TaxTMI 
TaxTMI 
2009 (2) TMI 879
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....er called the 'stock exchange'); that the petitioner/appellant had purchased and sold some shares through the stock broker during the period from 3rd July, 1996 to 9th July, 1996 and in which transaction he had suffered losses and had squared up his account vide his cheque dated 10th July, 1996 and had thereafter stopped purchase/sale of shares through the stock broker or anyone else; that the petitioner/appellant on 22nd December, 1996 received notice from the stock exchange of the statement of claim received by the stock exchange from the stock broker and requiring the petitioner/appellant to submit his defence thereto together with fee of arbitration as well as his nominees from the panel of arbitrators of the stock exchange; that the stock broker had filed a totally false claim against the petitioner/appellant with the stock exchange and on the basis of fabricated and forged documents; that photocopy of the Member Constituent Agreement received by the petitioner/appellant as part of the claim of the stock broker though purported to be signed by the petitioner/appellant was, in fact, not signed by him and never executed by him and had been forged and fabricated to cause ....
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.... written statement of the stock broker and the stock exchange filed an application under Section 8 of the Arbitration Act for referring the matter to arbitration. The stock broker in the written statement as well as the stock exchange in the said application also disputed the territorial jurisdiction of the courts at Delhi and relied upon the clause in the byelaws of the stock exchange with respect to the exclusive jurisdiction of the courts at Mumbai. The application was contested by the petitioner/appellant by filing a reply. 5. The learned Civil Judge vide order dated 1st February, 1997, inter alia, held that under Section 5 of the Act the jurisdiction of the civil court was barred; that there was no provision under the Arbitration Act to challenge the arbitration before the civil court; that the arbitration proceedings of the stock exchange had already commenced prior to the institution of the suit; that the petitioner/appellant has a right under Section 16 of the Arbitration Act to raise objections as raised in the suit before the arbitrator and even thereafter under Section 34 of the Act and thus allowed the application and dismissed the suit. 6. The petitioner/appellan....
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....pplication under Section 16 of the Arbitration Act is an alternative efficacious remedy to the same. and the counsels made submissions in RSA as well as OMP. 8. At the outset, query was made from the counsels as to the maintainability of the RSA, the order challenged therein being on an application under Section 8 of the Arbitration Act. No judgment was cited by counsel for either party on this aspect. The court, if allowing the application under Section 8 of the Act is required to refer the parties to arbitration. In the present case it was the admitted position that the arbitration proceedings had already commenced even prior to the institution of the suit. Since Section 8(3) provides that the arbitration proceedings may be commenced, continued and an arbitral award made notwithstanding the pendency of an application under Section 8. The suit was filed after the commencement of arbitration proceedings had been commenced by the stock exchange. The suit claimed the relief of stay thereof. The order made by the Civil Judge is thus not of referring the parties to arbitration as the court is required to do under Section 8 but of dismissal of the suit. 9. Section 100 of the CP....
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.... has argued that the application on which the suit was dismissed, in the present case, was filed by the stock exchange and not by the stock broker. It is contended that the agreement alleged of arbitration was between the petitioner/appellant and the stock broker and not between the petitioner/appellant and the stock exchange. It is thus contended that the right, if any, to apply under Section 8 of the Arbitration Act was of the stock broker only and not of the stock exchange. It is averred that in Section 8(1) '.. if a party so applies' refers to a party as defined in Section 2(h) and means a party to an arbitration agreement. 14. Per contra, the counsel for the stock broker has argued that the stock broker also in written statement filed by them had in the preliminary submissions itself taken the plea of the suit being barred owing to the existence of the arbitration agreement and thus it cannot be said that it is only the stock exchange which applied under Section 8 of the Act. It is also urged that even if it is considered that the stock broker alone could have applied under Section 8 of the Act and had not so applied, the suit has been dismissed under Order 7 Rule 1....
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....t in the arbitration and was competent to apply to the court under Section 8 of the Act. It cannot be called a stranger to the arbitration. 17. Section 2, upon Clause (h) whereas reliance is placed by the plaintiff/petitioner is subject to the context otherwise requiring. Context in which the word 'party' is used in Section 8 is in relation to a party to an action brought before the judicial authority and not in the context of a party to the arbitration. 18. I also do not find any merit in the plea of the petitioner/appellant that the stock broker had consented to the jurisdiction of the civil court and/or had waived/abandoned the right under Section 8. The preliminary objections in the written statement of the stock broker have already been referred to above. In the same the stock broker has unequivocally contested the jurisdiction of the civil court to proceed with the suit for the reason of the arbitration. Of course, the preliminary objections repeatedly refer to Section 5 and not to Section 8 but mere failure to cite the correct provision of law and/or referring to the wrong provision, cannot defeat the rights of the parties. It is of significance that the writte....
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....e, effect and validity of an arbitration agreement; however Section 33 thereof permitted the court to determine the existence or validity of the agreement. The 1996 Act, however, marks a change in this regard. There is no equivalent to the Sections 32 and 33 of the old Act. On the contrary, Section 16 has been introduced and Section 34 providing for recourse against an arbitral award expressly makes the invalidity of the arbitration agreement a ground for setting aside the arbitral award. A peremptory Section 5 prohibiting the jurisdiction of courts save as expressly provided under the Act has also been introduced. If in spite of the said changes, this Court is to hold that a suit is maintainable where the contract containing the arbitration clause is challenged on ground of forgery and the court in such suit is empowered to injunct arbitration proceedings (as otherwise no purpose would be served by such suit), in my view, it would tantamount to negating the effect of the change in the statute. It may also be noticed that arbitration is normally provided for in commercial agreements and whereunder after the disputes have arisen, one of the parties is always interested in delaying t....
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....ect to the adjudication by the courts while dealing with an application under Section 8 or Section 11 of the Act would not apply to the suit. Firstly, the proceedings under Sections 8 and 11 are provided for by the Act itself while the suit challenging the validity of the arbitration agreement has not been provided for in the Act and is barred under Section 5 of the Act. Thus merely because while interpreting Section 8 and Section 11 it has been held that the court before referring the parties to arbitration should satisfy itself of the existence of the arbitration agreement would not justify the institution of a suit for the same relief. Section 8 application is filed when a substantive suit is already before court and the question to be determined is whether that suit is to proceed or the parties are to be referred to arbitration. Similarly, Section 11 is an application for appointment of the arbitrator. Merely, because the court when faced with such provisions as provided for under the Act is to satisfy itself of the existence of the agreement cannot be understood to lay down that it is open to a party to even where no suit for substantial relief and application under Section 11....
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.... in not granting an order of injunction. There cannot be any dispute that in the absence of any arbitration clause in the agreement, no dispute could be referred for arbitration to an arbitral Tribunal. But, bearing in mind the very object with which the Arbitration and Conciliation Act, 1996 has been enacted and the provisions thereof contained in Section 16 conferring the power on the arbitral Tribunal to rule on its own jurisdiction including ruling on any objection with respect to existence or validity of the arbitration agreement, we have no doubt in our mind that the Civil Court cannot have jurisdiction to go into that question. A bare reading of Section 16 makes it explicitly clear that the arbitral Tribunal has the power to' rule on its own jurisdiction even when any objection with respect to existence or validity of the arbitration agreement is raised and a conjoint reading of Sub-section (2), (4) and (6) of Section 16 would make it clear that such a decision would be amenable to be assailed within the ambit of Section 34 of the Act. In this view of the matter, we see no infirmity with the impugned order so as to be interfered with by this Court. The petitioner who is ....
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....on and extortion and therefore unenforceable. An FIR on the basis of the said averments had also been lodged and cognizance thereof been taken. A suit had also been filed seeking declaration that the MoU was not binding. The respondent in that case thus set up a plea of nullity of the document containing the arbitration clause. This Court held that the jurisdiction of the arbitrator to decide upon the arbitrability of the disputes after considering evidence, in terms of Section 16 of the Act, is no longer undeniable; that the court cannot refuse to exercise the power under Section 11(6) of the Act on such pleas. The court thus allowed the application and referred the parties to arbitration. An SLP was preferred against the said order and which was dismissed in limine. 30. The arbitrator in the present case has, in the award, gone into the plea of the petitioner/appellant and after comparing the signatures of the petitioner/appellant on certain admitted documents including the letters written by the petitioner/appellant to the stock exchange/arbitrator, with the signatures on the Member Constituent Agreement, the arbitrator reached a conclusion that the agreement was, in fact, si....
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.... to have annexed the Member Constituent Agreement. 34. Byelaws of the stock exchange of January 1996 in Chapter XI, Byelaw 1-a provides that all differences and disputes between a trading member and constituent arising out of or in relation to dealings on the exchange shall be referred to and decided by arbitration in terms of the byelaws, rules and regulations of the exchange. Byelaw 2 provides that all dealings, transactions and contracts which are subject to the byelaws shall be deemed in all respects subject to the byelaws, rules and regulations. Chapter X, Byelaw 1 further provides that all contracts relating to dealings permitted on the exchange made by a trading member shall in all cases be deemed to be made subject to the byelaws, rules and regulations of the exchange and shall be a part of the terms and conditions of all such contracts. Chapter IX, Byelaw 8 provides for issuance of contract notes for deals effected with clients or on behalf of the clients. 35. The position which emerges is that all transactions between the stock broker and client/constituent are subject to byelaws and subject to arbitration. In my view the signing of the Member Constituent Agreement ....
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....etitioner/appellant the petitioner decided to cease the relationship with the respondent, I find it in the normal course of human behavior and business, within the meaning of Section 114 of the Indian Evidence Act to presume and believe that the Member Constituent Agreement as relied by the respondent was signed by the petitioner/appellant and do not find any illegality in the finding of the arbitrator of the validity of the same. 37. Though the counsel for the petitioner/appellant has, during the hearing, not urged any other ground challenging the validity of the award but I find that a number of other grounds have been taken in the petition. 38. It is pleaded that the appointment of the arbitrator was not in accordance with the procedure prescribed in the regulations of the stock exchange. Reliance in this regard is placed on Regulation 5.2 Exhibit P-13 to the affidavit by way of evidence of the petitioner/appellant. The same provides for each party to the reference submitting to the exchange the names of the proposed arbitrators from the panel of arbitrators of the exchange and for the respondent to submit within 7 days his selection of arbitrator. Regulation 5.3 provides ....
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....ge as a preliminary issue as sought for by the petitioner/appellant. 40. In this case the petitioner/appellant choose to pursue the civil suit, first appeal and then second appeal instead of defending the claim before the arbitrator. Though the petitioner/appellant sent notices/applications etc to the arbitrator but the petitioner/appellant failed to appear on any of the dates of hearing fixed by the arbitrator. The petitioner/appellant was fully aware that under the law (Section 8(3) of the Arbitration Act) notwithstanding the suit and the application under Section 8 therein having been filed the arbitrator could proceed with the arbitration and, in fact, was so proceeding. Though the petitioner/appellant had also applied for stay of arbitration proceedings but no stay has been granted at any stage. The petitioner/appellant thus took a chance of proceeding with the suit and not appearing before the arbitrator and after the award has been made cannot be heard to make grievance of the same. There has been no denial of hearing or breach of principles of natural justice and the petitioner has been given sufficient opportunity. Moreover, the arbitrator has in the award dealt with al....