Bombay High Court
Age: Adult vs 2 Ayush Securities on 2 November, 2012
Bench: Anoop V.Mohta
ssm 1 arbp897.09
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO. 897 OF 2009
Hansraj Sohanlal Gouthi, HUF,
through its Karta Ravi Gouthi
Age: Adult, Indian Inhabitant
residing at 10, Swami Gunateet
Nagar Society, Memnagar,
Ahmedabad-380 052,
Gujarat. .....Petitioner.
Vs.
ig
1 Standard Chartered
STCI Capital Markets Ltd.,
[Formerly known as UTI
Securities Ltd.] a company
having address at 1st Floor,
Dheeraj Arma, Anant Kanekar
Marg, Bandra (East),
Mumbai-400 051.
2 Ayush Securities,
A proprietary concern having
address at 350/A, New Plot
Market, Sarangepur,
Ahmedabad-380 004,
Gujarat. ....Respondents.
Mr. Mangal Bhandari a/w Ms. Khushbu Prabhu for the
Petitioner.
Mr. D.D. Madon, Senior Counsel along with Mr. Zubin Behram
Ramdin, Ms. Isha Kishandas i/by M/s. Bharucha and Partners
for the Respondents.
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ssm 2 arbp897.09
CORAM : ANOOP V. MOHTA, J.
JUDGMENT RESERVED ON : 30 OCTOBER 2012.
JUDGMENT PRONOUNCED ON : 2 NOVEMBER 2012
JUDGMENT :-
The Petitioner, original Respondent, has challenged
impugned award dated 13 July 2009 passed by the Arbitral
Tribunal, constituted under the Rules, Bye-laws and Regulations
of the Bombay Stock Exchange (for short, BSE), basically the
rejection of the counter-claim solely on the ground of limitation,
under Section 34 of the Arbitration and Conciliation Act, 1996
(for short, the Arbitration Act).
2 The dates and events are relevant for the purpose of
deciding the present Petition.
On 24 November 2007, Hansraj Gouthi suffered a major
stroke and was in a critical condition, totally incapacitated till
his death on 30 July 2008. On 23 October 2007, Respondent
No.1 filed Arbitration Application before the BSE for claim of
Rs.40,98,609.08 against the Petitioner. On 25 November 2007,
ssm 3 arbp897.09
the Petitioner denied the claim of Respondent No.1 stating that
the same were fraudulent transfers and an amount of Rs.
33,50,814.02 was due and payable to the Petitioner. On 25
February 2008, the Petitioner filed reply/ counter-claim stating
that the Respondent's claim was illegal, malicious and
fraudulent and prayed for payment of Rs.33,50,814.02.
On 13 July 2009, the Arbitration Award was passed,
whereby, claim of Respondent No.1 was rejected stating that
they were unable to substantiate authorization of transactions
entered pursuant to 24 November 2006. The Arbitrators also
rejected the counter-claim of the Petitioner on the ground of
limitation under the BSE Bye-law of 252(2).
4 Being aggrieved by the impugned Award, the Petitioner
filed the present Petition on 8 October 2009. The matter was
listed for final hearing on 30 October 2012. The Respondent
Bank has not challenged the impugned award against the
rejection of their main claim. We have to concern only with the
rejection of counter-claim of the Petitioner.
ssm 4 arbp897.09
5 On 11 August 2010 and 9 February 2011, the circulars of
SEBI stating that the Limitation Act, 1963 (for short, the
Limitation Act) has been made applicable for filing of the
Arbitration References with further clarification that the
Arbitration Applications which were rejected solely on the
ground of limitation should be reheard on merits, if the
limitation period of three years is not yet over.
6 The relevant clauses of circular dated 11 August 2010 are
as under:-
"5.1 The limitation period for filing an arbitration reference
shall be governed by the law of limitation, i.e. The Limitation
Act, 1963."
"13. This circular is issued in exercise of the 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 to protect the interests of investors in
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securities and to promote the development of, and to regulate
the securities market and shall come into effect from September
1, 2010."
This circular supersedes the earlier various circulars of the
Securities and Exchange Board of India (for short, SEBI), (from
9 July 1999 to 2 December 2009) and also modifies the
provisions relevant to Arbitration contained in various circulars
from the year 1997 to 2010.
7 By subsequent circular dated 9 February 2011, the
Arbitration mechanism of Stock Exchanges referring to the
applicability of the provisions of the Limitation Act has been
further elaborated in the following words:-
"This is in continuation of circular ref. No.
CIR/MRD/DSA/24/2010 dated August 11,2010, which inter
alia prescribed that the limitation period for filing an arbitration
reference shall be governed by the provisions of the Limitation
Act, 1963. In this regard upon consideration of various
representations received by SEBI and pursuant to the
ssm 6 arbp897.09
discussions held with the representatives of stock exchanges, it
has been decided that the limitation period, as modified to
three years in terms of Limitation Act, 1963, shall be applicable
to cover inter alia 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;
2 The cost for arbitration in such cases would be as under:-
i. Cases which were not filed earlier will be subject to
the fee amount in terms of SEBI circulars dated
August 11, 2010 and August 31, 2010.
ii. For cases filed earlier and rejected on the ground of
bar of limitation as per the earlier limitation period
of six months, the amount of fee already paid would
be deducted from the amount computed in terms of
SEBI circulars dated August 11, 2010 and August
ssm 7 arbp897.09
31, 2010. The balance shall be borne by the parties
to the arbitration in the manner specified vide SEBI
circulars dated August 11, 2010 and August 31,
2010."
8 Both the learned counsel appearing for the respective
parties restricted their arguments revolving around the point of
limitation, by referring to the circulars and BSE Bye-laws 252
(2). Bye-law 252 (2) of BSE reads as under:-
"252(2) Time period for filing of Arbitration Reference:-
(2) The Arbitrators shall not take cognizance of any claim,
complaint, difference or dispute unless the same has been
received by 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 a 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 this clause shall be decided by
ssm 8 arbp897.09
the Arbitrators.
Provided that the Governing Board or the Executive Director
may, from time to time, appoint a committee to amicably settle
all claims, complaints, difference and disputes that are referred
to it.
Provided further that when such claims, complaints differences
and disputes are referred to the aforesaid Committee, the time
taken in amicable settlement of such claims, complaints,
differences and disputes shall be excluded while computing the
period of limitation.
Provided further that this Bye-law shall be applicable in respect
of all Arbitration Cases filed on or after the date when this Bye-
Law comes into effect. Provided further that in respect of
Arbitration Cases arising out of the transactions having been
done prior to the date on which this Bye-law comes into effect,
the limitation period of six months shall be computed from the
date on which this Bye-law comes into effect."
9 As per the Bye-Laws, as prescribed referring to the
Arbitration, a period of six months from the date on which the
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claim, difference or dispute arises and/or deemed to have been
arisen, was in the field at the relevant time in the year 2006-
2007 and even prior to that. Those being agreed rules, have
binding force between the parties. All the parties acted
accordingly at the relevant time.
10 There is no serious dispute with this regard. Such Bye-
laws of BSE has been declared void by the Delhi High Court in
Biba Sethi and Anr. Vs. Dyna Securities 1 by judgment dated
17 March 2009. The relevant paragraph of the judgment is
reproduced in Mukesh Garg Vs. O.J. Financial Services Ltd. &
Ors. 2 by the Delhi High Court, decided on 15 February 2010,
which is as under:-
"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."
11 The Delhi High Court, further set aside such similar places
1 MANU/DE/1325/2009
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awards in Mukesh Garg (Supra) in the following words:-
"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."
12 In the present case, Respondent No.1 filed Arbitration
Petition on 23 October 2007. The Petitioner filed rejoinder on
25 February 2008, which was stated to be beyond period of
limitation of six months. The Arbitration Award was passed on
13 July 2009. The Delhi High Court declared the restricted
period of six months referring to the similarly situated Bye-laws
of National Stock Exchange of India Limited (for short, NSEIL)
to be void and the same was further reiterated in Mukesh Garg
(Supra) on 15 February 2010. Therefore, on the date of
passing of the award, in the present matter, the Delhi High
ssm 11 arbp897.09
Court has already declared such restricted period of six
months, by such exchanges, null and void.
13 The SEBI, by 11 August 2010 circular, referring to
the earlier circulars by superseding and by modifying
the same, specifically announced and extended the
provisions of the Limitation Act and the period for
filing the Arbitration reference. Therefore, in all
respect, everybody need to confer and read the
provisions of the Limitation Act while dealing
with any disputes, differences arising out of the
monetary claim or counter-claim and similarly situated
circumstances.
14 The period of six months has been
substituted and the period of 3 years has been
made applicable accordingly. The SEBI, thereafter,
by circular dated 9 February 2011 clarified the
position as recorded and reproduced above.
ssm 12 arbp897.09
15 The learned senior counsel appearing for the Respondent
submitted that the circulars in question cannot be extended to
the facts and circumstances of the present case. By circular
dated 9 February 2011,the SEBI has clarified that the provisions
of Limitation Act should be applicable only to the cases, where
three years have not yet elapsed and the parties have not filed
for Arbitration with the stock exchange,or 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. I am not inclined to
accept the same as the counter-claim was filed on 25 February
2008, though there was no such issue of close of transactions,
even on that day. From the date of circular i.e. 9 February
2011, even if we go back to the previous three years period, it
would be 9 February 2008. The counter-claim was filed on 25
February 2008. It is difficult to overlook even the same circular
whereby, it is specifically mentioned that "this is in continuation
of circular dated 11 August 2010, which inter alia prescribed
that the limitation period for filing an arbitration reference shall
be governed by the provisions of the Limitation Act". It means
ssm 13 arbp897.09
the intention was to provide and prescribe three years period
instead of six months. By circular dated 9 February 2011, it
was further clarified by referring to three years period,
retrospectively, not yet elapsed. I am inclined to observe
therefore, that the intention from plain reading of this circular
and in the background of the decisions given by the Delhi High
Court, is to give benefits of limitation to the maximum
claimants/litigants, to settle their disputes through the existing
Arbitration proceedings/Bye-laws, but subject to the existing
provisions of the Limitation Act.
16 In the present case, the learned counsel appearing for the
Petitioner submitted that it is only with respect of the alleged
claim against them, they filed counter-claim on 25 February
2008. The transactions were never closed. There was no
occasion for them to file and/or raise any dispute against the
Respondent. However, as the claim was raised, they filed
counter-claim based upon the existing provisions of their
running account. The submission, therefore, was also made
that there is no question of dismissal of their counter-claim on
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the ground of delay or even on merits.
17 In the present case, on 23 October 2007, Respondent
No.1 invoked Arbitration Clause. The Petitioner on 25
November 2007 denied the claim. On 25 February 2008, filed
the counter-claim. By the impugned award, on 13 July 2009,
the same was dismissed along with the claim of Respondent.
The Respondent did not challenge the award. The challenge is
only made by the Petitioner by filing Petition on 8 October
2009. Now, the matter is listed for final hearing and heard
accordingly on 30 October 2012.
18 I am, therefore, of the view that this itself means the
limitation period so prescribed by the circulars are extendable
to such pending cases also. All these pendency itself means the
claims, so filed by the concern party, have not attained finality
and/or not elapsed. The Court, therefore, under Section 34 of
the Arbitration Act, needs to consider this substantial change in
law, which certainly goes to the root of the claim/counter-claim
so raised by the person like the Petitioner. The SEBI has
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prescribed and announced that the general principle of
Limitation Act are applicable to settle the Arbitration disputes
between the parties through the same bye-laws, then rejection
of such claim on the ground of earlier six months period, would
definitely against the principle of law of limitation. There is no
dispute with regard to the contents of the Circulars. It also
means, the Court needs to consider the period of three years in
place of six months, for filing Arbitration references. In this
case, as recorded above, in view of the decisions of Delhi High
Court as referred above, the restricted period of six months,
declared null and void and/or ineffective on 17 March 2009
itself. The Arbitral Tribunal even on the date of passing of
award, ought to have taken note of this fact and the provisions
of law. I am of the view that both these circulars if read
together, it covers all the cases which are not adjudicated finally
on the ground of delay of six months. The Award so passed
and if challenged under Section 34, unless confirmed,
cannot be stated to have attained the finality. The ground
of limitation so raised under such Petition, therefore, are
entitled the person like the Petitioner to claim the benefits.
ssm 16 arbp897.09
The Court, under Section 34, would definitely entertain such
Application, as the award so passed by overlooking the law and
the provisions of the limitation, itself was contrary to the
express provisions and the public policy. Therefore, I am
inclined to set aside the award and remand the matter for re-
hearing only with regard to the counter-claim so rejected by the
Arbitrator.
19 The learned counsel appearing for the Petitioner has
relied on the Judgment of India Infoline Limited Vs.
Shyamlal Daulatram Vachhani 3 , wherein I have observed as
under:-
"4 In the present case, the Tribunal has considered,
as per the BSE Ledger, the basic date 30 January
2008. Considering the scope and purpose and to give
an another opportunity to the Petitioner to submit his
case, as it falls within the ambit of this
circulars/provisions, I am inclined to grant the same.
The impugned award is dated 22 September 2009.
The Petitioner has filed this Petition on 23 December
2009. The same is pending till this date. Therefore,
taking over all view of the matter and if the provisions
of Limitation Act are extended, the learned Arbitral
Tribunal has to re-consider this facet by giving the
opportunity to both the parties."
3 2012(3) All MR 206
ssm 17 arbp897.09
20 I have already observed in M/s. Gulraj Engineering
Construction Co. Vs. Hotel Corporation of India Ltd.
(Arbitration Petition No. 341 of 2009, dated 7 September
2012) that the Court under Section 34 (4) of the Arbitration
Act, is empowered to remand the matter back. In the present
case, the only question here is of counter-claim of the Petitioner.
There is no challenge raised by the Respondent with regard to
the rejection of their claim. Therefore, I am inclined to remand
the matter with directions to the Tribunal to adjudicate the
counter-claim of the Petitioner in accordance with law taking
note of both these circulars and existing provisions of law.
21 Therefore, taking over all view of the matter, the
following order:-
ORDER
a) The impugned award dated 13 July 2009 is
quashed and set aside only to the extent of
rejection of counter-claim.
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b) The matter is remanded back to the Arbitral
Tribunal to re-consider the same.
c) The Arbitral Tribunal to hear and dispose of
the matter expeditiously.
d) Rest of the award is maintained.
e) There shall be no order as to costs.
ig (ANOOP V. MOHTA, J.)
