1. As
common question of law and facts arise in these group of petitions,
they are being disposed of by this common judgment and order. The
short but an interesting question of law posed for the consideration
of this Court is whether in view of bye-laws in Chapter XI of
National Stock Exchange of India Limited, whether the jurisdiction of
civil suit is barred or the civil court's jurisdiction to entertain
the dispute between petitioner and the respondent have been ousted ?
1.1
Special Civil Application No.24299 of 2007 is filed by the
petitioner-original defendant under Article 227 of the Constitution
of India for an appropriate writ, order or direction quashing and
setting aside the order dated 6.7.2007 passed below application
Exh.27 in Special Civil Suit No.233 of 2001 (New Number Regular Civil
Suit No.337 of 2005) passed by the learned 7th Additional
Senior Civil Judge, Junagadh by which the learned trial court has
dismissed the said application submitted by the petitioner-original
defendant submitted under Order 7 Rule 11(d) of the Code of Civil
Procedure which was submitted to dismiss the suit.
1.2 Special Civil
Application No.24300 of 2007 is filed by the petitioner-original
defendant under Article 227 of the Constitution of India for an
appropriate writ, order or direction quashing and setting aside the
order dated 6.7.2007 passed below application Exh.18 in Special
Civil Suit No.231 of 2001 passed by the learned 7th
Additional Senior Civil Judge, Junagadh by which the learned trial
court has dismissed the said application submitted by the
petitioner-original defendant submitted under Order 7 Rule 11(d) of
the Code of Civil Procedure which was submitted to dismiss the suit.
1.3
Special Civil Application No.24302 of 2007 is filed by the
petitioner-original defendant under Article 227 of the Constitution
of India for an appropriate writ, order or direction quashing and
setting aside the order dated 6.7.2007 passed below application
Exh.23 in Special Civil Suit No.232 of 2001 passed by the learned
7th Additional Senior Civil Judge, Junagadh by which the
learned trial court has dismissed the said application submitted by
the petitioner-original defendant submitted under Order 7 Rule 11(d)
of the Code of Civil Procedure which was submitted to dismiss the
suit.
2. Respondent in each of
the petition had instituted the aforesaid special civil suit against
the petitioner-defendant for recovery of the amount as mentioned in
the suits. Certain trades of shares were transacted by the concerned
respondent-plaintiff through the petitioner who is a registered
trading member and stock broker of National Stock Exchange of
India Limited and contracts were drawn and issued and the bills were
also drawn and issued in respect of such trades executed by the
petitioner on behalf of the respondent. It was alleged that certain
amounts were due and payable by the petitioner to the respondent and
therefore the respective respondent-original plaintiff instituted the
aforesaid suits in the Court of learned Civil Judge (S.D.), Junagadh.
That in the said suits, the respective petitioners-original
defendants submitted application under Order 7 Rule 11(d) of the CPC
read with Section 142 of the Arbitration and Conciliation Act, 1996
(hereinafter referred to as "the Act of 1996") to reject
the respective plaints submitting that the petitioner-original
defendant is a Private Limited Company and `trading' member' of
National Stock Exchange of India Limited and the transactions took
place between the plaintiff and the defendant are subject to and
governed by the bye-laws and regulations of the National Stock
Exchange. It was submitted that there is an arbitration clause behind
all the bills and vouchers of the plaintiff. The said arbitration
clause is in a printed form and therefore the plaintiff is a
constituent and the defendant is trading member and therefore any
dispute between the constituent and a trading member is to be
referred to the arbitration under the provisions of the Act of 1996,
and as per the bye-laws of the National Stock Exchange and therefore
it was contended that the civil court has no jurisdiction and
therefore it was requested to dismiss the respective suit.
2.1 The said
applications were resisted by the respective respondent
herein-original defendant by submitting that merely because there is
an arbitration clause as per the bye-laws of the National Stock
Exchange unless there is a specific exclusion of the jurisdiction of
the civil court the suit is maintainable and therefore it cannot be
said that the civil court had no jurisdiction at all.
2.2 After considering
the rival submissions made on behalf of the respective parties, the
learned trial court by impugned orders dismissed the aforesaid
applications submitted by the petitioner-defendant submitted under
Order 7 Rule 11(d) of the CPC by holding that the civil court has
jurisdiction.
2.3 Being aggrieved
and dissatisfied with the impugned orders passed by the trial court
dismissing the applications submitted by the petitioner-defendant to
reject the plaint on the ground that in view of arbitration clause
and the bye-laws of the National Stock Exchange providing for
arbitration clause the civil court has no jurisdiction, the
respective petitioners-original plaintiffs have preferred present
Special Civil Applications under Article 227 of the Constitution of
India.
3. Shri
Sanjay Mehta, learned advocate appearing on behalf of the common
petitioners-defendants has vehemently submitted that the learned
trial court has materially erred in holding that the civil court has
jurisdiction to entertain the respective suits. It is submitted that
the learned trial court has not considered the relevant provisions of
Bye-laws of National Stock Exchange more particularly Bye-law (1) in
Chapter X of the Bye-laws of the National Stock Exchange and the
Regulation 3(5)(1), 3(5)(2), Part-A Clause 5(1), 5(2), 5(3)(A),
5(3)(B) and 5(4) which specifically provides reference of arbitration
for any dispute even between the member and non-member. It is
further submitted that even Clause 3(5) of the Contract Note between
the parties, the arbitration clause is printed with the information
of Regional Arbitration Centre and therefore any dispute between
plaintiff and the defendant shall be referred to and resolved only by
arbitration and therefore the jurisdiction of the civil court with
respect to the dispute between the plaintiff and the defendant is
ousted in view of the specific provisions of arbitration clause and
considering the Act of 1996. Therefore, it is submitted that the
learned trial court ought to have allowed the aforesaid applications
and ought to have dismissed the respective plaints in exercise of
powers under Order 7 Rule 11(d) of the CPC.
3.1 It is further
submitted by Shri Sanjay Mehta, learned advocate appearing on behalf
of the respective petitioners that the learned trial court did not
appreciate the fact that the petitioner-defendant is a Private
Limited Company and `Trading' member of National Stock Exchange of
India Limited, and the transactions that took place between the
plaintiff and the defendant are governed by the bye-laws and
regulations of the National Stock Exchange of India Limited and that
there is an arbitration clause behind all the bills and vouchers of
the plaintiff and the plaintiff is a constituent and the defendant
is trading member and therefore any dispute between the constituent
and a trading member is to be referred to the arbitration under the
provisions of the Act of 1996 and as per the bye-laws of the
National Stock Exchange and therefore the civil court has no
jurisdiction at all.
3.2 It is further
submitted that the learned trial court has erroneously held that
there is no specific provision in the Arbitration Act barring the
civil court's jurisdiction. It is submitted that as per Section 5 of
the Arbitration Act, there is a specific bar of judicial
intervention. It is further submitted that even as per the
provisions of Section 8 of the Act, it is compulsory to refer the
parties to the arbitration if a party applies not later than the
stage of submitting first statement on the substance of the dispute.
It is submitted that the provisions of arbitration act are not
properly appreciated by the learned trial court in its true
perspective inclusive of Section 42 of the Arbitration Act.
3.3 Shri Sanjay Mehta,
learned advocate appearing on behalf of the respective
petitioners-original defendants has heavily relied upon the decision
of the Bombay High Court in the case of PRASHANT
COMMERCIAL VS. RAJRATAN R.MOHTA reported in (2006) 69 SCL 241 (Bom.).
It is submitted that considering the relevant bye-laws of the
National Stock Exchange and considering the arbitration clause, the
Bombay High Court has held that the civil court would not have
jurisdiction over the dispute arising out of a contract between the
member and non-member for purchase and sales of securities.
Therefore it is requested to allow the present Special Civil
Applications and hold that in view of bye-laws of the National Stock
Exchange as well as the contract note providing for arbitration
clause, suit filed by the respective respondents herein-original
plaintiffs is not maintainable and the civil court would not have
jurisdiction over such dispute between the plaintiff and the
defendant, and in view of the arbitration clause, the jurisdiction of
the civil court is ousted.
4. All these petitions
are opposed by Shri Anshin Desai, learned advocate appearing on
behalf of the respective plaintiffs. It is submitted that unless
there is a specific bar, the jurisdiction of the civil court cannot
be ousted. It is submitted that neither in the Arbitration Act nor
even in the bye-laws of the National Stock Exchange, the jurisdiction
of the civil court is specifically barred and/or ousted. It is
submitted that as per section 9 of the cpc, the civil court will have
jurisdiction to try all suits of a civil nature excepting the suits
which either expressly or impliedly barred. It is submitted that
considering the provisions of the arbitration act as well as the
bye-laws of the National Stock Exchange relied upon by the
defendant, there is no express or implied provision to oust the
jurisdiction of the civil court. It is submitted that the ouster of
the civil court's jurisdiction cannot be presumed and the normal rule
is that the civil court would have jurisdiction to entertain all the
disputes of a civil nature between the parties. Therefore it is
submitted that merely because there is an arbitration clause, the
ouster of the jurisdiction of the civil court cannot be presumed. He
has relied upon the following decisions of the Hon'ble Supreme Court
in support of his above submissions and his prayer to dismiss the
present Special Civil Applications.
RITE
APPROACH GROUP LTD., VS. ROSOBORON EXPORT reported in (2006)
1 SCC 206.
DHULABHAI
ETC. VS. STATE OF MADHYA PRADESH AND ANOTHER reported in AIR
1969 SC 78.
ITI
LTD. VS. SIEMENS PUBLIC COMMUNICATIONS NETWORK LTD., reported
in (2002) 5 SCC 510.
S.
VANATHAN MUTHURAJA VS. RAMALINGAM ALIAS KRISHNAMURTHY GURUKKAL AND
OTHERS reported in (1997) 6 SCC 143.
VENKAMAMIDI
VENKATA SUBBA RAO VS. CHATLAPALLI SEETHARAMARATNA RANGANAYAKAMMA
reported in (1997) 5 SCC 460.
4.1 He has also relied
upon the decision of Rajasthan High Court in the case of MAHESH
KUMAR VS. RAJASTHAN STATE ROAD TRANSPORT CORPORATION reported in AIR
2006 RAJASTHAN 56 in support of his submission that mere
existence of arbitration clause in agreement does not bar
jurisdiction of civil court automatically. Relying upon the above
decisions and making the above submissions, it is requested to
dismiss the present Special Civil Applications.
5. Heard the learned
advocates appearing on behalf of the respective parties at length.
6. The short but an
interesting question of law posed for consideration of this Court as
stated hereinabove is whether in view of the arbitration clause in
the contract note and the bye-laws of the National Stock Exchange
framed under the Securities Contracts (Regulation) Act, 1956
providing for resolving the dispute by arbitration and considering
the provisions of the Arbitration Act, 1996, whether the
jurisdiction of the civil court is ousted?
7. Learned advocate
appearing on behalf of the respective petitioners has heavily relied
upon Chapter XI of the bye-laws of the National Stock Exchange of
India Limited, and according to the petitioners, all claims,
differences or disputes between the trading members and sub-brokers
and between sub-brokers and clients of sub-brokers and one of
sub-broker 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, fulfillment 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 the said bye-laws and regulations.
8. Learned advocate
appearing on behalf of the respective petitioner has submitted that
as per clause 2 of Chapter XI of the aforesaid bye-laws in all
dealings, contracts and transactions, which are made or deemed to be
made subject to the bye-laws, rules and regulations of the exchange,
the provisions relating to arbitration as provided in the said
bye-laws and regulations shall form and shall be deemed to form part
of the dealings, contracts and transactions and the parties shall be
deemed to have entered into an arbitration agreement in writing by
which all claims, differences or disputes of the nature referred to
in bye-laws (1), (1A), (1B) and (1D) of Chapter XI shall be
submitted to arbitration as per the provisions of the said bye-laws
and the regulations. It is also further submitted that as per
bye-law (3) of Chapter XI all the claims are required to be
submitted to arbitration within six months from the date on which
the claim, difference or dispute arose or shall be deemed to have
arisen. It is further submitted that as per Chapter XI of the said
bye-laws all contracts relating to the dealings permitted on the
exchange made by trading member are subject to the bye-laws, rules
and regulations. Under the circumstances, it is submitted that in
case of the dispute between the plaintiff and the defendant as per
the aforesaid bye-laws and the contract note, the said dispute is
required to be submitted to the arbitration only and therefore the
civil court would not any jurisdiction to entertain the dispute of
claims between the plaintiff and the defendant.
9. Learned advocate
appearing on behalf of the respective petitioners has also relied
upon Section 8 of the Act of 1996 in support of his submission that
the civil court would not have any jurisdiction and the civil court
has to refer the dispute for arbitration.
10. A fair reading of
the aforesaid bye-laws of the National Stock Exchange of India
Limited and even the contract note, it is true and it provides all
claims, differences or disputes between the plaintiff and the
defendant is to be submitted to arbitration, however, the question is
whether in view of arbitration agreement can it be said that the
civil court would not have any jurisdiction at all?
11. At this stage it is
required to be noted that Chapter VII of bye-laws of the National
Stock Exchange of India Limited, there is a specific clause with
respect to jurisdiction, and as per the said chapter, the civil court
in Mumbai in relation to any dispute arising out of or in connection
with or in relation to the contract note shall have exclusive
jurisdiction and that only civil court at Mumbai have exclusive
jurisdiction in claims arising out of such dispute. It is also to
be noted that even as per Chapter XI bye-law 14 the arbitration
proceedings as provided for by the provisions of the said bye-laws
and regulations shall be subject to the provisions of the Act to the
extent not provided for in the said bye-laws or the regulations.
Even as per bye-law 17 of Chapter XI which provides for jurisdiction,
all parties to a reference to arbitration under the said bye-laws and
regulations and the persons, if any, claiming under them, shall be
deemed to have submitted to the exclusive jurisdiction of the courts
in Mumbai. Therefore, considering the above, it can only be said
that there is an arbitration agreement between the plaintiff and the
defendant and any dispute and the claim between the plaintiff and
the defendant is required to be referred to the arbitration. Under
the circumstances and considering the above provisions, the
arbitration would govern by the Arbitration Act, 1996, and therefore,
Section 8 of the Arbitration Act would be applicable. Therefore when
a suit is filed by any of the party to the arbitration agreement, the
aggrieved party has to submit an application before the civil court
for referring the parties to the arbitration invoking Section 8 of
the Arbitration Act and subject to the limitation under Section 8 of
the Arbitration Act, and subject to fulfillment of all the
conditions referred to in Section 8 of the Arbitration Act, the Civil
Court is required to refer the parties to the arbitration.
11.1 Therefore if the
conditions provided under Section 8 of the Act of 1996 are not
satisfied, the civil court is not required to refer the
dispute/parties to the arbitration. It is also required to be noted
at this stage that even the aggrieved party who is aggrieved by the
award of the arbitrator can submit an application for setting aside
the arbitral award under Section 34 of the Arbitration Act, 1996.
Therefore even the arbitral award is subject to the order passed by
the civil court subject limitation under Section 34 of the Act of
1996 and therefore to that extent there is no finality attached to
the award by the arbitrator. Learned advocate appearing on behalf of
the petitioner has failed to satisfy the court and/or point out any
provisions either under the bye-laws of the National Stock Exchange
of India Limited and/or under the Arbitration Act, 1996, excluding
the jurisdiction of the civil court where there is an arbitration
clause or there is an arbitration agreement between the parties.
Learned advocate appearing on behalf of the petitioner has failed to
point out any provision by which the jurisdiction of the civil court
is specifically barred and/or ousted in a case where there is an
arbitration clause and/or an arbitration agreement between the
parties and the dispute is required to refer to the arbitration.
11.2 As observed by
the Hon'ble Supreme Court in the case of S.Vanathan Muthuraja
(supra), considering section 9 of the cpc and the question of
exclusion of civil court's jurisdiction, the Hon'ble Supreme Court
has observed and held that when a legal right is infringed, a suit
would lie unless there is a bar against entertainment of such civil
suit and the civil courts would take cognizance of it. It is further
observed by the Hon'ble Supreme Court in the said decision that the
normal rule of law is that civil courts have jurisdiction to try all
suits of civil nature except those of which cognizance is either
expressly or by necessary implication excluded. The rule of
construction being that every presumption would be made in favour of
the existence of a right and remedy in a democratic set-up governed
by rule of law and jurisdiction of the civil courts is assumed. The
exclusion would, therefore, normally be an exception. Courts
generally construe the provisions strictly when jurisdiction of the
civil courts is claimed to be excluded.
11.3 Similar
observations are made by the Hon'ble Supreme Court in the case of
Vankamamidi Venkata Subba Rao (supra).
11.4 In the case of
ITI Ltd. (supra), considering the relevant provisions of the
Arbitration Act, 1996, the Hon'ble Supreme Court has observed that
there is no express prohibition against the application of the Code
to a proceeding arising out of the Act before a civil court, and
therefore that being so, by inference it cannot be held that the
Code is not applicable. In para 11 of the said decision the Hon'ble
Supreme Court has further observed and held that the jurisdiction of
the civil court to which a right to decide a lis between the parties
has been conferred can only be taken by a statute in specific terms
and such exclusion of right cannot be easily inferred because there
is always a strong presumption that the civil courts have the
jurisdiction to decide all questions of civil nature. It is also
further observed by the Hon'ble Supreme Court in the said decision
that therefore if at all there has to be an inference the same should
be in favour of the jurisdiction of the court rather than the
exclusion of such jurisdiction.
11.5 Identical
question came to be considered by the Rajasthan High Court in the
case of Mahesh Kumar (supra) and the Rajasthan High Court has
specifically held that mere existence of arbitration clause in the
agreement does not bar jurisdiction of the civil court automatically.
It is held that it cannot be presumed that the civil court would not
have any jurisdiction to entertain the suit only because that there
is contract for referring the dispute to arbitrator. It is not a
case of total ouster of jurisdiction of the Court in the cases where
the arbitration clause is there in the contract between the parties
to the suit, but it depends upon compliance of the conditions by the
persons seeking for referring the matter to the arbitration.
11.6 Considering the
aforesaid decision of the Hon'ble Supreme Court as well as the
Rajasthan High Court, the contention on behalf of the original
defendant that in view of the bye-laws of the National Stock Exchange
and the contract note providing for resolving the dispute only by
arbitration, the jurisdiction of the civil court would be barred
and/or ousted cannot be accepted more particularly when there is no
specific provision in the Arbitration Act and/or bye-laws of the
National Stock Exchange framed under the Securities Contracts
(Regulation) Act, 1956 excluding the jurisdiction of the civil court
in a case where the dispute is to be referred to the arbitration.
11.7 Now so far as
the reliance placed upon the decision of the Bombay High Court by the
learned advocate appearing on behalf of original defendant in the
case of Prashant Commercial (supra) is concerned, before the Bombay
High Court the main dispute was whether a contract between a member
and non-member for purchase and sales of securities is deemed to be
made subject to rules/bye-laws and the regulations of the Bombay
Stock Exchange and any dispute or claim arising therefrom being
subject to arbitration in accordance with provisions contained in
bye-laws, and therefore the civil court would not have any
jurisdiction over such dispute. Before the Bombay High Court as such
there was no specific question whether in view of arbitration
agreement and the bye-laws, the jurisdiction of the civil court is
excluded. Even the Bombay High Court has not specifically dealt with
the said question in detail considering section 9 of the cpc. Even
otherwise considering the decision of the Hon'ble Supreme Court
referred to hereinabove and the discussions made hereinabove, this
Court is not in agreement with the view expressed by the Bombay High
Court in the said decision to the effect that the civil court would
not have any jurisdiction over the dispute where there is an
arbitration agreement. This Court is in complete agreement with the
view expressed by the Rajasthan High Court in the aforesaid decision.
12. At the end of
the above discussion, therefore it is to be held that merely because
there is an arbitration clause and/or bye-laws provides for referring
the dispute and the claim to the arbitration, the civil court's
jurisdiction is not barred but the same is subject to Section 8 of
the Arbitration Act, 1996. Under the circumstances, it cannot be
said that the court below has committed any error and/or acted
illegally in dismissing the application submitted by the defendant
submitted under Order 7 Rule 11(d) of the CPC by which it was prayed
to reject the plaint. No illegality has been committed by the trial
court in dismissing the said applications, which calls for
interference of this Court in exercise of the powers under Article
227 of the Constitution of India.
13. For the reasons
stated above, all the petitions fail and deserves to be dismissed and
are accordingly dismissed, and as stated above, it is held that
merely because there is an arbitration agreement the civil court's
jurisdiction is not ousted at all, however the same would be subject
to Section 8 of the Arbitration Act of 1996 and other relevant
provisions of the Arbitration Act. Rule is discharged in each of the
petitions. In the facts and circumstances of the case, there shall
be no order as to costs.
( M.R. SHAH, J. )
syed/
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