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2013 DIGILAW 589 (BOM)

Uttam Chand Garg v. Motilal Oswal Securities Ltd.

2013-03-08

ANOOP V.MOHTA

body2013
Judgment : The Petitioner-original Respondent has challenged Award dated 16th March, 2009, passed by the sole arbitrator in the matter of arbitration under (Section 34 of the Arbitration & Conciliation Act, 1996 hereinafter referred to “Arbitration Act”) the Bye-laws, Rules and Regulations of the National Stock Exchange of Indian Limited (hereinafter referred to “NSEIL”). 2. The operative part of the Award is as under: “THE AWARD (i) The applicant's claim for the dues in the NSE F & O segment is maintained but no sums are payable by the respondent in view of adequate surplus being available in NSE capital market segment for reasons adequately stated in para 7I above. (ii) The sole arbitrator refrains from passing any order on the respondent's counter claim on the surplus of Rs.20,87,858/33 in NSE capital markets and release of shares held in DP for reasons sufficiently enumerated in para 7G above. (iii) In regard to appropriation of the surplus funds and securities parties may agitate the mater before the appropriate forum. (iv) The cost of arbitration is to be borne by the applicant and respondents equally. (v) The award is signed and issued in three originals. NSEIL may retain the stamped original and forward one original each to the applicant and respondent.” 3. The learned Arbitrator has passed above operative part of the Award and there by refrained from passing any order with regard to the transaction/counter claim in NSEIL Capital market by observing as under in paragraph Nos.(G),(H) and (J) (G) Although the sole arbitrator has no jurisdiction over trades in BSE or to ascertain the authenticity of the debit balance of BSE capital Rs.25,26,418.70 the respondent has submitted the minutes of investor grievance redressal committee of BSE dated September 9, 2008 in the matter of his complaint against the trading member. “Complainants grievance is of non delivery of 1824 shares of GTL Infrastructure Ltd. and Few trades resulting into net loss. It san admitted position from the complainants side that his balance runs into debit on the BSE so there is no specific claim on trading members as on trades on BSE. The trading member justifies non delivery of shares because of debit balance. It san admitted position from the complainants side that his balance runs into debit on the BSE so there is no specific claim on trading members as on trades on BSE. The trading member justifies non delivery of shares because of debit balance. In the circumstances the dispute cannot be resolved and hence the complainant may take such steps as advised.” (H) It is therefore evident that the respondent has knocked at the doors of BSE without success and the applicant has justified non delivery of shares on account of BSE debit balance. (I) ….... (J) As regards the respondents counter claim on the surplus or Rs.20,87,858/33 in NSEIL the sole arbitrator refrains from passing any order in the light of the admission by the respondent before the investor grievance redressal committee of BSE that his balance runs into debit which prima facie authorized adjustment from NSE on account of his authorization to set off any debits in any segment of any exchange with credits of any other segment of any exchange. The dues in the BSE has neither been quantified nor is it within the jurisdiction of the sole arbitrator to examine the trades on BSE and arrive at the outstanding. The same observations are applicable to the transfer of share held in D.P.” 4. In view of above, without going further into the controversy even if so raised and without expressing anything on the merits of the claim, I am inclined to remand the matter back for reconsideration. Admittedly, based upon the separate agreement between the parties the various transactions of securities took place from time to time. There are some disputes between the Petitioner and Respondent No.1. Admittedly, Petitioner had engaged the service of Respondent No.1 in respect of transaction in stocks and securities and derivatives at both the stock exchanges. The stock exchanges are governed by their own Bye-laws and Regulations. They have different institutional procedure; and the arbitrator tribunal to deal and decide the dispute between the parties based upon the agreement. There is nothing to bind the respective arbitral tribunal and/or authorities to accept and/or follow and/or descend and/or overrule the Award passed by the other arbitral Tribunal arising out of the dispute, between the same parties. 5. They have different institutional procedure; and the arbitrator tribunal to deal and decide the dispute between the parties based upon the agreement. There is nothing to bind the respective arbitral tribunal and/or authorities to accept and/or follow and/or descend and/or overrule the Award passed by the other arbitral Tribunal arising out of the dispute, between the same parties. 5. Admittedly, the arbitrator tribunals of the NSE and BSE would have to decide the dispute and/or adjudicate the claim as per their respective Bye-laws, within the ambit and purview of their respective jurisdiction. To follow and/or not to follow the view or opinion expressed by the other Tribunal of different exchange, is nowhere governed and/or controlled by any Bye-laws or any Rules or Regulations. 6. While dealing with the same situation in the case of SharekhanLimited Vs. Nita Thakkar (2012(3) Bom. C.R. 889), I have noted as under: “11. It is the arbitration mechanism in stock exchanges, basically governed by the provisions of the Securities Contracts (Regulation) Act, 1956 (for short, the Securities Act) and the Rules and Regulations and Bye-laws framed thereunder, including the circular issued by the Government and the Securities and Exchange Board of India (For short, :SEBI”) from time to time. The circulars are issued principally under section 11(1) of the Securities and Exchange Board of India, Act 1992 (for short, the SEBI Act”) read with Section 10 of the Securities Act. The Arbitration proceedings are governed by the Arbitration Act, 1966 read with above Acts, Bye-laws and circulars apart from the provisions of general laws. I have already elaborated the issue in the following words (Sahyadri Earthmovers Vs. L & T Finance Limited & anr.), 2011 (6) Bom. C.R. (O.S.) 393 : 2011(4) Mh. L. J. 200.” The Doctrines to be followed The arbitrator cannot disregard the substantive and procedural law. The arbitrator s therefore bound to take note of law; of interpretation, precedent, obiter dicta, ratio decidendi, Estoppal, acquiescence, waiver and resjudicata, public policy, natural justice, fairplay and equity. 12...... 13. The Appellate Tribunal's decision is binding on the lower Tribunal, but the Appellate Tribunal of one exchange whether is again a matter which one has to consider from the point of view of avoiding conflicting views and decisions apart from the judicial discipline. 12...... 13. The Appellate Tribunal's decision is binding on the lower Tribunal, but the Appellate Tribunal of one exchange whether is again a matter which one has to consider from the point of view of avoiding conflicting views and decisions apart from the judicial discipline. I am of the view that all these are situations where SEBI and/or Competent Authority must take note of and issue necessary circulars or guidelines to avoid further complications and delay in taking early decisions in the arbitration proceedings. The investors, shareholders and financial institutions and public at large are involved in all these financial transactions. 14. The conflicting views, difference of opinion, is permissible but while taking final decisions, the Tribunal also needs to consider the settled principle of law, as well as the binding decisions of the Supreme Court or High Court etc. These Arbitral Tribunals as everyone knows, decide the right of the parties by such arbitration mechanism. Therefore, basic laws and principles just can not be overlooked even by the Arbitral Tribunal so that the arbitration mechanism is not termed as costly, tardy, adjudication procedure in contesting mtters. We have to make it more effective and less expensive. The arbitrator can use his expertized in the field read with the commercial trade usage and practices if any, but at the same stroke, he must take into consideration the basic laws of the land, apart from the principle of fairplay, equity and natural justice.” 7. I have already observed that the arbitrators are bound to follow the prescribed principles of law including of Civil Procedure Code and Evidence Act though they are not strictly bound by the same. The fair play, equity and equality, a part from principle of natural justice are always foundation for adjudicating any claim/dispute between the trading members and his constituents. The “law of precedents” and/or stare decisis and/or obiter dicta; cannot be just overruled even by such arbitrator. But in absence of any guidelines and/or Rules, Regulations and/or Bye-laws under Securities and Exchange Board of India Act 1992 (herein referred to as “the SEBI Act”), it is difficult to direct and/or insist that the respective arbitrator tribunal to follow and/or bind by the Award given by the other exchange arbitration tribunal. In this process, however, the litigants i.e. the trading members and/or constituents, suffers for want of “Clarity” and/or “Discipline”. In this process, however, the litigants i.e. the trading members and/or constituents, suffers for want of “Clarity” and/or “Discipline”. The confusion & ambiguity in such type of commercial market transactions caused further confusion and delay. The parties in such circumstances, would not get fruit of their Award as early as possible though, the arbitral tribunal takes interest and disposed of the arbitration proceedings at earliest and/or within the prescribed period. In my view, it is necessary for the concerned authorities to deal with this subject at the earliest, specially by one who makes guidelines and/or Rules and Regulations and control these exchanges. 8. In view of the existing practice there are bound to have such interlinked litigations/disputes between the constituents and/or such other persons with trading members and/or their sister concern. In my view, the Tribunal is under obligation to pass order as per the jurisdiction in accordance with law by giving reasons. The issue and the subject of jurisdiction needs to be address at earliest. If there is no jurisdiction, no question of adjudicating the related claim also. The parties and the arbitrator, are bound by the doctrine of jurisdiction. 9. Admittedly, the learned arbitrator who decided the matter on merit but refrained from passing the orders as referred above, which in my view for the above reasons, is impermissible. The parties will take steps once the above Award is passed in their favour, but to refrain from passing any order as done in the present case is just impermissible basically when there is no restrictions and/or prohibition in any of the Bye-laws or Rules and Regulations. 10. Therefore, by taking all points open, the impugned Award dated 16th March, 2009, is required to be quashed and set aside. Hence, I pass the following order: ORDER a) The impugned Award dated 16th March, 2009, is quashed and set aside. b) The matter is remanded back for rehearing. The arbitrator to rehear and dispose of the matter expeditiously by giving opportunity to both the parties and pass order in accordance with law. c) The parties to take steps. d) Registry is directed to forward a copy of this Judgment to the Head Office of SEBI. e) There shall be no order as to costs.