SHANKARLAL V. KESWANI Vs. INDIA INFOLINE LTD

JUDGEMENT

(1.) THE appeal arises from a judgment of a learned Single Judge dated 1 October 2012 on a Petition which challenged an arbitral award of the appellate tribunal of the Bombay Stock Exchange. The judgment in appeal, has dismissed the petition under Section 34 of the Arbitration and Conciliation Act, 1996. The Petitioner before the Single Judge is in appeal.

(2.) THE Respondent is a member of the Bombay Stock Exchange (BSE) and of the National Stock Exchange (NSE). The Appellant was a constituent. The Appellant and the Respondent entered into an agreement on 27 November 2006 in pursuance of which transactions were entered into both on the BSE and the NSE. According to the Respondent, the transactions on the BSE resulted in a debit of Rs. 1.17 crores on 12 February 2008. The case of the Respondent is that in February, May and October 2008, the Appellant met a director of the Respondent in the presence of its Vice President and one Deepak Bathija, who was acting as a Relationship Manager of the Respondent and was closely related to the Appellant. At these meetings, the Appellant is alleged to have requested the Respondent not to dispose of the shares held by the Appellant in two companies, Opto Circuit Ltd. and IVR Prime Ltd. which were available as collateral security. Accordingly, the Respondent waited until 24 October 2008 when it proceeded to dispose of all shares held by it on behalf of the Appellant. After deducting the value of shares sold from the outstanding of Rs. 1.17 crores, the claim in arbitration was in the amount of Rs. 78.63 lakhs.

(3.) THE rejection of the counter claim was not challenged in appeal by the Appellant before the appellate tribunal of the BSE. The appeal was filed only by the Respondent to challenge the rejection of its claim by the arbitral tribunal. The appellate tribunal constituted by the BSE allowed the appeal of the Respondent on 7 January 2011. The appellate tribunal came to the conclusion that: (i) There was a debit balance in the account of the Appellant as on 12 February 2008 in the amount of Rs.1.17 crores which stood reduced by an amount of Rs. 32.76 lakhs by the sale of shares in October 2008; (ii) The bye -laws of the stock exchange permitted the sale of shares by the Respondent and in fact, the entire counter claim of the Appellant proceeded on the basis that the Respondent ought to have disposed of the shares in February 2008 and in failing to do so, a loss had been caused to the Appellant; (iii) It was for the Respondent to select the time when the shares would be sold and significantly, nothing prevented the Appellant to instruct the Respondent to dispose of the shares at a time which he had considered to be the most appropriate; (iv) There was no reason to disbelieve the Respondent that it was the Appellant who had approached the Respondent with a request to withhold the sale of shares. This was taken into consideration as a justification for the time selected by the Respondent and not that it extended limitation; (v) The starting point of limitation would be 22 October 2008 and/or 31 October 2008 and not 12 February 2008 in which event the reference was filed within six months and was within time.