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2012 Supreme(Bom) 1802
High Court of Judicature at Bombay
R.D. DHANUKA
Kalpana Munish Bumb
Versus
M/s. Joindre Capital Services Ltd. & Others
Arbitration Petition Nos. 313 of 2012, 428 of 2012 & 554 of 2012
Decided on: 25-09-2012
For the Petitioner:Ms. Arti Bhide, Advocate.
For the Respondents:R1, Ajay Khandar, R2, Ms. Ruchita Ramani along with Ms. Amrita Joshi i/by M/s. Law Point, Advocates.
The circulars issued by SEBI are statutory and binding on the parties, stock exchanges, and arbitral tribunals, and the limitation period for filing arbitration reference is governed by the Limitation Act, 1963.
Headnote:
Arbitration Act - Stock Exchange Disputes - Arbitration & Conciliation Act, 1996, Securities and Exchange Board of India Act, 1992, Securities Contracts (Regulation) Act, 1956 - Regulations 252(2) of the Bombay Stock Exchange, Limitation Act, 1963 - The court discussed the applicability and interpretation of the regulations and circulars issued by SEBI in relation to the limitation period for filing arbitration reference, the binding nature of SEBI circulars on stock exchanges and arbitral tribunals, and the effect of non-amendment of bye-laws/regulations on the validity of the circulars. The court found that the circulars issued by SEBI were statutory and binding on the parties, stock exchanges, and arbitral tribunals, and that the limitation period for filing arbitration reference was governed by the Limitation Act, 1963. The court held that the learned arbitrator's decision did not require interference under section 34 of the Arbitration Act, 1996.
Fact of the Case:
The petitions involved disputes between trading members and constituents of stock exchanges, where the respondents invoked arbitration clauses. The petitioners raised a plea of limitation based on regulations and circulars issued by SEBI.
Finding of the Court:
The court found that the circulars issued by SEBI were binding on the parties, stock exchanges, and arbitral tribunals, and that the limitation period for filing arbitration reference was governed by the Limitation Act, 1963. The court held that the learned arbitrator's decision did not require interference under section 34 of the Arbitration Act, 1996.
Issues: The issues involved the applicability and interpretation of regulations and circulars issued by SEBI in relation to the limitation period for filing arbitration reference, the binding nature of SEBI circulars on stock exchanges and arbitral tribunals, and the effect of non-amendment of bye-laws/regulations on the validity of the circulars.
Ratio Decidendi: The court held that the circulars issued by SEBI were statutory and binding on the parties, stock exchanges, and arbitral tribunals, and that the limitation period for filing arbitration reference was governed by the Limitation Act, 1963. The court found that the learned arbitrator's decision did not require interference under section 34 of the Arbitration Act, 1996.
Final Decision: The petitions were dismissed with no order as to costs.
1.These three petitions are filed under Section 34 of the Arbitration & Conciliation Act, 1996 (For short Arbitration Act). Since the facts and submissions in all three petitions are identical, were heard together and are being disposed of by a common order.
FACTS IN ARBITRATION PETITION NO. 313 OF 2012 :
2. It is not in dispute that the respondent is a trading member of the Stock Exchange. The Petitioner was a constituent of the respondent. A member client agreement has been entered into between the petitioner and respondent. It is not in dispute that the last transaction between the parties had taken place in the month of March, 2008. The dispute arose between the parties. The first respondent invoked arbitration clause as per Regulations framed by the Exchange. Statement of case was filed on 20th December, 2010. Prior to the issuance of circular dated 11.10.2010, the bye-laws governing the period of limitation i.e. Regulation 252(2) of the Bombay Stock Exchange provides as under:
“The Arbitrators shall not take cognizance of any claim, complaint, difference or dispute unless the same has been received by the concerned Regional Arbitration Center of the exchange within six months from the date of the transaction or from the date on which the client claims to have given the instruction/order to buy or sell and security or from the date on which the client claims to have paid money or given a security, whichever is earlier. Any dispute as to whether a claim, complaint, difference or dispute falls within the ambit of these clauses shall be decided by the Arbitrators.”
3.On 11th August, 2010 the Securities and Exchange Board of India (Fort short 'SEBI”) issued a circular in exercise of powers conferred on it under section 11 (1) of the Securities and exchange Board of India Act, 1992 read with Section 10 of the Securities Contracts (Regulation) Act, 1956 with a view to protect the interest of the investors in securities and to promote the development of, and to regulate the securities market and made it effective from 1st September, 2010. Clause 1 of that circular provided that in consultation with the stock exchanges, it has been decided to streamline the arbitration mechanism available at stock exchanges for arbitration of disputes (claims, complaints, differences etc) arising between a client and a member (Stock Broker, Trading Member and Clearing Member) across various market segments. Clause 5 of the said regulation provided that the limitation period for filing an arbitration reference shall be governed by the law of limitation i.e. Limitation Act, 1963.
4. On 9th February, 2011 SEBI issued another circular in continuation of its earlier circular dated 11th August, 2010 by which certain clarifications came to be issued. The said circular provided that upon consideration of various representations received by the SEBI and pursuant to the discussions held with the representatives of the stock exchanges, it has been decided that the limitation period is modified to three years in terms of the Limitation Act, 1963 shall be applicable to cover the following cases :
“(i) Where three years have not yet elapsed and the parties have not filed for arbitration with the stock exchange, or
(ii) 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.”
Clause (4) of the said circular provided as under:
“4. The recognized stock exchanges are advised to :
(i) make necessary amendments to the relevant rules/bye-laws/regulations for the implementation of the above decision immediately;
(ii) bring the provisions of this circular to the notice of the members of the stock exchange and also to disseminate the same through their website; and
(iii) communicate to SEBI, the status of implementation of the provisions of this circular in the monthly Development Reports to SEBI.”
Clause (vi) provided that the
