M.R. Shah, J.@mdashAs common question of law and facts arise in there 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 CPC 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 CPC 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 CPC 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 C.P.C. 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 C.P.C. 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 Regulations 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 C.P.C.
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
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 C.P.C., 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.
(i)
(ii)
(iii)
(iv)
(v)
4.1. He has also relied upon the decision of Rajasthan High Court in the case of Mahesh Kumar v. Rajasthan State Road Transport Corporation reported in AIR 2006 Raj. 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, fulfilment 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 have 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 u/s 8 of the Arbitration Act, and subject to fulfilment 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 u/s 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 u/s 34 of the Arbitration Act, 1996. Therefore, even the arbitral award is subject to the order passed by the Civil Court subject limitation u/s 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 C.P.C. 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 setup 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 I.T.I. 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 C.P.C. 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 C.P.C. 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.
