S.A. Bobde, J.
1. The petitioner Viraj Holdings challenges the arbitral award dated 18-1-2000 made by the Arbitrator at the National Stock Exchange. By the award, the learned Arbitrator has held that respondent No. 1 M/s. Motilal Oswal Securities Pvt. Ltd. is entitled to receive a sum of Rs. 21,66,489.73.
2. The first ground of challenge made by Mr. Kamdar, learned counsel for the petitioner, is that the Arbitrator had no jurisdiction to entertain the claim made by the respondent since admittedly no agreement between the petitioner as a sub-broker and the respondent as a broker was executed between the parties. According to the learned counsel, even if such an agreement was not executed, an Arbitrator at the National Stock Exchange would have jurisdiction provided a constituent-broker agreement was executed between the parties. Admittedly, none of these two agreements have been executed between the parties. There is no dispute on behalf of the respondent that the statement of claim is not made on the basis of the aforesaid two agreements. However, according to the learned counsel for the petitioner, the subject-matter of the dispute was not capable of arbitration since the claim was made by the respondent in respect of transactions for which even contract notes were not executed. According to the learned counsel for the petitioner, even if such contract notes were executed in respect of the transactions, the Arbitrator never got jurisdiction.
3. In order to appreciate the contention of the learned counsel for the petitioner, it is necessary to set out the provisions pertaining to the issue of a contract. Regulation 3.5 of the regulations framed by the National Stock Exchange reads as follows :--
'3.5 CONTRACT NOTE
3.5.1 Every Trading Member shall issue a contract note to his constituents for trades executed in such format as specified in ANNEXURE : 2 with all relevant details as required therein to be filled in, and issued in such manner and within such time as prescribed by the Exchange.
3.5.2. A contract note shall be signed by a Trading Member or his Authorised signatory or constituted Attorney.'
The form of a contract note itself is provided in annexure 2. It requires the signature of the member broker as contemplated by regulation 3.5.2. The contract not contains a clause which makes the contract subject to the rules, bye-laws, regulations and usage of the National Stock Exchange Ltd. There is no dispute that it is under these rules, bye-laws and regulations that the present arbitration has been conducted.
4. As pointed out earlier, the contention of the learned counsel for the petitioner, however, is that no such contract notes were issued by the respondent at all in respect of transactions for which the statement of claim is to be made.The learned counsel for the petitioner fairly submitted that the transaction to the extent of Rs. 5,85,748.73 are admitted and the amount is due to the respondent who acted as the broker for the petitioner. From the award, it is clear that the learned Arbitrator has completely rejected the petitioner's contention that there were no contract notes issued by the respondent. As before the Arbitrator, it is the contention of the petitioner before this Court also that the contract notes ought to have been disbelieved because the contract notes were not acknowledged by the petitioner. According to the petitioner, the contract notes submitted by the respondent in proof of the transaction are false, forged and fabricated. This contention has been rejected in its entirety by the learned Arbitrator on the ground that he had not issued any acknowledgment for those bills and, therefore, his contention that merely because he has not acknowledged the receipt of contract notes, the contract notes itself and the underlying transaction should be disbelieved, cannot be accepted. In fact, the learned Arbitrator has found that the respondent has traded on behalf of the petitioner right through upto valan No. 51 i.e. settlement No. 51 which terminated sometime in December 1998. The petitioner is disputing certain transactions only in respect of the subsequent valan Nos. 1 and 2. The learned Arbitrator has examined the transactions in detail and has given the following findings in respect of valan Nos. 1 and 2 :--
(1) The petitioner has accepted all the delivery transaction in valan Nos. 1 and 2 from bill analysis in exhibits 4 and 5.
(2) The petitioner has accepted some transaction for a scrip while not accepting the other transaction executed at the same time i.e. trade log or valan Nos. 1 and 2.
(3) The petitioner accepts certain trades executed from the same order number and does not accept other trade from the same order number as can be seen from the trade log valan No. 1 and 2.
(4) On the same day, the petitioner accepted certain transactions and denied certain others.
5. Having regard to the above, the learned Arbitrator has eventually found that the petitioner has accepted certain subsequent contracts and bills and, however, declined to accept earlier contracts and bills.
6. The aforesaid findings of the learned Arbitrator is challenged by the learned counsel for the petitioner on the ground that it is based on improper appreciation of evidence and on the ground that the Arbitrator has failed to take into account certain evidence such as books of accounts, trade logs, etc., which were produced by the petitioner. It is not possible to accept this contention on behalf of the petitioner since what the petitioner really invited this Court to do is to embark upon appraisement of the evidence which has led to the aforesaid conclusion; which is clearly impermissible. It is well-settled that the Arbitrator is the Judge of all that. In the words of the Supreme Court from MCD v. Jagan Nath Ashok Kumar, reported in : [1988]1SCR180 , as reproduced in Sudarsan Trading Co. v. Government of Kerala, reported in : [1989]1SCR665 :--
'Furthermore, in any event, reasonableness of the reasons given by the arbitrator, cannot be challenged. Appraisement of evidence by thearbitrator is never a matter which the court questions and considers. If the parties have selected their own forum, the deciding forum must be conceded the power of appraisement of the evidence. The arbitrator is the sole judge of the quality as well as the quantity of evidence and it will not be for the court to take upon itself the task of being a judge on the evidence before the arbitrator. See the observations of this Court in MCD v. Jagan Nath Ashok Kumar.'
7. Mr. Kamdar, learned counsel for the petitioner, further submitted that a ground under Section 34 of the Arbitration Act is made out in view of the fact that the learned Arbitrator has observed that the petitioner did not produce any evidence such as accounts book, etc., even though the accounts book, etc., were produced. Mr. Khandhar, learned counsel for the petitioner, denies that the learned Arbitrator in making the observation was referring to the same books which the petitioner has produced. Even otherwise, if the learned Arbitrator has ignored certain evidence that brought before him, it would not furnish the petitioner with a ground for challenging under Section 34 of the Arbitration and Conciliation Act, 1996, hereinafter referred to as the 'Act'. According to the learned counsel for the petitioner, when the Arbitrator ignores certain evidence produced before him, the award is vitiated by non-application of mind in that the Arbitrator thereby acts in breach of Section 28 of the Act. Section 28(1) of the Act on which the learned counsel for the petitioner relies reads as follows :--
'28. Rules applicable to substance of dispute. -- (1) where the place of arbitration is situate in India. --
(a) in an arbitration other than an international commercial arbitration, the arbitral tribunal shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India :
(b) in international commercial arbitration, --
(i) ............................
(ii) ...........................
(iii) failing any designation the law under Clause (a) by the parties, the arbitral tribunal shall apply the rules of law it considers to be appropriate given all the circumstances surrounding the dispute.'
8. It is difficult to appreciate how Section 28(1) is violated when a certain piece of evidence is not adverted to or ignored by the Arbitrator. Mr. Kamdar relied on an unreported judgment of this Court in Arbitration Petition No. 374 of 1999 S.N. Agarwal HUF v. Rajkumar Keshardev and Anr. decided on 11-9-2001 where this Court took the view that by relying on one entry in the documents and ignoring other documents, the award was made by non-application of mind and, therefore, such a finding is no finding in the eye of law and, therefore, such an award is in violation of Section 34 of the Act.
9. As far as this Court is concerned, I am of the view that the contention on behalf of the petitioner must be rejected in view of the Division Bench judgment of this Court in Vijaya Bank v. Maker Development Services, reported in 2001 (3) B.C.R. 652 wherein a Division Bench of this Court observed that thejurisdiction of this Court to interfere with an arbitral award can be exercised only when' the grounds enumerated in Section 34 of the Act are available. That whether the expression 'public policy' has to be given a wider or restricted meaning contravention of law simpliciter is not covered by it. The petitioner's contention that Section 28 is violated when certain evidence is ignored, has no merit. In any case, the complaint is in regard to contravention of law simpliciter. The judgment of the learned single judge referred to above cannot now assist the petitioner.
10. The next contention urged by Mr. Kamdar, learned counsel for the petitioner, is that the contract note relied on by the Arbitrator cannot be said to contain an arbitration agreement in writing as contemplated by Section 7 of the Act on the ground that it is not signed by both the parties and, therefore, the Arbitrator on the panel of the National Stock Exchange could not have decided the claim under the bye-laws and regulations framed by the National Stock Exchange of India. There is no doubt that Section 7 requires the arbitration agreement to be in writing and signed by both the parties. Section 7(2) reads as follows :--
'7'. Arbitration agreement. -- (1) ..........
(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.'
11. Appreciating this contention it is necessary to set out the scheme of arbitration under which the contract notes are executed by member brokers on the National Stock Exchange of India. As observed earlier, the contract note is issued under regulation 3.5 reproduced above. That regulation is part of the regulations which are framed by the National Stock Exchange in exercise of powers under Section 9 of the Securities Contract Regulation Act, 1956. Section 9 to the extent it is relevant reads as follows:--
'9. Power of recognized stock exchanges to make bye-laws. -- (1) Any recognized stock exchange may, subject to the previous approval of the Securities and Exchange Board of India, make bye-laws for the regulation and control of contracts.
(2) In particular, and without prejudice to the generality of the foregoing power, such bye-laws may provide for--
(a) ..................
(b) ..................
(c) ..................
(d) ..................
(e) ..................
(f) ..................
(g) ..................
(h) ..................
(i) ..................
(j) the terms, conditions and incidents of contracts including the prescription of margin requirements, if any conditions relating thereto, and the forms of contracts in writing;
(k) the regulation of the entering into, making, performance, rescission and termination, of contracts, including contracts between members or between a member and his constituent or between a member and a person who is not a member, and the consequences of default or insolvency on the part of a seller or buyer or intermediary, the consequences of a breach or omission by a seller or buyer, and the responsibility of members who are not parties to such contract;
(l) ..................
(m)..................
(n) the method and procedure for the settlement of claims or disputes, including settlement by arbitration;'
The National Stock Exchange of India has in addition to the regulations framed bye-laws. Bye-law No. 1 of Chapter X reads 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.'
It is clear that all contracts relating to dealings permitted on the Exchange made by a trading member are made subject to the bye-laws, rules and regulations of the Exchange.
12. Bye-law No. 1 of Chapter XI which provides for arbitration reads as follows :--
Reference to Arbitration
(1) All claims, differences or disputes between the Trading Members inter se and between Trading Members and Constituents arising out of or in relation to dealings, contracts and transactions made subject to the Bye-Laws, Rules and Regulations of the Exchange or with reference to anything incidental thereto or in pursuance thereof or relating to their validity, construction, interpretation, fulfilment or the rights, obligations and liabilities of the parties thereto and including any question of whether such dealings, transactions and contracts have been entered into or not shall be submitted to arbitration in accordance with the provisions of these Byelaws and Regulations.'
It is noteworthy that the aforesaid bye-laws empower the Arbitrator to decide all questions, including the question whether such dealings, trades and transactions have, in fact, been entered into or not under the bye-laws and regulations.
13. One thing is clear Section 7 of the Arbitration Act, though the later statute of the same legislation, does not contain a non obstante clause and regulation 3.5 of the National Stock Exchange which is framed under the Securities Contracts (Regulation) Act, 1956 clearly provides for the manner in which such a contract should be executed; to the extent that even the form ofcontract is provided. The regulation as well as the form only provides that such a contract note shall be signed by the trader member or broker.
14. The contract in question i.e. the contract notes are framed under a special lav. i.e. the Securities Contracts (Regulation) Act, 1956 and contain a specific stipulation that they shall be subject to the rules, bye-laws and regulations of the National Stock Exchange of India. The law governing the execution of such contract notes itself provides for a mode of execution of such contract notes and that is by the signature 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.
15. Mr. Kamdar, however, referred to SEBI (Stock-brokers and Sub-brokers) Regulations, 1992 which prescribe certain 'precautions to be exercised by the member-brokers'. One of the mandatory precautions is as follows:--
'(viii) Member-brokers should insist on clients to return the duplicate copy of contract notes duly signed by them in token of their having received the contract notes.'
It is clear from the introductory para containing the aforesaid guidelines that it is meant for protecting the interest of member-brokers and for instilling transparency and discipline in the deal between clients and brokers. Moreover, the acknowledgment contemplated by that guideline is meant to be in token of the client having received the contract notes, and not in token of having entered into the contract. This note as if a contract is brought into existence only upon the acknowledgment having been signed. There is, therefore, no merit in the submission on behalf of the petitioner that no acknowledgment having been proved by the respondent, the contract note was invalid and the Arbitrator had, therefore, no jurisdiction.
16. The last contention urged by the learned counsel for the petitioner is that since the respondent's written submissions dated 1-11-1999 were not handed over to the petitioner in advance, there is a breach of Section 18 of the Act which reads as follows:--
'18. Equal treatment of parties.-- The parties shall be treated with equality and each party shall be given a full opportunity to present his case.'
Firstly, written submissions are not incorporated as part of any procedural law governing either the functioning of Courts or Arbitrators. They are often required by Arbitrator or submitted by the parties voluntarily for the sake of convenience. Merely because a written submission is not served in advance on the other side, itwould not be possible to infer that there is denial of equal treatment to the parties who are required to be given a full opportunity to present their case. Moreover, Section 18 requires the Arbitrator to treat the party with equality. If one party does not submit its written submission to the other party in advance, it could hardly be said to be a lapse on the part of the Arbitrator. There is, therefore, no merit in the contention that Section 18 of the Act has been violated and, therefore, the award is liable to be set aside under Section 34(2)(a)(v) which enables the Court to set aside an award on the ground :
'(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part or'
As observed earlier, no principles of equality in the matter of procedure has been violated.
17. In the result, there is no merit in the petition which is dismissed with costs.
18. P. S. to give ordinary copy of this judgment to the parties concerned.