieved by the circulars issued by the SEBI, the petitioner herein filed Writ Petition (L) No. 412 of 2011 in this court challenging the validity of the said circulars. On 18th August, 2011, the petitioner however, did not press the said petition. This court by order dated 18th August, 2011 recorded the said statement made by the petitioner through his counsel keeping all the rights and contentions of the petitioners open including entitlement of the petitioner to challenge the circular issued by the SEBI if it becomes necessary to do so upon making of the arbitrarl award.
6. The Petitioner thereafter filed written statement before the arbitral tribunal and raised a plea of limitation. On 13 th December, 2011 the learned sole arbitrator made an award by giving detailed reasons and allowed the claim made by the first respondent after discussing the issue of limitation at length and rejecting the same. It is not in dispute that the petitioner has not objected the claim made by the first respondent on merits and only raised the plea of limitation before the arbitral ::: Downloaded on - 09/06/2013 19:09:45 ::: hvn 6 ARBP313-428-554.12 tribunal. The learned arbitrator has recorded this fact in the impugned award.
FACTS IN ARBITRATION PETITION NO. 428 OF 2012 :
7. This petition is arising out of bye-laws and regulations framed by the National Stock Exchange. The first respondent is a registered member of the National Stock Exchange. The Petitioner was a constituent of the first respondent.
The parties had entered into a member client agreement as is mandatory under the provisions of the bye-laws and regulations framed by the Stock Exchange. According to first respondent as on 31st March, 2008, there was debit balance of Rs.4,48,564.37 in the account of the petitioner herein. Despite the notice of demand dated 26 th September, 2009 sent to the petitioner the same was not complied with. On 20 th December, 2010 the first respondent filed statement of claim before the Stock exchange. The last transaction admittedly was undertaken by the first respondent on behalf of the petitioner on 28th February, 2008. By an award dated 13th December, 2011, the learned arbitrator made an award giving detailed reasons allowing the claim made by the first respondent after rejecting the plea of limitation raised by the petitioner.
FACTS IN ARBITRATION PETITION NO. 554 OF 2012 :
8. This petition is arising out of bye-laws and regulations framed by the National Stock Exchange. The first respondent is a registered member of the National Stock Exchange. The Petitioner was a constituent of the first respondent.
The parties had entered into a member client agreement as is mandatory under the ::: Downloaded on - 09/06/2013 19:09:45 ::: hvn 7 ARBP313-428-554.12 provisions of the bye-laws and regulations framed by the Stock Exchange. According to first respondent as on 31st March, 2008, there was debit balance of Rs.16,76,892.72 in the account of the petitioner herein. Despite of the notice of demand dated 26th September, 2009 sent to the petitioner, the same was not complied with. In the month of December, 2010 the first respondent filed statement of claim before the Stock Exchange. The last transaction admittedly was undertaken by the first respondent on behalf of the petitioner on 28 th February, 2008. By an award dated 13th December, 2011, the learned arbitrator made an award giving detailed reasons allowing the claim made by the first respondent after rejecting the plea of limitation raised by the petitioner.
9. The learned counsel for the petitioner made following submissions while impugning three awards allowing the claims made by the first respondent and rejecting the plea of limitation.
(1) The learned counsel fairly conceded that there was no grievance made by the petitioner on merits of the claim either before the arbitrator or in the present proceedings. The statement of claim was filed prior to the date of issuance of circular. It is submitted that the first respondent had filed statement of claim prior to the date of the issuance of circular dated 11 th August, 2010 and therefore, the rights and obligations of the parties were governed by the Regulation providing limitation of six months.
(2) There was no averment made in the statement of claim that the claim was within limitation. On the date of circular i.e. 11th August, 2010, the claim of the first respondent was already barred by law of limitation as per ::: Downloaded on - 09/06/2013 19:09:45 ::: hvn 8 ARBP313-428-554.12 Regulations providing limitation for six months and such rights once accrued cannot be taken away by issuance of circular by SEBI. It is submitted that even if the said circular has statutory force, in view of the fact that it directs the stock exchanges to frame bye-laws incorporating necessary amendment for giving effect to the circular issued by SEBI and admittedly no such amendment to the bye-laws, regulations has been carried out, no reliance on such circular could be placed by the stock exchange, the respondent or the learned arbitrator.
(3)No reasons are given by the learned arbitrator as to why the circulars are binding on the parties including the arbitrator.
10. On the other hand, the learned counsel appearing for the first respondent made following submissions :
(1) Statement of claim was filed on 20th December, 2010 i.e,. much after issuance of circular dated 11th August, 2010. Under the member client agreement entered into between the parties, it was agreed that the provisions of the agreement shall always be subject to Government notifications, rules and regulations and guidelines issued by the SEBI and rules, regulations and bye-laws of the concerned stock exchanges as may be in force from time to time. It is submitted that the circular issued by the SEBI which was issued in exercise of powers conferred under section 11(1) of Securities and Exchange Board of India Act, 1992 read with section 10 Securities Contracts (Regulation) Act, 1956 and which was ::: Downloaded on - 09/06/2013 19:09:45 ::: hvn 9 ARBP313-428-554.12 issued to protect interest of investors is binding not only on the parties but also on the stock exchanges and the learned arbitrator.
(2) The plea of limitation was raised by the petitioner herein before the arbitral tribunal and the same has been deliberated in detail and has been rightly rejected by the learned arbitrator.
11. From the perusal of the record, it is clear that the statement of claim was filed after circular dated 11th August, 2010 came to be issued. In my view, there is no substance in the first submission made by the learned counsel appearing for the petitioner that the claim was filed prior to issuance of the circular.
12. The learned arbitrator has given detailed reasons as to why the said circular dated 11th August, 2010 and 9th February, 2011 are binding on the parties as well as the learned arbitrator in the impugned award. Proviso 1 to section 11 of SEBI Act empowers the SEBI to issue circular or guidelines making it applicable immediately.
The said proviso reads as under :
"provided that if the Securities and exchange Board of India is satisfied in any case that in the interest of the trade or in the public interest any bye-
law should be made immediately, it may by order in writing specifying the reasons therefore, dispense with the condition of previous publication."
13. In view of the fact that the constitutional validity of the circulars issued by the SEBI though was challenged by filing a separate petition by the petitioner in this court, the same was not pressed with a liberty to challenge the same after publication ::: Downloaded on - 09/06/2013 19:09:45 ::: hvn 10 ARBP313-428-554.12 of the award by the learned arbitrator. It is common ground that after publication of the award by the learned arbitrator, the petitioner has not challenged the constitutional validity or otherwise of the circular in this court. Neither the arbitral tribunal nor this court can decide the constitutional validity of the circular while exercising powers under section 34 of the Arbitration Act. In my view the circular issued by the SEBI is statutory and is binding not only on the parties, but also Stock Exchanges as well as arbitral tribunal. The arbitral Tribunal is bound to decide it in accordance with the provisions of the contract and law. In my view the learned arbitrator has rightly relied upon the circular. It provided that the limitation period for filing arbitration reference shall be governed by the law of limitation i.e. Limitation Act, 1963. It is not in dispute that under the relevant article of Limitation Act, the limitation for making the claim for recovery of money is three years.
When the statement of claim was filed on 20th December, 2010 three years period had not expired. The learned arbitrator was therefore, right in rejecting the plea of limitation.
14. The next submission of the learned counsel for the petitioner is that the circular issued by SEBI cannot be implemented since direction in para 4 of the circular dated 9th February, 2011 directing the stock exchange to make necessary amendment to the relevant rules, bye-laws for giving effect to the said circular had not been complied and no amendment had been carried out. It is not in dispute that the relevant rules/bye-laws and or regulations which provide for the period of limitation for filing arbitration claim has not been amended so far after issuance of the said circular. However, clause 13 of the circular dated 11 th August, 2010 clarifies ::: Downloaded on - 09/06/2013 19:09:45 ::: hvn 11 ARBP313-428-554.12 this issue. It is provided that the said circular shall come into effect from 1 st September, 2010. In clause 13 of the said circular dated 11 th August, 2010, reasons as to why the said circular was made effective from 1 st September, 2010 are provided.
In my view therefore, there is no substance in the submissions made the learned counsel for the petitioner that unless proper amendment to the bye-
laws/regulations or rules of the Stock Exchange was carried out as directed by the SEBI in its circular, the period of limitation provided in such circular cannot be made effective. In my opinion, the circular itself is statutory in nature and therefore, in the absence of any amendment to the bye-laws is binding till the appropriate amendment to the bye-laws are carried out. I therefore, find that there is no substance in this plea raised by the petitioner.
15. In my view, the learned arbitrator has given detailed reasons in the impugned award and does not require interference. No case is made out for interference under section 34 of the Arbitration Act, 1996. In the result, I pass the following order :
The petitions are dismissed. There shall be no order as to costs.
(R.D. DHANUKA, J.) ::: Downloaded on - 09/06/2013 19:09:45 :::