MUKESH MANSUKHBHAI KANANI Vs. EDELWEISS FINANCIAL ADVISORS LTD

JUDGEMENT

(1.) This arbitration petition challenges an award passed by Appellate Arbitral Tribunal of National Stock Exchange. By the impugned award, the tribunal directed the Petitioner herein, who was the constituent of the Respondent sharebroker, to pay to the Respondent a sum of Rs.15,89,399.69.00 together with interest. This sum was said to represent the dues owed by the Petitioner to the Respondent under a member client agreement for trading on the National Stock Exchange.

(2.) The relationship between the parties and the dues owed by the Petitioner to the Respondent at the foot of his trading account are not matters of dispute. What is disputed by the Petitioner, and on which the arbitral tribunal has held against him, is (i) maintainability of the arbitration reference on account of time bar and (ii) justifiability of the Respondent's claim on account of the latter's breach of his obligations under the applicable regulations. It is submitted that the Respondent's claim was time barred, since it was made more than three years after the last entry in the trading account. Secondly, it is submitted that under Clause 3.11 of Part A of Capital Market Regulations of NSE (constituent in default), as explained by clarifications issued by the National Stock Exchange, the Respondent, as a trading member, was bound to sell the Petitioner's securities held by him by the fifth trading day from the date of pay-in, i.e. at T+5. It is submitted that had the Respondent complied with this obligation, no amount would have been due by the Petitioner to the Respondent in the trading account.

(3.) So far as limitation is concerned, the arbitral tribunal, in its award, has held that the last transaction in the account was admittedly of the trade executed on 3 Nov. 2010 and it was also an admitted fact that the Petitioner herein had paid an amount of Rs.35 lakhs to the Respondent trading member on 4 Nov. 2010. The arbitral tribunal observed that the period of limitation for the sake of the arbitration reference, as per the relevant provisions, would come to an end on 31 Dec. 2019, i.e. three years after the end of the quarter, during which the last entry was made in the account. The arbitral tribunal held that since the arbitration reference was filed on 29 Nov. 2013, the same was within time. No fault can be found with this assessment by the arbitral tribunal. The arbitral tribunal has correctly applied Art. 113 of the Schedule to the Limitation Act to the facts of the case. The member client agreement between the parties indisputably shows that the Petitioner had settled for quarterly settlement of fund/securities. In other words, the settlement of the account had to be on a quarterly basis. Since the last entry is made in the account in the quarter commencing from 1 Sept. 2010 and ending on 31 Dec. 2010, the settlement of the account inter alia based on such entry was due as at 31 Dec. 2010 and, if that is so, the period of limitation available for invoking the arbitration agreement is upto 31 Dec. 2013, i.e. for a period of three years when the right to sue accrues in accordance with Art. 113. Learned Counsel for the Petitioner relies on the judgment of State of Punjab vs. Gurdev Singh, 1991 4 SCC 1 in support of his case on limitation. Gurdev Singh's case involved a challenge to dismissal from service. The Supreme Court held that the right to sue could be said to have accrued in favour of the employees concerned on the date of passing of the order of dismissal or on the date of rejection of departmental appeal/revision against such order. In the present case, the right to sue can be said to have arisen when the Petitioner failed to settle the account at the end of the quarter in which the last entry was made in the account. The suit, reckoned by that date, as noted above, was within time. The case of Pankaj Goshar vs. Fortune Equity Brokers (I) Ltd., ARBP/368/2003 dtd. 28/3/20015,Coram: D.K. Deshmukh, J. , referred to by learned Counsel for the Petitioner, also does not help the Petitioner. It merely reaffirms the position that the period of limitation for reference of a dispute to arbitration commences from the same date on which the cause of action for institution of a suit arises. In Pankaj Goshar's case the trading member had sent a statement of account, which our court treated as a clear demand for payment. The court held that as, even according to the trading member, his right to demand payment arose on the date he sent the statement of account, the cause of action for claiming payment arose on that date; for accrual of such cause of action, it was not necessary that the constituent should dispute his liability in writing; non-payment itself amounted to refusal to pay. This statement of law has no bearing on the facts of our case. There is, thus, no infirmity in the impugned award so far as the arbitrator's view on limitation is concerned.