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Issues: (i) Whether the brokerage contract notes and the dispute arising out of them fell within section 6 of the Bombay Securities Contracts Control Act, 1925 so as to make the arbitration clause and award void. (ii) Whether the contract notes were void under Rule 167 of the Native Share and Stock Brokers' Association Rules.
Issue (i): Whether the brokerage contract notes and the dispute arising out of them fell within section 6 of the Bombay Securities Contracts Control Act, 1925 so as to make the arbitration clause and award void.
Analysis: The dispute between the parties arose from the contract of employment of the broker and not from a contract for sale or purchase of securities. The contract notes were only the written record of dealings effected on behalf of the constituent and did not themselves amount to contracts of sale or purchase of securities. Section 6 barred claims for remuneration in respect of such contracts, but it did not declare the collateral employment contract void. The written terms were therefore sufficient to constitute an arbitration agreement covering disputes arising out of the broker's employment.
Conclusion: The matter did not fall within section 6, and the arbitration agreement and proceedings were valid on this ground.
Issue (ii): Whether the contract notes were void under Rule 167 of the Native Share and Stock Brokers' Association Rules.
Analysis: The Rules of the Association formed a complete code and had to be construed on their own terms. The distinction drawn by section 3(4) of the Bombay Securities Contracts Control Act, 1925 between ready delivery contracts and other contracts could not be imported into Rule 167. Reading Rules 359 to 363 together with Rule 167, the contract notes in question answered the description of ready delivery contracts under the Rules and were not forward contracts contemplated by Rule 167. The form used by the broker was, on that construction, not invalid merely because brokerage was not separately shown in the manner suggested by the respondent.
Conclusion: The contract notes were not void under Rule 167, and the award could not be invalidated on that basis.
Final Conclusion: The order setting aside the award was reversed and the matter was remitted for rehearing on the remaining objections to the award.
Ratio Decidendi: A contract collateral to a securities transaction is not rendered void merely because the underlying sale or purchase contract may fall within a statutory prohibition, and association rules governing brokers must be construed independently of the statutory definition unless the rules themselves incorporate it.
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