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2013 DIGILAW 1016 (BOM)

Angel Capital & Debt Market Ltd. v. Dianum

2013-06-10

ANOOP V.MOHTA

body2013
Judgment : 1. The Petitioner is a trading member has challenged the arbitral Award passed by the Arbitral Tribunal constituted under the Bye-laws, Rules and Regulations of the National Stock Exchange of India Limited (NSE Regulations). 2. The operative part of the Award is as under: “We, the Panel of Arbitrators in the AM No. F & O/M-0732/2008 between the Applicant M/s. Dianum (Constituent) and the Respondent M/s. Angel Capital and Debt Market Limited (Trading Member) gives Award as under : I. The Respondent M/s. Angel Capital and Debt Market Limited (Trading Member) to pay a sum of Rs. 15,25,564.49 (Rs. Fifteen lakhs twenty five thousand five hundred sixty four & paise forty nine only) to the Applicant M/s Dianum (Constituent). II. The Respondent to pay interest @ 12% p.a. On the award amount of Rs. 15,25,564.49 from date of filing Arbitration Application i.e. July 21, 2008. III. The counter-claim of Rs. 73,84,466.70 of the Respondent is rejected. IV. The cost of arbitration to be borne by the Applicant and the Respondent equally. V. The Award is signed and issued in three originals. NSE may retain the stamped original and forward one original to each of the Applicant and the Respondent.” 3. The basic events for the purpose of the present Petition are as under: On 29th November, 2006, the Respondent opened a trading account with the Petitioner by executing the Client Registration Form, Member Client Agreement and other necessary documents. Between 25th January,2008 to 21st April, 2009 and 30th November, 2006 to 22nd January, 2008, the Respondent entered into several transactions on the NSE Capital Segment and Futures and Options Segment through the Petitioner in the normal course of business. On February 2, 2008, the Respondent account maintained with the Petitioner on the NSE & F & O Segment showed a debit balance of Rs. 74,39,466.7/-. On March 28, 2008, the Petitioner issued a demand notice to the Respondent and requested the Respondent to clear the outstanding debit balance in its account. On July 18, 2008, the Petitioner filed an Arbitration Claim before the NSE and claimed an amount of Rs. 73, 84, 466.70/-. On July 21, 2008, the Respondent also filed an Arbitration claim against the Petitioner for an amount of Rs. 75,86, 286.45/-. In the month of August, 2008, the Arbitration Department of NSE returned the Arbitration Application filed by the Petitioner. 73, 84, 466.70/-. On July 21, 2008, the Respondent also filed an Arbitration claim against the Petitioner for an amount of Rs. 75,86, 286.45/-. In the month of August, 2008, the Arbitration Department of NSE returned the Arbitration Application filed by the Petitioner. The Arbitration Department of NSE vide its letter dated 25th August, 2008 served a copy of the Arbitration Application/ Arbitration Claim to the Petitioner. On November 24, 2008, the Arbitration Department of the NSE communicated to the Petitioner about the tribunal members. The first hearing in the matter was fixed on December 18, 2008. The panel of Arbitrators vide the said letter also directed the parties to furnish certain details including the details of Counter claim by the Petitioner. On December 27, 2008 the Petitioner filed its Reply and a Counter claim for Rs. 73,84,466.70/-. On January 27, 2009 the Respondent sought time to file its Rejoinder and same was granted. Further, the Ld. Arbitral Tribunal also directed the Petitioner to provide details of earlier Arbitration Application. On March 31, 2009, the Respondent filed its Rejoinder and Reply to the Counter Claim filed by the Petitioner. On April 22, 2009, the Petitioner filed its rejoinder. Further, the Petitioner also filed an amendment application and sought to revise/ reduce the abovementioned Counter claim to Rs. 18,70,940.82/-. The Respondent vide its letter dated May 22, 2009 filed its reply to the amendment application and also filed its Sur-rejoinder. The Arbitration Department of NSE vide its letter dated July 23, 2009 informed the Petitioner for the first time that the earlier Arbitration Application was defective and therefore, returned on August 5, 2008. On August 14, 2009, the Petitioner submitted that the letter dated July 23, 2009 to the Ld. Arbitral Tribunal and strongly contended that the deficiency was never informed by the Arbitration Department of NSE and therefore, the learned Arbitral Tribunal should not rely upon the information provided by the Arbitration Department of NSE. On August 31, 2009, the learned Arbitral Tribunal passed the impugned Award. On September 18, 2009 a copy of the impugned Award received by the Petitioner. Hence, the present Petition lodged on 17.12.2009. 4. On August 31, 2009, the learned Arbitral Tribunal passed the impugned Award. On September 18, 2009 a copy of the impugned Award received by the Petitioner. Hence, the present Petition lodged on 17.12.2009. 4. The learned counsel appearing for the Petitioner has strongly relied upon a decision of this Court in HansrajSohanlal Gouthi, HUF vs. Standard Chartered STCI Capital Markets Ltd., (2012 Law Suit (Bom) 1614), whereby I have remanded the matter for giving opportunity to the person like Petitioner to reagitate the counter claim, as the same was denied due to the restricted period of six months, as per the then existing similar Rules. I have observed as follows: “18. I am, therefore, of the view that this itself means the limitation period so prescribed by the circulars are extendable to such pending cases also. All these pendency itself means the claims, so filed by the concern party, have not attained finality and/or not elapsed. The Court, therefore, under Section 34 of the Arbitration Act, needs to consider this substantial change in law, which certainly goes to the root of the claim/counter-claim so raised by the person like the Petitioner. The SEBI has prescribed and announced that the general principle of Limitation Act are applicable to settle the Arbitration disputes between the parties through the same bye-laws, then rejection of such claim on the ground of earlier six months period, would definitely against the principle of law of limitation. There is no dispute with regard to the contents of the Circulars. It also means, the Court needs to consider the period of three years in place of six months, for filing Arbitration references. In this case, as recorded above, in view of the decisions of Delhi High Court as referred above, the restricted period of six months, declared null and void and/or ineffective on 17 March 2009 itself. The Arbitral Tribunal even on the date of passing of award, ought to have taken note of this fact and the provisions of law. I am of the view that both these circulars if read together, it covers all the cases which are not adjudicated finally on the ground of delay of six months. The Award so passed and if challenged under Section 34, unless confirmed, cannot be stated to have attained the finality. I am of the view that both these circulars if read together, it covers all the cases which are not adjudicated finally on the ground of delay of six months. The Award so passed and if challenged under Section 34, unless confirmed, cannot be stated to have attained the finality. The ground of limitation so raised under such Petition, therefore, are entitled the person like the Petitioner to claim the benefits. The Court, under Section 34, would definitely entertain such Application, as the award so passed by overlooking the law and the provisions of the limitation, itself was contrary to the express provisions and the public policy. Therefore, I am inclined to set aside the award and remand the matter for rehearing only with regard to the counterclaim so rejected by the Arbitrator. 19. The learned counsel appearing for the Petitioner has relied on the Judgment of India Infoline Limited Vs. Shyamlal Daulatram Vachhani 3 , wherein I have observed as under:- “4. In the present case, the Tribunal has considered, as per the BSE Ledger, the basic date 30 January 2008. Considering the scope and purpose and to give an another opportunity to the Petitioner to submit his case, as it falls within the ambit of this circulars/provisions, I am inclined to grant the same. The impugned award is dated 22 September 2009. The Petitioner has filed this Petition on 23 December 2009. The same is pending till this date. Therefore, taking over all view of the matter and if the provisions of Limitation Act are extended, the learned Arbitral Tribunal has to reconsider this facet by giving the opportunity to both the parties.” 20. I have already observed in M/s. Gulraj Engineering Construction Co. Vs. Hotel Corporation of India Ltd. (Arbitration Petition No. 341 of 2009, dated 7 September 2012) that the Court under Section 34 (4) of the Arbitration Act, is empowered to remand the matter back. In the present case, the only question here is of counterclaim of the Petitioner. There is no challenge raised by the Respondent with regard to the rejection of their claim. Therefore, I am inclined to remand the matter with directions to the Tribunal to adjudicate the counterclaim of the Petitioner in accordance with law taking note of both these circulars and existing provisions of law.” 5. There is no challenge raised by the Respondent with regard to the rejection of their claim. Therefore, I am inclined to remand the matter with directions to the Tribunal to adjudicate the counterclaim of the Petitioner in accordance with law taking note of both these circulars and existing provisions of law.” 5. In the present case also the learned Tribunal has rejected the Petitioner's (Original Respondent) Counter Claim of Rs. 73,84, 466.70/- on the ground of limitation and awarded the Claim of Rs. 15,25,564.49/- with interest. Here also there is no denial to the existence of the SEBI Circulars dated 11th August, 2010 and 9th February, 2011. The Petitioner had filed the earlier Arbitration Application for sum of Rs. 73 lakhs on 18.07.2008. M/s. Dianum (Constituent) filed the Arbitration Application on 21st July, 2008 for Rs. 75,86,286.45/-. On 05.08.2008, the Petitioner's Application was returned for want of some deficiency. The Respondent's Application was proceeded further, by treating him as the Applicant in view of his claim Application. The Petitioner on 27th December, 2008 filed the Reply and Counter Claim to the Respondent's Application. The alleged cause of action date was 27th January, 2008 and the date of Counter Claim was 27th December, 2008. The Petitioner's return of Application date was 18th July, 2008. No further steps were taken by the Petitioner which was the main reason to deny the counter claim in view of the NSE-Regulations 5.9. The Award is dated 31st August, 2009. The date of Petition is 17th December, 2009. This Court has admitted the Petition on 31st January, 2011. Thereafter on 26th April, 2013, I have heard the Petition finally by consent of the parties and closed the matter for orders. This period should be taken into consideration, while deciding the aspects of limitation by excluding the period of pendency of the matter in court. The benefit of the Judgment should also be extended to all the concerned. In such institutionalized arbitration matter, the NSE department or such other department must point out such Judgments to the learned tribunals/ Arbitrator to extend the benefit to all. 6. It is relevant to note that the Delhi High Court by Judgment dated 17th March, 2009 considered the similar Bye Laws of BSE and held that such bye-laws, restricting the limitation period are void and impermissible. This view was not pointed out to the learned Arbitral Tribunal. 6. It is relevant to note that the Delhi High Court by Judgment dated 17th March, 2009 considered the similar Bye Laws of BSE and held that such bye-laws, restricting the limitation period are void and impermissible. This view was not pointed out to the learned Arbitral Tribunal. Even otherwise pending the present Petition, there are subsequent judgments of the Delhi High Court on the similar line, whereby the similar awards were set aside, by which the Counter Claims were declared to be time barred in view of the then existing period of limitation of six months. I have noted in Hansraj Sohanlal Gouthi (supra) in paras 12 and 15 as under: “12. In the present case, Respondent No.1 filed Arbitration Petition on 23 October 2007. The Petitioner filed rejoinder on 25 February 2008, which was stated to be beyond period of limitation of six months. The Arbitration Award was passed on 13 July 2009. The Delhi High Court declared the restricted period of six months referring to the similarly situated Byelaws of National Stock Exchange of India Limited (for short, NSEIL) to be void and the same was further reiterated in Mukesh Garg (Supra) on 15 February 2010. Therefore, on the date of passing of the award, in the present matter, the Delhi High Court has already declared such restricted period of six months, by such exchanges, null and void. 15. The learned senior counsel appearing for the Respondent submitted that the circulars in question cannot be extended to the facts and circumstances of the present case. By circular dated 9 February 2011,the SEBI has clarified that the provisions of Limitation Act should be applicable only to the cases, where three years have not yet elapsed and the parties have not filed for Arbitration with the stock exchange, or where the Arbitration Application was filed but was rejected solely on the ground of delay in filing within the earlier limitation period of six months and three years have not yet elapsed. I am not inclined to accept the same as the counterclaim was filed on 25 February 2008, though there was no such issue of close of transactions, even on that day. From the date of circular i.e. 9 February 2011, even if we go back to the previous three years period, it would be 9 February 2008. The counterclaim was filed on 25 February 2008. From the date of circular i.e. 9 February 2011, even if we go back to the previous three years period, it would be 9 February 2008. The counterclaim was filed on 25 February 2008. It is difficult to overlook even the same circular whereby, it is specifically mentioned that “this is in continuation of circular dated 11 August 2010, which inter alia prescribed that the limitation period for filing an arbitration reference shall be governed by the provisions of the Limitation Act”. It means the intention was to provide and prescribe three years period instead of six months. By circular dated 9 February 2011, it was further clarified by referring to three years period, retrospectively, not yet elapsed. I am inclined to observe therefore, that the intention from plain reading of this circular and in the background of the decisions given by the Delhi High Court, is to give benefits of limitation to the maximum claimants/litigants, to settle their disputes through the existing Arbitration proceedings/ Byelaws, but subject to the existing provisions of the Limitation Act.” 7. I am, therefore, inclined to observe in the present matter that the reasons for rejection of Counter Claim on the ground of limitation of six a months as recorded and observed by the learned Arbitral Tribunal requires reconsideration in view of the above decisions. The Court cannot grant or accept the case of the Respondent that the learned Arbitral Tribunal has considered the Counter Claim and awarded the amount after adjusting the same. The Award is quite silent on this specifically in view of the reasons given for rejecting the Counter claim. The submission of the Petitioner that the Counter Claim was rejected on the ground of limitation is fully supported by the reasons given in paragraph 5.9 of the Award. In view of Judgments & the Circulars, the Arbitral Tribunal is required to reconsider the claim and counter claim again. It will be subject to the adjustment of the claim of the respective parties. All points are kept open. I am inclined to quash and set aside the Award. The Arbitral Tribunal to reconsider the claim and counter claim. The remand in the present matter is the only remedy whereby the parties can appear before the same Tribunal or the other and reagitate all the issues on the basis of the same material. All points are kept open. I am inclined to quash and set aside the Award. The Arbitral Tribunal to reconsider the claim and counter claim. The remand in the present matter is the only remedy whereby the parties can appear before the same Tribunal or the other and reagitate all the issues on the basis of the same material. The Arbitral Tribunal shall give opportunity to both the parties and pass appropriate orders, covering the issue of limitation. It goes to the root of the matter in view of the judgments/ decisions and the NSE Regulations and the Circulars which cannot be overlooked by the tribunal and even by the court. 8. Resultantly, the following order is passed: ORDER a) Award dated 31st August, 2009 is quashed and set aside. b) Matter is remanded before the same Arbitral Tribunal and /or other for reconsideration after giving opportunity to both the parties. c) Matter is expedited. d) All points are kept open. e) The parties to take steps accordingly. f) There shall be no order as to costs.