Bombay High Court
Banhem Securities (P.) Ltd. vs National Stock Exchange on 23 January, 2002
Equivalent citations: (2005) 5 CompLJ 224 Bom, 2003 48 SCL 739 Bom
Bench: A Shah, V Tahilramani
ORDER
1. The challenge in this petition is to the circular issued by the SEBI Board dated 9-7-1999, the relevant portion of which reads thus :
The Stock Exchange should on receipt of the arbitration award, debit the amount of the arbitration award from the security deposit or any other monies of the member (against whom an award has been passed) and keep the amount in a separate account. Thereafter, a confirmation may be obtained from the concerned member that he has not filed any appeal within the stipulated lime under Section 34 of the Arbitration Act and Conciliation Act, and only then the payment may be made to the awardee. If an appeal is filed and the same is pending in a Court of law, the amount so kept in the separate account be paid to the awardee in accordance with the court orders.
At the lime of debiting the amount, the Stock Exchange may if so desire inform him that the Exchange will not be liable for loss of interest, business etc. in case the award is modified by the Court. The Exchange may also indicate that if any amount of interest is still payable to the awardee e.g., from the date of debiting the member's account till the date of payment of the award amount to the awardee, the same be recoverable from the concerned member and the Stock Exchange shall not be liable in this regard".
The validity of the circular is assailed mainly on the ground that it is contrary to the provisions of Section 36 of the Arbitration and Conciliation Act, 1996. Section 36 lays down that where time prescribed under Section 34 to set aside the award has, expired and no application is made therefrom or if it is made, it has been refused, then the award would become enforceable as a decree under the provisions of the C.P.C. It further provides that if application is made, then till the application is refused the award does not become enforceable as a decree and such enforceability is postponed till the application for setting aside the award under Section 34 is decided. The contention is that if the award is not enforceable under the provisions of the said Act, it cannot be made executable by virtue of the administrative instructions issued by the SEBI. It is also contended that the impugned circular makes provision for deposit only in the case where the award is passed in favour of the constituent and against a broker but does not make any provision where the award is passed in favour of a broker and against the constituent. Therefore it is contended that the circular is violative of Article 14 of the Constitution. It is contended that in any event once award is set aside then the amount with accrued interest is liable to be refunded. The circular, however, provides only for refund of the principal amount.
2. In our opinion the challenge to the impugned circular is without any substance. The circular has been issued by the SEBI Board in exercise of powers under Sections 11 and 11B of the SEBI Act in order to protect interest of the investors. It has been brought to the notice of the SEBI Board that arbitration awards passed in favour of the clients/investors are not implemented and the Stock Exchanges are unable to take appropriate action in order to ensure implementation of the awards. In our opinion the decision taken by the SEBI is in the right direction. It helps to protect the investors. The circular issued by the SEBI is confined to members/brokers of the Stock Exchanges and there is no question of the circular being contrary to the provisions of Section 36 or any other provisions of the Arbitration and Conciliation Act, 1996. We do not find any illegality or arbitrariness in the circular.
3. Petition is dismissed.
