POISE SECURITIES & EXCHANGE LTD. v. D. V. LONKAR — 1999 DIGILAW 933 (BOM)

JUDGMENT D. K. DESHMUKH, J. - By this petition, the petitioner challenges the award dated 13th November, 1998 made by the sole Arbitrator National Stock Exchange of India Ltd. By that award, the Arbitrator was directed the petitioners to return the shares to the respondents or to pay the price of the shares. The only objection that was raised before me is that the statement of claim filed by the respondents was barred by limitation. The learned counsel for the petitioners submits that Chapter V of the Capital Market Trading Regulations of the National Stock Exchange provides a period of limitation of three months for referring disputes to arbitration. According to the petitioners the cause of action to the respondents accrued against the petitioners on 23rd July, 1996 whereas the dispute has been referred to arbitration on 20th December, 1998. It is clearly beyond the period of three months. The learned counsel submits that the Arbitrator has totally misconstrued and mis-appreciated the Bye-laws of the respondent No. 2 to hold that the claim is not barred by limitation. The learned counsel appearing for the respondents on the other hands, submits that though the cause of action did arise on 23rd September, 1996, according to him as some shares were returned by the petitioners to the respondents on 17th December, 1997, the cause of action would be extended to 17th December, 1997 and therefore, the reference made in February, 1998 would be within the period of limitation i.e., from the date of accrual of the cause of action. The learned counsel relied on the letter dated 5th December, 1997 addressed to the respondents by the petitioners. According to the learned counsel, by this letter the petitioners acknowledged their liability. Perusal of that letter however, shows that by that letter, the petitioners do not acknowledge their liability. On the contrary in the letter it is stated that the shares of the respondents have been received back because they are under objection. Insofar as the letter dated 17th December, 1997 relied on by the learned counsel for the respondents is concerned neither copy of that letter is on record nor a statement is made anywhere that that letter was before the Arbitrator. 2. Insofar as the letter dated 17th December, 1997 relied on by the learned counsel for the respondents is concerned neither copy of that letter is on record nor a statement is made anywhere that that letter was before the Arbitrator. 2. Now, if in the light of these rival submissions the record of the case is perusal, it becomes clear that Regulation No. 5 of the regulations framed by the respondent No. 2 clearly lays down limitation of three months for referring a matter to an Arbitrator from the date on which the cause of action accrues. Regulation No. 5 however, lays down that the provisions of that regulation are subject to the Bye-laws of Stock Exchange to the extent that there are no provisions made in the Regulations and in case of any inconsistency. Regulation No. 5 reads as under: "5. Arbitration In case of any claim, complaint dispute or difference between Trading Members or between Trading Member and Constituent related to trading on NSE Capital Market segment, the party/parties thereto shall resolve such claim complaint dispute or different only by arbitration as per the procedure prescribed in this Chapter within 3 months of the date when it arose. The party/parties shall not have recourse to any other legal avenues except and to the extent specifically stated herein. The procedure prescribed herein is subject to the bye-laws of the Exchange to the extent not provided herein and in case of any inconsistency the bye-laws shall prevail." The respondent No. 2 has also framed bye-laws. Chapter IX of the bye-laws lays down rules governing arbitration between trading members and constituents. The petitioners are a trading member, the respondents are a constitutent. Chapter XIA does not have any provision laying down any period of limitation for referring any dispute to arbitration. Thus, in Chapter XIA there is no provision which can be said to be inconsistent with the provisions of Regulation No. 5. Chapter XIB deals with arbitration between trading members. It has a provision regarding limitation contained in Bye-laws No. 53 but that is in consonance with the provisions of Relation No. 5. Thus, it is clear that it is Regulation No. 5 which will govern the period of limitation and therefore, reference of the dispute has to be made within a period of three months from the date of accrual of the cause of action. Thus, it is clear that it is Regulation No. 5 which will govern the period of limitation and therefore, reference of the dispute has to be made within a period of three months from the date of accrual of the cause of action. There does not appear any dispute between the parties that the date of accrual of the cause of action is 23rd July, 1996. The respondents themselves have also stated in paragraph 19 of their affidavit that the dispute between the parties arose on 23rd September, 1996. In terms of the provisions of Regulation No. 5 therefore the dispute ought to have been referred within three months from 23rd September, 1996. Admittedly, no dispute has been referred within that period. The learned counsel for the respondents also did not show me any letter or document which came into existence within a period of three months from 23rd September, 1996 which can be considered as acknowledgment of liability by the petitioners so that it can be said that the period of limitation gets extended. The letter dated 5th December 1997 referred to by the learned counsel for the respondents firstly is beyond the period of three months from 23rd July, 1996 and secondly, its contents do not show that it can operate as an acknowledgment. Thus, it is clear to my mind that the reference of the dispute in February, 1998 was clearly beyond the period of three months from the date of accrual of the cause of action. The learned counsel for the petitioners also relied on a judgment of this court in Arbitration Petition No. 365 of 1999 decided on 28th October, 1999. In the result therefore the petition succeeds and is allowed. Petition is granted in terms of prayer Clause (a). Certified copy expedited. Petition allowed.