Delhi District Court
Suresh Kabra vs Bonanza Portfolio Ltd on 2 February, 2007
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IN THE COURT OF DR.SUDHIR KUMAR JAIN, ADDITIONAL DISTRICT JUDGE, DELHI.
Petition No. 151/2005
Date of Institution : 27.10.2005
Date of Decision : 02.02.2007
Suresh Kabra,
S/o Ramswaroop Kabra,
C-150, Shastri Nagar,
Jodhpur, through his attorney,
Shri Prakash Mal Jain
... Appellant/ Petitioner
Versus
1. Bonanza Portfolio Ltd.,
4353-4C, Madan Mohan Street,
Daryaganj,
Delhi-110002.
2. National Stock Exchange,
of India Ltd.,
Thapar House, Western Wing,
Mezannine Floor, Janpath Lane 124,
Janpath, Connaught Place,
New Delhi.
... Respondents
Appearances:
For the petitioner : Sh.Pradeep Mahajan, Advocate.
For the respondent no.1 : Sh.S.S.Mittal, Advocate.
For the respondent no.2 : None.
Petition u/s 34 of Indian Arbitration & Conciliation Act, 1996.
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JUDGMENT
This judgment shall decide a petition u/s 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act") for setting aside the award dated 01.07.2005 (hereinafter referred to as `impugned award') and subsequent order dated 20.07.2005 passed by the Arbitrator Mrs.Lakshmi Swaminathan in arbitration proceedings bearing AM No.D023/2005 titled as Suresh Kabra V Bonanza Portfolio Ltd.and another.
2. The relevant facts as alleged by the petitioner are that the petitioner has filed an arbitration application before the respondent no.2 for praying an award against the respondent no.1 in respect of claim of Rs.11,40,000/-with interest @ 18% per annum w.e.f. July, 2003 till the date of payment which was assigned to arbitration; appellant filed the statement of claim which was replied by the respondent no.1; the respondent no.1 alleged that the arbitration application filed by the petitioner on 28.02.2005, in pursuance of dispute stated to have been arisen on 27.07.2004 in pursuance of letter dated 27.07.2004 issued by the respondent no.2, is time barred as is filed after the expiry of six months as per the Bye laws of respondent no.2; the Arbitrator vide impugned award dismissed the arbitration application/claim of the petitioner being barred by limitation as per Bye laws of respondent no.2; the petitioner filed another application u/s 33 of the Act which was dismissed by 3 the Arbitrator vide order dated 20.07.2005. The petitioner has filed the petition against impugned award and subsequent order dated 20.07.2005 on the grounds that the respondent no.2 has considered the plea of limitation before issuing the letter dated 27.07.2004; the period of limitation of six months should not have been calculated from 28.02.2005 when the respondent no.2 has issued the letter advising the petitioner to file an application for arbitration in respect of disputes against the respondent no.1; the Arbitrator has gone beyond the scope of reference; the respondent no.1 has not raised the objection regarding the limitation; the impugned award is against the public policy. The petitioner has prayed that the impugned award and subsequent order dated 20.07.2005 passed by the Arbitrator be set aside.
3. The respondent no.1 has filed the written statement/reply. The respondent no.1 alleged that the application has not been signed, verified and filed by a duly authorized person; the objections are time barred; no ground for challenging the award as per section 34 of the Act has been made out; this court has no territorial jurisdiction to decide the objections. The respondent no.1 also disputed the grounds of appeal. The respondent no.1 has denied that the Arbitrator has erred in considering the issue of limitation.
4. The respondent no.2 was proceeded exparte vide order dated 15.12.2005.
5. Sh.Pradeep Mahajan, Advocate for the petitioner and Sh.S.S.Mittal, 4 Advocate for the respondent no.1 heard. Record as well as the impugned award and subsequent order dated 20.07.2005 perused.
6. The Act restricts the judicial intervention in the matter of arbitration except as provided under Part I of the Act. Section 34 of the Act deals with the application for setting aside the arbitral award. Section 34 provides various grounds for setting aside a award which are listed as under:--
i) that the party challenging award was under incapacity to enter into arbitral agreement; or
ii) the arbitration agreement is not valid under the law to which parties are subject to or under the law for the time being in force; or
iii) the party making the application was not given notice of appointment of an arbitrator or that of arbitral proceeding which prevented him from presenting his case; or
iv) the arbitral award given is beyond the scope of the submission of arbitration provided that such part which is without jurisdiction cannot be separated from the valid part of the award; or
v) the composition of the arbitral tribunal or the procedure adopted by the tribunal was not in accordance with the arbitral agreement of the parties provided that the clause violative of the agreement itself was not against the provisions contained in Part I of this Act; or
vi) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force; or
vii) the arbitral award is in conflict with the public policy of India.
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7. Sh.Pradeep Mahajan, Advocate for the petitioner argued that the Arbitrator has failed to apply its judicial mind while passing the impugned award and subsequent order; the sole arbitrator has passed the impugned award in a mechanical way by holding that the arbitration proceedings have been filed after the expiry of period of limitation of six months as provided under Bye laws of respondent no.2. Sh.Mahajan stated that the impugned award and the subsequent order dated 20.07.2005 are liable to be set aside.
Sh.S.S.Mittal, Advocate for the respondent no.1 has argued that Prakash Mal Jain through whom the petitioner has filed the objections does not have any authority to file the petition; the objections are time barred; and the petitioner has already filed a review application u/s 33 of the Act which was rejected by the arbitrator vide order dated 20.07.2005; this court has no territorial jurisdiction as only the courts at Mumbai have jurisdiction to decide the validity and legality of the impugned award.
8. The petitioner stated that the Arbitrator vide impugned award has dismissed the arbitration application of the plaintiff filed against the respondent no.1 being time barred as not filed within a period of six months as per the relevant Bye laws of the National Stock Exchange of India Ltd. i.e.respondent no.2. The respondent no.1 has filed the relevant Bye laws of respondent no.2 pertaining to arbitration. The Bye law no. 3 deals with the limitation period for 6 reference of claims, differences or disputes for arbitration. It provides that all claims, differences or disputes shall be submitted to arbitration within six months from the date on which the claim, difference or dispute arose or shall be deemed to have arisen. As per the relevant Bye law a dispute can be referred for arbitration to the respondent no.2 within a period of six months from the date when the dispute is stated to have been arisen.
9. The impugned award perused. The Arbitrator has observed that the petitioner was informed by the arbitration department of respondent no.2 vide letter dated 27.07.2004 to submit the arbitration application within a period of six months from the date of claim or the dispute deemed to have arisen, as per the Byelaws. The petitioner has filed the statement of claim for arbitration on 28.02.2005 as appears from the impugned award. The arbitrator has calculated the period of six months from 27.07.2004 and observed that the arbitration application preferred by the petitioner before the arbitrator is clearly time barred and not maintainable.
10. What is appearing from the perusal of impugned award is that the petitioner's application for arbitration was rejected as the same was filed after the expiry of period of six months from the date when the dispute deemed to have arisen i.e. 27.07.2004. The respondent no.1 did not highlight the fact that the Bye laws of respondent no.1 are statutorily enforceable.
The Act deals with the aspect of limitations. Section 43(1) of the Act 7 provides that the Limitation Act, 1963 shall apply to arbitrations as it applies to proceedings in Court. Sub-section(2) further provides that for the purpose of Limitation Act, 1963 arbitration shall be deemed to have commenced on the date referred in section 21. Section 21 provides that unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.
11. The Article 137 of the Schedule of the Limitation Act, 1963 provides that an application for which no period of limitation is provided elsewhere in the Schedule itself, the limitation period would be three years when the right to apply accrues. A combined reading of section 21 and 43 of the Act and Article 137 of the Schedule of the Limitation Act, 1963 reflects that in case of arbitration a reference can be made within a period of three years. It was held by the Supreme Court in State of Orissa V Damodar Das, 1 (1996) Civil Law Times 294 that the application for reference must be made within three years from the date when the right to apply first accrues. It was also held in Technofab Engg.Ltd. V Bharat Petroleum, 76 (1998) DLT 425 that the claim to be made within three years from date when right to apply accrues.
12. The right of the claimant for filing claim before the arbitrator and settlement of disputes by arbitration which is governed by the specific provisions of the Act cannot be curtailed by any other Bye laws unless and 8 until it is specifically and statutorily provided. The respondent no.2 is not a creation of statute but it is a limited company. The respondent no.2 is having arbitration mechanism for settlement of disputes involving its members. The respondent no.2 has evolved arbitration mechanism by way of Bye laws. However, the said Bye laws cannot curtail the specific provisions of the Act and do not have overriding effect over the Act. The Bye laws must be in conformity with the Act. Even if the Byelaws have provided a period of six months for making reference to the arbitration from the date when the dispute is stated to have arisen but the right of the claimant to make reference within a period of three years cannot be curtailed in any circumstance. The Arbitrator without applying its mind to the relevant provisions of the Act has passed impugned award in a mechanical way by holding that the reference is barred by limitation. The Arbitrator has not examined the aspect of limitation as provided under the Act for making reference to an arbitrator.
13. Section 18 of the Act cast a duty upon the arbitrator to treat the parties with equality and also to give each party a full opportunity to present his case. The perusal of impugned award reflects that the representative of the respondent no.1 has orally submitted that the statement of claim as filed by the petitioner is beyond the period of six months and is liable to be dismissed. It also appears that the authorized representative of the petitioner has pleaded before the arbitrator that after the receipt of letter dated 9 27.07.2004 the applicant had filed another application to SEBI for settlement of disputes. It is not understandable as to how the arbitrator has formed an opinion that the period of limitation is to be commenced only from 27.07.2004 for which no cogent finding is given by the arbitrator. The aspect whether the statement of claim was barred by limitation, was not a pure question of law but appears to be a mixed question of law and fact. The arbitrator was under a statutory obligation to provide an opportunity to the petitioner to prove that the claim was preferred within a period of limitation even as per the Bye laws of respondent no.2. The impugned award is bad in law and is liable to be set aside.
14. The argument advanced by Sh.Mittal that the objections are time barred as not filed within the period of limitation provided u/s 34(2) of the Act and this court has no territorial jurisdiction to hear the objections considered. It is not explained by the respondent no.1 how the courts at Delhi have no territorial jurisdiction to entertain the objections. Even if the objections are time barred even then it does not give any validity or legality to the impugned award dated 01.07.2005 which is manifestly bad in law. The arguments as advanced by Sh.Mittal are without any merit.
15. The impugned award dated 01.07.2005 is set aside and is remanded back to the arbitrator with the direction to give an opportunity to both the parties to present their respective case and then decide the claim of petitioner 10 against respondent no.1 in accordance with law including the limitation aspect. Both the parties are directed to appear before the arbitrator on 17.04.2007. The respondent no.2 i.e.National Stock Exchange of India Pvt.Ltd.shall be at liberty to appoint any other arbitrator in case Ms.Laxmi Swaminathan is not available due to any reason. No order as to costs. A copy of this order be also sent to the respondent no.2 for necessary information and compliance. File be consigned to the record room.
Announced in the open court (Dr.Sudhir Kumar Jain) Dated: 02.02.2007 Additional District Judge / Delhi 11 151/05 24.01.2007 Present: None.
Record perused. No clarifications are required. It is 4.00 p.m. No time left.
Put up on 02.02.2007 for orders.
(Dr.Sudhir Kumar Jain) Additional District Judge / Delhi 02.02.2007 Present: None.
Vide my separate judgment, the impugned award dated 01.07.2005 is set aside and is remanded back to the arbitrator with the direction to give an opportunity to both the parties to present their respective case and then decide the claim of petitioner against respondent no.1 in accordance with law including the limitation aspect. Both the parties are directed to appear before the arbitrator on 17.04.2007. The respondent no.2 i.e.National Stock Exchange of India Pvt.Ltd.shall be at liberty to appoint any other arbitrator in case Ms.Laxmi Swaminathan is not 12 available due to any reason. No order as to costs. A copy of this order be also sent to the respondent no.2 for necessary information and compliance. File be consigned to the record room.
(Dr.Sudhir Kumar Jain) Additional District Judge / Delhi