D.Y. Chandrachud, J.
1. Rule, returnable forthwith. Learned Counsel for the Respondent waives service. By consent, taken up for hearing and final disposal forthwith.
2. In these proceedings under Section 34 of the Arbitration and Conciliation Act, 1996, the Petitioner seeks to challenge an award of an Arbitral Tribunal constituted under the Bye-laws, rules and Regulations of the National Stock Exchange of India Ltd. By its award dated 19th April, 2002, the Arbitral Tribunal has directed the Petitioner to pay to the Respondent, an amount of Rs. 31,62,159 together with interest thereon at the rate of 10% p.a. from 1st April, 2001 till the date of the award and at the rate of 18% p.a. from the date of the award till payment.
3. The claim of the Respondent in the arbitral proceedings is that the petitioner was a constituent of the Respondent and that commencing from the year 1999 the Respondent executed for and at the instance of the Petitioner transactions in shares of the Companies listed on the National Stock Exchange (NSE) from time to time. The total amount that is claimed, Rs. 31.62 lakhs, was in respect of dealings made up to August 2000. The Respondent filed before the Arbitral Tribunal, copies of its Ledger Account reflecting transactions made during the period December 1999 and March 2000 which showed a debit balance of Rs. 31.39 lakhs and an endorsement by the Petitioner recording thereon that these outstandings were 'seen'. Thereafter, a meeting was held between the parties at which joint minutes were drawn up on 4th June, 2000. The minutes recorded that the Petitioner had agreed to liquidate the outstandings of the Respondent by restarting business dealings with the Respondent. According to the Respondent, transactions continued until 15th August, 2000 as of which date an outstanding of Rs. 31.62 lakhs became due and payable. Thereafter, there were no further transactions with the petitioner.
4. The defence of the Petitioner to the arbitral proceedings would show that the Petitioner admitted in paragraph 14 of the reply that he had signed the Minutes dated 4th June, 2000 but, according to him, this was without accepting any liability or obligation for himself. The Petitioner similarly admitted that he had placed the endorsement, 'seen', on the Ledger Account. However, according to the Petitioner, a Director of the Respondent had informed him that the Respondent had incurred huge losses and that for the purposes of writing off certain bad debts for the year ended 31st March, 2000 'some paper work was required to be done for limited and internal audit purpose'. This according to the Petitioner, was 'purely and a transitory parking arrangement'. Thus, the defence appears to be that there was no dealing between the parties at all and that the Petitioner had agreed to furnish accommodation to the Respondent in view of its large losses. The petitioner contended that there was no arbitration agreement between the parties, that there was no broker -constituent agreement and that one J.P. Goenka who had signed some of the contract notes/bills was not authorised by the Petitioner.
5. The Arbitral Tribunal has rejected the defence of the Petitioner and by the arbitral award impugned in these proceedings allowed the claim. The findings of the Arbitral Tribunal may be briefly, summarised thus :
(i) The Ledger Account and the Minutes of Meeting which incorporate the outcome of the dealings and transactions of the Petitioner have been signed by the Petitioner. The signature of the petitioner in recognition of the dealings/transactions showed that a contract did exist between the parties and each contract note which had been issued clearly contained an agreement for arbitration and a provision for reference to arbitration;
(ii) There was a running account between the parties from December 1999 to August 2000; a demand was sent in March 2001 and the claim to arbitration was, therefore, within the period of limitation;
(iii) The signatures of Mr. J.P. Goenka on some of the contract notes/ bills were on behalf of the Petitioner. The Respondent was also a sub-broker on the Bombay Stock Exchange and the petitioner was the constituent of the Respondent on that Stock Exchange as well. The Respondent had produced a document in which the acknowledgement of delivery had been furnished admittedly on behalf of the Petitioner herein by the said J.P. Goenka. This transaction showed that J.P. Goenka was duly authorised by the Petitioner and the contention of the Petitioner that the authorisation was limited only to the Bombay Stock Exchange could not be accepted.
6. In assailing the correctness of the arbitral award, the following submissions have been urged on behalf of the Petitioner:
(i) There was no agreement between the parties to refer their dispute to arbitration;
(ii) The claim of the respondent was barred by limitation since it was not preferred within a period of six months prescribed by bye-law 3;
(iii) The statement of case did not specify any claim amount in arbitration;
(iv) There was a non-joinder of J.P. Goenka who was necessary party to the proceedings; and
(v) The defence of the Petitioner has not been duly considered.
7. Before dealing with the correctness of the challenge that has been preferred by the Petitioner, it would be necessary to reiterate that insofar as a challenge to an arbitral award under the Arbitration and Conciliation Act, 1996 is concerned, a Division Bench of this Court consisting of Mr. Justice, B.N. Sri Krishna (as the Learned Judge then was) and Mr. Justice S.A. Bobde held in Vijaya Bank v. Maker Development Services 2001 (3) Bom. C.R. 652, that the jurisdiction of the Court to interfere with an arbitral award can be exercised only where one of the grounds enumerated in Section 34 of the Act is available. The Division Bench further held that the expression 'public policy' which furnishes a ground of challenge cannot involve a contravention of law simplicltor. Thus, whether the expression is to be given a wider meaning or a restricted meaning, it cannot mean merely a contravention of law. The judgment of the Division Bench has been rendered specifically in the context of the provisions of the Arbitration and Conciliation Act, 1996. However, it would be necessary to note that even while construing a challenge to an arbitral award under the earlier Arbitration Act of 1940, it was a settled principle that the reasonableness of the reasons of the arbitrator cannot be challenged; that the appraisement of the evidence by the Arbitrator cannot be enquired into by the reviewing Court and the Arbitrator is the sole judge of the quality as well as the quantity of evidence - Sudarsan Trading Co. v. Government of Kerala : [1989]1SCR665 . This principle must apply as a fortiori or with greater force to a challenge to an arbitral award under Section 34 of the Act of 1996 because the avowed object of Parliament in enacting the new Act was to reduce judicial intervention in arbitral proceedings and with arbitral awards to the minimum. The Statement of Objects and Reasons of the Act of 1996 has been adverted to in detail in the judgment of the Division Bench in the Vijaya Bank's case (supra). It would also be necessary for this Court to follow the binding principles laid down in the subsequent judgment of a Division Bench consisting of Mr. Justice H.L. Gokhale and Smt. Justice Nishita Mhatre in BFIL Finance Ltd. v. G. Tech Stone Ltd. [Appeal No. 284 of 2002 in Arbitration Petition No. 499 of 2001 ]. Holding that it was impermissible for the Single Judge while exercising jurisdiction under Section 34 of the Act to substitute his views for that of the Arbitrator, Mr. Justice H.L. Gokhale, speaking for the Division Bench held thus :
'That apart, from the two paragraphs which we have quoted above, it is very clear that the learned Single Judge was substituting his own views over that of the Arbitrator. That was clearly outside his jurisdiction. It is quite possible that the Learned Single Judge had another view of the matter. That is not the jurisdiction which is vested while looking into the question of the legality or validity of the award when it is challenged under Section 34 of the Act. Similarly as far as the question of public policy is concerned, by linking it with natural justice and thereafter linking it to law of limitation, the learned Judge has found fault with the majority judgment. This very approach has been criticised by a Division Bench of this Court in the case of Vijaya Bank (supra). In that judgment, the Division Bench clearly observed that the expression 'public policy' cannot mean contravention of law simpliciter. That being the judgment rendered by a Division Bench, we are bound by the same and we have no reason to differ therefrom.'
8. The challenge to the arbitral award can now be considered in the context of these binding principles. Insofar as the ground that there was no arbitration agreement between the parties is concerned, that contention is without any merit whatsoever. In dealing with this submission, it would be necessary to notice at the outset that the Ledger Account ending on 31st March, 2000 and the Minutes of Meeting dated 4th June, 2000 are admitted documents (though the Petitioner has an explanation as regards why those documents were brought into existence). Now, there is no dispute about the fact that some of the contract notes/bills are signed by one J.P. Goenka while others have been signed by the Petitioner. On the basis of the evidence before it, the Arbitral Tribunal has found that in respect of transactions on the Bombay Stock Exchange on which there was no dispute, J.P. Goenka had signed for and on behalf of the Petitioner. The Arbitral Tribunal has not accepted the case of the Petitioner that this authorisation was for the Bombay Stock Exchange and not for the National Stock Exchange. The Arbitral Tribunal held that the signature of the Petitioner on the Ledger Account and on the admitted minutes of meeting showed that there were dealings/transactions between the parties and that a contract existed between them. Each contract note contained an arbitration agreement and for a reference to arbitration.
9. The provision for arbitration is contained in the Bye-laws of the National Stock Exchange. Bye-law 1 of Chapter X initially provides as follows :
'All Contracts subject to Bye-laws, Rules and Regulations.
(1) All contracts relating to dealings permitted on the Exchange made by a trading member shall in all cases be deemed made subject to the Bye-laws, Rules and Regulations of the Exchange. This shall be a part of the terms and conditions of all such contracts and shall be subject to the exercise by the relevant authority of the powers with respect thereto vested in it by the Bye-laws, Rules and Regulations of the Exchange.'
Regulation 3.5.1 of the Regulations framed by the National Stock Exchange provides that every trading member shall issue a contract note to his constituent for trades executed, in such format as specified in Annexure 2. Regulation 3.5.2 provides that a contract note shall be signed by a Trading Member or his Authorised signatory or Constituted Attorney.
10. These provisions came up for consideration before a Learned Single Judge of this Court in Viraj Holdings v. Motilal Oswal Securities (P.) Ltd. [Arbitration Petition No. 277 of 2000]. The Learned Single Judge, S.A. Bobde, J., noted that it is clear from Bye-law 1 of Chapter X that all contracts relating to dealings permitted on the Exchange made by a Trading Member shall in all cases be deemed to be made subject to Bye-laws, Rules and Regulations of the Exchange. Bye-law 1 provided that this shall be a part of the terms and conditions of all contracts. Bye-law 1 of Chapter XI provides that all claims, differences or disputes between Trading Members and between Trading Members and constituents arising out of or in relation to dealings, contracts and transactions made subject to the Bye-laws, Rules and Regulations of the Exchange shall be submitted to arbitration. The Learned Single Judge then noted that Bye-law 1 of Chapter XI provides that the Arbitrator shall decide all questions including the question as to whether dealings, trades and transactions have in fact, been entered into or not under the Bye-laws and Regulations. The Learned Judge held that contract notes are framed under the Regulations of the Stock Exchange and these Regulations are made under a special law, namely, the Securities Contracts (Regulation) Act, 1956. Under Section 9 of the Securities Contracts (Regulation) Act, 1956, a recognised Stock Exchange is entitled to make Bye-laws inter alia for the regulation and control of contracts and to provide for terms and conditions and incidents of contracts : The forms of contracts and for regulations for entering into and for the performance of contracts including contracts between a member and his constituent. In this context, the Learned Single Judge held as follows :
'The law governing the execution of such contract notes itself provides for a mode of execution of a registered stock broker. In this situation, it must be held that the arbitration agreement contained in these special contracts are not arbitration agreements any the less, on the ground that the writing is not signed by both the parties. The legislative competence to enact a provision prescribing a specific mode of execution of contract is not questioned. Thus, on a harmonious construction of the provisions of the Arbitration Act and the regulations framed under the Securities Contracts (Regulation) Act, 1956, both enacted by Parliament, I am of the view that contract note executed in accordance with regulation No. 3. 5 signed only by the registered broker and containing a stipulation that the contract would be subject to rules, bye-laws and regulations, which in turn provide for arbitration can constitute a valid arbitration agreement even though it is signed by the trader-member. '
11. Apart from the recent decision of the Learned Single Judge in the National Stock Exchange's case (supra), it would be material to refer to an earlier judgment of a Learned Single Judge in Hemendra V. Shah v. Stock Exchange : (1995)97BOMLR737 . In that case, Mr. Justice S.N. Variava (as the Learned Judge then was) considered and rejected the submission that in the absence of contract notes between the parties, there could be no arbitration under the Rules, Bye-laws and Regulations of the Bombay Stock Exchange. The Learned Single Judge held as follows :
'Bye-law 226(a) provides that all contracts made by a Member for or with a non-member, for the purchase or sale of securities in which dealings are permitted on the Exchange, shall in all cases be deemed to be made subject to the Rules, Bye-laws, Regulations and Usage of the Exchange. The said Bye-law also provides that all such Contracts shall be subject to the exercise by the Governing Board and the President of the powers with respect thereto vested in it or him by the Rules, Bye-laws and Regulations of the Exchange.
Further Bye-law 226(c) provides that in cases of all claims (whether admitted or not), differences and disputes arising out of or in relation to all contracts referred to in Sub-clause (a) the parties concerned shall be deemed to have agreed and acknowledged that such contracts have been entered into and are to be performed within the City of Bombay, that they are subject to Arbitration in accordance with the provisions relating to Arbitration contained in these Bye-laws and Regulations. Thus Bye-laws 226(a) and 226(c) make it very clear that all such Contracts or dealings, irrespective of the fact that there may be no contract notes, are deemed to be subject to these Rules, Bye-laws and Regulations. It is clear that these Rules, Bye-laws and Regulations will govern such Contracts and dealings. Such contracts and dealings are also subject to Arbitration in accordance with these Rules, Bye-laws and Regulations.'
The Law laid down by this Court in the aforesaid two judgments of the Learned Single Judges, noted above, furnishes a clear answer to the first submission that has been urged on behalf of the Petitioner. That is, quite independent of the position that the findings of fact of the Arbitral Tribunal cannot be disturbed in proceedings under Section 34.
12. Insofar as the question of limitation is concerned, the Arbitral Tribunal noted that there was a running account between the parties from December 1999 to August 2000 and, a demand notice was also sent in March 2001. There is no dispute in the present case about the fact that the reference to arbitration was made on 31st March, 2001. In this context, the attention of the Court has been drawn to a judgment of the Learned Single Judge, D.K. Deshmukh, J. in Geetashree Securities (P.) Ltd. v. Option Pratibhuti and Vinimay Co. Ltd., where the same Bye-law, Bye-law 3 of the Bye-laws of the National Stock Exchange came up for consideration. Bye-law 3 provides that all claims, difference or disputes shall be submitted to arbitration within 6 months from the date on which the claim, difference or dispute arises or shall be deemed to have arisen. The Learned Single Judge held, after referring to a judgment of the Supreme Court in ?? : [1993]3SCR361 , that the cause of action for referring the matter to arbitration arose when the respondent had demanded the amount and it was not paid by the Petitioner. In the present case, the joint minutes of meeting are dated 4th June, 2000, Transactions between the parties continued till August 2000 and the demand was made against the Petitioner on 12th March, 2001. The amount not having been paid, the reference to arbitration was made on 31st March, 2001. There was a running account between the parties. The view that has been formed by the Arbitral Tribunal can be in these circumstances by no means be regarded as erroneous, or implicating a breach of public policy. Even a possible view ought not to be disturbed.
13. Insofar as the third submission is concerned, there is no merit in the argument that the statement of case did not specify the amount that was claimed in arbitration. The attention of the Court has been drawn to Form 1 appended to the statement of case in which the claim has been quantified. Similarly, there is no merit in the next contention that the arbitral proceedings suffer from a non-jointer of J.P. Goenka. The Parties to the arbitration could only be those who were parties to the arbitration agreement, J.P. Goenka was only accepting documents on behalf of the petitioner. There was, therefore, no occasion to implead him as a party to the reference. Finally, there is no merit in the contention that the defence of the petitioner has not been considered. The Arbitral Award has duly considered the defence of the Petitioner before proceeding to accept the claim of the Respondent.
14. Having regard to the limited parameters of judicial review in relation to an arbitral award governed by the Arbitration and Conciliation Act, 1996, no case for interference has been made out. The Arbitration Petition is accordingly rejected.