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TMI Blog2002 (6) TMI 453X X X X Extracts X X X X X X X X Extracts X X X X ..... itrator Justice D. B. Deshpande allowed the claim of BHH Securities (P.) Ltd. against Continental Securities (P.) Ltd., i.e., the respondent No. 2 herein. The learned arbitrator has rejected the claim against P.R. Shah Share Stock Broker (P.) Ltd., i.e., the petitioners herein. The third arbitrator has rejected the claim against the petitioners only on the ground that the arbitrators have no jurisdiction to hear and decide the claim against the petitioner since the petitioner is a member of the Stock Exchange. It may be noted that the third arbitrator has not accepted the petitioner s defence on merits. 2. The respondent No. 1 BHH Securities (P.) Ltd., ( BHH ), made a claim against the petitioner P.R. Shah Share Stock Broker (P.) Ltd. ( P.R. Shah Ltd. ) and the respondent No. 2 Continental Securities (P.) Ltd. ( Continental Ltd. ). According to BHH, they were approached by Miss K. C. Sheth, a director of the P.R. Shah Ltd. and also a director of Continental Ltd. She requested BHH to get a carry forward sauda in respect of 15,000 shares of BPL and 15,000 shares of Sterlite Industries Ltd. transferred to BHH on behalf of Continental Ltd. through a negotiated deal. There i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tered into and they have not received any bill or contract and that the amount of Rs. 13 lakhs was paid by P.R. Shah Ltd. as a loan to BHH. In order to resolve the controversy the arbitrators asked the petitioner P.R. Shah Ltd. to produce its sauda sheet for the said date which they did not on the ground that their computers were not in a working condition. 6. On facts, the arbitrators found that though the BHH did not have any account of P.R. Shah Ltd. in their books and neither was their parties name represented by a client s note code number on the sauda sheet, however, there is a practice of entering the short name of the client which has been done. The arbitrators relying on a well-known practice observed that brokers entered into transaction with the other brokers in their own name or in their firm s name or in the name of the different entity, which is also owned by the member broker. As a fact the arbitrators, therefore, found that P.R. Shah Ltd. had entered into transaction with the BHH in the name of its constituent respondent No. 1, i.e., Continental Ltd. In fact, the arbitrators have observed as follows : "However, for just name sake they have given the name of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to in its name. The difference in opinion and the order is only on account of the fact that P.R. Shah Ltd. is a member broker and, therefore, the forum for arbitration is different. 10. At this juncture, it would be necessary to set out the two fora contemplated by the Rules, Bye-laws and Regulations of the Stock Exchange, Mumbai. The first category of arbitration is Arbitration other than between members . Bye-law 248( a ) which is relevant, reads as follows "All claims (whether admitted or not) difference and disputes between a member and a non-member (the terms non-member and non-members shall include a remisler, authorised clerk, a sub-broker who is registered with SEBI as affiliated with that member or employee or any other person with whom the member shares brokerage) arising out of or in relation to dealings, transactions and contracts made subject to the Rules. Bye-laws and Regulations of the Exchange or with reference to anything incidental thereto or in pursuance thereof or relating to their construction, fulfilment or validity or in relation to the rights, obligations and liabilities of remislers, authorised clerks, sub-brokers, constituents, employees or any othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of Continental Ltd. is given as being C/o. P.R. Shah Shares Stock Brokers (P.) Ltd. The learned counsel also referred to the invoice which is raised by BHH in favour of Continental Ltd. and not in favour of P.R. Shah Ltd. 12. At the outset, Mr. Madon, the learned counsel for the respondent No. 1 raised a preliminary objection to the above contention raised on behalf of the petitioners on the ground that this contention though raised before the arbitrator, is no where pleaded in the petition and, therefore, the petitioner is not entitled to raise it. Grounds ( a ) and ( b ) of the petition which are relevant, read as follows : ( a )There is no privity of contract between the petitioners and the respondent No. 1 and in the absence of any contract, the learned arbitrator ought not to have proceeded against the petitioners. ( b )The subject contract note dated 4-6-1998 based on which the present reference has been filed is in the name of respondent No. 2 and, therefore, the reference ex facie is not maintainable against the petitioners. The above grounds do not specifically refer to the Bye-law 248 and there are no specific words to the effect that the arbitration pane ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Regulations of the Stock Exchange. The answer to the question that arises in this case depends on the meaning that may be attributed to the following words "or with reference to anything incidental thereto." If these words are construed as qualifying only the preceding words "in relation to dealing, transaction and contract", then there is no doubt that a reference between a member and a member and a non-member cannot be decided under Bye-law 248( a ). If, however, one looks to the setting of the rule, its context and the text, it appears that the words "or with reference to anything incident thereto" are intended to qualify all that which precedes them, that is to say, they are intended to enable the resolution of a dispute between a member and a non-member and a member, where the dispute between the member and other member is incidental to the dispute between the member and the non-member. There is no other Bye-law whereunder a dispute between a member and a non-member in which another member is also involved or concerned can be agitated upon or can be referred to arbitration. 15. According to Mr. Samdani, the learned counsel for the petitioner, the claim against the petiti ..... 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