2015 (4) TMI 62 - HC - Indian Laws

Arbitration agreement or not - Stock trading agreement between appellant and respondent - Appellant raised a grievance that without his instructions 65 transactions were effected by Edelweiss without any confirmed order or instruction from him - Respondent contends that matter referable to arbitration - No application was filed under Section 8 of the Arbitration and Conciliation Act, 1996 - view taken by the learned Single Judge is that the requirement of law i.e. Section 8 of the Arbitration and Conciliation Act, 1996 is for a party relying upon an arbitration agreement to apply to the Court praying that parties be referred to arbitration not later than when submitting the first statement on the substance of the dispute - Held that - Section 9 of the Securities Contracts (Regulation) Act, 1956 provides that any recognized stock exchange may, subject to the previous approval of Securities and Exchange Board of India (SEBI) make bye-laws for the regulation and control of contracts. Section 9(2)(n) of the Act provides the method and procedure for settlement of claims or disputes including settlement by arbitration. Under S.9(2)(n) the National Stock Exchange has framed Bye-Laws which have been approved by SEBI. Section 9(4) provides that the Bye-Laws made under Section 9 shall be subject to conditions with regard to previous publication, and the same shall be published in the Gazette of India, and also in the Official Gazette of the State in which the principal office of the recognized Stock Exchange is situated, and shall have effect as from the date of publication in the Gazette of India. - arbitration under the National Stock Exchange Bye-Laws are Statutory Arbitrations would be covered under Section 2(4) of the Arbitration and Conciliation Act, 1996. In the written statement filed a specific prayer has not been made to refer the parties to arbitration, but we have highlighted hereinabove that in the written statement filed a preliminary objection has been taken that the suit is barred in view of the arbitration agreement. The written statement filed is with strings attached by challenging the maintainability of the suit in view of the arbitration clause and therefore in such circumstance the said objection taken by Edelweiss contained in the written statement could be treated as an application under Section 8 of the Arbitration and Conciliation Act, 1996. - It is trite that it is the substance of a matter contained in a document which matters and not the form thereof - appeal has to be dismissed - Decided against appellant.

Summary

Issues:
1. Jurisdiction of the court to entertain the suit in view of an arbitration agreement.
2. Interpretation of Section 8 of the Arbitration and Conciliation Act, 1996.
3. Applicability of statutory arbitrations under the National Stock Exchange Bye-Laws.
4. Maintainability of the appeal under Section 37 of the Arbitration and Conciliation Act, 1996.

Issue 1: Jurisdiction of the court to entertain the suit in view of an arbitration agreement:
The plaintiff filed a suit against the defendant seeking a decree for a specific sum, alleging unauthorized transactions and losses incurred without his instructions. The defendant contended that the suit should be referred to arbitration as per the agreement between the parties. The court observed that the agreement mandated arbitration for resolving disputes. Despite no specific prayer in the written statement for arbitration, the objection raised challenging the suit's maintainability based on the arbitration clause was considered equivalent to an application under Section 8 of the Arbitration and Conciliation Act, 1996. The court emphasized that the substance of the matter, challenging the suit's maintainability due to the arbitration clause, was crucial.

Issue 2: Interpretation of Section 8 of the Arbitration and Conciliation Act, 1996:
The court interpreted Section 8 of the Arbitration and Conciliation Act, 1996, which requires a party to apply for arbitration not later than when submitting the first statement on the substance of the dispute. It was clarified that the first statement, typically the written statement in a suit, must bring to the court's notice the existence of an arbitration agreement covering the subject matter of the suit. The court emphasized that the substance of the matter in the document matters more than the form, allowing objections challenging the suit's maintainability based on the arbitration clause to be treated as an application under Section 8.

Issue 3: Applicability of statutory arbitrations under the National Stock Exchange Bye-Laws:
The court highlighted that arbitration between a stockbroker and a client under the Bye-Laws of the National Stock Exchange is considered statutory arbitration. Previous decisions affirmed that arbitration under stock exchange bye-laws falls under statutory arbitration. The court emphasized that such arbitration proceedings are subject to the provisions of the Arbitration and Conciliation Act, 1996, to the extent not provided for in the bye-laws and regulations.

Issue 4: Maintainability of the appeal under Section 37 of the Arbitration and Conciliation Act, 1996:
The court addressed a preliminary objection regarding the maintainability of the appeal under Section 37 of the Arbitration and Conciliation Act, 1996. It was argued that an order under Section 8 of the Act was not appealable. However, the court chose to decide on the merits to interpret the law correctly, considering conflicting decisions by Single Judges. The court affirmed the view taken in the present case, overruling contrary views by other judges and settling the point of law.

In conclusion, the court dismissed the appeal, citing reasons related to the arbitration agreement, interpretation of Section 8, statutory arbitrations under stock exchange bye-laws, and the maintainability of the appeal under Section 37 of the Arbitration and Conciliation Act, 1996.