2011 (10) TMI 519 - SC - Indian Laws

Arbitration and Conciliation Act, 1996 - Bye Law 248 - Arbitration claim non-payment of the amounts due - appellant and the first respondent are members first respondent alleged that appellant and second respondent are sister concerns - Held that - Bye-law 248 applies to a dispute between a member and a non-member, yet a claim by a member against another member can be entertained by an arbitral forum constituted under Bye-law 248, where said claim is incidental or connected with a claim against a non-member, in the present case, First respondent cannot claim amount from appellant - Second respondent was liable as claimed by the first respondent, but the appellant was not liable only on the ground that the arbitrators appointed by the Stock Exchange under Bye Law 248, in a claim against a non-member, had no jurisdiction to decide a claim against another member

Summary

Issues Involved:
1. Jurisdiction of the Arbitral Tribunal under Bye Law 248.
2. Existence of a contract between the first respondent and the appellant.
3. Use of personal knowledge by the Arbitral Tribunal in deciding the dispute.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Arbitral Tribunal under Bye Law 248:
The appellant contended that under Bye Law 248, arbitration could only occur between a member and a non-member, and disputes between two members should be decided under Bye Law 282. The appellant argued that the constitution of the Arbitral Tribunal, the procedure followed, and the remedies available were different for disputes between a member and a non-member compared to disputes between two members. Therefore, a single arbitration for a claim involving both a member and a non-member was not permissible. The court noted that the arbitration was an institutional arbitration under the Bye Laws of the Exchange, which allowed for arbitration of claims, differences, complaints, and disputes between members without a separate arbitration agreement. The court held that the principle of avoiding multiplicity of proceedings and conflicting decisions justified a single arbitration when there are provisions for arbitration for both parties involved. The court concluded that the Exchange's permission for a single arbitration against both the appellant and the second respondent was proper and just, thus rejecting the appellant's contention.

2. Existence of a Contract Between the First Respondent and the Appellant:
The appellant argued that there was no contract between the first respondent and the appellant and that the claim was based on fabricated documents. The Arbitral Tribunal examined the facts and held that both the second respondent and the appellant were liable. The majority view was that the appellant conducted the transaction in the name of the second respondent and was therefore liable. The minority view agreed with the liability of the second respondent but contended that the Arbitral Tribunal under Bye Law 248 had no jurisdiction to decide a claim against another member. The court emphasized that it does not sit in appeal over the award of an arbitral tribunal by re-assessing or re-appreciating the evidence and that an award can only be challenged under the grounds mentioned in section 34(2) of the Arbitration and Conciliation Act, 1996. Therefore, the court found no grounds to re-examine the facts and upheld the Arbitral Tribunal's findings.

3. Use of Personal Knowledge by the Arbitral Tribunal in Deciding the Dispute:
The appellant contended that the Arbitral Tribunal used personal knowledge to decide the matter, pointing to an observation in the award that referenced market practices known to the arbitrators. The court clarified that while an arbitral tribunal cannot use personal knowledge of the facts of the dispute not part of the record, it can use its expert or technical knowledge and general knowledge about the particular trade. The court found that the arbitrators' reference to market practices did not constitute using personal knowledge of specific facts of the transaction and was permissible.

Conclusion:
The court found no reason to interfere with the judgment of the High Court and dismissed the appeal, affirming the Arbitral Tribunal's award and the High Court's decision. The court upheld the single arbitration against both the appellant and the second respondent, the findings of liability, and the use of market practice knowledge by the arbitrators.