*IN THE HIGH COURT OF DELHI AT NEW DELHI
+ FAO.No.285/2005
Date of Reserve: 24th September, 2009
Date of Decision: 15th February, 2010
%
MUKESH GARG ..... Appellant
Through : Mr. Vidhu Upadhyaya, Adv.
versus
O.J. FINANCIAL SERVICES LTD. & ORS. ..... Respondent
Through : None.
CORAM :-
THE HON'BLE MR. JUSTICE J.R. MIDHA
1. Whether Reporters of Local papers may YES
be allowed to see the Judgment?
2. To be referred to the Reporter or not? YES
3. Whether the judgment should be YES
reported in the Digest?
JUDGMENT
1. The appellant has challenged the order passed by the learned Additional District Judge whereby his petition under Section 34 of the Arbitration and Conciliation Act, 1996 has been dismissed.
2. The appellant conducted transactions of sale/purchase of shares through respondent No.1 from 1998 up to 30 th October, 2000. Respondent No.1 is a member of National Stock Exchange (Respondent No.2). According to the appellant, respondent No.1 committed irregularities of non- delivery of shares, wrong credit of share transactions, non- transfer of shares in D-MAT account of the appellant due to FAO 285/2005 Page 1 of 5 which the appellant suffered loss to the tune of Rs.4,85,547.65.
3. The appellant made a complaint against respondent No.1 to Securities Exchange Board of India (respondent No.3) on 2nd December, 2002, which was forwarded to the National Stock Exchange on 22nd January, 2003. The National Stock Exchange referred the matter to the Investors' Grievances Cell of Stock Exchange but the dispute could not be resolved and, therefore, vide letter dated 18th August, 2003, National Stock Exchange directed the appellant to take recourse to arbitration by filing application for arbitration against respondent No.1.
4. The appellant submitted the arbitration application to National Stock Exchange claiming Rs.4,85,547.65 from respondent No.1 whereupon the National Stock Exchange vide letter dated 25th March, 2004 appointed Justice R.P. Gupta (Retd.) as Sole Arbitrator. The Arbitrator passed an award dated 7th June, 2004 dismissing the claim of the appellant as time barred under Bye law-3 of Chapter XI of the National Stock Exchange of India Limited. The findings of the learned Arbitrator are reproduced hereunder:-
"As per Bye laws of NSEIL pertaining to arbitration, prescribed in Chapter II, Clause No.3 prescribes a period of six months for seeking arbitration, from the date on which the claim, difference or dispute arose or is deemed to have arisen. The time taken in conciliation proceedings initiated and conducted as per the provisions of the Act and the time taken by the relevant authority to administratively resolve the FAO 285/2005 Page 2 of 5 claim, differences or disputes shall be extended for the purpose of determination the period of six months.
It is thus apparent that the claimant has approached the NSEIL for arbitration much after the expiry of six months after the dispute arose or after his claims arose. This arbitration petition is therefore, rejected as barred by time."
5. The appellant filed the petition under Section 34 of the Arbitration and Conciliation Act, 1996 before learned Additional District Judge which was dismissed.
6. Bye law-3 of Chapter XI of National Stock Exchange Bye laws provides the period of limited as six months for making a claim. Bye law-3 is reproduced hereunder:-
"Bye law (3) : Limitation period for reference of claims, differences or disputes for arbitration All claims, differences or disputes referred to in Bye laws (1), (1A), (1B) and (1D) above 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. The time taken in conciliation proceedings, if any, initiated and conducted as per the provisions of the Act and the time taken by the Relevant Authority to administratively resolve the claim, differences or disputes shall be excluded for the purpose of determining the period of six months."
7. Bye law-3 of National Stock Exchange Bye laws has been declared to be void by this Court in OMP Nos. 63/2007 titled Biba Sethi and Anr. Vs. Dyna Securities Limited decided on 17th March, 2009, MANU/DE/1325/2009 wherein this Court held as under:-
"34. If the Bye law 3 of Chapter XI to the extent prescribing limitation period for FAO 285/2005 Page 3 of 5 reference of claims/disputes for arbitration is contractual, then, Section 2(4) of Arbitration Act prescribes that Part-I thereof will apply including Section 43 making the Indian Limitation Act applicable to arbitration. Consequently, Section 28 of the Contract Act, declaring agreements by which a party is restricted absolutely from enforcing rights under a contract by usual legal proceedings in ordinary tribunal or which limits the time within which he may thus enforce his rights, as void to that extent comes into play. Thus, the part of Bye law 3 of Chapter XI of NSE Bye laws, to the extent prescribing limitation of six months for reference of disputes/claims to arbitration is void. The time therefore will be governed by the Limitation Act.
35. This Court recently in Pandit Construction Co. v. DDA 143 (2007) DLT 270 held the clause in works contract requiring the demand for arbitration to be made within 90 days, to be violative of Section 28 of the Contract Act and thus void.
36. Section 28 of the Arbitration Act provides for decision by Arbitral Tribunal in accordance with substantive law of India and Section 34 thereof provides for setting aside of an arbitral award, if in conflict with public policy of India, which as held in SBP & Co. v. Patel Engineering Ltd. 2005(6) SCC 288 means the laws of India. The awards in the present case are found to be contrary to Section 28 of the Contract Act and are set aside.
37. Consequently, both these petitions are allowed and the arbitral awards holding that the claims of the petitioners are barred by time, are set aside. The petitioners shall be entitled to approach the NSE and/or the Arbitral Tribunal for adjudication of the claims of the petitioners. In the facts of the case, the parties are left to bear their own costs."
8. Since Bye law-3 of Chapter XI of National Stock Exchange Bye laws has been declared void to the extent FAO 285/2005 Page 4 of 5 prescribing limitation of six months for reference of disputes/claims to arbitration, the award of the arbitrator in the present case is liable to be set aside.
9. The appeal is allowed and the impugned order is set aside. Consequently, the Arbitral Award holding the claim of the appellant as time barred is also set aside and the matter is remanded back to the Arbitral Tribunal for passing fresh award on merits. The copy of this order along with the original arbitration record be sent back to National Stock Exchange, 4th Floor, Jeevan Vihar Building, Parliament Street, New Delhi-110001 through a special messenger.
10. In the facts of the case, the parties are left to bear their own costs.
J.R. MIDHA, J.
th 15 FEBRUARY, 2010 s.pal FAO 285/2005 Page 5 of 5