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2010 DIGILAW 109 (BOM)

Narayan Securities Ltd. v. Pramod Kumar Aneja

2010-01-21

ANOOP V.MOHTA

body2010
Judgment 1. The petitioner has invoked Section 34 of the Arbitration and Conciliation Act, 1996 (for short, the Arbitration Act) in the matter of an Award passed by the Sole Arbitrator at Mumbai dated 2nd September, 2008/27th October, 2008 in Arbitration reference under the Rules, Byelaws and Regulation of the National Stock Exchange of India Limited (for short, NSEIL Byelaws). 2 The relevant facts are : The petitioner is a share and stock broker and member of National Stock Exchange of India Ltd. And carrying out business of share brokering. The respondent was the registered constituents of the petitioner. On the request of the respondent, the petitioner arranged installation of VSAT at the respondent’s Hansi (Haryana) address and provided online trading facility to respondent. 3 The respondent executed all the transactions between the periods from December, 2003 till June, 2006 and the petitioner has issued various contract notes to the respondent from time to time. The respondent sent various cheques towards deposit, bills and other charges and same were posted along with bills in the ledger account of the respondent which was showing a debit balance of Rs.3,89,511.89. 4 Some dispute arose between the petitioner and respondent and the respondent sent a legal notice dated 10th August, 2006 to the petitioner through his advocate. 5 The petitioner through their advocate’s letter dated 5th September 2006 replied to the notice of the respondent. 6 On 27.02.2007, the respondent filed a complaint No.80/07 before the Court of President of Consumer Forum, Hisar (Haryana). 7 The petitioner has also filed a suit before the Court of District Judge, Delhi on 12th April, 2007. 8 Between 30.08.2007 to 15.10.2007, after expiry of period of limitation the respondent filed a complaint to NSE and NSE by their letter dated 11th September, 2007 advised the respondent to submit them certain papers. The respondent again sent a letter dated 15th October, 2007 but no form was submitted as required under the Byelaws of NSE. NSE had not registered any complaint in the matter and the relevant Authority has not taken any steps to administratively resolve the issue. 9 On 21.1.2008, approximately after 19 months from last transaction, the respondent filed Arbitration Application with NSE and lodged a claim Rs.24,86,000. NSE had not registered any complaint in the matter and the relevant Authority has not taken any steps to administratively resolve the issue. 9 On 21.1.2008, approximately after 19 months from last transaction, the respondent filed Arbitration Application with NSE and lodged a claim Rs.24,86,000. 10 On 1.4.2008 the petitioner filed their reply and raised preliminary objection to the jurisdiction of Mumbai Regional Arbitration Centre and limitation as provided under Byelaws and Regulation of the NSE. The petitioner has also given their reply on facts and lodged a counter claim of Rs.3,89,511.89. On 22.04.2008, the respondent submitted his rejoinder and admitted that first time dispute arose when he served legal notice on 10th August 2006 filed complaint to NSE/SEBI on 30th August 2007 and claimed that his case is within time. The respondent also stated that since at the time of filing arbitration reference he is residing at Pune so the Mumbai Regional Arbitration Centre will have jurisdiction. 11 Between 6.5.2008 to 10.6.2008 the petitioner submitted additional clarification and documents in compliance with the direction given by the learned Arbitrator. 12 On 11.6.2008, the respondent submitted his additional submissions and explained how his claim is not barred by limitation and his entitlement for the relief sought. 13 On 2.9.2008, the learned Arbitrator Shri Arvind A. Kanolkar passed an award and held that the Mumbai Regional Arbitration Centre has jurisdiction and overruled the objection of limitation and directed the petitioner to pay a sum of Rs.3,05,651.29 to the respondent within one month from the date of the award along with interest @ 10% p.a. From 4th February, 2008. 14 The petitioner filed an application u/s. 34 of the Arbitration Act for setting aside the award in the Court of District Judge at Delhi. However, on 17th October, 2008, the Court of District Judge at Delhi held that the Award which is under the challenge in the petition was passed by the learned Arbitrator at Mumbai, therefore, the objection could have been filed in the Court at Mumbai only and the District Judge at Delhi lacked the territorial jurisdiction. 15 The respondent aggrieved by the award filed an application under section 33 of the Arbitration Act and prayed to correct, make additional award and review the award. 15 The respondent aggrieved by the award filed an application under section 33 of the Arbitration Act and prayed to correct, make additional award and review the award. 16 The learned Arbitrator passed a final award dated 27th October, 2009 under Section 33 of the Arbitration Act and revised the amount and directed the petitioner to pay Rs.3,55,651.29 to the respondent. 17 Being aggrieved by the impugned award dated 7th September, 2006 and award dated 27th October, 2008 being Exhibits G and J, the petitioner is challenging the award under Section 34 of the Arbitration Act on the following grounds and amongst other grounds which are set out hereunder without prejudice to one another. 18 The learned counsel appearing for the petitioner has pointed out the basic issue of jurisdiction of Mumbai Regional Arbitration Centre, in view of the fact that admittedly the basic contract/agreement and internet transaction took place at Hansi (Haryana) as the parties used online trading terminal facility through VSAT and executed trades accordingly. Therefore, preliminary objections apart from limitation mainly of jurisdiction was raised in the following words: “4 The respondent submits that the present arbitration is the case of difference or dispute between a constituent and a trading member. The constituent had executed all the transactions through the online trading connectivity provided by the respondent at Hansi (Haryana) and the trading member has its registered office and dealing office at the address at New Delhi and therefore for all practical purpose only Delhi Regional Arbitration Centre has jurisdiction to decide the matter. The respondent most respectfully submits that Mumbai Regional Arbitration Centre has no jurisdiction to register the Arbitration Application and decide the matter as same would be without jurisdiction.” 18-A The said issue of jurisdiction was replied by the respondent in the following terms: “1 In reply to the objection with regard to the jurisdiction of this Arbitral Tribunal, it is submitted that the applicant is gainfully employed in IAI Industries Ltd., located at Chakhan, Pune and is residing at Yashwant Nagar, Yashwant Apartments, Near Magar Stadium, Pimpri, Pune. At the time of registration of present case, the applicant had submitted all the proofs with regard to the address of employment and residence at Pune. At the time of registration of present case, the applicant had submitted all the proofs with regard to the address of employment and residence at Pune. It is well settled that the applicant can lodge the case before this Hon’ble Arbitral Tribunal at the place of his present residence.” 19 The Arbitrator has dealt with the issue of jurisdiction in the following words: “5.2 The Respondent has also raised a question of regional jurisdiction. The Respondent has submitted to NSEIL’s Byelaws, Rules & Regulations. NSEIL’s Head Office is in Mumbai. The Applicant is presently residing in Pune, though he was in Hansi during the period in which he traded through the Respondent. The Application, therefore, lies within the jurisdiction of present Arbitral Forum.” 20 The Arbitrator thereby rejected the question of regional jurisdiction and passed the impugned award against the petitioner (trading members) and in favour of the respondent (constituent). 21 Both the learned counsel appearing for the parties restricted and submitted their submission only on the point of jurisdiction. 22 The relevant clauses of National Stock Exchange (Futures & Options Segment) Trading Regulations (for short, the NSEIL Regulations), admittedly govern the parties as well as the arbitration proceedings. Both the parties have relied and referred clauses 5.12, 5.20 including the forms and specially clause 5.2 (Seat of Arbitration), clause 5.3 (Criteria for Selection of Seat of Arbitration), clause 5.3A and clause 5.9 (Procedure for Arbitration). The relevant clause 5.2 is as under: 5.2 SEAT OF ARBITRATION (a) The Relevant Authority may provide for different seats of arbitration for different regions of the country either generally or specifically and in such an event the seat of arbitration shall be the place so provided by the Relevant Authority. Save as otherwise specified by the Relevant Authority, the seat of arbitration for different regions shall be as follows: Seat of ArbitrationRegional Arbitration Centres (RACs) : States covered by the RAC DELHI : Delhi, Haryana, Uttar Pradesh, Uttaranchal, Himachal Pradesh, Punjab, Jammu & Kashmir, Chandigarh, Rajasthan. Save as otherwise specified by the Relevant Authority, the seat of arbitration for different regions shall be as follows: Seat of ArbitrationRegional Arbitration Centres (RACs) : States covered by the RAC DELHI : Delhi, Haryana, Uttar Pradesh, Uttaranchal, Himachal Pradesh, Punjab, Jammu & Kashmir, Chandigarh, Rajasthan. KOLKATA : West Bengal, Bihar, Jharkhand, Orissa, ssam, Arunachal Pradesh, Mizoram, Manipur, Sikkim, Meghalaya, Nagaland, Tripura, Chhattisgarh CHENNAI : Andhra Pradesh, Karnataka, Kerala, Tamilnadu, Andaman & Nicobar, Lakshadweep, Pondicherry MUMBAI : Maharashtra, Gujarat, Goa, Daman, Diu, Dadra & Nagar Haveli, Madhya Pradesh The relevant portion of Clause 5.3 reads as under: 5.3 CRITERIA FOR SELECTION OF SEAT OF ARBITRATION Save as otherwise specified by the Relevant Authority , the criteria for selection of seat of arbitration for a particular matter is as follows: Parties to Dispute Place of filing the Application for Arbitration Place of hearing TM v/s. C* and C vs TM The Application for Arbitration shall be filed by the Applicant at the RAC covering the State in which the Constituent ordinarily resides. The hearing shall be held in that RAC where the Applicant has filed the Application for Arbitration and the Respondent shall attend the hearing in that particular RAC. Clause 5.3A reads as under: 5.3A Notwithstanding anything contained hereinabove and unless otherwise specifically agreed in writing between the Trading Member and the Constituent, in respect of any claims, disputes and differences arising out of internet trading between the Constituent and Trading Member, the seat of arbitration shall be the Regional Arbitration Centre within the area in which the Constituent ordinarily resided at the time of relevant trading, provided however in respect of a nonresident Indian Constituent, the seat of arbitration shall be the Regional Arbitration Centre in the area of which the correspondence office of the Trading Member is situated. 23. From the plain reading of above provisions and in the present facts and circumstances, admittedly, the petitioner/trading member and the respondent/the Constituent, after execution of the agreement had executed all the transactions through online trading connectivity provided by the petitioner at Hansi (Haryana). The petitioner has its registered office and dealing office having address of New Delhi. The Mumbai Regional Arbitration Centre, in view of above clauses/Regulations has no jurisdiction to register the arbitration application and to proceed with the same as done in the present case. The petitioner has its registered office and dealing office having address of New Delhi. The Mumbai Regional Arbitration Centre, in view of above clauses/Regulations has no jurisdiction to register the arbitration application and to proceed with the same as done in the present case. The Delhi Regional Arbitration Centre has jurisdiction as the differences/disputes arose between the parties arising out of the said online transaction. The dealing office of the trading member from which the dealing was carried out in the present case was at Delhi as per clause 5.3, the Seat of Arbitration, Regional Arbitration Centre, therefore, as per clause 5.2 would fall within the jurisdiction of Delhi and not Mumbai. 24. Even as per clause 5.3A, in case of any claims, disputes and differences arising out of internet trading between the Constituent and the Trading Member, the Seat of arbitration shall be the Regional Arbitration Centre within the area in which the Constituent ordinarily reside at the time of relevant trading. 25. The respondent, therefore, at the relevant time was in Hansi during the period in which he traded through the petitioner. The respondent at the time of filing of this petition and/or presently residing in Pune that itself, in my view, is not sufficient to hold that the present application/such application is maintainable within the jurisdiction of the present Arbitral Forum as the respondent now/presently residing in Pune. The constituent’s ordinary residence at the time of relevant trading is important and not the subsequent response and/or the residence at the time of filing of application. The fact that the business was transacted at the relevant time at Hansi, as per the agreement and he was residing there at the time of relevant trading the Seat of Arbitration shall be the RAC in which area the respondent resided i.e.at Delhi as per clause 5.2 covering the Haryana State. 26. In my view, the Arbitrator is wrong in entertaining the application at RAC at Mumbai only because the respondent was residing at the time of filing of application at Pune. The clause 5.3A of the Regulations (F & O Segment), (NSEIL), provides that- “the seat of arbitration shall be the Regional Arbitration Centre within the area in which the Constituent ordinarily resided at the time of relevant trading.” 27. The Byelaws/ Regulations so framed are mandatory. The parties are bound by the Agreements and also, Byelaws and the Regulations. The clause 5.3A of the Regulations (F & O Segment), (NSEIL), provides that- “the seat of arbitration shall be the Regional Arbitration Centre within the area in which the Constituent ordinarily resided at the time of relevant trading.” 27. The Byelaws/ Regulations so framed are mandatory. The parties are bound by the Agreements and also, Byelaws and the Regulations. Therefore, all the concerned parties need to file application and the Arbitrator also need to proceed with the same considering the Seat of Arbitration and respective jurisdiction considering the Criteria for selection of the Seat of Arbitration. There is nothing on record to show that the parties have waived this clause of jurisdiction and, accordingly, proceeded. There was preliminary objection raised at the time of hearing before the Tribunal and the Tribunal has also dealt with the same. The submission, therefore, on the basis of preliminary objection as raised, in view of above clauses and the facts and circumstances of the case just cannot be overlooked, after noticing the agreement between the parties including the relevant Byelaws and Regulations and in view of the fact that at the relevant time, the respondent had traded at Hansi in Haryana. 28. The respondent has in fact filed the case in Consumer Court and thereafter in Civil Court at Teeshazari Court at Delhi and lastly approached to the SEBI of NSEIL and filed the present arbitration application. 29. Resultantly, the Petition is allowed without observing anything on the merits of the matter, but only for want of jurisdiction. The Arbitral Tribunal has no jurisdiction to pass the Award at Mumbai as the dispute/difference between the parties falls within the ambit of RAC, Delhi and not RAC, Mumbai. 30. No costs.