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ALLAHABAD HIGH COURT
D.K. Seth, J.
VEENA OJHA - PETITIONER
v.
U.P. STOCK EXCHANGE ASSOCIATION LTD. AND OTHERS - RESPONDENTS.
Civil Misc. Writ Petition No. 23761 of 1998
Decided on : August 7, 1998.
ARBITRATION - BYE-LAWS - JURISDICTION - VALIDITY OF ARBITRATION AGREEMENT - CHALLENGE - SECTION 34 OF THE ARBITRATION AND CONCILIATION ACT, 1996 - WRIT JURISDICTION - MAINTAINABILITY:
Fact of the Case:
Petitioner alleged that an ex-parte award was passed against her in an arbitration proceeding under bye-laws framed pursuant to Section 9 of the Securities Contracts (Regulation) Act, 1956, for alleged dealings/transactions she never entered into. She claimed no notice of the arbitration and misconduct by the Arbitrator. The Arbitrator's jurisdiction was challenged as the transaction did not fall within the ambit of the relevant bye-laws.
Finding of the Court:
The Court held that the bye-laws, framed under Section 9(2)(k) of the Act, provided for arbitration of disputes between members and non-members, including the question of whether a transaction existed. The Arbitration and Conciliation Act, 1996 (the Act) applies to such arbitration, subject to the provisions of the bye-laws. The petitioner's contention that the award could be directly challenged under Article 226 of the Constitution due to lack of jurisdiction was rejected.
Issues: 1. Whether the bye-laws provided jurisdiction to the Arbitrator to decide the existence and validity of the arbitration agreement? 2. Whether the petitioner could directly challenge the award under Article 226 of the Constitution due to lack of jurisdiction? 3. Whether the petitioner had an adequate alternative remedy under Section 34 of the Act?
Ratio Decidendi: 1. The Court interpreted Bye-laws 247(a) and 247(b) of the bye-laws, which provided for arbitration of disputes between members and non-members, including the question of whether a transaction existed. It held that the bye-laws conferred jurisdiction on the Arbitrator to decide the very existence and validity of the arbitration agreement. 2. The Court analyzed Section 34 of the Act, which provides for setting aside arbitral awards. It noted that the existence and validity of the arbitration agreement could be challenged under Section 34(2)(a)(ii), similar to the provisions of Section 33 of the Arbitration Act, 1940. The Court held that the petitioner could challenge the award under Section 34 of the Act, which provided an adequate alternative remedy. 3. The Court emphasized that the petitioner's challenge involved disputed questions of fact, such as whether she entered into the arbitration agreement and received proper notice. The Court held that it could not enter into disputed questions of fact while exercising writ jurisdiction and that the petitioner should pursue the appropriate legal remedies.
Final Decision: The Court dismissed the writ petition on the grounds of alternative remedy and maintainability. It clarified that the observations made in the judgment were tentative and would not influence any future proceedings before other forums.
D. K. Seth, J. - The petitioner has alleged that the Arbitrator appointed under the bye-laws framed pursuant to Section 9 of the Securities Contracts (Regulation) Act, 1956, had passed an ex-parte award against her in the matter arising out of alleged dealings/transactions, which the petitioner had never entered into. It is further alleged that the petitioner had no notice of the arbitration and the Arbitrator had mis-conducted himself in passing the said award ex-parte. It is further contended that the Arbitrator had no jurisdiction to enter into arbitration since the alleged transaction did not fall within the ambit of bye-laws 247(a) and 247(b) of the bye-laws framed under the said Act.
2. I have heard Mr. R. K. Ojha, learned counsel for the petitioner and Mr. Mahendra Bahadur Singh, learned counsel appearing for respondent No. 3, at length.
3. Section 9 of the said Act provides for framing of bye-laws which in sub-section (2) Clause (k), provides for the regulation of the entering into, making, performance, rescission and termination of contracts including, contracts between members or between a member and his constituent or between a member and a person who is not a member, and the consequences of default or insolvency on the part of a seller or buyer or intermediary, the consequences of a breach or omission by a seller or buyer, and the responsibility of members who are not parties to such contracts.
4. The bye-laws have been framed in terms of sub-rule (4) which requires its previous publication and when approved by the Central Government it is to be published in the Gazette of India and also in the official gazette of the State in which the principal office of the recognised stock exchange is situated and the same becomes effective from the date of such publication in the Gazette of India. It is not disputed that such bye-laws have been framed under sub-section (4) of Section 9 of the aforesaid Act. It is pointed out by Mr. Ojha that the bye-laws 247(a) and 247(b) of the bye-laws so framed, provide for arbitration other than between the members. The said bye-laws provide as follows :
"247. (a) All claims (whether admitted or not); difference and disputes between a member and a non-member or non-members (the terms "non-members" and "non-members" shall include a remisier, authorised clerk or any other persons with whom the member shares brokerage) arising out of or in relation to dealings, transactions and contracts made subject to Rules, Bye-laws and Regulations of the Exchange or with reference to anything incidental thereto or in pursuance thereof or relating to their constructions fulfilment to validity or relating to the rights, obligation and liabilities or reminsiers, authorised clerks, employees or any other person with whom the member shares brokerage in relation to such dealings, transaction and contracts shall be referred to be decided by arbitration as provided in the Rules, Bye-laws, and Regulations of the Exchange.
Contract constitutes Arbitration Agreement (b) An acceptance whether express or implied of a contract subject to arbitration as provided in sub-clause (a) and with this provision for arbitration incorporated therein all constitute and shall be deemed to constitute an agreement between the member and the non-member or non-members concerned that all claims (whether admitted or not), differences and disputes of the nature referred to in sub-clause (a) in respect of all dealings, transactions and contracts of a date prior or subsequent to the date of the contracts shall be submitted to and decided by arbitration as provided in the Rules, Bye-laws and Regulations of the Exchange and that in respect thereof any question whether such dealings, transactions and contracts have been entered into or not, shall also be submitted to and decided by arbitration as provided in the Rules, Bye-laws and Regulations of the Exchange."
5. A plain reading of the above bye-laws indicates that all dealings and tran
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