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TMI Blog2023 (7) TMI 1496X X X X Extracts X X X X X X X X Extracts X X X X ..... ns the arbitration clause, it has to be referred to arbitration for the necessary adjudication. The Court in this scenario cannot adjudicate upon whether the disputes which are arbitrable under the agreed terms between the parties. Hon ble Supreme Court in Magma Leasing Finance Ltd. v. Potluri Madhavilata, [ 2009 (9) TMI 592 - SUPREME COURT ] has strictly narrated its view with regard to the cases wherein reference to the arbitration has not been allowed by the Court despite existence of an arbitration clause in the agreement. The application filed before the learned Trial Court has been properly accompanied by the AOF, which outlines the petitioner s rights and obligations and acknowledgment of the same by the petitioner therein. It evidently specifies that any dispute between the client and stock broker‟ should be referred to arbitration. In addition, Chapter-11 of the National Stock Exchange of India Byelaws provides for arbitration between trading members and constituents deriving from or relating to dealings, contracts, and transactions made subject to the byelaws, rules, and regulations of the Exchange. On bare perusal of the reliefs sought by the petitioner before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ouse Court, New Delhi. - HON'BLE MR. JUSTICE CHANDRA DHARI SINGH For the Appellant : None For the Respondent : Ms. Shivani Khandeka, Advocate for R-1 Md. Zaryab Jamal Risvi, Advocate for R-2 ORDER CHANDRA DHARI SINGH, J (Oral) 1. The present petition under Section 115 read with Section 151 of the Code of Civil Procedure, 1908 (hereinafter CPC ), has been filed by the petitioner seeking the following reliefs: I). Quash, set aside and declare null and void the impugned order dated 17.11.2021 passed by Ld. Trial Court in CSCJ 677 of 2021, II). Direct the Ld. Trial Court to entertain and proceed with the trial of suit of the petitioner as per law. III). Pass such further orders as may be considered just and appropriate in the facts and circumstances of the case. FACTUAL MATRIX 2. The petitioner is an individual investor, carrying out transactions in shares, stocks, and derivative products at the National Stock Exchange of India (hereinafter NSE ), respondent No. 1. National Stock Exchange of India Limited, a company incorporated in the year 1992, is running a stock exchange recognized by and under regulatory framework/control of Securities and Exchange Board of India (hereinafter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial Court vide Order dated 17th November 2021, allowed the application filed by respondent no. 2 under Section 8 of the Act, 1996. It was held that there exists an agreement for arbitration between the petitioner and the respondent no. 2 in the AOF. Hence, the parties may resolve their disputes by way of entering into arbitration. Therefore, the main dispute of the petitioner is with respondent no. 2. 9. Aggrieved by the impugned Order dated 17th November 2021, the petitioner has approached this Court by way of the instant revision petition. SUBMISSIONS (on behalf of the petitioner) 10. Petitioner appearing in person submitted that a shareholder having his name in the prescribed register is to be maintained by the Company i.e., respondent no. 2. It is submitted that when a person sells certain shares on a cum dividend date, then the buyer has a right to the dividend and the seller has to return any dividend they have received. It is submitted that a holder of Stock Futures who does not have his name in the shareholder s register has no rights and incurs no liability for the return of dividends. Therefore, no dividend can be deducted from the value position of the petitioner. Howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion clause in the Byelaw No. 18 of the NSE which is subordinate to the AOF. The said byelaw has been reproduced herein below: Exclusion (18) For removal of doubts, it is hereby clarified that the Exchange shall not be construed to be a party to the dealings, contracts and transactions referred to under these Byelaws; and the provisions of this Chapter shall not apply in case of claims, differences or disputes between the Exchange and a Trading Member and no arbitration shall lie between the Exchange and a Trading Member. 17. It is submitted that the impugned letters/circulars dated 1st February 2021 and 8th February 2021 by which CAA is done against the petitioner, are illegal because the value position of the market participant is not being protected. A perusal of the said letters/circulars shows that the respondents derive their authority from the Master Circular dated 16th December 2016 read with Circular dated 5th July 2018. The action taken by respondent No. 2 is a serious violation of the above-said Master Circular as the CAA has been taken on the Futures Contract. The same is not permissible under the SEBI Master Circular as CAA can only be taken whenever there is an announ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Securities Contracts (Regulation) Act, 1956 (hereinafter SCRA ) and are duly approved by the Central Government and SEBI under the SCRA. 24. It is submitted that Section 9 of the SCRA empowers NSE to make byelaws to regulate contracts between trading members, or between a trading member and its constituent. Pertinently, the byelaws also provide for the consequences of a breach or omission by a seller or a buyer, including the method and procedure for the settlement of claims or disputes through arbitration. 25. It is submitted that Chapter 11 of the byelaws provides that all claims, differences, or disputes inter se between the trading members as well as between trading members and constituents, arising out of, or in relation to dealings and contracts pertaining to transactions made on NSE‟s platform shall be settled by arbitration. 26. It is submitted that the byelaws further provide that the arbitration agreement extracted shall be deemed to be incorporated in all the contracts pertaining to the trades made on the NSE‟s platform. The byelaws also state that the NSE shall not be construed to be a party to the dealings, contracts and transactions between the constitue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are referred to arbitration, the parties are required to approach the arbitral tribunal under Section 16 of the Act, 1996. 33. It is submitted that as per the judgment of the Hon ble Supreme Court in Hindustan Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleums, (2003) 6 SCC 503, it has been ruled that it is a mandatory duty of a court to refer the dispute to an arbitrator in case of the existence of a valid arbitration clause covering the subject matter of the suit. 34. It is also submitted that in view of the judgment of the Hon ble Supreme Court in Ameet Lalchand Shah Ors. V. Rishabh Enterprises Anr. (2018) 15 SCC 678, amended Section 8 of the Act, 1996 would apply notwithstanding any prayer, judgment, decree, or order of the Supreme Court or any other Court and it is the duty of the Court to impart commercial understanding between the parties with a sense of business efficacy and not by mere averments made in the plaint. 35. It is further submitted that in view of the judgment of Ameet Lalchand (Supra), reference to the arbitration cannot be rejected on account of the prayers and averments made in the plaint. The present case of the petitioner is not maintainable and this Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing reference to arbitration is maintainable under Section 115 of the CPC? 40. The petitioner has raised the objections against the impugned Order dated 17th November 2021 on the ground that the dispute of the petitioner is a tripartite dispute with respondent no. 1 and respondent no. 2, and the matter cannot be referred to arbitration under Section 8 of the Act, 1996. The respondent no. 1 is a necessary party for the proper adjudication of the present dispute. It is the case of the petitioner that the letters/circulars issued by the respondent no. 1, containing directions for the Stock Broker/respondent no. 2 are illegal. 41. The challenge to the impugned Order is solely on the ground that, allowing the application of the respondent no. 2 under Section 8 is illegal and the same is not maintainable in the eyes of law. This very contention has been opposed by the respondent by relying upon various judgments of Hon ble Supreme Court and this Court wherein the challenge under Section 115 of the CPC against an order allowing reference to the arbitration has been strictly restricted. 42. To elucidate upon the scope of Section 115 of the CPC, reliance has been placed on the observati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercised a jurisdiction not vested in him by law or had failed to exercise a jurisdiction so vested in him, in recording the order that the proceedings under reference be stayed till the decision of the appeal by the High Court in the proceedings for specific performance of the agreement in question. Clause (c) also does not seem to apply to the case in hand. The words illegally and with material irregularity as used in this clause do not cover either errors of fact or of law; they do not refer to the decision arrived at but merely to the manner in which it is reached. The errors contemplated by this clause may, in our view, relate either to breach of some provision of law or to material defects of procedure affecting the ultimate decision, and not to errors either of fact or of law, after the prescribed formalities have been complied with. The High Court does not seem to have adverted to the limitation imposed on its power under Section 115 of the Code. Merely because the High Court would have felt inclined, had it dealt with the matter initially, to come to a different conclusion on the question of continuing stay of the reference proceedings pending decision of the appeal, cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove, it becomes evident that this Court has limited powers which can be exercised under Section 115 of the CPC. It is also prudent to apply the ratio observed in the judgments, by way of which, this Court finds that not every order of the learned Trial Court can be regarded as an order that can be put under the ambit of revisional jurisdiction of the High Court. 47. In view of the instant matter, the learned Trial Court has referred the dispute of the petitioner for arbitration under Section 8 of the Act, 1996. Relevant paras of the impugned Order are reproduced herein below: Section 8 of the Arbitration and Conciliation Act, 1996 is peremptory in nature. It provides that a judicial authority shall, on the basis of the Arbitration agreement between the parties, direct the parties to go for Arbitration. The application filed before this court is duly accompanied with the account opening form which provides rights and obligations in Part-C and duly agreed upon by the plaintiff vide declaration in Part-A of the account opening form. It clearly stipulates the reference of dispute between the client and the stock broker to Arbitration. Further, Chapter-11 of the National Stock of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oney, etc., to arbitration as per the Rules, Byelaws and Regulations of the Exchanges where the trade is executed and circulars/notices issued thereunder as may be in force from time to time. 25. The stock broker shall ensure faster settlement of any arbitration proceedings arising out of the transactions entered into between him vis- -vis the client and he shall be liable to implement the arbitration awards made in such proceedings. 49. This Court is of the view that any agreement that contains an arbitration clause must be referred to arbitration in an application under Section 8 of the Act, 1996. The same must be done because the parties have already consented to arbitration. Since the AOF in the instant case contains the arbitration clause, it has to be referred to arbitration for the necessary adjudication. The Court in this scenario cannot adjudicate upon whether the disputes which are arbitrable under the agreed terms between the parties. 50. At this juncture, reliance can be further placed on the judgment of Hon ble Supreme Court in the case of A. Ayyasamy v. A. Paramasivam, (2016) 10 SCC 386, wherein the following was observed: 12.2. When arbitration proceedings are trigge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecline to refer parties to arbitration if it is found that the arbitration agreement is null and void, inoperative or incapable of being performed. Section 8 of the 1996 Act has made a departure which is indicative of the wide reach and ambit of the statutory mandate. Section 8 uses the expansive expression judicial authority rather than court and the words unless it finds that the agreement is null and void, inoperative and incapable of being performed do not find place in Section 8. 38.Hence, in addition to various classes of disputes which are generally considered by the courts as appropriate for decision by public fora, there are classes of disputes which fall within the exclusive domain of special fora under legislation which confers exclusive jurisdiction to the exclusion of an ordinary civil court. That such disputes are not arbitrable dovetails with the general principle that a dispute which is capable of adjudication by an ordinary civil court is also capable of being resolved by arbitration. However, if the jurisdiction of an ordinary civil court is excluded by the conferment of exclusive jurisdiction on a specified court or tribunal as a matter of public policy such a di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilment of the conditions of Section 8, no option is left to the court and the court has to refer the parties to arbitration. There is nothing on record that the prerequisite conditions of Section 8 are not fully satisfied in the present case. The trial court, in the circumstances, ought to have referred the parties to arbitration as per arbitration Clause 22. 52. In another judgment of Hindustan Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleums, (2003) 6 SCC 503, the issue similar to the present petition has been outrightly discussed by the Hon ble Supreme Court, as under: 24. This brings us to consider the last question involved in this appeal, namely, the maintainability of the revision petition before the High Court under Section 115 CPC. The High Court by the impugned order has come to the conclusion that its jurisdiction to entertain a revision petition would only be available if the order impugned is such that if it is allowed to stand, it would occasion failure of justice or cause an irreparable injury to a party against whom the said order is made. In support of this finding, the High Court has relied upon certain judgments of this Court. Having perused the said judgments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner before the learned Trial Court, it is ex facie apparent that the petitioner s primary concern is against respondent no. 2. The reference to arbitration is mandatory for adjudication of the dispute in the present petition. The petitioner's contention that the current dispute is a tripartite dispute and not a bipartite dispute is not sustainable. 56. The petitioner has not been able to make out his case as to how his grievances could be resolved qua respondent no. 1. Section 8 the Act, 1996 requires that the dispute be referred to arbitration if an arbitration agreement exists. Accordingly, the application under Section 8 the Act, 1996 seeking arbitration has been allowed, and the parties are referred to arbitration. 57. The petitioner s grievances are arising out of the AOF and the respondent no. 2 is a party to it. It is necessary to state that the reference to arbitration is legally justifiable in the light of the facts and statements. The learned Trial Court has acted in accordance with its jurisdiction under the law. CONCLUSION 58. Therefore, this Court is of the view that the learned Trial Court has not committed any error of law that can be the subject matter to be e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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