2002 (6) TMI 560 - HC - Companies Law

Summary

Issues Involved:
1. Jurisdiction of the Arbitrator
2. Validity of Contract Notes
3. Appreciation of Evidence by the Arbitrator
4. Arbitration Agreement under Section 7 of the Arbitration Act
5. Alleged Breach of Section 18 of the Arbitration Act

Detailed Analysis:

1. Jurisdiction of the Arbitrator:
The petitioner challenged the arbitral award on the ground that the arbitrator lacked jurisdiction since no formal agreement was executed between the petitioner (sub-broker) and the respondent (broker). The court noted that the arbitration was conducted under the rules, bye-laws, and regulations of the National Stock Exchange (NSE). The petitioner admitted transactions amounting to Rs. 5,85,748.73 but contested the remaining amount. The arbitrator found that the petitioner had accepted certain transactions and rejected others inconsistently. The court upheld the arbitrator's jurisdiction, emphasizing that the arbitrator is the sole judge of evidence quality and quantity.

2. Validity of Contract Notes:
The petitioner contended that no contract notes were issued by the respondent for the transactions in question, and those submitted were false and fabricated. The arbitrator rejected this claim, finding that the petitioner had accepted transactions up to a certain settlement number and inconsistently disputed subsequent ones. The court supported the arbitrator's findings, stating that the arbitrator's appraisement of evidence is not subject to court review.

3. Appreciation of Evidence by the Arbitrator:
The petitioner argued that the arbitrator improperly appreciated evidence and ignored certain documents such as books of account and trade logs. The court dismissed this contention, reiterating that the arbitrator is the judge of evidence and that courts cannot re-evaluate the evidence considered by the arbitrator. The court cited Supreme Court precedents affirming this principle.

4. Arbitration Agreement under Section 7 of the Arbitration Act:
The petitioner argued that the contract notes did not constitute a valid arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996, as they were not signed by both parties. The court examined the scheme of arbitration under the NSE regulations and the Securities Contracts (Regulation) Act, 1956. It concluded that contract notes signed by the broker, as per NSE regulations, are valid arbitration agreements even if not signed by both parties. The court harmonized the provisions of the Arbitration Act with the specific regulations governing stock exchange contracts.

5. Alleged Breach of Section 18 of the Arbitration Act:
The petitioner claimed a breach of Section 18 of the Arbitration Act, arguing that the respondent's written submissions were not provided in advance, denying equal treatment. The court found no merit in this argument, stating that written submissions are not mandatory procedural requirements and that the arbitrator's role is to ensure equal treatment. The court held that the arbitrator did not violate any principles of equality or procedural fairness.

Conclusion:
The court dismissed the petition, upholding the arbitral award and finding no merit in the petitioner's challenges. The judgment emphasized the arbitrator's authority in appraising evidence and the validity of arbitration agreements under specific regulatory frameworks. The petition was dismissed with costs.