Nitin Sethi vs Rajiv Mehta
2014 Latest Caselaw 5772 Del

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*      IN THE HIGH COURT OF DELHI AT NEW DELHI
%                                      Judgement delivered on: 13.11.2014

+                   ARB.P. 102/2006

NITIN SETHI                                          ..... Petitioner

                    versus

RAJIV MEHTA                                          ..... Respondent

Advocates who appeared in this case:

For the petitioner: Mr Himal Akhtar & Mr Sunny Kadiyan, Advs. For the respondent: Mr Ashish Aggarwal, Mr Ashish Virmani, Mr Misba Huddin Siddiqui & Ms Kritika Khanijo, Advs.

CORAM:

HON'BLE MR. JUSTICE RAJIV SHAKDHER

RAJIV SHAKDHER, J

1. The petitioner in this case seeks appointment of an arbitrator in respect of disputes articulated in the petition. Peculiarly, the petition was not filed under Section 11 of the Arbitration & Conciliation Act, 1996 (in short the Act), but was filed under Section 7 & 8 of the said Act, and that too with the District Judge at the Tis Hazari Court, New Delhi. 1.1 The prayer made in the original petition was to the effect that the respondent should be injuncted from selling and/or alienating the shares in question, as detailed out in paragraph 10 of the petition, pending the decision thereto.

1.2 The error was noticed by the District Court, and the record shows that by order dated 21.01.2006, the captioned file was dispatched to this court.

1.3 Consequently, the matter was placed in court on 24.01.2006. 1.4 I must note, in the interregnum, an application for amendment of the petition was moved by the petitioner which was allowed by the District Court vide order dated 08.12.2005.

2. The record shows that, after notice was issued to the respondent vide order dated 03.05.2006, the petitioner did very little to have the respondent served in the matter. There are several orders on record which are indicative of the fact that due steps were not taken in effecting service on the respondent. To some extent, the respondent may have also been guilty of avoiding service, as there are notings of the registry to the effect that the employee of the respondent was served, or when, service was sought to be effected, the respondent was found to be out of station.

2.1 Be that as it may, the respondent was finally served in and around August, 2013 and, therefore, entered appearance before court, on 09.10.2013. Since then a reply has been filed by the respondent.

3. Before I proceed further, let me sketch out the broad parameters of the petitioner's case.

3.1 The petitioner says that he had been engaging services of the respondent; a broker affiliated with trading member M/s Seventilal Kantilal Securities Pvt. Ltd. The petitioner has averred that, from time to time he purchased shares from the market through the aegis of the respondent, upon payment of price.

3.2 The petitioner's grievance is that, while he paid money qua certain shares, which the respondent had been directed to buy from the market on his behalf, the said shares were not delivered to him. The details with respect to the shares not delivered to him, despite payment of price, are set

out in paragraph 10 of the petition.

3.3 According to the petitioner he had maintained a running account with the respondent, and that the last payment made by him towards purchase of share, was on 20.11.2002. It is the petitioner's case that since the respondent did not deliver shares to him, a legal notice dated 11.11.2005 was served upon the respondent. The said legal notice was sent via recorded delivery, i.e., registered post (A.D) and under certificate of posting. 3.4 The petitioner also avers that when the respondent failed to deliver the shares in issue, he brought the matter to the notice of the member of the Bombay Stock Exchange (BSE), within the prescribed time. It is further averred that the matter was also brought to the notice of the "exchange officials for resolution". I must note here though, that there is no reference to any communication or details as to the persons, the petitioner engaged for the said purpose.

3.5 The petitioner being aggrieved, as indicated above, instituted a petition before the district court in November, 2005 whereupon, it was finally placed before this court.

4. The respondent, on the other hand, has in his reply taken the following defence:

(i) That this court would have no jurisdiction under the arbitration clause provided in the contract memos, as the courts in Mumbai, have been conferred with exclusive jurisdiction.

(ii) The claim is time barred, as the last transaction allegedly took place between the parties herein, on 28.10.2001.

(iii) No notice was served upon the respondent or the executive director of the BSE to trigger the arbitration mechanism. For this purpose, reliance is

placed on Bye-laws 249(i)(a) of the Rules, Bye-laws and Regulations (in short RBRs) of the BSE.

5. I have heard the learned counsels for the parties. In order to adjudicate upon this petition, one would have to advert to the arbitration clause, which is relied upon by both parties. I may only note that there is no dispute though, between the parties herein as to the existence or the validity of the arbitration clause. The relevant portion of the said clause is extracted hereinbelow:

"....This confirmation Memo is subject to the Rules, Bye- laws, Regulations and usages of the Stock Exchange, Mumbai. Brokerage has been charged as stated above at rates not exceeding the official scale of brokerage and indicated separately. This Contract is subject to the exclusive jurisdiction of the courts in Mumbai. In the event of any claim (whether admitted or not) difference or dispute arising between you and me/ us out of these transactions the matter shall be brought to the notice of the member within 6 months from the date if dispute and same shall be as far as possible be settled with the help of member/ broker failing which it shall be brought to the notice of exchange officials for resolution. If the dispute persists the same shall be referred to arbitration in Mumbai as provided in the Rules, Bye-Laws and Regulations of The Stock Exchange, Mumbai. This confirmation memo acts constitutes and shall be deemed to constitute as provided overleaf an agreement between you and me/ us that all claims (whether admitted or not) differences and disputes in respect of any dealings, transactions and contracts of a date prior or such the due of this contract including any question whether any question whether such dealings, transactions or contract have be entered into or not shall be submitted to and decided by arbitration in Mumbai as provided in the Rules, Bye-laws and Regulations of the Stock Exchange, Mumbai......."

(emphasis is mine) 5.1 A bare reading of the said clause would show that, in the event of

dispute and differences arising between the parties, the matter is required to be brought to the notice of the Member of the Stock Exchange within six months of the date on which the dispute has arisen and the same is required to be settled as far as possible with the help of the member/ broker. Upon failure to reach a settlement, the dispute, is required to be brought to the notice of the exchange officials for endeavouring a resolution of the dispute said to have arisen in the matter. The arbitration clause further provides that, if no resolution is achieved, despite intercession of either the member or the exchange officials, it shall be referred to arbitration.

5.2 For reference to arbitration, the procedure appears to be encapsulated in Bye-law 249(i)(a) of the RBRs of the BSE1.

249(i)(a) All claims, differences and disputes which are required to be referred to arbitration under these Bye-laws and Regulations shall be referred to arbitration of a sole arbitrator or of three arbitrators to be appointed by the Executive Director or by the parties from the panel of Arbitrators constituted by the Governing Board, in the manner provided in these Bye-Laws and Regulations. The Executive Director shall appoint a sole arbitrator.

(b) In an arbitral tribunal of three arbitrators, each party shall appoint one arbitrator and the third Arbitrator will be appointed by Managing Director and Chief Executive Officer. Those proposed arbitrators shall be from the panel of arbitrators constituted by the Board of Directors. If any of the parties fail to appoint arbitrator within such period as may be provided by the Exchange, the Managing Director and Chief Executive Officer shall appoint such arbitrators in the manner provided in these Bye-laws. All the Bye- laws providing arbitration by a single arbitrator shall apply mutatis-mutandis to arbitration by three members.

(ii) While making an application for reference to arbitration, the claimant shall state the names of 3 proposed arbitrators from amongst the concerned panel of arbitrators prepared as per Bye-law 262 (b)

(iii) The names of the proposed arbitrators shall be forwarded by the concerned Regional Arbitration Centre of the Exchange to the respondent or all the respondents (as the case may be)

(iv)(a) If there is only one respondent, the respondent may consent to any one of the proposed arbitrators being appointed as the arbitrator by delivering to the concerned Regional Arbitration Centre of the Exchange, within such period as may be provided by the Exchange, of the respondent having received from the concerned Regional Arbitration Centre of the Exchange, the names of the proposed arbitrators, in writing in a form prescribed by the Exchange signed by the respondent signifying his consent, failing which the claimant and the respondent shall be deemed to have failed to have agreed as to the person to be appointed as the arbitrator.

(b) If there are two or more respondents then each respondent may consent to the appointment of any one or more of the proposed arbitrators as the arbitrator by delivering to the concerned Regional Arbitration Centre of the Exchange, within such period as may be provided by the Exchange, of the respondent having received from the concerned Regional Arbitration Centre of the Exchange, the names of the proposed arbitrators, in writing in a form prescribed by the Exchange signed by that respondent signifying his agreement to one or more of the proposed arbitrators being appointed as the arbitrator. If the claimant and all the respondents agree to any one of the proposed arbitrators being appointed as the arbitrator, such person shall act as the arbitrator.

5.3. A bare perusal of the Bye-law 249(i)(a) would show that the petitioner was required to approach the Executive Director in case either a sole arbitrator or even where a tribunal comprising of three arbitrator was to be appointed. In case where, a tribunal of three arbitrators is to be appointed, the parties are given liberty to appoint their respective nominees with the third arbitrator being appointed by the Managing Director and Chief Executive Officer of the BSE. The Bye-law, is also indicative of the fact that where a tribunal of three arbitrators is to be appointed, if one of the parties fails to appoint an arbitrator within such period, as may be provided by the Exchange, the Managing Director and the Chief Executive Officer is vested with the power to appoint an arbitrator in the manner provided in the Bye-law.

5.4 What transpires upon perusal of averments made and the material placed on record, that the plea of the petitioner that he approached a member or Exchange official for resolution of dispute is complete bereft of any material details. Apart from the fact that no document has been filed to establish this fact, there is no detail provided as to which member or Exchange official was met by the petitioner. Furthermore, no averment is made which, would give a clue, in the very least, as to the approximate date of the purported meeting. This apart, if one were to assume that averments in that behalf are correct, there is no assertion that the petitioner approached the Executive Director for appointment of a sole arbitrator or a tribunal comprising of three arbitrators. Since, no such step was taken, there was, as

If the claimant and all the respondents agree to more than one of the proposed arbitrators being appointed as arbitrators, the Exchange's Managing Director and Chief Executive Officer shall name one of such persons to act as the arbitrator. If the claimant and all the respondents do not agree to at least one of the proposed arbitrators being appointed as arbitrator, the claimant and the respondents shall be deemed to have failed to have agreed as to the persons to be appointed as the arbitrator.

a matter of fact, no occasion to approach this court by way of a petition for appointment of an arbitrator. It appears that, the petitioner had initially wanted to secure an interim order and, therefore, for that purpose had approached the District Court, for an order of restraint. Instead of asking for an order of restraint, the petitioner, somehow, was persuaded to convert the action for interim protection to one for appointment of an arbitrator. This eventually, compounded problems of the petitioner.

5.5 Therefore, in my view, the petition cannot be entertained as the pre- requisites for triggering the arbitration have not been fulfilled.

6. In that view of the matter, I need not examine the aspect of limitation. Though, I must state that the petitioner has averred that he got a demand notice dated 11.11.2005 issued to respondent, which was within three years of what he says was the last payment made qua the account in issue. According to the petitioner, the last payment was made on 20.11.2002. Since, the reply filed by the respondent is not a para-wise reply, I asked the learned counsel for the respondent as to whether this aspect had been traversed by the respondent in his reply. Learned counsel for the respondent concedes that there is no specific denial put on record qua this aspect, even though the objection vis-a-vis limitation is generally taken.

7. Despite this position, for the aforementioned reasons, the petition cannot be entertained. It is, accordingly, dismissed. Parties shall bear their own costs.

RAJIV SHAKDHER, J NOVEMBER 13, 2014 kk