ROSHAN LAL GUPTA Vs. PARASRAM HOLDINGS PVT LTD

JUDGEMENT

(1.) THE appellant/petitioner on 9th January, 1997 instituted in the court of the Senior Civil Judge, Delhi a suit for declaration and permanent injunction from which the Regular Second Appeal (RSA) has arisen. It was the case of the petitioner/appellant in the plaint that he is a retired officer from the IDBI; that the respondent No. 1 Shri Parasram Holdings Pvt Ltd (hereinafter called the "stock Broker") is carrying on business as a stock broker and is a member of the (respondent No. 3 in the RSA) M/s National Stock Exchange of India Ltd (hereinafter called the "stock exchange"); that the petitioner/appellant had purchased and sold some shares through the stock broker during the period from 3rd July, 1996 to 9th July, 1996 and in which transaction he had suffered losses and had squared up his account vide his cheque dated 10th July, 1996 and had thereafter stopped purchase/sale of shares through the stock broker or anyone else; that the petitioner/appellant on 22nd December, 1996 received notice from the stock exchange of the statement of claim received by the stock exchange from the stock broker and requiring the petitioner/appellant to submit his defence thereto together with fee of arbitration as well as his nominees from the panel of arbitrators of the stock exchange; that the stock broker had filed a totally false claim against the petitioner/appellant with the stock exchange and on the basis of fabricated and forged documents; that photocopy of the Member Constituent Agreement received by the petitioner/appellant as part of the claim of the stock broker though purported to be signed by the petitioner/appellant was, in fact, not signed by him and never executed by him and had been forged and fabricated to cause the stock exchange to entertain the claim of the stock broker for arbitration; that the petitioner/appellant had never authorized the transactions on the basis whereof the claim was made and had not made any part payment, after adjusting which the balance was being claimed by the stock broker.

(2.) THE petitioner/appellant further claimed that he had, prior to the institution of the suit, served a legal notice on the stock broker and the stock exchange calling upon them to withdraw the claim and the request for arbitration but no reply had been received thereto. The petitioner / appellant apprehending that the stock broker and the stock exchange will continue with the arbitration proceedings, instituted the suit for the relief of declaration that the Member Constituent Agreement relied upon by the stock broker and providing for arbitration of the stock exchange was fabricated and forged and thus void and for perpetual injunction restraining the stock exchange from taking any arbitration proceedings in pursuance to the notice aforesaid served on the petitioner/appellant.

(3.) SUMMONS/notice of the suit/application for interim relief were issued on 9th January, 1997 for 16th January, 1997. On 16th January, 1997 the stock broker (and its director who was impleaded as defendant No. 2 and who is respondent No. 2 in the RSA) filed their written statement. In the preliminary objections in the written statement it was, inter alia, stated that the suit was not maintainable owing to the Arbitration and Conciliation Act, 1996 having come into force on 25th January, 1996; reference was made to Section 5 thereof and it was pleaded that there was no provision under the Act to challenge the arbitration agreement before the court when the arbitration proceedings had already commenced; the claim in suit for permanent injunction was also pleaded to be barred by Section 41 (h) of the Specific Relief Act; it was further pleaded that in view of the byelaws of the stock exchange providing for arbitration of disputes between the stock broker and its clients/constituents, the court had no jurisdiction to try the suit. Other pleas on merits were also taken in the written statement.