TaxTMI 
TaxTMI 
2019 (7) TMI 1533
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.... Exchange. The National Stock Exchange constituted an Arbitral Tribunal. The Tribunal awarded one claim out of four made by the Respondent and directed the Appellant to pay an amount of 17,52,47,517/- with interest. The Appellant challenged the Award before the learned Single Judge. The learned Single Judge rejected the Arbitration Petition, and the Appellant is in appeal. The award is challenged on two counts. First, the claim granted was beyond the period of limitation. Second, the Arbitration Application was not maintainable because the Directors of Respondent who were disqualified could not have filed the Application. We do not find any merit in these challenges. The factual backdrop and reasons for this conclusion are as follows. 2. The Respondent appointed the Appellant as a stockbroker to effect transactions on the National Stock Exchange of India and Bombay Stock Exchange. The Respondent opened a trading account with the Appellant in January 2009. The Respondent commenced transactions through the Appellant around February 2009. The Respondent had acquired shares of Pipapvav Defence and Offshore Engineering reflected in the client muster on 31 March 2015 and those shares ....
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.... arbitration was conducted before the panel of arbitrators, consisting of Presiding Arbitrator and two Arbitrators, under the Bye-laws, Rules & Regulations of National Stock Exchange of India Ltd. Claim No. 2 for 22,27,74,135/- was rejected on merits by the Arbitral Tribunal. The Tribunal rejected claim No. 3 for 47,81,53,245/- since the transaction pertaining for the period from 9 October 2009 to 28 February 2013 and the claim was time-barred. The fourth claim of 8,40,02,219/- was also rejected because the claim was beyond the period of six years. 5. As regards the Claim No.1 of 17,52,47,517/-, (which was granted), the Appellant had raised two main defenses. First, this claim was barred by limitation and second, that the claim was not maintainable, having moved by the Company, i.e. Respondent whose name was struck off from the Register of Companies and whose directors stood disqualified. The Arbitral Tribunal found that the application was maintainable. On limitation, the Tribunal held that the Appellant did not dispute the amount of 17,52,47,517/- in their documents and the balance shown in the accounts of the Appellant for the year 31 March 2018 brought the claim within the e....
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....to how the period of limitation was computed or which Article of the Limitation Act was invoked and was applicable. Assuming, Article 1 Part -I of Limitation Act applies, the last trade between the parties was on 18 February 2015 and therefore the period of limitation would expire on 18 February 2018. If it is the case of the Respondent that period of limitation was extended because of section 18 of the Limitation Act, view of Order VII Rule 6 of the Code of Civil Procedure (CPC) it had has to be specifically pleaded. There is no such pleading by the Respondent. The plaint of the Civil Suit filed by the Appellant, which was brought on record by the Appellant, could not have been looked into. Thus, in short, it was submitted that the claim granted was beyond the period of limitation, extension of limitation was not specifically pleaded, and the Arbitral Tribunal could not have referred to the plaint filed by the Appellant, and the learned Single Judge did not consider the case in the context of Order VII Rule 6 of CPC. 11. The first limb of the argument on limitation is that the Arbitral Tribunal could not have looked into the documents annexed to the plaint by the Appellant beca....
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....being the power of the court conferred for effective adjudication, it is not prudent whittle it down, more particularly in absence any specific embargo. Further in the preset case, we are concerned with arbitral proceedings. The arbitrators were called upon to decide whether the claim filed by the Respondent was within limitation. The Respondent, who had raised the ground of bar of limitation, had in its admitted documents provided the ingredient of section 18 of the Limitation Act. In this context, if the arbitrators have chosen to rely on the pleading of the Respondent, and we find no perversity in the same. 13. The next limb of the argument is whether the document on record showed that the period of limitation stood extended in view of section 18 of the Limitation Act, 1963. Section 18 states that where, before the expiry of prescribed period for a suit or application regarding any property, an acknowledgement of liability regarding such property has been made in writing signed by the parties against whom the right is claimed, then fresh period of limitation shall be computed from the time when the acknowledgement is so signed. 14. We have perused the plaint filed by the A....
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....ellant for intervention before the NCLT was dismissed. Position is that once the name of the company is restored to the Register of the Companies, it is deemed to have never been struck off. Therefore, the question would whether the Directors of the Respondent who were disqualified under Section 164 (2) (a) of the Act of 2013 could present the Reference before the Arbitral Tribunal on 31 August 2018. 16. According to the Appellant, at the time of the Reference, the name of the Respondent was struck off, and the Company was dissolved. The Arbitration Application was filed on behalf of the Respondent by Ms. Mansi Vora, who was disqualified as Director of the Company, the other Directors were also disqualified, and thus the claim made in the Company's name was not maintainable. It was contended that the Arbitral Tribunal failed to consider that even though the Company was restored to Register of Companies, the Directors continued to be disqualified and the learned Single Judge was in error on relying on Section 250 and 252 of the Act of 2013. The Respondent assert that the reference was maintainable. 17. The arguments on the legal position on this aspect center around Sectio....
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....intment. (3) ... * * * 167. Vacation of office of director. (1) The office of a director shall become vacant in case - (a) he incurs any of the disqualifications specified in section 164; Provided that where he incurs disqualification under sub-section (2) of section 164, the office of the director shall become vacant in all the companies, other than the company which is in default under that sub-section. (b) to (h)..(2) .. (3)..(4) Appellant contends that as per Section 167(1), the office of a director shall become vacant if he incurs the disqualifications specified in section 164 and, therefore, such a director ceases to function as a director. The Respondent contends there is no ipso facto vacation of the office of a director disqualified under Section 164(2)(a) nor he stands denuded of all powers to act on behalf of the company in default and the consequence is only of restrictions on reappointment of such director. Respondent contends that directors disqualified under Section 164(2)(a), can represent the company, and, for instance, can file arbitration references. 18. In the case at hand, the disqualification of the D....
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....r reappointment but their offices will stand vacant, it will create a vacuum. The offices of directors of such a company would forthwith fall vacant and the cause of such company cannot be proceeded with by the directors. Directors would not be able to take steps even if company is restored to Register of Companies and defend it in the court of law or in arbitration. It could not have been the intention of the law to create an absurdity. Therefore, Section 167(1)(a) will have to be read down to mean that the reference to Section 164 in Section 167(1)(a) is not to the contingencies provided in the second part i.e. Sub-section (2) of Section 164. A question may arise that how Section 167 can then be reconciled with Section 164(1) because this section deals with disqualification for appointment. It may be contended that if a person cannot be appointed as a director, then there cannot be a vacation of his office. However, Section 164 (1) does not deal only with disqualification for initial appointment, it also contemplates a sitting director. Because it cannot be the position that a disqualification applicable for appointment as a director, such as unsound mind and conviction, cannot d....