The court affirmed the arbitral tribunal's jurisdiction over a husband based on an oral agreement of joint liability for transactions in his wife's account, rejecting claims of lack of jurisdiction and patent illegality.

JUDGMENT :

PAMIDIGHANTAM SRI NARASIMHA, J.

1. Leave granted.

2. The issue arising in the present appeal is whether respondent no. 1, who is the husband of respondent no. 2, could have been made a party to the arbitration that was invoked by the appellant, who is a registered stock broker, and held to be jointly and severally liable for the debit balance that had accrued in the wife’s (respondent no. 2’s) account with the appellant. The arbitral tribunal found that both respondents were jointly and severally liable for repaying the debit balance in respondent no. 2’s account, and the respondents’ applications under Section 34 of the Arbitration and Conciliation Act, 1996¹[Hereinafter “the Act”.] to set aside the arbitral award were dismissed by the learned single judge of the High Court. However, the division bench of the High Court allowed the Section 37 appeal preferred by respondent no. 1 by order dated 29.04.2021 and set aside the arbitral award only against him, which is impugned before us in the present appeal. For the reasons detailed below, we have allowed the appeal and set aside the impugned order based on the following conclusions: First, by interpreting Bye-law 248(a) of the Bombay Stock Exchange²[Hereinafter “BSE”.] Bye- laws, 1957 that provides for arbitration between members and non-members of the BSE, and considering the nature of respondent no. 1’s involvement qua transactions conducted in respondent no. 2’s account, we have held that an oral contract undertaking joint and several liability falls within the scope of the arbitration clause and the arbitral tribunal could exercise jurisdiction over respondent no. 1. Second, considering the settled jurisprudence on the scope of judicial intervention under Section 34 and Section 37 of the Act, we have held that the arbitral tribunal arrived at a reasonable conclusion, based on evidence, as to the joint and several nature of the respondents’ liability. The arbitral award does not suffer from perversity and patent illegality as has been held by the High Court in the Section 37 appeal, and therefore, we have upheld the arbitral award in its entirety.

3. Facts: The relevant facts are as follows. The appellant is a stock broker and a registered member of the BSE. In 1999, the respondent nos. 1 and 2, who are husband and wife respectively, approached the appellant for opening trading accounts and to this end, they executed individual Client Registration Applications on 01.08.1999. As per the appellant, respondent no. 1 represented that the accounts would be jointly operated by both of them and they would be jointly and severally liable for any losses.

3.1 At the end of the settlement period on 31.01.2001, there was an undisputed credit balance of Rs. 7,40,020/- in the account of respondent no. 1, that was payable by the appellant. On 16.02.2001, respondent no. 1 further paid a sum of Rs. 2 lakhs to the appellant, that increased his credit balance to Rs. 9,40,020/-. On the other hand, there was a debit balance of Rs. 7,77,058/- in respondent no. 2’s account on 20.01.2001, which further increased to Rs. 11,40,413/- by 17.02.2001. The appellant’s case is that on oral instruction of respondent no. 1, it transferred the credit balance of Rs. 9,40,020/- from the husband’s account to the wife’s account on 05.03.2001 to offset the losses.

3.2 However, due to a stock market crash in 2001, the debit balance in respondent no. 2’s account bludgeoned to Rs. 1,18,48,069/- as on 12.04.2001, which is the recoverable amount in arbitration.

3.3 The appellant initiated arbitration under BSE Bye-law 248(a) and impleaded both the respondents, seeking an amount of Rs. 1,27,36,670/- with 18% interest from both of them to recover the losses in respondent no. 2’s account. The re