The central legal point established in the judgment is that the circulars issued by SEBI, in exercise of its statutory powers, govern the limitation period for filing an arbitration reference.

(Dr. D.Y. Chandrachud, J.) The Appeal arises from a judgment of a learned Single Judge dated 25 September 2012 on a petition under Section 34 of the Arbitration and Conciliation Act, 1996. A reference was made to arbitration, before an arbitral tribunal, constituted by the National Stock Exchange of India Limited. The Appellant was a constituent of the First Respondent. The First Respondent was carrying on transactions in shares on behalf of the Appellant. There was a debit balance of Rs.16,76,892/- at the foot of the account which the Appellant failed to pay despite a notice of demand dated 26 September 2009. The First Respondent submitted a reference to arbitration and lodged a statement of case on 20 December 2010. The arbitral tribunal allowed the claim together with interest at the rate of 12% per annum from 29 February 2008.

2. The learned Single Judge has dismissed the petition under Section 34. In appeal, the only point which has been canvassed on behalf of the Appellant at the hearing is that the claim of the First Respondent was barred by limitation. Counsel submits that when the reference was made on 20 December 2010, the byelaws of the National Stock Exchange required a claim to be submitted within a period of six months and since the last transaction, as noted by the arbitrator, was undertaken on 28 February 2008, the claim was barred by limitation.

3. Now it needs to be noticed that on 11 August 2010, the Securities and Exchange Board of India ( SEBI) issued a circular in exercise of its powers conferred by the Securities and Exchange Board of India Act, 1992 read with Section 10 of the Securities Contracts (Regulation) Act, 1956. Clause 13 of the circular was to the following effect:

“13. This Circular is issued in exercise of the powers conferred 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 to protect the interests of the investors in securities and to promote the development of, and to regulate the securities market and shall come into effect from September 1, 2010.”

4. Clause 5.1 of the circular states as follows:

“5.1 The limitation period for filing an arbitration reference shall be governed by the law of limitation i.e. The Limitation Act, 1963.”

5. Subsequently, on 9 February 2011, SEBI issued a further circular in exercise of its statutory powers. The relevant part of the circular states as follows:

“This is in continuation of circular ref. No. CIR/MRD/DSA/24/2010 dated August 11, 2010, which inter alia prescribed that the limitation period for filing an arbitration reference shall be governed by the provisions of the Limitation Act, 1963. In this regard upon consideration of various representations received by SEBI and pursuance to the discussions held with the representatives of stock exchanges, it has been decided that the limitation period, as modified to three years in terms of Limitation Act, 1963, shall be applicable to cover inter alia 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 6 of the circular referred to the statutory basis for the circular in terms of the two legislations referred to earlier and provides that the circular shall come into effect immediately.

6. The arbitral tribunal had due regard to the terms of these circulars. The first circular dated 11 August 2010 stipulated that the period of limitation shall be governed by the Limitation Act, 1963 and that the circular would come into effect from 1 September 2010. The recognised stock exchanges were advised by clause 11 of the circular to make amendments to their byelaws, rules and regulations to implement the decision but, there can be no do