1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO.2 OF 2002 Porecha Global Securities Pvt. Ltd. ....Petitioner V/s. Mrs.Bina Sahni ....Respondent Mr.Simil Purohit i/b M/s.Purohit & Co. for the Petitioner. Mr.Shailesh Shah with Ms.Asha Nair i/b Mahesh Menon & Co. for the Respondent. CORAM : S.J. VAZIFDAR, J. DATE : 2ND DECEMBER, 2009. ORAL JUDGMENT :- 1. This is a Petition for setting aside a purported award dated 21.3.2001 of the Appellate Bench and a purported award dated 11.10.2000 made by the Arbitral Tribunal. I use the term “purported” advisedly for I have come to the conclusion that the decisions are not awards either under the Arbitration and Conciliation Act, 1996 or the arbitration agreement between the parties. 2. The Petitioner is a member of The Mumbai Stock Exchange and carries on business as a share and stock broker. The Assistant Commissioner of Income Tax requested the Petitioner to sell 1,89,000 shares of C.J. Gelatine Products Ltd. standing in the name of the Respondent and to deposit the sale proceeds with the Income Tax Department after deducting the brokerage and other expenses. The 2 Petitioner sold 1,02,000 shares at an average rate of Rs.43.18 per share realizing a net amount of Rs.44,69,098/- and requested the company to effect the transfer of the shares in favour of the transferees. The company however refused to register the transfer on the ground that the Respondent had undertaken to I.C.I.C.I. not to transfer the promoters shares. The shares were therefore returned and constituted a bad delivery. The Petitioner informed the Income Tax Authorities of the same. The BSE informed the members of the non-transferability of the Respondent’s shares and directed them to close out the transaction in respect of the Respondent’s shares. Thereafter 90,200 of the said shares were received back as bad delivery. In accordance with the directions of the BSE, the Petitioner closed out the transaction in respect of all the shares including 11,800 shares still to be received back on account of the bad delivery. This procedure was completed by June, 1996. The Petitioner deposited the sale proceeds with the Income Tax Department. 3. Three years thereafter, the Respondent by her advocate’s letter dated 14.3.1998 addressed to the Executive Director of The Stock Exchange alleged that she had been cheated by substantial amounts ; that the Petitioner had failed to give inspection of the contracts and account in respect of the said transaction and stated that The Stock Exchange would also be involved in any civil or criminal proceedings “that may be initiated” by her. The Stock Exchange was requested as “a supervisory body” to ensure that the Petitioner gave the Respondent necessary particulars and inspection forthwith failing which it was stated that they would “feel constrained to proceed further in the matter in such manner as she may 3 be advised”. 4. There is in The Stock Exchange a Committee known as the Investors’ Grievances Redressal Committee (IGRC). Pursuant to the Respondent’s said complaint, the IGRC passed an order directing the Petitioner to return 1850 shares of the company and a sum of Rs. 10,29,403/- to the Respondent. I will deal with the nature of the IGRC and the effect of the decision of the IGRC after narrating the further proceedings adopted by the Petitioner. Suffice it to note that the further proceedings were based solely on and were in relation to the decision of IGRC. 5. Aggrieved by the directions of the IGRC, the Petitioner filed a reference before the Arbitral Tribunal. A majority of two out of three members of the Arbitral Tribunal by their purported award dated 11.10.2000, after dealing with the decision of the IGRC, dismissed the Petitioner’s application and stated ”Award accordingly Reference closed”. In other words all that the Arbitral Tribunal did was to dismiss the Petitioner’ reference which in turn challenged the decision of the IGRC. The Petitioner’s reference to the Arbitral Tribunal was only with reference to the decision of the IGRC. It was not an independent reference for the adjudication of a claim in accordance with the arbitral procedure provided in the Rules, Bye-laws and Regulations of The Stock Exchange. 6. Being aggrieved by the decision of the Arbitral Tribunal, the Petitioner filed an appeal before the Appellate Bench, Arbitration Department, Stock Exchange. The Petitioner approached the Appellate Bench in respect of the decision of the Arbitral Tribunal. The Appellate 4 Bench by the purported award dated 21.3.2001 made the award directing the Petitioner to deposit Rs.4,48,647=50 with The Stock Exchange with interest at 9% p.a. from 6.7.1998 till the date of the deposit within seven days, failing which the Petitioner was directed to pay interest at 24% p.a. The decision of the Arbitral Tribunal was as I have noted earlier based on a reference solely with respect to the decision of the IGRC. It may only be noted here that the Arbitral Tribunal does not have appellate powers over the findings or decision of the IGRC. 7. The IGRC is not an Arbitral Tribunal. Mr.Shah, the learned counsel appearing on behalf of the Respondent was unable to indicate anything in the Rules, Bye-laws and Regulations of The Stock Exchange which conferred upon the IGRC any power whatsoever to arbitrate in respect of the disputes between the parties such as the Petitioner and the Respondent or for that matter any other parties. The entire role of the IGRC is informal and the IGRC has no power to pass any directions in a matter of this nature. I hasten to add that I am not concerned here with the directions that the IGRC may issue regarding the Petitioner’s membership with The Stock Exchange and the effect thereof. I am only concerned with the order/directions issued by the IGRC, on the Respondent’s complaint to The Stock Exchange against the Petitioner. 8. It is axiomatic then that any further proceedings based on or with reference to the order of the IGRC cannot be said to be arbitration proceedings in accordance with the Rules, Bye-laws and Regulations of The Stock Exchange. The purported awards were based solely on and in relation to and connected only with the order of the IGRC. Neither the 5 Petitioner nor the Respondent invoked the arbitration process under or in accordance with the arbitral procedure under the Rules, Bye-laws and Regulations independently in respect of the disputes and differences between them. The procedure prescribed for arbitration was not followed for the arbitral process was not initiated at all. The Arbitral Tribunal is not concerned with and has no jurisdiction to sit in appeal over or even consider the decision of the IGRC. 9. There could have been no award in the Respondent’s favour of the Appellate Bench for another reason. I will presume for the purpose of this judgment and while considering Mr.Shah’s next submission that the Arbitral Tribunal was a duly constituted one under the Rules, Bye-laws and Regulations had the arbitration proceedings been initiated in accordance therewith. Mr.Shah admitted however that the Respondent never initiated arbitration proceedings in any manner whatsoever in respect of her grievance against the Petitioner with The Stock Exchange either under the said Rules, Bye-laws and Regulations or even otherwise. He however, contended that despite the same and despite the fact that the IGRC had no power or authority to issue such directions, the award by the Arbitral Tribunal and by the Appellate Bench must be upheld in view of the fact that at least the Petitioner had made a reference. 10. As stated earlier, the Respondent had not only not filed a statement of claim but had not even invoked the arbitration provided for under the Rules, Bye-laws and Regulations of The Stock Exchange. It is not open to an Arbitral Tribunal to make an award in favour of a party who 6 has neither invoked the arbitral process nor sought any relief. This would be so even if the other party has invoked the arbitral process and sought relief. The rejection of a claim made by a party in arbitration does not entitle the Arbitral Tribunal to make an award granting a claim in favour of the other party without such party having made a claim in arbitration. 11. It was not even necessary for the Petitioner to have challenged the order of the IGRC before the Arbitral Tribunal. At least in so far as the decision purported to adjudicate the rights between the Petitioner and the Respondent, the IGRC had no power or authority to do so. The IGRC in any event was not entitled to pass the arbitral award. It was outside the purview of the arbitration machinery provided under the Rule, Bye-laws and Regulations of The Stock Exchange. The decision of the IGRC therefore could never have been enforced as an arbitral award under the 1996 Act or otherwise. In this view of the matter, the mere fact that the Petitioner filed a reference before the Arbitral Tribunal cannot confer upon the decision of the IGRC the status of an arbitration award. Nor can it change the status of the IGRC order into that of an arbitration award. 12. The purported award of the Appellate Bench suffers from the same infirmity as the purported award of the Arbitral Tribunal. In other words, if the decision of the IGRC was not an award, all subsequent proceedings and orders/purported awards based thereon or connected therewith and that too at the instance of the Petitioner can be of no value whatsoever as awards as neither the decision of the IGRC, the Arbitral Tribunal and the Appellate Bench can be said to be the awards within the 7 meaning of that expression in the said Act and the said Rules, Bye-laws and Regulations. 13. Mr.Shah submitted that the Respondent cannot be faulted for the decision of the IGRC as the Respondent did not invoke the jurisdiction of the IRGC. The Stock Exchange referred the matter to the IRGC on its own. 14. Firstly that would make no difference to the status or nature of the decision of the IGRC. In other words the reference by The Stock Exchange to the IRGC would not clothe the IGRC with the powers of an Arbitral Tribunal or convert its status to that of an Arbitral Tribunal. Secondly, the letter/complaint addressed by the Respondent did not invoke the arbitral procedure/procedure in the Rules, Bye-laws and Regulations of The Stock Exchange. Much less did it raise a claim. Even if it did, that would not entitle the IGRC to make an arbitral award. 15. Mr.Purohit’s other submissions were in the alternative and based on the assumption that the said decisions were awards. As I have come to the conclusion that they are not, it is not necessary to deal with the same. 16. In the circumstances, the Petition is disposed of by holding that the decision of the IGRC has no force of law and the said purported awards are not awards within the meaning of the said Act. In as much as they purport to be awards, the Petition is made absolute as prayed. There shall however be no order as to costs. This order is stayed upto and including 31.1.2010.