Delhi High Court
Mukesh Garg vs O.J. Financial Services Ltd. & ... on 15 February, 2010
Author: J.R. Midha
*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
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
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
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
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
