Hon'ble Aditya Nath Mittal,J.
(Delivered by Hon'ble Aditya Nath Mittal, J.)
1. This first appeal from order has been preferred against the judgment and order dated 27.4.2009 passed by the District Judge, Kanpur Nagar, by which application under Section 34 of Arbitration and Conciliation Act, 1996 has been dismissed.
2. The appellant was dealing with respondent no.1, who is a share broker, to purchase and sale the shares. Various transactions were made during 27.8.2003 to 24.8.2005 and the appellant invested a sum of Rs.23,73,049.09. In order to quit herself from the business, the appellant demanded her money back by letter dated 4.4.2006 and subsequently by legal notice dated 14.7.2006. The appellant also lodged a claim before the Grievance Committee of U.P. Stock Exchange Association Limited, Kanpur on 24.7.2006 but the Grievance Committee rejected the claim of the appellant vide order dated 4.10.2006 on the ground that the claim was barred by time. The appellant filed an Arbitration Case on 3.11.2006 before the Arbitration Committee of U.P. Stock Exchange Association Limited, Kanpur for quashing the decision of the Grievance Committee. After hearing both the parties, the Sole Arbitrator also rejected the claim of the appellant on the ground of delay. An application under Section 34 of Arbitration and Conciliation Act, 1996 was filed before the District Judge, Kanpur Nagar, which was also rejected vide impugned order dated 27.4.2009.
3. The order of the District Judge, Kanpur Nagar has been challenged on the ground that learned District Judge has not appreciated properly the aspect that when the dispute arose. Rule 269 of Bye-laws of the U.P. Stock Exchange Association Limited, Kanpur has been wrongly interpreted. The date of 5.10.2005 has been wrongly interpreted to be a date of dispute. The date of dispute should be calculated from the date when the statement of account was demanded on 4.4.2006 or from the date of legal notice dated 14.7.2006. Learned Sole Arbitrator has failed to appreciate the fact and circumstances of the case and the provisions of law applicable in its proper prospective and has illegally rejected the claim of the appellant, hence the judgment and order dated 27.4.2009 is liable to be set-aside.
4. In the counter affidavit of respondent no.1, the allegations have been denied. It is alleged that the appellant had sold the shares to mitigate the losses and alleged payment has been made to square up the accounts. The appellant was involved in jobbing work and has suffered heavy losses and an amount of Rs.3,00,948/- is due against the appellant and to avoid payment of her liability, the present petition has been filed. The respondent no.1 has also filed a Civil Suit No.1481 of 2006 in the Court of Civil Judge (Senior Division), Kanpur Nagar for the recovery of aforesaid amount. The statements of account of the appellant were regularly delivered to her and she has also filed the same before the U.P. Stock Exchange Association Limited, Kanpur. The Grievance Committee has specifically recorded the findings that the last transactions between the appellant and respondent no.1 took place on 23.8.2005, whereas the claim was lodged on 24.7.2006 which was barred by time as per the provisions of Rule 269 of Bye-laws of U.P. Stock Exchange Association Limited, Kanpur. The Arbitral Tribunal also came to the conclusion that the claim was barred by time under Rule 269 of Bye-laws. Although appellant is claiming the said amount paid from 27.8.2003 to 24.8.2005 but if she had outstanding amount against the respondent then why an additional amount of Rs.40,000/- was paid on 5.10.2005. The appellant has deliberately concealed about her previous transactions which were made during the period from 26.7.2000 to 10.2.2003, during which an amount of Rs.2,04,929.43 was also paid to respondent no.1. The account of the appellant was running in debit hence there was no occasion to claim the aforesaid amount from respondent no.1. The claim filed by the appellant is baseless.
5. Learned counsel for the appellant has submitted that the time of limitation should be calculated from the date when first letter of demand was sent on 4.4.2006 or from the date of notice dated 14.7.2006. The Grievance Committee, Arbitrator as well as the District Judge, Kanpur Nagar have wrongly calculated the limitation from the date of last transaction.
6. On the other hand, learned counsel for the respondent no.1 has submitted that it is a dispute between a member of the Stock Exchange and a non-member hence the Bye-laws of the U.P. Stock Exchange Association Limited, Kanpur are binding on both the parties and as per Regulation 269 the dispute must be referred within four months of the date when it arose. It is also submitted that appellant was not a new to the share transactions and as per established practices the outstanding payments are received or made immediately after date of clearing.
7. The main question, therefore, is that when the dispute arose between the parties. Whether it will said to have arisen within four months from the date of last transaction or within four months from the date of demand letter or the legal notice.
8. The scope for interference by the courts under Section 34 of the Arbitration and Conciliation Act, 1996 is very limited as has been held by Hon'ble the Apex Court. Hon'ble the Supreme Court in Oil and Natural Gas Corporation Ltd. Vs. SAW Pipes Ltd., AIR 2003 SC 2629, has summarised the position regarding powers of courts to set-aside arbitral award as follows:-
"75. In the result, it is held that:-
A. (1) The Court can set aside the arbitral award under Section 34(2) of the Act if the party making the application furnishes proof that:-
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
2) The Court may set aside the award:-
(i) (a) if the composition of the arbitral tribunal was not in accordance with the agreement of the parties,
(b) failing such agreement, the composition of the arbitral tribunal was not in accordance with Part-I of the Act.
(ii) if the arbitral procedure was not in accordance with:-
(a) the agreement of the parties, or
(b) failing such agreement, the arbitral procedure was not in accordance with Part-I of the Act.
However, exception for setting aside the award on the ground of composition of arbitral tribunal or illegality of arbitral procedure is that the agreement should not be in conflict with the provisions of Part-I of the Act from which parties cannot derogate.
(c) If the award passed by the arbitral tribunal is in contravention of provisions of the Act or any other substantive law governing the parties or is against the terms of the contract.
(3) The award could be set aside if it is against the public policy of India, that is to say, if it is contrary to:-
(a) fundamental policy of Indian law;
(b) the interest of India; or
(c) justice or morality, or
(d) if it is patently illegal.
(4) It could be challenged:-
(a) as provided under Section 13(5); and
(b) Section 16(6) of the Act."
9. Again in Delhi Development Authority Vs. R.S. Sharma and Company, New Delhi, (2008) 13 SCC 80, the principles for interference with the arbitral award under Section 34(2) of the 1996 Act have been summarised as follows:-
"21. From the above decisions, the following principles emerge:
(a) An Award, which is
(i) contrary to substantive provisions of law ; or (ii) the provisions of the Arbitration and Conciliation Act, 1996 ; or
(iii) against the terms of the respective contract ; or
(iv) patently illegal; or
(v) prejudicial to the rights of the parties, is open to interference by the Court under Section 34(2) of the Act.
(b) The award could be set aside if it is contrary to :
(a) fundamental policy of Indian Law; or
(b) the interest of India; or
(c) justice or morality;
(c) The Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the Court.
(d) It is open to the Court to consider whether the Award is against the specific terms of contract and if so, interfere with it on the ground that it is patently illegal and opposed to the public policy of India."
10. In Steel Authority of India Limited Vs. Gupta Brother Steel Tubes Limited, (2009) 10 SCC 63, the principles laid down in Oil and Natural Gas Corporation Ltd.'s case (supra) have been followed and it has been held as under:-
"Suffice it to say that the legal position that emerges from the decisions of this Court can be summarised thus:
(i) In a case where an arbitrator travels beyond the contract, the award would be without jurisdiction and would amount to legal misconduct and because of which the award would become amenable for being set aside by a Court.
(ii) An error relatable to interpretation of the contract by an arbitrator is an error within his jurisdiction and such error is not amenable to correction by Courts as such error is not an error on the face of the award.
(iii) If a specific question of law is submitted to the arbitrator and he answers it, the fact that the answer involves an erroneous decision in point of law does not make the award bad on its face.
(iv) An award contrary to substantive provision of law or against the terms of contract would be patently illegal.
(v) Where the parties have deliberately specified the amount of compensation in express terms, the party who has suffered by such breach can only claim the sum specified in the contract and not in excess thereof. In other words, no award of compensation in case of breach of contract, if named or specified in the contract, could be awarded in excess thereof.
(vi) If the conclusion of the arbitrator is based on a possible view of the matter, the court should not interfere with the award.
(vii) It is not permissible to a court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings."
11. Before coming to the grounds of challenge, it is also relevant to mention relevant regulations of the Bye-laws of the U.P. Stock Exchange Association Limited, Kanpur which are as follows:-
"52.
Clearing Days
(b) The Board of Directors shall fix in advance the first and the last business day of each Clearing and the various clearing days. The first business day of a Clearing shall not be more than two business days previous to and including the last business day of the preceeding Clearing.
Alteration of Clearing and Clearing Days
61. The Board of Directors may be a special resolution and for reasons to be recorded at any time curtail, extend, alter or postpone from time to any other date or dates the entire Clearing or any or all of the various clearing days in respect of any or all of the Cleared Securities;
Provided that except with the approval of the SEBI such extension or postponement shall not be at any time for a period exceeding the period of one Clearing;
Provided further that if in the case of Cleared Securities the Pay-in-Day notified for any Clearing is extended or postponed by a period beyond one week the Board of Directors shall fix a contango payable by the purchaser to the seller for such securities on the basis of the contango of the preceeding Clearing.
Late Claims Barred
269. The Exchange shall not accept and take cognizance of any claim, complaint, difference or dispute other than of Bad Delivery of shares, which is not referred to it within four months of the date when it arose. Bad Delivery claims shall be accepted & dealt uptill such time as provided in SEBI guidelines in force from time to time.
Declaration of Default
308. A member shall be declared a defaulter by direction of the Board of Directors or the President or in the absence of the President by direction of any two Members of the Board of Directors.
(i)if he is unable to fulfil his engagements; or
(ii)if he admits or discloses his inability to fulfil or discharge his engagements, obligations and liabilities; or
(iii)if he fails or is unable to pay within the specified time the damages and the money differences due on a closing-out effected against him under these Bye-laws and Regulations; or
(iv)if he fails to pass Claim Notes to members (provided that fact is reported to the Exchange by the member not receiving the Claim Note before the Pay-in-Day-fixed for that Clearing) or to pay any sum due to the Clearing House or to submit or deliver to the Clearing House on the due date the Delivery and Receive Orders, Statement Sheets of Differences, and Securities, Balance Sheet and such other Clearing Forms as the Board of Directors may from time to time determine provided that in any such case the declaration of default may be delayed if deemed proper upto but not beyond the Settling Day fixed for that Clearing; or
(v)if he fails to pay or deliber to the Defaulters' Committee all moneys, securities and other assets due to a member who has been declared a defaulter within such time of the declaration of default of such member as the Board of Directors or the President may direct.
Failure to Fulfil Obligations to non-Members
309. The Board of Directors may order a member to be declared a defaulter if he fails to meet an obligation to a member or non-member arising out of a Stock Exchange transaction."
12. The above provisions of Regulations of the U.P. Stock Exchange Association Limited, Kanpur makes it clear that the transactions at Stock Exchange are strictly time bound. The appellant taking recourse to these Bye-laws, had submitted her claim before the Grievance Committee as well as before the Sole Arbitrator. By the implications of the Bye-laws as well as the conduct of the parties it is also clear that a dispute between a member and non-member has to be submitted to Grievance Committee and the decision of the Grievance Committee can be challenged before the Sole Arbitrator appointed by the Stock Exchange. This clearly establishes that the appellant has chosen the forum and the procedure laid down in aforesaid Bye-laws. Although, she could have filed a civil suit before the competent court regarding recovery of money or even she could have filed her counter claim in Suit No.1481 of 2006 pending before the Civil Judge (Senior Division), Kanpur Nagar but there is nothing to show that the appellant have filed any civil suit or any counter claim before a competent court.
13. Learned counsel for the appellant has submitted that it is the moot question for the present case when did such dispute arose. Learned counsel for the appellant has relied upon Major (Retd.) Inder Singh Rekhi Vs. Delhi Development Authority, AIR 1988 SC 1007, in which Hon'ble the Apex Court has held that in order to be entitled to ask for a reference under Section 20 of the Arbitration and Conciliation Act, 1996, there must not only be an entitlement to money but there must be a difference or dispute must arise. It has further been held that a dispute arises where there is a claim and a denial and repudiation of the claim. The dispute entails a positive element and assertion in denying, not merely inaction to accede to a claim or a request. When in a particular case a dispute has arisen or not has to be found out from the facts and circumstances of the case.
14. In the present proceedings before the Grievance Committee, Sole Arbitrator and the District Judge, Kanpur Nagar the last date of transaction i.e. 5.10.2005 has been taken as a date when dispute arose. On the other hand the appellant claims that the dispute between the parties arose on 4.4.2006 when a letter under U.P.C. was sent or on 14.7.2006 when the legal notice was served. It is alleged that the letter dated 4.4.2006 sent by U.P.C. was never received to the respondent no.1 but the legal notice dated 14.7.2006 was received to him.
15. The case of Major (Retd.) Inder Singh Rekhi (supra) did not apply to the facts and circumstances of this case because that decision is regarding the interpretation of Section 20 of the Arbitration and Conciliation Act, 1996 and it has also been held in this case that a party cannot postpone the accrual of cause of action by writing reminders or sending reminders but where a bill had not been finally prepared, the claim made by a claimant is the accrual of the cause of action.
16. The respondent no.1 in his counter affidavit has filed the copy of the ledger of the appellant from 1.4.2003 to 31.3.2004, 1.4.2004 to 31.3.2005 and 1.4.2005 to 31.3.2006. The perusal of the copy of ledger clearly reveals that all the payments made by appellant through cheque or due to sale of shares have been duly credited in her account and the last balance of Rs.300948.83 is in debit side for which the respondent no.1 has already filed a civil suit for recovery. We also find that the margin money of Rs.3,00,000/- debited on 4.4.2003 and 1.5.2003 has also been credited on 1.3.2004 and 31.3.2004 and at every financial year there is a closing of account and the closing balance has been transferred into next financial year as opening balance. The perusal of the copy of the ledger also reveals that the appellant played frequently in the share market and even more than 9 transactions of sale of different shares has been done in a day. In these circumstances, it cannot be said that she was not aware of the outstanding of her account with respondent no.1.
17. In view of Regulation 52(b) (supra) the first business day of a clearing shall not be more than two business days previous to end including the last business day of the preceeding clearing. The clearing and clearing days may be altered by the Board of Directors and exercise of the powers under Regulation 61 (supra) and Rules 61 also provides that if clearing is extended or postponed by a period beyond one week, the Board of Directors shall fix a contango payable by the purchasers to the sellers. It clearly establishes that the member of the Stock Exchange has to clear his outstanding dues within the prescribed time which cannot be beyond one week and in the return the member i.e. the share broker has also right to recover from its client or to pay the outstanding amount to the client within time bound scheme. In this way the payment due if any can be demanded back from the broker after the clearing and if the client himself do not claims his outstanding dues on the earliest opportunity, then he cannot blame the stock broker for delay.
18. In the present case as per ledger, there was a debit balance of Rs.8,75,948/- as on 31.3.2005. There were no sale and purchase of shares after 29.9.2004 when the debit balance was Rs.8,77,645/-. The copy of ledger for the financial year 2005-06 shows that during this period also there were no sale and purchase transaction but the appellant had paid Rs.5,75,000/- by various cheques during the period 8.4.2005 to 5.10.2005. In this way, the last transaction took place on 29.9.2004 and the last payment made by the appellant was on 5.10.2005. Nothing has been explained that if such a huge amount of Rs.23,69,049/- was due against respondent no.1 then what prevented her not to demand such a huge amount from the date it became due or the date of last transaction i.e. 5.10.2005 and why the matter was kept pending upto 14.7.2006 i.e. almost 11 months from the last deposit of cheque. Because the appellant has failed to show any cogent reason before the Grievance Committee, and the Arbitral Tribunal for the delay hence the parties being bound by Bye-laws of the U.P. Stock Exchange Association Limited and more particularly Regulation 269 hence the appellant cannot take benefit of the postpone and the accrual of cause of action by writing a letter dated 4.4.2006 or by sending legal notice dated 14.7.2006.
19. As mentioned earlier, the last share transaction with the respondent no.1 was made on 29.9.2004 and if any payment was due against the broker, the same should have been claimed within a reasonable period but not beyond the period as provided in Regulation 269 (supra). The Grievance Committee has taken the date of 23.8.2005 as the last date of transaction while the claim was lodged on 24.7.2006 which was found to be barred by time as provided in Regulation 269 (supra). The appellant has also pleaded that she had not given the cheque of Rs.40,000/- on 5.10.2005. Even this is also believed then the last cheque by the appellant was given on 23.8.2005 and as per Regulations 52(b) and 61(supra) the outstanding dues should have been demanded after the clearing which is on the weekly basis.
20. The appellant and the respondent no.1 are bound by the Bye-laws of the U.P. Stock Exchange Association Limited and the dispute between the parties shall be said to have arose on 23.8.2005 or latest on 5.10.2005 which cannot be stretched by letter dated 4.4.2006 or legal notice dated 14.7.2006. It is also relevant to mention that the copy of the ledger shows that there is no cash transaction and either the amount has been debited/credited due to sale/purchase of shares or receipt of cheques, hence it cannot be said that the copy of the ledger is a forged document.
21. In view of Oil and Natural Gas Corporation Ltd. (supra), the case of Delhi Development Authority (supra) and the case of Steel Authority of India Limited (supra), the scope of interference by the courts is very limited and in the present case it cannot be said that the arbitration procedure was not in accordance with the agreement of the parties or the award passed by the Arbitral Tribunal is in contravention of the provisions governing the parties. In the present case it can also not be said that the Arbitrator has travelled beyond the contract or there is any legal misconduct. The Arbitrator has not committed any illegality or error in the interpretation of Regulation 269 (supra). The decision of the authorities below cannot be said to be an erroneous decision in point of law or contrary to substantive provisions of law or against the terms of the contract.
22. For the facts and circumstances discussed above, we do not find any error of law or error of fact in the findings made by the Grievance Committee, the Arbitral Tribunal or the District Judge, Kanpur Nagar. There is no ground to interfere with the impugned judgment.
23. The appeal is dismissed.
Order Date :- 14.12.2012 Kpy