“Normally” Means “Directory”: Bombay High Court Affirms that the Three-Month Time Limit for NSE Arbitrations Is Indicative, Not Mandatory – A Commentary on Bhanuchandra J. Doshi v. Motilal Oswal Securities Ltd. & Anr. (Bombay HC, 14 Aug 2025)

1. Introduction

The Bombay High Court’s decision in Bhanuchandra J. Doshi v. Motilal Oswal Securities Ltd. settles a long-running capital-market dispute and, more importantly, clarifies the status of the “three-month” arbitral time frame contained in the National Stock Exchange (NSE) arbitration bye-laws. The judgment answers two recurring questions that vex securities arbitrations:

1. From which date does the arbitral clock start—the first scheduled meeting or the first hearing actually held?
2. Is the three-month period mandatory (going to the root of jurisdiction) or merely directory (a guideline subject to extension)?

Justice Somasekhar Sundaresan holds that the clock starts on the first hearing actually held, not merely scheduled, and that the three-month period is directory; the outer six-month limit alone wears a mandatory character. The ruling brings welcome certainty to securities arbitration, a field where speed is crucial yet procedural challenges are common.

2. Summary of the Judgment

• Facts: Mr. Doshi, a long-standing client of Motilal Oswal Securities (through sub-broker Natwarlal Parekh Securities), disputed margin calls and alleged unauthorised trades during the January 2008 market crash, triggering arbitration under NSE bye-laws. Three rounds of arbitration followed, culminating in an appellate award (“Second Award”) that upheld Motilal’s position.
• Challenge: Under Section 34 of the Arbitration & Conciliation Act, 1996 (A&C Act), Doshi attacked the Second Award primarily on the ground that the first-instance award (“First Award”, 27 Apr 2013) was rendered beyond the statutory three-month limit from 3 Dec 2012, the date on which the first hearing had originally been scheduled.
• High Court’s Holding:
  • The “date of entering upon reference” under NSE Rule 13(d) is the date the tribunal actually holds its first hearing (here, 28 Jan 2013), not the date first fixed.
  • The word “normally” in Rule 13(b) makes the three-month limit directory; only the six-month outer cap is potentially mandatory.
  • Because the First Award fell within three months of 28 Jan 2013, no extension was required, rendering Doshi’s limitation challenge meritless.
  • Doshi’s allegations of back-dating, bias and misunderstanding of capital-market nuances were unsupported by evidence.
  • Findings on unauthorised trades, margin shortfall and collateral liquidation were rational, hence unassailable under Section 34.
• Outcome: Petition dismissed; costs of ₹10,000 imposed on the petitioner.

3. Detailed Analysis

3.1 Precedents Cited and Their Influence

1. Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Ltd., 2024 SCC OnLine SC 2494
   Supreme Court held that an application to extend the arbitral mandate under Section 29A of the A&C Act may be made even after expiry of the original period, so long as factors such as diligence, complexity, and party conduct justify continuation.
   Relevance: The High Court analogised the NSE bye-law scheme to Section 29A. Even if an extension had been required, it could have been granted post-expiry; thus Doshi’s timing objection lacked teeth. The citation underscores judicial tolerance for practical delays if parties are not prejudiced.
2. Ram Kawar Garg v. Bajaj Capital Investor Services Ltd. (Delhi HC, 1 Jul 2025)
   The Delhi High Court noted that a tribunal exceeded the prescribed three-month period but did not decide whether the limit was mandatory.
   Relevance: Justice Sundaresan distinguished the case, observing that unlike Ram Kawar, the First Award in Doshi was delivered within three months of the first actual hearing.

3.2 The Court’s Legal Reasoning

“The use of the word ‘normally’ for the deadline and the allowance for extensions, in my opinion, would inexorably result in the three-month deadline being directory and not mandatory.”

The reasoning unfolds in three logical layers:

1. Textual Interpretation – Rule 13(b) uses “shall make the award normally within 3 months”, whereas Rule 13(c) employs prohibitive language (“notwithstanding the extensions granted … shall make the award within six months”). The juxtaposition indicates a soft (directory) inner limit versus a hard (mandatory) outer limit.
2. Purpose-Driven Approach – Securities markets thrive on speed. Treating every procedural adjournment as jurisdiction-destroying would incentivise tactical delays and defeat the bye-laws’ object of expeditious resolution.
3. Conduct of Parties – Doshi himself sought the adjournment of 3 Dec 2012; equity disfavours a litigant who takes advantage of a situation he created. The “clock” should not penalise the counter-party for such adjournment.

3.3 Anticipated Impact

• Arbitral Efficiency: Tribunals can now focus on substance without fear that an adjournment—often inevitable—will nullify months of work.
• Reduced Section 34 Litigation: A main avenue of challenge (time overruns) in NSE arbitrations narrows, fostering finality of awards.
• Guidance for Institutional Rules: Exchanges and commodity platforms may re-examine similar “normal” time prescriptions, aligning them with the High Court’s directory reading.
• Investor-Broker Dynamics: The Court’s scepticism toward unsubstantiated allegations (bias, back-dating) sends a message that Section 34 is not a rehearing avenue for disgruntled investors.

4. Complex Concepts Simplified

5. Conclusion

The Bombay High Court’s ruling marks a pivotal clarification in Indian securities arbitration. By declaring the “three-month” NSE deadline directory and pegging the start of the period to the first actual hearing, the Court:

• Reconciles procedural timelines with practical realities of complex market disputes;
• Reinforces party autonomy and institutional flexibility through a purposive reading of arbitration rules;
• Provides a template for interpreting similar time-bound provisions in other self-regulatory organizations and institutional rules.

For practitioners, the judgment underscores the importance of maintaining accurate records of actual hearings, exercising adjournments judiciously, and avoiding speculative allegations of bias or procedural impropriety. For market participants, it offers assurance that legitimate awards are less likely to be derailed by tactical time-bar challenges.

Key Takeaway: In NSE arbitrations, the three-month limit is a guideline—not a guillotine. Parties would do well to focus their energies on the merits rather than procedural gamesmanship.