TaxTMI 
TaxTMI 
2023 (7) TMI 1496
X X X X Extracts X X X X
X X X X Extracts X X X X
....nal 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 "SEBI"). The respondent No. 2, ICICI Securities Limited, is also a company incorporated in the year 1995 and is functioning inter-alia as a share broker having membership with respondent No.1. 3. The petitioner had executed an Account Opening Form (hereinafter "AOF") with the respondent no. 2 and is maintaining a Share Trading Account and a Demat Account of shares with defendant no. 2/respondent no. 2. 4. On 4th and 5th February 2021, the petitioner executed Futures Contract/Stock Futures with respect to 32,500 shares of Indian Oil Corporation Limited at an average rate of Rs. 103.55/-. The above future positions were squared off on 11th February 2021 at an average rate of Rs. 96.74/-. It is alleged that a gross sum of Rs. 2,21,325/- was to be credited to the petitioner's account instead of a debit of Rs. 22,175. 5. The petitioner raised his grievance by way of a Complaint to the respondent n....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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. However, the respondents have grossly abused the SEBI Circular, in collusion with each other and have illegally debited the dividend amount. 11. It is further submitted that the arbitration clause in the AOF with respondent no. 2 does not cover the dispute in the Suit by any stretch. The respondent no. 1 is opposing the suit only to get away with the misappropriated amount. The respondents have not even disclosed any information regarding the status of money which has been debited to the petitioner's account despite numerous requests and RTI application. 12. It is submitted that there is a bipartite agreement between the petitioner and respondent no. 2. Therefore, the same is not applicable to the dispute in the present matter as the same is a tripartite dispute among the petitioner, respondent no. 1 and respondent no. 2. 13. It is also submitted that a bipartite....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ive 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 announcement and payment of dividend yield of more than 5%. 18. It is submitted that the case of the petitioner is maintainable since there is no further remedy available with the petitioner against the respondent no. 1, as there is no arbitration agreement with respondent no. 1, no arbitral tribunal can get constituted. Further, the applicability of the arbitration clause with respondent no. 2 is clearly excluded as per the Byelaw no. 18. 19. It is further submitted that the Securities and Exchange Board of India Act, 1992 (hereinafter "SEBI Act, 1992") does not impose a bar to a Suit, particularly for the recovery of an amount. The SEBI Act, 1992 only provides for adjudication and procedure for appeal which only leads to imposition of penalty. On the contrary, the SEBI Act, 1992 specifically protects the right to sue und....
X X X X Extracts X X X X
X X X X Extracts X X X X
....223;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 constituents and trading members. 27. It is also submitted that the SCRA provides for an appeal before the Securities Appellate Tribunal in the event a party is aggrieved by an order or decision of the NSE or any other registered stock exchange. Therefore, the SCRA read with the SEBI Act, 1992 and the NSE byelaws provide a framework capable of resolving any grievance faced by investors. 28. It is further submitted that the petitioner has claimed an amount of Rs. 2,21,325/- towards futures transactions carried out through respondent no. 2, the stockbroker. NSE is a regulatory body and was not party to the dealings and the transactions between the petitioner and respondent no. 2. Therefore, NSE is neither a necessary party nor a proper party to the dispute and has been added only to circumvent th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 Court does not have the jurisdiction to entertain a revision against the order of the learned Trial Court referring the dispute of the petitioner to the arbitration. 36. It is therefore submitted that the present revision petition, being not maintainable, is baseless and does not fall within the strict category of Section 115 of the CPC. The grounds raised are frivolous and not substantial. Hence, the petition is liable to be dismissed. ANALYSIS AND FINDINGS 37. The matter was heard at length with arguments advanced by both the sides. This Court has also perused the entire material on record including the judicial pronouncements relied upon by the parties. 38. Before delving into the merits of the case, it is pertinent to understand the context behind....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o 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 observations of the Hon'ble Supreme Court in Pandurang Dhondi Chougule v. Maruti Hari Jadhav, (1966) 1 SCR 102, wherein it was held that: "10. The provisions of Section 115 of the Code have been examined by judicial decisions on several occasions. While exercising its jurisdiction under Section 115, it is not competent to the High Court to correct errors of fact however gross they may, or even errors of law, unless the said errors have relation to the jurisdiction of the court to try the dispute itself. As clauses (a), (b) and (e) of Section 115 indicate, it is only in cases where the subordinate court has exercised a jurisdiction not vested i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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, could hardly justify interference on revision under Section 115 of the Code when there was no illegality or material irregularity committed by the learned Additional District Judge in his manner of dealing with this question. It seems to us that in this matter the High Court treated the revision virtually as if it was an appeal." 44. The scope of Section 115 of the CPC includes jurisdiction alone, the irregular exercise or non-exercise of it or the illegal assumption of it. The mere fact that the decision of the Trial Court is erroneous due to a question of fact or of law does not amount to illegality or material ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... "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 Byelaws provides for Arbitration between the trading members inter se and between trading members and constituents arising out of or in relation to dealings, contracts and transactions made subject to byelaws, rules and regulations of the Exchange. On perusal of the relief claimed by the plaintiff, it is seen that the plaintiff is seeking prayer 1, prayer 2 qua the defendant no.2 and on the said dispute the aforementioned reference to the Arbitration is mandatory. The contention of the plaintiff that the present dispute is a tripartite dispute and not a bipartite d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itration 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 triggered by one of the parties because of the existence of an arbitration agreement between them, Section 5 of the Act, by a non obstante clause, provides a clear message that there should not be any judicial intervention at that stage scuttling the arbitration proceedings. Even if the other party has objection to initiation of such arbitration proceedings on the ground that there is no arbitration agreement or validity of the arbitration clause or the competence of the Arbitral Tribunal is cha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 dispute would not then be capable of resolution by arbitration. 41. In P. Anand Gajapathi Raju v. P.V.G. Raju [P. Anand Gajapathi Raju v. P.V.G. Raju, (2000) 4 SCC 539] this Court held that the language of Section 8 is peremptory in nature. Hence, where there is an arbitration agreement, it is obligatory for the court to refer the parties to arbitration and nothing remains to be decided in the original action after such an application is made, except to refer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y 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, we are of the opinion that the findings given in those judgments do not apply to the facts of this case at all. We have come to the conclusion that the civil court had no jurisdiction to entertain a suit after an application under Section 8 of the Act is made for arbitration. Therefore, we are of the opinion that the trial court erred when it rejected the application of the appellant filed under Sections 8 and 5 of the Act....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 exercised by this Court exercising its revisional powers under Section 115 of the CPC. Section 8 of the Act, 1996 refers to a clause that limits Court‟s interference in the arbitration procedure. This Court has serious objections to the extent of interference on the grounds of the arbitrability of the subject matter, and the competence of the arbitral tribunal to deal with it. ....