Delhi High Court
Ram Kawar Garg vs Bajaj Capital Investor Services … on 1 July, 2025
Author: Jasmeet Singh
Bench: Jasmeet Singh
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on: 20.03.2025
Judgment pronounced on: 01.07.2025
+ O.M.P.(COMM.) 83/2024
RAM KAWAR GARG .....Petitioner
Through: Petitioner in person.
versus
BAJAJ CAPITAL INVESTOR SERVICES LIMITED NOW NEW NAME
IS JUST TRADE SECURITIES LIMITED AND ORS. .....Respondents
Through: Mr. Dhruv Dewan, Ms. Smarika
Singh, Ms. Yashna Mehta, Mr. Arjun
Singh Rana, Ms. Sanjukta Roy, Advs.
for R-1.
Mr. Sujoy Sur, Mr. Aubert Sebastian,
Mr. Vedant Kumar, Advs. R-2&3.
Mr. Ashish Aggarwal, Mr. Rahul
Malik, Ms. Shivangi Shokeen, Advs.
for R-4.
CORAM:
HON'BLE MR. JUSTICE JASMEET SINGH
JUDGMENT
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: JASMEET SINGH, J
1. This is a petition filed under Section 34 of the Arbitration and Conciliation
Act, 1996 (for brevity “the Arbitration Act“) seeking to challenge the
Appellate Arbitral Award dated 31.07.2015 (for brevity “the Appellate
Award”) whereby the Appellate Arbitral Tribunal dismissed the appeal of
the petitioner against the Original Arbitral Award dated 16.05.2014 (for
brevity “the Original Award”) vide which the Original Arbitral Tribunal
dismissed the claim of the petitioner of Rs. 2.25 crores against the
respondent No. 1.
2. In the present case, the respondent No. 1 is the stock broker, respondent No.
2 is the National Stock Exchange of India Limited (for brevity “the NSE”),
the respondent No. 3 is the Arbitration Department of the NSE and the
respondent No. 4 is the Securities and Exchange Board of India (for brevity
“the SEBI”).
FACTUAL BACKGROUND
3. The brief facts of the case as per the pleadings are that on 13.07.2007, the
petitioner entered into a Member Client Agreement (for brevity “the MCA”)
with the respondent No. 1. According to the MCA, the petitioner, being “the
client”, agreed to invest and trade in securities, contracts and other
instruments admitted for trading on the NSE. The MCA also allowed the
petitioner to trade in the derivatives segment and enter into derivative
contracts through the respondent No. 1, being “the stock broker”.
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4. In 2007, the petitioner opened its trading account with the respondent No. 1.
From September 2010 to June 2011, the petitioner, with the client ID No. PP
14 RG 012, traded in Nifty Futures through the respondent No. 1. The
petitioner deposited a total of Rs. 1,46,00,000/- into the trading account via
RTGS, including Rs.1,21,00,000/- on 11.10.2010 and Rs.25,00,000/- on
19.10.2010. As per the respondent No. 1, the petitioner incurred losses
during trading and on 29.06.2011, the respondent No. 1 issued a cheque for
Rs.31,525.19/- along with the statement of accounts, reflecting the credit
balance available in the account of the petitioner.
5. Subsequently, the petitioner invoked the arbitration mechanism under
Regulation 5.9(h) of the NSE (Futures & Options Segment) Trading
Regulations (for brevity “NSE Regulations”) by filing a Statement of Case
dated 20.09.2013 before the NSE. The petitioner alleged that the losses
incurred were solely due to the actions of the respondent No. 1, alleging
unauthorized trades in the derivatives segment, violations of the Securities
and Exchange Board of India Act, 1992 (for brevity “the SEBI Act“) and
incompetence of the respondent No. 1. The petitioner stated that the
respondent No. 1 failed to provide contract notes, allowed excessive
leverage and squared off positions erratically without notice. Consequently,
the petitioner made a claim of Rs. 2.25 crores against the respondent No. 1,
which included the principal amount of Rs.1,46,00,000/- plus interest at 15%
per annum for three years.
6. The Original Arbitral Tribunal dated 16.05.2014 concluded that all trading
transactions during the relevant period were within the knowledge of the
petitioner and subsequently dismissed the entire claim.
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7. Thereafter, the petitioner challenged the Original Award before the
Appellate Tribunal through an appeal dated 23.06.2014. In this appeal, the
petitioner argued that the funds of Rs.1,46,00,000/- were provided for
delivery-based share trading in the cash market. The petitioner also
contended that the recordings of conversations between him and the
respondent No. 1, submitted to the Original Arbitral Tribunal, were false and
fabricated and that his positions were squared off without prior notice.
8. The Appellate Arbitral Tribunal, in the impugned award, dismissed the
appeal of the petitioner and upheld the findings of the Original Tribunal.
9. Hence, the present petition with the following substantial prayers:
“i. In view of the above humble respectful submission of the
petitioner client it is prayed that the full claim of Rs. 2.25
crores of the client may kindly be allowed by setting aside the
impugned arbitration award on each of the issues and grounds
raised by the petitioner in the grounds of appeal, pleadings and
submissions. Further the petitioner may kindly be awarded
interest from 01.11.2013 till the final date of disposal of this
application of the petitioner along with the cost of arbitration
proceedings both at the original and appellate stage held in the
National Stock Exchange Limited, New Delhi and the costs
involved in pursuing this application.
ii. The kind directions of the Hon’ble Court may be issued to the
National Stock Exchange Limited, Mumbai and New Delhi to
provide all the information sought by the petitioner which is
essential to determine the claim of the petitioner. If the
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respondent broker and the exchange fail to provide the factual
details vis-a-vis the prevailing position of substantive law
contained in the rules, regulations, orders , notifications etc.
issued by the market regulator SEBI and in pursuance thereof
by the exchange in terms of the said trading regulations then it
is impossible to settle the subject matter of dispute through
arbitration as per the present law in force as contained in sub
clause (i) of clause (b) of sub section 2 of section 34 of the said
Arbitration Act. As such the Hon’ble Court is requested to
kindly pass suitable order in this regard. The market regulator
SEBI is under a legal duty to oversee the functioning of the
exchange as per the rules and regulations mandated by the
SEBI Act 1992 and as such suitable directions may kindly be
issued to SEBI in asking the NSE Ltd to provide all the relevant
information and details called by the client in the interest of
justice. …”
SUBMISSIONS ON BEHALF OF THE PETITIONER
The Appellate Award and the Original Award are time barred, being passed
beyond the limitation period.
10. The Original Award dated 16.05.2014 is time-barred since it was passed and
received well after the four-month period mandated from the date of the
appointment of the arbitrators i.e. 31.10.2013, as provided under Bye-Law
13(b) of Chapter XI of the National Stock Exchange Bye-Laws (for brevity
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“the NSE Bye-Laws”). The petitioner received the award on 23.05.2014, well
past the required receipt date of 28.02.2014 and no SEBI-sanctioned
extension was sought by the respondent No. 1 or the NSE. As a result, the
Original Award is void ab initio, rendering any subsequent proceedings
based on it legally groundless.
11. Similarly, the Appellate Award dated 31.07.2015 is also time-barred because
it was made after the stipulated three-month period from the appointment of
the appellate arbitrators i.e. 05.09.2014, as provided under Bye-Law 19(b) of
the NSE Bye-Laws. An extension of 2 months was granted on 01.12.2014
and a further extension was agreed upon for reconstitution of the tribunal on
21.01.2015. The award was issued on 31.07.2015, well past the required date
of 21.04.2015.
12. Moreover, in terms of SEBI Circular No. CIR/MRD/ICC/8/2013 dated
18.03.2013, the NSE failed in its duty to promptly notify the petitioner as
regard to the appointment of the arbitrator and thereby exacerbating delays.
In the case of the appointment of the original arbitrators, the arbitrators were
appointed on 31.10.2013 and the said intimation was sent on 29.11.2013 and
thus, there was an unexplained delay of 29 days. In the case of the
appointment of the appellate arbitrators, the arbitrators were appointed on
05.09.2014 and the said intimation was sent on 24.09.2014 and thus, there
was an unexplained delay of 19 days.
13. It is further submitted that the legal maxim “sublato fundamento cadit opus”,
as established in Kanwar Singh Saini v. High Court of Delhi, (2012) 4 SCC
307, is applicable in the present case, asserting that once the foundational
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award is removed due to lapse of time, any derivative or appellate award
loses its legal basis.
14. Consequently, both the Original and Appellate awards are deemed void and
the arbitrators, having become functus officio due to time lapse, no longer
possessed the legal mandate to decide on the matter in both the original
arbitral proceedings as well as the appellate arbitral proceedings.
15. Reliance is placed on the decisions of the Hon’ble Supreme Court, in
Pathapati Subba Reddy (Died) by LRs & Ors. v. The Special Deputy
Collector (LA), 2024 INSC 286, Shri Mukund Bhavan Trust & Ors. v.
Shrimant Chhatrapati Udayan Raje Pratapsinh Maharaj Bhonsle & Anr.,
Civil Appeal No. 14807 of 2024, Order dated 20.12.2024 and H.
Guruswamy & Ors. v. A. Krishnaiah since deceased by LRs, 2025 INSC
53, wherein it has been reiterated that the law of limitation is a matter of
public policy, mandating fixed periods for litigation to end.
16. The Hon’ble Supreme Court in NBCC Limited v. J.G. Engineering Private
Limited, (2010) 2 SCC 385 held that judicial leniency in extending time
cannot override clear statutory limits and that once a stipulated time elapses
without award publication or proper extension under Section 28 of the
Arbitration and Conciliation Act, 1940 (for brevity “the 1940 Arbitration
Act“), the mandate of the arbitrator terminates.
17. Reliance is placed on Harji Engineering Works Private Limited v. M/s
Bharat Heavy Electricals Limited & Anr., 2008:DHC:2719, Ariba India
Private Limited v. M/s Ispat Industries Limited, 2011:DHC:3251 and
Scorpion Express Private Limited v. Union of India through Secretary,
AIR 2018 Delhi 51, to urge that once the time prescribed in the arbitration
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agreement is exceeded without a clear extension under the Arbitration Act
(or invoking Section 28 of the 1940 Arbitration Act, where applicable), the
arbitrator becomes functus officio and the award is liable to be set aside.
The composition of the Appellate Tribunal is bad in law.
18. The composition and appointment process of the appellate tribunal violates
several procedural and statutory requirements. The three arbitrators,
including Justice (Retd.) K.S. Gupta, were simultaneously appointed as the
arbitrators in fifteen cases of the family members of the petitioner, which is
contrary to stipulated NSE and SEBI Regulations and the Arbitration Act.
The appointment process, guided by the SEBI Circulars dated 11.08.2010
and 18.03.2013, is challenged on the grounds that it allowed for conflict of
interest, with one arbitrator improperly designated as the presiding arbitrator,
thus compromising the impartiality and fairness of the arbitral tribunal.
19. Further, the petitioner stated that the NSE is authorized for managing the
tribunal appointments through a “Centralized Arbitrator Appointment
Process” and does not adhere to the detailed procedure mandated by its own
guidelines.
20. Hence, in accordance with Section 34(2)(a)(v) of the Arbitration Act, the
entire process is flawed and vitiated in law, warranting the appellate award
to be struck down.
Factual Contentions of the Petitioner.
Trade Logs and NEAT System Generated Confirmation Slips:
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21. The petitioner argued that the absence of trade logs and NEAT system-
generated confirmation slips renders the derivative trades unauthorized.
According to the petitioner, the NSE is legally obligated under the NSE
Regulations, specifically Clause 3.4 and Clause 5.13A, to maintain and
provide these records. The failure to do so, coupled with the neglect of the
arbitrators to call and verify these critical documents, as also outlined in
their appointment letters, has resulted in biased and collusive award that
favor respondent No. 1, thereby compromising the integrity of the arbitration
process. The petitioner contends that this omission is a clear violation of
Section 34(2)(b) Explanation 1(i) of the Arbitration Act.
Standard Operating Procedures:
22. The petitioner argued that the branch of respondent No. 1 and its employees
have not been approved or recognized by the NSE; the respondent No. 1 has
failed to furnish information despite repeated requests. The respondent No. 1
did not comply with the Standard Operating Procedures (for brevity “the
SOP”) or Clauses 2.1.2, 4.1.1 and 4.2.1.(b) of the NSE Regulations for
operating a branch and for having NCFM-qualified employees/dealers.
Further, the NSE, which should ensure compliance, has not provided the
requested details and appears biased, acting as a spokesperson for the
respondent No. 1 and arbitrators. The petitioner stated that the findings of
the arbitrators are contradictory and illegal because they downplayed the
necessity of adhering to the NSE and SEBI Regulations. The arbitrators have
violated the Code of Conduct stipulated in the SEBI Circular dated
11.08.2010.
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Telephone Recordings:
23. The petitioner contended that the telephone recordings provided by the
respondent No. 1 are fabricated, tampered with, manipulated and therefore,
inadmissible as evidence since they do not represent confirmed order
placements but rather general discussions. The recordings, produced for only
four days, were never officially played during arbitration and the order
sheets remain silent on the matter. The petitioner argues that these
recordings were not authenticated by the regulatory authorities, the SEBI
and the NSE, who do not recognize such unauthenticated recordings as valid
evidence. Further, the respondent No. 1 initiated unauthorized trading
activities based on these distorted recordings, starting a spree of
unauthorized entries into the account of the petitioner which resulted in the
wiping out of the initial capital of the petitioner. The transcripts do not
include essential details such as the names and designations of the employee
of the respondent No. 1, who recorded these conversations, raising serious
doubts about their authenticity. In addition, the explanation of the
respondent No. 1 for not producing all recordings is not valid as per the
petitioner stating that the excuse of a long passage of time is insufficient,
especially as the recordings should have been preserved and produced when
initially requested in a letter dated 25.04.2011.
Written Consent of the Petitioner:
24. The petitioner contended that the original tribunal and the appellate tribunal
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produced by the respondent No. 1. It is stated that the contention of the
respondent No. 1 that these recordings are oral orders, is impermissible
under the NSE Regulations. According to the SEBI Circular No.
SEBI/HO/MIRSD/DOPI/CIR/P/2018/54 dated 22.03.2018, only confirmed
written instructions are valid. The reliance of the respondent No. 1 on these
recordings being oral orders, which have not been approved or confirmed in
writing, is therefore contested as illegal and unauthorized. It is further
argued that merely presenting recordings from four days does not suffice to
validate all the trades executed in the account of the petitioner. It emphasizes
that every trade must be supported by unequivocal, documented consent of
the client. The reliance of the arbitrators on a limited, allegedly manipulated
sample of recordings is stated as a distorted interpretation that disregards the
lack of written evidence. This approach violates natural justice principles
and prescribed code of conduct by the SEBI for arbitrators.
Contract Notes, Quarterly Statement of Accounts, Daily Margin Statements etc.:
25. The petitioner contended that the respondent No. 1 violated the regulations,
notably the SEBI Circular No. MIRSD/SE/Cir-19/2009 dated 03.12.2009
and NSE Circular No. NSE/INSP/2010/91 dated 03.02.2010, by entering
derivative trades without obtaining the specific option of the petitioner
through written authorization. According to the petitioner, derivative trades
form an independent class requiring clear and confirmed orders and the
failure of the respondent No. 1 to provide proper disclosures or verify the
instructions of the petitioner renders the trades unauthorized. In addition, the
respondent No. 1 did not send any quarterly statements to the petitioner
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constituting intimation of such derivative trades. The respondent No. 1 did
not adhere to the SOP prescribed under Chapters 3, 4 and 6 of the NSE
Regulations. Key procedural lapses included not obtaining written confirmed
order instructions before executing trades, not maintaining statutory records
such as NEAT system-generated trade slips or order confirmations and
issuing contract notes without proper consent of the petitioner. These
breaches mean the contract notes do not reflect the actual orders of the
petitioner, thereby making them invalid. Consequently, the petitioner
submits that the appellate tribunal has erred in concluding that the trades
were executed with the consent of the petitioner.
Margin Calls:
26. The petitioner argued that the respondent No. 1 unilaterally liquidated and
squared off the positions of the petitioner without any prior margin calls,
notifications or written consent. The claim of respondent No. 1 of having
informed the petitioner about such actions is denied and evidence is cited
from the own defense statement of respondent No. 1, which admits to these
unauthorized actions. It is submitted that by creating artificial positions and
then squaring them off, the respondent No. 1 effectively wiped out the
capital of the petitioner, arguing that this was done without due diligence
and in clear violation of the NSE Regulations. The respondent No. 1
provided extra leverage and exposure without the request of the petitioner,
leading to significant financial losses. According to the petitioner, the
actions of the respondent No. 1, including the absence of mandated margin
calls and subsequent failure to process proper payout procedures, further
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accentuating the losses. Furthermore, the petitioner stated that the arbitrators
failed to address these issues adequately. It is argued that key facts, such as
the unilateral squaring off and the provision of extra leverage by respondent
No. 1, were either ignored or misinterpreted. The submissions of the
petitioner regarding these violations of Clause 3.10(b) and Clause 6.1.4 of
the NSE Regulations were not properly considered, thus resulting in an
unjust award.
The Appellate Award passed is against the terms of the MCA, the Arbitration Act
and are against the public policy of India.
27. The petitioner argued that the impugned appellate award is invalid because it
violates substantive law, the terms of the contract and the public policy of
India. It is contended that the award is driven by fraud, corruption and
institutional inefficiencies and that the arbitrators exceeded their jurisdiction
by rewriting the contract and ignoring evidence. It is stated that the award is
violative of Sections 28(1), 28(3) and 34(2)(b)(ii) of the Arbitration Act. The
petitioner argues that the award is vitiated by patent illegality, as the
appellate arbitrators dismissed the grounds of appeal without proper
consideration.
28. It is further submitted that respondent No. 1 has committed blatant violations
of the MCA which outlines that both parties must adhere to the NSE Bye-
Laws, the NSE and SEBI Regulations and relevant government notifications.
The violations include not reconciling accounts periodically, not providing
mandatory daily activity logs and not maintaining acknowledged duplicate
copies of contract notes as required by SEBI and the NSE Regulations. It is
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also asserted that the respondent No. 1 carried out unauthorized trades in an
inactive account, illegally retained funds and securities and disregarded the
required procedures such as the Running Account Authorization.
29. Moreover, both the original and appellate arbitrators provided contradictory
findings and denied the petitioner a proper opportunity to present evidence
or challenge the trades effectively. It is stated that the arbitrators ignored key
evidence, pertinent correspondence and established case law, thereby
undermining the principles of natural justice.
30. It is alleged that the arbitrators are siding with the respondent No. 1 and
failing to address the numerous compliance failures, leading to an unjust
outcome. The petitioner emphasizes that the arbitration process should
protect the interests of the petitioner and any ambiguities should be resolved
in favor of the petitioner.
31. Reliance is placed on Associate Builders v. Delhi Development Authority,
(2015) 3 SCC 49, Ssangyong Engineering and Construction Company
Limited v. National Highway Authority of India, AIR 2019 SC 5041 and
Delhi Metro Rail Corporation Limited v. Delhi Airport Metro Express
Private Limited, 2024 SCC OnLine SC 522.
On Respondent No. 2, 3 and 4.
32. The petitioner emphasized that the NSE and the SEBI fall under the
definition of “Relevant Authority” as provided under Definition 11 of the
NSE Bye-Laws. The petitioner argued that these authorities cannot avoid
answering critical regulatory issues, which are directly relevant to the
determination of the present petition. Specific unanswered regulatory
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questions, such as the legality of award timelines, compliance with
appointment procedures of the arbitral tribunals and the failure of the
arbitrators to seek trade logs, are listed by the petitioner, which are required
to be addressed by the SEBI and the NSE.
33. Originally, the NSE and the SEBI were made parties to the petition under
Section 34 of the Arbitration Act, although no monetary relief was sought
against them. While they were later removed from the list of parties by an
earlier court order dated 19.10.2016 passed by this Court, the NSE was
subsequently re-added by the court on 14.03.2018 due to its essential role in
explaining delays in passing the appellate award. The SEBI is duly
represented in the present case and has filed an affidavit dated 06.07.2023
outlining procedural requirements and confirming that award must be passed
within prescribed limits, reinforcing that they are active participants in the
matter, despite claiming otherwise.
34. It is stated that the NSE is acting in collusion with the respondent No. 1 by
seeking dismissal of the present petition, despite being responsible for
managing arbitration and regulatory compliance. This amounts to
misconduct and a failure to act as a neutral regulatory authority.
35. The arbitration in question is described as institutional and mandatory,
conducted under the rules of the NSE approved by the SEBI. It is stated that
the NSE, being the custodian of all arbitral records, must assist the court in
understanding and verifying the process required to be adhered to.
SUBMISSIONS ON BEHALF OF RESPONDENT NO. 1
The Appellate Award is not time barred.
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36. The petitioner contended that the Appellate Award issued on 31.07.2015, is
null and void because it was rendered beyond the time limits set by Bye-Law
19(b) of the NSE Bye-Laws. The petitioner argues that the Appellate
Tribunal is functus officio, meaning it no longer has the authority to act and
therefore, the award should be considered invalid.
37. It is pertinent to note that the Appellate Tribunal was appointed on
11.09.2014 and was required to dispose of the appeal within 3 months, by
10.12.2014. An extension of 2 months was granted on 01.12.2014 and a
further the parties agreed for reconstitution of the tribunal on 21.01.2015.
Ultimately, the Appellate Award was issued on 31.07.2015.
38. The respondent No. 1 argued that the petitioner did not raise any objections
regarding the timeline until after the award was issued, effectively waiving
his right to contest the timing under Section 4 of the Arbitration Act. The
respondent No. 1 also claims that the timelines in the NSE Bye-Laws are
directory rather than mandatory, as there are no specified consequences for
non-compliance.
39. Furthermore, the respondent No. 1 asserted that the Appellate Tribunal was
not functus officio because the NSE Bye-Laws and the SEBI Circulars do
not provide for automatic expiration of the mandate of the arbitral tribunal
upon the expiration of the time period. The respondent No. 1 argues that the
absence of a provision for automatic termination means that the tribunal
retained its authority.
40. The respondent No. 1 also pointed out that prior to the 2015 Amendment to
the Arbitration Act, there were no explicit consequences for failing to meet
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timelines, and thus any delay would be considered an irregularity rather than
an illegality.
41. In conclusion, the respondent No. 1 argued that even if the Appellate Award
was issued beyond the prescribed time, it does not meet the criteria for being
set aside under Section 34 of the Arbitration Act and therefore, the award
should be upheld.
The Appellate Award is valid under the law.
42. The petitioner argued that the Appellate Tribunal failed to adequately
address the merits of the dispute in its award, claiming that both the
Appellate and Original Awards should be set aside. However, the respondent
No. 1 contends that the Appellate Tribunal considered the necessary facts
and circumstances in the Original Award before issuing their reasoned
Appellate Award.
43. In paragraph 6 of the Appellate Award, the Appellate Tribunal found that the
petitioner was aware of the Nifty Future trades and had provided funds for
trading. The tribunal highlighted that the petitioner did not raise objections
about the contract notes until years after the trades were executed,
undermining his claims of ignorance.
44. In paragraph 7 of the Appellate Award, the Appellate Tribunal reviewed
contract notes, quarterly statements, and other relevant documents,
concluding that the petitioner had received the necessary documentation and
was aware of the terms and conditions of the trading account. The tribunal
noted that the petitioner deposited a significant amount shortly after opening
the account, indicating knowledge of the trading activities.
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45. In paragraph 7 of the Appellate Award, the Appellate Tribunal noted that the
respondent No. 1 had the right to square off positions if the petitioner failed
to meet margin requirements, as stipulated in the MCA. The tribunal found
that the respondent No. 1 acted within its rights under the MCA.
46. In paragraph 8 of the Appellate Award, the Appellate Tribunal examined
audio recordings of conversations between the petitioner and the
representatives of the respondent No. 1, confirming that the petitioner did
not deny the authenticity of these recordings. The tribunal dismissed the
claims of the petitioner that the recordings were manipulated, stating that
they were relevant to the case.
47. In paragraph 10 of the Appellate Award, the Appellate Tribunal determined
that the respondent No. 1 did not breach any applicable NSE or SEBI
Regulations, stating that the absence of strict compliance with
documentation requirements did not render the trades illegal.
48. The respondent No. 1 argued that the claim of the petitioner that the
Appellate Award is against public policy lacks merit, as the necessary legal
standards were not violated by the respondent No. 1, which is correctly held
by the Appellate Tribunal.
49. The respondent pointed out that the petitioner has filed similar petitions
against multiple brokers, indicating a pattern of vexatious litigation aimed at
recouping losses rather than legitimate grievances.
On the Factual Contentions raised by the Petitioner.
Trade Logs and NEAT System Generated Confirmation Slips:
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50. The respondent No. 1 countered the claim of the petitioner regarding the
absence of order confirmation slips and trade logs for the derivative trades
executed in the account of the petitioner. Regulation 6.1.4 of the NSE
Regulations, mandates that brokers maintain order confirmation slips, trade
confirmation slips, and exercise notice records for a period of five years. The
respondent No. 1 asserts that all trading activities occur on the NEAT
Platform, where all relevant documents, including contract notes (also
referred to as confirmation slips), are generated and maintained. The
respondent No. 1 has produced copies of the contract notes generated from
the NEAT System before the Original Tribunal, demonstrating compliance
with the regulatory requirements. This evidence supports the assertion that
the necessary documentation was maintained and is available.
Standard Operating Procedures:
51. The petitioner asserted that respondent No. 1 did not adhere to the SOP for
entering trades and failed to obtain approval from the NSE for opening its
branch. However, the respondent No. 1 contends that the requisite approval
for opening the branch was indeed obtained from the NSE. The respondent
No. 1 emphasizes that if it had not secured the necessary approval, the NSE
would have penalized it and taken appropriate action. This indicates that the
broker was compliant with regulatory requirements. Regarding the
qualifications of its employees, the respondent No. 1 provided evidence of
compliance by submitting a copy of the NCFM Certificate for Mr. Vishal
Pal, which was annexed with the Statement of Defence (for brevity “the
SoD”).
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Telephone Recordings:
52. The petitioner asserted that only four transcripts of phone conversations
between him and the broker were submitted, claiming that these do not
accurately represent the situation and suggesting that other recordings have
been destroyed or concealed. The respondent No. 1 clarifies that the Original
Tribunal specifically directed the production of sample
recordings/transcripts, which is why only the transcripts for four days were
provided. There was no requirement from the tribunal to produce all
transcripts related to every trade executed by the petitioner.
Written Consent of the Petitioner:
53. The respondent No. 1 refuted the claim of the petitioner that written consent
was not obtained prior to executing transactions, asserting that such consent
is not strictly mandated under the relevant regulations. Regulation 3.4.1 of
the NSE regulations states that trading members must obtain “appropriate
confirmed order instructions” from clients before placing orders on the
NEAT system. However, it does not explicitly require these instructions to
be in written form. Regulation 17(j) of the SEBI (Stock Brokers and Sub
Brokers) Regulations, 1992 (for brevity “the SEBI Regulations”) requires
brokers to maintain written consent for contracts entered into as principals,
but this does not negate the validity of trades executed based on confirmed
instructions received through other means. The respondent No. 1 argues that
the amendment to the NSE Regulations clarifies that “appropriate confirmed
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order instructions” can include instructions received via telephone, provided
that these instructions are recorded and maintained. The respondent No. 1
maintains that the MCA does not stipulate that trade orders must be given in
writing. Clause 1.3.5 of the MCA serves as a general advisory for the benefit
of the investor, indicating that instructions can be given in a manner
mutually agreed upon.
Contract Notes, Quarterly Statement of Accounts, etc.:
54. The respondent No. 1 asserted that the claim made by the petitioner
regarding the non-supply of contract notes, quarterly statements of accounts
and other relevant documents is false. The respondent No. 1 included copies
of the contract notes and proof of dispatch in the Original SoD. Specifically,
contract notes and quarterly statements for the period from September 2010
to June 2011 were annexed with the SoD and proof of dispatch of the
contract notes was included with the SoD. The petitioner himself submitted
quarterly statements along with his submissions dated 03.02.2014, to the
Appellate Tribunal. The Original Award concluded that the petitioner was
provided with all relevant documents and was aware of the trades conducted
in his account, as noted in paragraph 23 of the Original Award. The
Appellate Award also confirmed that the petitioner was aware of the trades
and had received the necessary documentation, as stated in paragraph 7 of
the Appellate Award.
Margin Calls:
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55. The respondent No. 1 countered the claim of the petitioner that the broker
unilaterally squared off the margin position without prior approval. The
respondent No. 1 states that Regulation 3.10(a) of the NSE Regulations does
not apply in the present case, as the respondent No. 1 acted in accordance
with the provisions outlined in the MCA. Specifically, Clauses 37 and 40 of
the MCA allow the respondent No. 1 to square off open positions without
prior notification if the petitioner fails to meet margin requirements. The
respondent No. 1 emphasized that the petitioner had not disputed the fact
that he failed to meet the margin requirements. Therefore, the respondent
No. 1 was justified in squaring off the positions to mitigate risk. The
respondent No. 1 asserts that the petitioner was informed about the squaring
off of the positions, which aligns with the terms of the MCA. Furthermore,
the respondent No. 1 claims that there was no violation of Regulation
3.10(a) of the NSE Regulations because the margin was collected from the
petitioner. The transaction was closed due to the non-payment of daily
settlement obligations by the petitioner, in accordance with Regulation
3.10(b) of the NSE Regulations.
SUBMISSIONS ON BEHALF OF RESPONDENT NO. 2 AND 3
NSE is neither a necessary nor a proper party to the present proceedings.
56. The respondent No. 2 and 3 argued that the NSE is neither a necessary nor a
proper party to the current proceedings under Section 34 of the Arbitration
Act.
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57. The dispute arose solely from the MCA between the petitioner and the
respondent No. 1, in which the NSE is not a party. Therefore, the
involvement of the NSE in the proceedings is unwarranted.
58. The respondent No. 2 and 3 submitted that the NSE has already complied
with the relief sought by the petitioner, as the arbitral record has been
submitted to the court.
59. The arbitration proceedings were conducted under the aegis of the NSE, but
the NSE was not involved in the dispute between the petitioner and the
respondent No. 1, nor did it have any interest in the outcome. The petitioner
did not seek any relief against the NSE in the arbitration proceedings and the
arbitral tribunal did not issue any directions against the NSE.
60. The respondent No. 2 and 3 highlighted that this Court, by an order dated
19.10.2016, removed the NSE from the list of parties, affirming that the
arbitration was solely between the petitioner and the respondent No. 1.
Additionally, an order dated 24.08.2018 passed by this Court, directed the
NSE to provide an affidavit regarding the consent of the petitioner and the
respondent No. 1 for continuation of the proceedings by the Appellate
tribunal. The affidavit noted that both parties had no objection to the same
panel of arbitrators being reconstituted.
61. The respondent No. 2 and 3 cited specific provisions from the NSE Bye-
Laws that clarify that the NSE is not to be construed as a party to disputes
arising between clients and trading members, namely:
A. Bye-Law 4 indicates that the NSE does not incur liability regarding
dealings in securities.
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B. Bye-Law 5 states that no legal proceedings can be initiated against the
NSE for actions taken in good faith.
C. Bye-Law 18 states that the NSE shall not be considered a party to
dealings or transactions under the Bye-Laws.
The Appellate Award is not time barred.
62. The respondent No. 2 and 3 outlined that the Appellate Tribunal was
constituted on 11.09.2014, with a 3 months period for completing the
proceedings expiring on 10.12.2014, as per Bye-Law 19(b) of the NSE Bye-
Laws. A request for an extension of the mandate of the Appellate Tribunal
was made on 28.11.2014. An extension of 2 months was granted on
01.12.2014, extending the mandate to 10.02.2015. Respondent No. 1
consented to the reconstitution of the Appellate Tribunal on 21.01.2015, and
the petitioner provided consent for the reconstitution on 28.01.2015. The
Appellate Award was issued on 31.07.2015.
63. The respondent No. 2 and 3 asserted that the NSE Bye-Laws do not specify
timelines for a reconstituted arbitral tribunal, nor do any SEBI circulars
address the timelines for concluding reconstituted arbitration proceedings.
64. In compliance with an order dated 24.08.2018 passed by this Court, the NSE
filed an affidavit on 02.11.2018, explaining the situation regarding the
Appellate Arbitral proceedings. The affidavit noted that both parties had no
objection to the same panel of arbitrators being reconstituted.
65. The respondent No. 2 and 3 argued that both parties were aware of the
expiration of the time period for the Appellate Award and consciously
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approved the reconstitution of the same panel of arbitrators, as evidenced by
the letter of the petitioner dated 28.01.2015.
66. The respondent No. 2 and 3 emphasized that there is no provision in the
NSE Bye-Laws for the automatic termination of the arbitral tribunal upon
the expiration of the mandate of the arbitrator.
SUBMISSIONS ON BEHALF OF RESPONDENT NO. 4
SEBI is neither a necessary nor a proper party to the present proceedings.
67. The respondent No. 4 asserted that SEBI is not a necessary or proper party to
the proceedings, as the dispute arises solely from the MCA between the
petitioner and the respondent No. 1, with SEBI not being a party to this
agreement or the arbitration proceedings. Reliance is placed on Section 2(j)
of the Securities Contracts (Regulations) Act, 1956 and the SEBI Act.
68. The respondent No. 4 highlighted that this Court, by an order dated
19.10.2016, removed SEBI from the list of parties, affirming that the
arbitration was strictly between the petitioner and the respondent No. 1. This
order has not been challenged by the petitioner.
69. The respondent No. 4 emphasized that jurisdiction of the SEBI is limited to
regulatory actions and does not extend to adjudicating disputes between
clients and brokers. The resolution of such disputes falls within the purview
of civil courts or arbitration tribunals.
70. The respondent No. 4 addressed the reliance of the petitioner on specific
clauses of the NSE Trading Regulations, asserting that it is the responsibility
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of the petitioner to prove any violations and that SEBI has no role in this
regard.
The Appellate Award is not time barred.
71. Both parties consented to the reconstitution of the Appellate Tribunal,
indicating their awareness of the timeline for the Appellate Award. The
petitioner provided written consent for the reconstitution on 28.01.2015.
72. The respondent No. 4 explained that the NSE Bye-Laws do not impose
mandatory timelines for the reconstituted arbitral tribunal and there are no
penal consequences for exceeding the prescribed timelines. The absence of
such provisions means that the deadlines should be interpreted as directory
rather than mandatory.
ANALYSIS AND FINDINGS
73. Section 34 of the Arbitration Act delineates the grounds for setting aside an
arbitral award. The provision reads as under:
“34. Application for setting aside arbitral award.–
(2) An arbitral award may be set aside by the Court only if–
(b) the Court finds that–
(i) the subject-matter of the dispute is not capable
of settlement by arbitration under the law for the
time being in force, or
(ii) the arbitral award is in conflict with the public
policy of India.
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Explanation 1.–For the avoidance of any doubt, it is
clarified that an award is in conflict with the public
policy of India, only if–
(i) the making of the award was induced or
affected by fraud or corruption or was in violation
of Section 75 or Section 81; or
(ii) it is in contravention with the fundamental
policy of Indian law; or
(iii) it is in conflict with the most basic notions of
morality or justice.
Explanation 2.–For the avoidance of doubt, the test as
to whether there is a contravention with the fundamental
policy of Indian law shall not entail a review on the
merits of the dispute.
(2-A) An arbitral award arising out of arbitrations other than
international commercial arbitrations, may also be set aside by
the Court, if the Court finds that the award is vitiated by patent
illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the
ground of an erroneous application of the law or by
reappreciation of evidence.”
74. In Delhi Metro Rail Corporation Limited (supra), the Hon’ble Court
endorsed the position in Associate Builders (supra) and Ssangyong Engg.
& Construction Co. Ltd. (supra), on the scope for interference with
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domestic award under Section 34 of the Arbitration Act. The relevant
paragraphs reads as under:
“39. In essence, the ground of patent illegality is available for
setting aside a domestic award, if the decision of the arbitrator
is found to be perverse, or so irrational that no reasonable
person would have arrived at it; or the construction of the
contract is such that no fair or reasonable person would take;
or, that the view of the arbitrator is not even a possible view.
[Patel Engg. Ltd. v. North Eastern Electric Power Corpn. Ltd.,
(2020) 7 SCC 167 : (2020) 4 SCC (Civ) 149.] A “finding”
based on no evidence at all or an award which ignores vital
evidence in arriving at its decision would be perverse and
liable to be set aside under the head of “patent illegality”. An
award without reasons would suffer from patent illegality. The
arbitrator commits a patent illegality by deciding a matter not
within his jurisdiction or violating a fundamental principle of
natural justice.”
75. On perusal, the position of the law is settled that under Section 34 of the
Arbitration Act, judicial intervention is confined to manifest errors,
procedural irregularities and breaches of principles of natural justice. The
courts do not re-assess factual findings unless there is a clear error or
violation of statutory or public policy.
76. In the present case, even though the petitioner has made averments
challenging both the Appellate Award and the Original Award on the ground
that the law of limitation is a matter of public policy and the fixed timelines
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mandate the speedy disposal of the arbitration proceedings under the
Arbitration Act as well as the NSE and the SEBI rules and regulations,
however, the parties have substantially argued only on the merits/demerits of
the Appellate Award. Hence, the scope of the present judgment is limited to
the validity of the Appellate Award and is not going into the examination of
the validity of the Original Award.
The Appellate Award is time barred being passed beyond the limitation period.
77. The undisputed facts of the present case are that the arbitral proceedings are
governed by the NSE Bye-Laws. The Appellate Tribunal was appointed on
11.09.2014. In terms of Clause 6.5 of the SEBI Circular dated 11.08.2010
and Bye-law 19(b) of the NSE Bye-laws, the Appellate Tribunal was to
dispose of the appeal within 3 months i.e., by 10.12.2014. One of the
arbitrators wrote to respondent No. 3 on 28.11.2014 requesting for extension
of time of the mandate of the Appellate Tribunal. As per Clause 6.6 of the
SEBI Circular dated 11.08.2010, an extension of 2 months was granted on
01.12.2014, starting from 10.12.2014 till 10.02.2015. On 21.01.2015, the
respondent No. 1 wrote to the respondent No. 3 giving its consent for re-
constitution of the Appellate Tribunal. A letter dated 28.01.2015 for re-
constitution of the Appellate Tribunal after 10.02.2015 was also signed by
the petitioner. The Appellate Award was issued on 31.07.2015.
78. Clause 6.5 of the SEBI Circular dated 11.08.2010 reads as under:
“6.5 The appeal shall be disposed of within three months from
the date of appointment of appellate panel of such appeal by
way of issue of an appellate arbitral award.”
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79. Bye-Law 19(b) of the NSE Bye-Laws reads as under:
“19 (b) The Appellate Arbitrator shall consist of three
arbitrators who shall be different from the ones who passed the
Arbitral Award appealed against and such Appellate
Arbitrators shall dispose of the appeal by way of issue of an
Appellate Arbitral Award within three months from the date of
appointment of the Appellate Arbitrator.”
80. Clause 6.6 of the SEBI Circular dated 11.08.2010 reads as under:
“6.6 The Managing Director/ Executive Director of the stock
exchange may for sufficient cause extend the time for issue of
appellate arbitral award by not more than two months on a
case to case basis after recording the reasons for the same.”
81. The petitioner argued that the Appellate Award was passed beyond the
legally mandated time limits as prescribed under Bye-law 19(b) of the NSE
Bye-laws as it was rendered beyond the three‐month period from the
appointment of the appellate tribunal. Further, the petitioner argued that the
extension sought by only one arbitrator rather than unanimously by the three
appointed arbitrators is violative of Section 29(1) of the Arbitration Act.
82. The Appellate Award was issued on 31.07.2015. Even if the NSE had the
authority to extend the mandate and to reconstitute the Appellate Tribunal,
the Appellate Award was to be made within the 3-month timeline, i.e. till
10.05.2015 and not thereafter.
83. The respondent No. 1 argued that the timelines in the NSE Bye-Laws are
directory rather than mandatory, as there are no specified consequences for
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non-compliance and no specific provision for automatic expiry of the
mandate of the arbitral tribunal.
84. It is pertinent to note that the Hon’ble Supreme Court in Union of India v.
U.P. State Bridge Corporation Limited, (2015) 2 SCC 52, observed the
following four pillars of the arbitration. The relevant paragraph reads as
under:
“14. Speedy conclusion of arbitration proceedings hardly needs
to be emphasised. It would be of some interest to note that in
England also, Modern Arbitration Law on the lines of UNCITRAL
Model Law, came to be enacted in the same year as the Indian
law which is known as the English Arbitration Act, 1996 and it
became effective from 31-1-1997. It is treated as the most
extensive statutory reform of the English arbitration law.
Commenting upon the structure of this Act, Mustill and Boyd in
their Commercial Arbitration, 2001 companion volume to the
2nd Edn., have commented that this Act is founded on four
pillars. These pillars are described as:
***
Section 1 of the Act sets forth the three main principles of
arbitration law viz. (i) speedy, inexpensive and fair trial by an
impartial tribunal; (ii) party autonomy; and (iii) minimum
court intervention. This provision has to be applied
purposively. In case of doubt as to the meaning of any provision
of this Act, regard should be had to these principles.”
(Emphasis supplied)
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85. The Hon’ble Supreme Court in the case of Pathapati Subba Reddy (Died)
by LRs & Ors. (supra) has held as under:
“7. The law of limitation is founded on public policy. It is
enshrined in the legal maxim “interest reipublicae ut sit finis
litium” i.e. it is for the general welfare that a period of
limitation be put to litigation. The object is to put an end to
every legal remedy and to have a fixed period of life for every
litigation as it is futile to keep any litigation or dispute pending
indefinitely. Even public policy requires that there should be an
end to the litigation otherwise it would be a dichotomy if the
litigation is made immortal vis-a-vis the litigating parties i.e.
human beings, who are mortals.”
86. Further, the Hon’ble Supreme Court in the case of H. Guruswamy & Ors.
(supra) has held as under:
“17. We are of the view that the question of limitation is not
merely a technical consideration. The rules of limitation are
based on the principles of sound public policy and principles of
equity. No court should keep the „Sword of Damocles‟ hanging
over the head of a litigant for an indefinite period of time.”
87. In NBCC Limited (supra), the arbitration proceedings had lingered on for 9
years. The Hon’ble Supreme Court held that the said delay defeated the
notion of the whole process of resolving the disputes through arbitration.
The decision of the High Court in fixing a time schedule within which the
arbitration should be concluded was upheld. The relevant paragraph is
extracted as under:
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“14. Arbitration is an efficacious and alternative way of dispute
resolution between the parties. There is no denying the fact that
the method of arbitration has evolved over the period of time to
help the parties to speedily resolve their disputes through this
process and in fact the Act recognises this aspect and has
elaborate provisions to cater to the needs of speedy disposal of
disputes. The present case illustrates that in spite of adopting
this efficacious way of resolving the disputes between the
parties through the arbitration process, there was no outcome
and the arbitration process had lingered on for a considerable
length of time which defeats the notion of the whole process of
resolving the disputes through arbitration. The contention of
the appellant therefore cannot be justified that since the dispute
was highly technical in nature, it had to be dealt with
elaborately by the arbitrator and thus, he was justified in being
late. The High Court had thus correctly fixed the time for the
arbitration to be concluded within a period of six months from
the appointment of the fourth arbitrator Shri A.K. Gupta
considering the time that had been spent for the arbitration
process prior to Mr Gupta’s appointment.”
(Emphasis supplied)
88. The Coordinate Bench of this Court in the case of Harji Engineering Works
Private Limited (supra) has held as under:
“20. It is natural and normal for any arbitrator to forget
contentions and pleas raised by the parties during the course of
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arguments, if there is a huge gap between the last date of
hearing and the date on which the award is made. An
Arbitrator should make and publish an award within a
reasonable time. What is reasonable time is flexible and
depends upon facts and circumstances of each case. In case
there is delay, it should be explained. Abnormal delay without
satisfactory explanation is undue delay and causes prejudice.
Each case has an element of public policy in it. Arbitration
proceedings to be effective, just & fair, must be concluded
expeditiously. Counsel for the respondent had submitted that
this Court should examine and go into merits and demerits of
the claims and counter claims with reference to the written
submissions, claim petition, reply, document etc. for deciding
whether the award is justified. In other words, counsel for the
respondent wanted the Court to step into the shoes of the
Arbitrator or as an appellate court decide the present
objections under Section 34 of the Act with reference to the said
documents. This should not be permitted and allowed as it will
defeat the very purpose of arbitration and would result into full
fledged hearing or trial before the Court, while adjudicating
objections under Section 34 of the Act. Objections are required
to be decided on entirely different principles and an award is
not a judgment. Under the Act, an Arbitrator is supposed to be
sole judge of facts and law. Courts have limited power to set
aside an award as provided in Section 34 of the Act. The Act,
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therefore, imposes additional responsibility and obligation
upon an Arbitrator to make and publish an award within a
reasonable time and without undue delay. Arbitrators are not
required to give detailed judgments, but only indicate grounds
or reasons for rejecting or accepting claims. A party must have
satisfaction that the learned Arbitrator was conscious and had
taken into consideration their contentions and pleas before
rejecting or partly rejecting their claims. This is a right of a
party before an Arbitrator and the same should not be denied.
An award which is passed after a period of three years from the
date of last effective hearing, without satisfactory explanation
for the delay, will be contrary to justice and would defeat
justice. It defeats the very purpose and the fundamental basis
for alternative dispute redressal. Delay which is patently bad
and unexplained, constitutes undue delay and therefore unjust.”
(Emphasis supplied)
89. On perusal, it can be concluded that the above cited judgments underscore
that the law of limitation in arbitration is fundamentally grounded in public
policy, aiming to ensure that litigation does not extend indefinitely. The
arbitrators are obligated to convene and conclude proceedings expeditiously.
Failure to do so, may lead to consequences ranging from judicial
intervention to the termination of the arbitral mandate or the setting aside of
the award. In essence, the courts have made it clear that any unjustified
delay undermines the efficacy and cost-effectiveness of arbitration,
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rendering prolonged proceedings contrary to the fundamental objectives of
dispute resolution.
90. In addition, the use of the word “shall” in Bye-Law 19(b) of the NSE Laws
read with Clause 6.5 of the SEBI Circular dated 11.08.2010 suggests that the
time frame of three months for the appellate tribunal to make and publish the
award is mandatory. Even if the three-month time frame is considered to be
directory, Clause 6.6 of the SEBI Circular dated 11.08.2010 emphasises that
the appellate tribunal cannot be granted an extension for a period of more
than two months. Hence, in the present case, the reconstituted Appellate
Tribunal could not have passed the Appellate Award beyond the period of
three months from 10.02.2015, as there was no further extension granted to
the reconstituted Appellate Tribunal. Any award passed thereafter is
violative of the intent, purpose and spirit of the NSE and SEBI rules and
regulations.
91. If the interpretation of the respondent No. 1 is to be accepted, then, the same
will render Bye-Law 7(b) of the NSE Bye-Laws otiose. Bye-Law 7(b) reads
as under:
“(b) in the opinion of the Relevant Authority, the arbitrator
becomes de jure or de facto unable to perform his functions or
for other reasons fails to act without undue delay including
failure to make the arbitral award within the time period
prescribed by the Relevant Authority. Such a decision of the
Relevant Authority shall be final and binding on the parties;”
92. It can be inferred that the NSE Bye-Laws aim to prevent undue delay and
thus, prescribe for time limits as well as consequence of the non-compliance
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with such timelines. Merely inaction of the relevant authority (being NSE
and SEBI) will not legitimize the delay on behalf of the Appellate Tribunal.
93. The decision of the Hon’ble Supreme Court in Harinarayan G. Bajaj v.
Rajesh Meghani, (2005) 10 SCC 660 (para 15), highlights that “the
arbitration proceedings as provided in the Bye-laws and Regulations are
subject to the provisions of the Arbitration and Conciliation Act, 1996, to the
extent not provided for in the Bye-laws and Regulations [Bye-law (14)]” and
further outlines that the disputes “shall be submitted to arbitration in
accordance with the provisions of these Bye-laws and Regulations. [Bye-law
(1)]”. This reinforces that any deviation from established procedural
timelines invalidates the proceedings.
94. Hence, despite the absence of an automatic expiry clause for the mandate of
the arbitral tribunal under NSE Bye-Laws, Bye-law 7(b) empowers the
Relevant Authority to terminate an arbitrator who fails to act within the
prescribed time, thereby indirectly limiting the mandate of the arbitral
tribunal. It can be seen that the intent and spirit of the NSE Bye-Laws is
similar to the Arbitration Act as the NSE Bye-Laws also impose specific
timelines for issuing awards.
95. The respondent No. 1 has relied on the decision of the Bombay High Court
in M/s Snehdeep Auto Centre v. Hindustan Petroleum Corporation
Limited, Appeal No. 143 of 2012 and the decision of the Madras High Court
in Indian Oil Corporation Ltd. v. Devi Constructions, (2009) 2 CTC 791
(DB), to urge that the petitioner had waived his rights to object to the
expiration of the mandate of the Appellate Tribunal as he participated in the
proceedings by filing further submissions on 01.04.2015.
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96. The decision of M/s Snehdeep Auto Centre (supra) was correctly
distinguished by the Bombay High Court in the decision of Bharat Oman
Refineries Limited v. M/s Mantech Consultants, 2012 SCC OnLine Bom
669, wherein it was held as under:
“30. The object and the scheme of the Arbitration Act is to
secure expeditious resolution of disputes. Its foundation is
based upon National and International Commercial Arbitration
practice. The Arbitrator is required to adjudicate the disputes
in view of the agreed terms of contract and the agreed
procedure. All are bound by the agreed terms. Therefore, the
Arbitration proceedings should be governed and run by the
terms. The Arbitrator, therefore, cannot go beyond the
Arbitration Agreement clauses. We all need to respect the
legislative intent underlying the Act. The speedy and alternative
solution to the dispute just cannot be overlooked. Delay
occurred, if any, may destroy the arbitration scheme itself.
31. In view of the agreed clause itself, after lapse of agreed
time, the Arbitrator looses his jurisdiction as per the mandate
of Sections 14 and 15 of the Act. Such defect is incurable. The
implied consent cannot confer jurisdiction once the agreed
period is lapsed. There is no provision to raise objection to the
constitution of the Arbitral Tribunal except Sections 14 and 15
of the Act. But, once the Arbitration is closed for award, that
stage also goes and the parties have no choice but to wait for
the award. There was no reason and/or occasion for the
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respondent to raise any such objection before the Arbitrator
under Section 16 of the Act and/or even before the Court under
Section 14 of the Act. Once the matter is closed for
judgment/order, a call for stamp-paper is nothing, but a
ministerial procedure. It cannot be stated to be judicial
proceedings to be attended by all the parties. Even otherwise,
how party can presume that the arbitrator would not follow the
mandate of the arbitration agreement, once the agreed period
is over. The arbitrator could have and/or might have, after
expiry of two years, and as extendable by consent one year
more, refused to pass Award or terminated the arbitration
proceedings suo motu. Any judgment and/or order cannot be
presumed or assumed by the parties after closing of the matter
unless actual order is passed and/or circulated to the parties.
32. The delay by the Arbitrator, to pass the award in such
fashion itself, in our view, is a misconduct as contemplated
under the Act. It is also illegal as it is not in pursuance of the
agreed clause and is in breach of terms. The Arbitrator himself
must refuse to continue first and/or ask for extension if parties
want to. The permission and/or consent which is required to be
in writing as per the agreement clauses cannot be deemed to
have been granted on the basis of alleged unilateral waiver by
only one party.
***
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37. In Snehadeep (Supra) the Written statement was filed before
the Arbitrator, though period was expired. Both the parties,
participated, before the Arbitrator, even after expiry of
mandatory period. The facts are totally different here. The
clause also very distinctive in the present case. There is no
conflict of law in view of clear distinguishable facts. The law is
binding if facts are similar and not when facts are different. In
the present case such objection was raised and the Court had
decided the same. Even the challenge about mandate of
Arbitration was not raised in Section 34 Petition. The fact
based decision cannot be treated as precedents, specially when
those are distinct and distinguishable.
38. The doctrine of “waiver” or “deemed waiver” or
“estoppal” is always based on facts and circumstances of each
case, conduct of the parties in each case and as per the
agreement entered into between the parties. The Apex Court
Judgment in NBCC Ltd. (Supra) in fact recognized the
importance of imposition of time limit for the conclusion of the
Arbitration proceedings. The parties have to stand by the terms
of the contract including the Arbitrator.”
(Emphasis Supplied)
97. On perusal, I am of the view that filing of the written submission by the
petitioner cannot be construed as a waiver to the right to object to the
mandate of the arbitrator. Further, it is pertinent to note that the written
submissions filed by the petitioner on 01.04.2015 were with regard to the
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last arbitral proceeding conducted on 26.11.2014 and further, no new
grounds were raised by the petitioner in the said written submissions.
98. Another contention of respondent No. 1 is that non-issuance of an arbitral
award within time was not in contravention of the Act prior to the
Arbitration and Conciliation (Amendment) Act, 2015.
99. The Coordinate Bench of this Court in Ariba India Private Limited (supra)
highlighted that even though the Arbitration Act (pre-amendment 2015) does
not prescribe a strict fixed period for rendering awards, arbitrators are
obligated to convene and conclude proceedings expeditiously. The relevant
paragraphs are extracted as under:
“46. Merely because the Act does not fix a time limit within
which the arbitral tribunal should render its award, it does not
mean that the tribunal can display a casual or non-serious
approach in the matter of conduct of the arbitral proceedings.
It is the tribunal which has to control the proceedings by laying
down definite times lines and by enforcing strict adherence to
them. Of course, there may be occasional and genuine
exceptional situations, when those times lines may be relaxed in
the interest of justice and fair play, but by and large, those time
lines should be strictly enforced even handedly and consistently
by the tribunal.
47. The reason why the act does not lay down a fixed time
within which the tribunal should render the award from the
time of its entering upon the reference is not to set the arbitral
proceedings at large and give an unlimited time to the tribunal
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to conclude the proceedings and render the award. Under the
Arbitration Act, 1940, section 28 empowered the Court to
extend the time of the arbitrator for making the award in case
the award was not made within the period of four months,
which was the statutorily fixed time for making of the award, or
within the mutually extended time period. It was felt that the
procedure for extension of time, which required one of the
parties to approach the Court for extension of time, was
proving to be self-defeating and counter-productive, inasmuch,
as, the petition under section 28 remained pending in the court
for a very long duration before being disposed of. To ensure
that the arbitration proceedings are not obstructed by one or
the other party, merely by denying its consent to the extension
of time for making of the award, the Act did away with the time
limit of four months for making of the award from the date of
the arbitrator entering upon the reference. This, however, did
not mean that the arbitral tribunal was given a carte blanch,
and could act casually in the matter of conduct of the
arbitration. The legislative intent is that the tribunal should act
without undue delay. Lest, the parties can determine the
mandate of the Tribunal, and if any dispute in this regard
remains, the Court can declare that the mandate of the Tribunal
stands terminated.
48. For the institution of the arbitration to succeed, it is
essential that the arbitrators take up the reference with all
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seriousness and exhibit a sense of urgency and professionalism.
It is absolutely essential that the tribunal functions efficiently,
not only in terms of time, but also in terms of costs to the
litigating parties, else the litigating public would not feel
attracted to accept this mode of alternate dispute resolution –
an alternate to the conventional dispute resolution mechanism
through the process of the courts.”
(Emphasis supplied)
100. The Hon’ble Supreme Court in the case of ONGC Limited v. Saw Pipes
Limited, (2003) 5 SCC 705, has held as under:
“31. It is true that under the Act, there is no provision similar
to Sections 23 and 28 of the Arbitration Act, 1940, which
specifically provided that the Arbitrator shall pass Award
within reasonable time as fixed by the Court. It is also true that
on occasions, Arbitration proceedings are delayed for one or
other reason, but it is for the parties to take appropriate action
of selecting proper Arbitrator(s) who could dispose of the
matter within reasonable time fixed by them. It is for them to
indicate the time limit for disposal of the Arbitral proceedings.
It is for them to decide whether they should continue with the
Arbitrator(s) who cannot dispose of the matter within the
reasonable time. However, non-providing of time limit for
deciding the dispute by the Arbitrators could have no bearing
on interpretation of Section 34. Further, for achieving the
object of speedier disposal of dispute, justice in accordance
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with law cannot be sacrificed. In our view, giving limited
jurisdiction to the Court for having finality to the Award and
resolving the dispute by speedier method would be much more
frustrated by permitting patently illegal Award to operate.
Patently illegal Award is required to be set at naught, otherwise
it would promote injustice.”
(Emphasis supplied)
101. Hence, if the delays are excessive and result in a delayed award, they would
contravene the broader public policy mandate of achieving swift, just
resolution of disputes. In balance, while the unamended Act does not
prescribe strict time limits, the validity of such an award may still be
challenged under Section 34 of the Arbitration Act if the delay is
unreasonable as to defeat the purpose of arbitration and the fundamental
principles of justice.
102. In the present case, the Appellate Award has clearly been passed beyond the
time prescribed under Bye-Law 19(b) of the NSE Bye-Laws and Clause 6.5
of the SEBI Circular dated 11.08.2010 and thus, is violative of public policy
under Section 34 of the Arbitration Act.
103. Consequently, the resulting non-compliance with statutory limits effectively
renders the Appellate Award void and the Appellate Award needs to be set
aside on this ground alone.
104. Since the award is being set aside on the ground of delay, I need not dwell
into the factual challenges made by the petitioner.
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CONCLUSION
105. For the reasons set forth above, the petition under Section 34 of the
Arbitration Act is allowed and the Appellate Award dated 31.07.2015 in the
matter of Shri Ram Kawar Garg v. Just Trade Securities Limited,
NSE/Appeal Arbn./F&O/D-0085/2013, is set aside.
JASMEET SINGH, J
JULY 01, 2025 / shanvi
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