Hemendra V. Shah vs Stock Exchange, Bombay and others

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1995 Supreme(Bom) 312

IN THE HIGH COURT OF BOMBAY
S.N. Variava, J.
Hemendra V. Shah.... Petitioner.
Versus
The Stock Exchange, Bombay and others.... Respondents.
Arbitration Petition No. 71 of 1995, decided on 14-7-1995.
Advocates appeared :
Navneet Shah with Niranjan i/b. Niranjan Co., for the petitioner.
Virag Tulzapurkar with Mody i/b Wadia Ghandy Co., for the respondent No. 1.
Soli Cooper i/b. Maneksha Sethna, for respondent No. 6.

Headnote:SECURITIES CONTRACTS (REGULATION) ACT, 1956
       Section 9-Bye-laws of Bombay Stock Exchange, Bye-laws Nos. 254, 261 and Arbitration Act, 1940 Sections 37 and 46-Applicabilitiy of.
       Under Bye law 261, the Governing Bombay can extend time, from time to time. This even though the period may have expired, Mr. Tulzapurkar slated that even if time has not yet been extended the Governing Body or the president will be extending time to make the A ward. Thus there is no substance in the submission that the Arbitration proceedings and adjudication are the barred. There is also no substance in the submission that most of the claims are time barred.
       If the Consent Minutes are seen it is clear that, under Clause I thereof, the Arbitrators were appointed by consent and the parties have submitted to arbitration in respect of claims, disputes and differences between them in accordance with the Rules, Bye-laws and Regulations of the Bombay Stock Exchange. There can be no doubt that this is an Arbitration as per the Rules. Bye-laws and Regulations of the Bombay Stock Exchange. If that be so, then under the Rules, Bye-laws and Regulations of the Bombay Stock Exchange, be Government Body or the President is entitled to appoint some other Arbitrator in place and instead of the Arbitrator who has resigned. Also the order itself clarifies that the Arbitrators are appointed under Chapter II of the Arbitration Act Chapter II deals with eases of Arbitration without intervention of Court.
       Bye-law 226 (a) provides that all contracts made by a Member for or with a non Member, for the purchase or sale of securities in which dealings permitted to be made subject to the Rules, Bye laws Regulations and Usage of the Exchange. The said Bay-law also provides that all such Contracts shall be subject to the exercise by the Governing Board and the president of the powers with respect thereto vested in it or him by the Rules, Bye-laws and Regulations of the Exchange.
       Bye-law 226 (c) provides that in cases of all claims (whether admitted or not), differences and disputes arising out of or in relation to all contracts referred to in sub clause (a) the parties concerned shall be demand to have agreed and acknowledged that such contracts have been entered into and are to be performed within the City of Bombay that they are subject to Arbitration in accordance with the provisions relating to Arbitration contained in these Bye-laws and Regulations. Thus Bye-laws 226 (a) and 226 (c) make it very clear that all such Contracts or dealings, irrespective of the fact that there may be no contract notes, are deemed to be subject to these Rules, Byelaws and Regulations. It is clear that these Rules, Bye-laws and Regulations will govern such Contracts and dealings. Such contracts and dealings are also subject to Arbitration in accordance, with these Rules, Bye-laws and Regulations.

JUDGMENT - S.N. VARIAVA, J. :---This petition is filed for a declaration that there is no valid and subsisting or binding Arbitration Agreement between the petitioner and the 6th respondent. A declaration is sought that the 3rd respondent is not entitled to fill in the vacancy caused by resignation of one Mr. G.B. Desai and that the purported appointment of one Mr. J.B. Bhatt is illegal, invalid, inoperative and of no effect. A further declaration is sought that the Award, if any, passed would be illegal and invalid.

2. Briefly stated the facts are that the petitioner was the clerk of the 6th respondent. The 6th respondents was a member of the Bombay Stock Exchange. The petitioner applied for Membership in the year 1988. It is claimed that the 6th respondent gave his no-objection and also stood as a Guarantor. On 13th April, 1989, the petitioner was enrolled as a Member.

3. The 6th respondent claimed that the petitioner was the Proprietor of one R. Dalal Co. The 6th respondent filed before the Bombay Stock Exchange a claim in a sum of Rs. 2.18 crores against the petitioner. The claim was in respect of transactions in A Group Shares during the period 5th November, 1986 to 18th April, 1989 and in respect of transactions in B Group Shares from 27th November, 1986 to 14th September, 1989. Arbitration under the Rules, Bye-laws, and Regulations of the Bombay Stock Exchange was invoked. The Bombay Stock Exchange appointed one Mr. G.V. Desai as an Arbitrator. On 13th September, 1991, the petitioner appointed one Mr. H.K. Shah as his Arbitrator. This was done without prejudice to his contention.

4. Mr. G.V. Desai resigned on 16th October, 1991. The Bombay Stock Exchange appointed one Mr. Ashok Khandwalla in place and stead of Mr. G.V. Desai. The petitioner objected to the appointment of Mr. Ashok Khandwalla. The petitioner therefore filed a petition bearing No. 216 of 1991. In this petition basically the same reliefs as claimed herein were asked for. On 13th January, 1992, a Consent Order in terms of the Minutes was taken in this petition. The order read as under :

"1. Parties have already appointed Mr. G.V. Desai and Mr. V.K. Shah as Arbitrators under Chapter II of the Arbitration Act, 1940. The Arbitration shall proceed in accordance with the Consent Minutes filed under Chapter II of the said Act. Accordingly no Order of reference through the Court is necessary.

2. In view Arbitration of disputes and differences in accordance with the consent Minutes taken on record, no order on the petition. No order as to costs.

3. On the request of both sides, it is clarified that neither of the parties has given up any of their claims and contentions.

4. Consent Minutes marked X.

5. Issue of certified copy is expedited."

The consent Minutes read as follows :

"1. We the applicant and the respondent by consent appoint Mr. G.B. Desai and Mr. V.K. Shah as Arbitrators and submit to the Arbitration in respect of all claims, disputes and differences between us in accordance with the Rules, Bye-laws and Regulations of the Bombay Stock Exchange.

2. The parties will be at liberty to raise all pleas, legal as well as factual for determination by the Arbitrators.

3. The learned Arbitrators will proceed with the matter as expeditiously as possible.

4. The Award given by the Arbitrators shall be binding on the parties and shall not be challenged in any Court of Law.

5. All the cases pending in any Court shall be withdrawn forthwith."

5. Thus it is to be seen that Mr. G.V. Desai is continued as an Arbitrator. However, in place of Mr. H.K. Shah, one Mr. V.K. Shah is appointed.

6. Mr. G.V. Desai thereafter again resigned. The Bombay Stock Exchange by its letter dated 18th June, 1994, informed the petitioner of such resignation. The Bombay Stock Exchange also informed the petitioner that the Executive Director would appoint some other Member. This was objected to by the petitioner by his letter dated 7th July, 1994. The Bombay Stock Exchange by its letter dated 12th September,

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