S.P. Lamba & Another vs Phj Securities Pvt. Ltd.
2011 Latest Caselaw 5407 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

%                             Date of Judgment: 09.11.2011

+              C.R.P. No. 395-396/2005


S.P. LAMBA & ANOTHER                           ........... Petitioners.
                  Through:          Mr. Sanjeev Narula, Advocate.


                     Versus


PHJ SECURITIES PVT. LTD.                        ..........Respondent
                    Through:        Mr. N.S. Jain, Advocate.


CORAM:
HON'BLE MS. JUSTICE INDERMEET KAUR


    1. Whether the Reporters of local papers may be allowed to
       see the judgment?

    2. To be referred to the Reporter or not?              Yes

    3. Whether the judgment should be reported in the Digest?
                                                         Yes


INDERMEET KAUR, J. (Oral)

1 The order impugned before this Court is the order dated

05.10.2005 vide which the application filed by the defendants

under Section 8 of the Arbitration and Conciliation Act, 1996

(hereinafter referred to as the 'said Act') had been dismissed. This

order is the subject matter of the present petition.

2 Record shows that the present suit had been filed by the

plaintiff seeking a recovery of Rs.16,20,200/-; contention in the

plaint was that the defendants S.P. Lamba and Saroj Lamba had

utilized the services of the plaintiff company for the purpose of

buying and selling shares through Stock Exchange on the promise

and assurance of paying the amount of the purchase or

differences of the amount of purchase and sale transacted through

the defendants. Further contention is that during the financial

year 2000-2001, defendant No. 1 for and on behalf of defendant

No. 2 made purchase and sale of shares securities through the

plaintiff company on different dates between 31.07.2000 to

28.03.2001; an amount of Rs.4,52,009.34 became payable to the

plaintiff; further sale and purchase of shares were made by the

defendants on behalf of the plaintiff company of dates ranging

between 09.08.2000 to 28.03.2001 and a sum of Rs.18,08,664.11

become recoverable; defendant No. 1 in June,2001 had authorized

the plaintiff to adjust the outstanding amount of the account of

defendant No. 2 as well. The plaintiff had maintained a mutual,

open and current account of both the defendants; all credit and

debit entries had been correctly made by the plaintiff therein;

contention is that an amount of Rs.11,15,712.87 paise was

outstanding against the defendant as on 02.08.2001; inspite of

legal notice, the defendants have failed to pay the aforenoted sum

which is payable with interest @ 15% amounting to

Rs.5,00,787.13 paise along with notice expense of Rs.3,500/-, the

aforenoted suit in the sum of Rs.16,20,000/- was accordingly filed.

3 Before filing of the written statement, an application under

Section 8 of the said Act had been filed. The contention of the

defendants is that this application had been filed as a first step in

the proceedings and it was not later than submitting his first

statement on the substance of the disputes which is the

requirement of Section 8 of the said Act; impugned order

dismissing his application had called for an interference.

4 Admittedly the parties had relied upon the contract notes

which contained an arbitration clause and this has in fact been

admitted. As such there was an admitted arbitration clause

between the parties.

5 Vehement contention of the petitioners is that when there is

admittedly an arbitration agreement between the parties; the

arbitration clause has also been admitted; there was a mandate

upon to Court to have referred the disputes under Section 8 of the

said Act to the Arbitrator and the impugned order holding that

bye-law No. 3 was applicable and period of six months from the

date of disputes having since elapsed, the matter cannot be

referred to arbitration clearly suffers from a perversity. This

submission of the petitioner has force.

6 In a judgment of this Court reported in 2009 (6) RAJ 454

(Del) Biba Sethi Vs. Dyna Securities Ltd. a Bench of this Court had

the occasion to consider the same bye-law i.e. bye-law No. 3

chapter XI of the NSE India Pvt. Ltd. wherein it had noted that the

period of six months provided for submission of claims/disputes to

arbitration is only contractual; it is not statutory and this part of

bye-law No. 3 of Chapter XI of the NSE Bye-Laws to the extent

that it had prescribed a limitation of six months for reference of

disputes/claims to arbitration is void; time would be governed by

the Limitation Act which is admittedly three years from the date

when the disputes had arisen between the parties.

7 Suit has been filed on 30.07.2004On this point, learned

counsel for the respondent has also drawn the attention of this

Court to the specific averments made by the plaintiff in paras 7 &

8 of the plaint, his contention is that the last transaction on these

contract notes had been transacted between the parties on

02.08.2001 and as such the suit filed by the plaintiff on

30.07.2004 was well within the period of limitation. These

submissions are prima-facie borne out from the averments made

in the plaint. The Arbitrator will however adjudicate upon this

point.

8 In (2003) 6 SCC 503 Hindustan Petroleum Corporation Ltd.

Vs. Pinkcity Midway Petroleums the Apex Court has noted that

wherever an arbitration clause exists and an appeal has been filed

under Section 8 of the said Act there is a mandate upon the Court

to refer the disputes arising between the parties to the Arbitrator

and the civil court has no jurisdiction to continue with the suit. To

the same effect is the judgment of the Apex Court delivered and

reported in (2009) 10 SCC 103 Branch Manager, Magma Leasing

and Finance Limited And Another Vs. Potluri Madhavilata &

Another wherein it had been noted that Section 8 is in the form of

legislative command; on fulfillment of the conditions required for

the applicability of Section 8 Court has no option except to refer

the parties to arbitration.

9 In the instant case all the conditions of Section 8 of the said

Act have been fulfilled. The application under Section 8 of the Act

had been filed in the first instance i.e. before any statement could

have been submitted by the defendants; there is admittedly an

arbitration clause arising out of an arbitration agreement and the

present suit is a suit in which the disputes have arisen out of the

contract notes, last of which had been executed between the

parties on 11.07.2001. The impugned order thus suffers from an

infirmity. It was incumbent upon the Court to have referred the

disputes to arbitration in terms of the arbitration clause. The

disputes between the parties are accordingly referred to

arbitration in terms of the arbitration clause.

10 Parties to appear before the NSE on 12.12.2011.

11     Petition disposed of in the above terms.




                                               INDERMEET KAUR,J
NOVEMBER 09, 2011
A