IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO.13 OF 2008 Kotak Securities Limited .. Petitioner Versus Chetan Bhandary & Ors. .. Respondents Mr.Jaideep Mitra i/by D’Lima & Associates for the petitioner. Mr.Chetan Bhandary respondent no.1-in person. CORAM CORAM CORAM : A.S.OKA, J. : A.S.OKA, J. : A.S.OKA, J. DATE DATE DATE : 25th November 2008. : 25th November 2008. : 25th November 2008. JUDGMENT: JUDGMENT: JUDGMENT: . The 1st respondent appearing in person raised a preliminary objection contending that this Court does not have jurisdiction to entertain and decide this petition under section 34 of the Arbitration and Conciliation Act, 1996. I have heard the learned counsel appearing for the petitioner on the said preliminary objection regarding the maintainability of this petition in this Court. I have also heard the 1st respondent appearing in person. 2. The prayer in this petition under section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter 2 referred to "as the said Act") is of setting aside the award dated 18th September 2007 passed by the sole arbitrator under the Bye-Laws, Rules and Regulations of the National Stock Exchange of India Ltd. 3. Briefly stated, the 1st respondent approached the petitioner for availing Securities Trading Facility with the Bombay Stock Exchange and National Stock Exchange. The case of the petitioner is that after execution of all necessary documents, the 1st respondent was admitted as client with effect from April 2006 and was allotted a client Code. A reference has been made to the documents executed by the 1st respondent including risk disclosure document by which the 1st respondent agreed to maintain sufficient margin either in the form of cash or in the form of securities. The specific case made out in the petition is that the 1st respondent availed services of the petitioner through the 3rd respondent and carried on business. 4. On 29th December 2006, the 1st respondent executed several trades when Nissan Copper Ltd got listed with Exchange and the 1st respondent short sold 16,000 shares of the said company seven times at various rates. The contract notes for the said trades were sent 3 to the 1st respondent. The case of the petitioner is that the said trades were instructed by the 1st respondent within a gap of two to three minutes. The 1st respondent defaulted in giving delivery of the said 16,000 shares and therefore the shares were auctioned which resulted in debit of Rs.17,04,480/- in the account of the 1st respondent. According to the case of the petitioner as on 07th January 2007 the 1st respondent had a debit of Rs.09,04,165/-. The case of the petitioner is that the 1st respondent admitted his liability and instructed the petitioner to sell 500 shares of another company and assured to pay Rs.50,000/- within a week. He made a request for permitting him to pay the balance amount in 36 instalments. The case is that though the 1st respondent paid a sum of Rs.50,000/-, he failed and neglected to pay the balance amount. The petitioner called upon the 1st respondent to pay the outstanding amount by notice dated 20th April 2007. Another letter dated 07th May 2007 was issued to the 1st respondent calling upon him to discharge his liability. As the 1st respondent did not discharge the liability, the petitioner submitted its claim petition before the arbitration department of the 2nd respondent (the National Stock Exchange of India). The claim was registered. The 1st respondent disputed the claim of 4 the petitioner and made a counter claim for loss of Rs.08,43,500/- towards selling of shares of the Nissan Copper Limited, refund of a sum of Rs.48,250/- towards sell of 500 shares of Orchid Chemicals and for reimbursement of Rs.50,000/- towards the cheque amount paid by him. He claimed a sum of Rs.01,00,000/- as compensation on account of mental agony and hardship. The counter claim was replied to by the petitioner. 5. Mr.M.V.Badrinath was appointed as the sole arbitrator. By the impugned award, the learned arbitrator dismissed the claim of the petitioner. The counter claim made by the 1st respondent was allowed and the petitioner was directed to pay to the 1st respondent a sum of Rs.08,74,750/- with interest at the rate of 12% per annum from 29th December 2006 till the date of the award. The petitioner was directed to pay costs and expenses in the sum of Rs.50,000/- to the 1st respondent. 6. The contention of the 1st respondent appearing in person is that the 3rd respondent is a Banglore based registered sub-broker of the petitioner and he was availing services of the petitioner through the said sub-broker. According to the 1st respondent, he had 5 opened an account through the 3rd respondent and the disputed transaction of 29th January 2006 was punched by the 3rd respondent. His submission is that the cause of action arose at Bangalore. He pointed out that even the petitioner was having an office at Bangalore. He relied upon a decision of the Apex Court in the case of Patel Roadways Limited Vs. Prasad Trading Company [(1991) 4 Supreme Court Cases 270]. He also pointed out that the arbitral proceedings were held at Chennai. He submitted that this Court has no jurisdiction to entertain this petition under section 34 of the said Act. 7. The learned counsel appearing for the petitioner relied upon a decision of learned single Judge of the Delhi High Court in the case of M/s.Gulati Construction Co Vs. Betwa River Board and Another [AIR 1984 Delhi 299]. He submitted that the place at which the arbitral proceedings are conducted is irrelevant for deciding the issue of jurisdiction. He also placed reliance on a decision of Gujrat High Court in the case of Hemburg Bulk Carriers GMBH Vs. Vishal Exports Overseas Ltd [2005 (2) R.A.J. 675 (Guj)]. He invited my attention to the amended paragraph 7 of the petition. He submitted that as per the bye-laws of the 2nd respondent, the claim was filed before the Regional 6 Arbitration Centre at Chennai and therefore the award was made at Chennai. He submitted that all the transactions had been carried out by the 1st respondent at the exchange situated at Bombay and therefore in view of section 2(1)(e) of the said Act, this Court has jurisdiction to entertain and try this petition. He also invited my attention to Regulation No.5.3A of the 2nd respondent which provides that proceedings against the 2nd respondent need to be instituted before the Courts at Bombay. He submitted that the decision of the Apex Court in the case of Patel Roadways (supra) will have no application to the facts of this case. 8. I have carefully considered the submissions. A petition under section 34 of the said Act is maintainable before the Court as defined by section 2(1)(e) of the said Act. The said clause (e) reads thus: "2(1)(e) "Court" means the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the 7 arbitration if the same had been the subject-matter of a suit, but does not include any civil court of a grade inferior to such principal Civil Court, or any Court of Small Causes;" Thus, this Court will have jurisdiction provided this Court has jurisdiction to decide the questions forming the subject matter of arbitration if the same had been the subject matter of a suit. In the circumstances, reference will have to be made to the relevant provisions of the Code of Civil Procedure, 1908. The relevant section is section 20 of the said Code which reads thus: "20. Other suits to be instituted where defendants reside or cause of action arises.-Subject to the limitations aforesaid, every suit shall be instituted in a Court within the local limits of whose jurisdiction- (a) the defendant, or each of the defendants where there are more than one, at the time of the commencement of the suit, actually and 8 voluntarily resides, or carries on business, or personally works for gain; or (b) any of the defendants, where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain, provided that in such case either the leave of the Court is given, or the defendants who do not reside, or carry on business, or personally work for gain, as aforesaid, acquiesce in such institution; or (c) the cause of action, wholly or in part, arises." 9. Now coming back to the facts of the case, the claim was filed by the petitioner before the Regional Arbitration Centre at Chennai by invoking the provisions relating to the arbitration under the Bye Laws, Rules and Regulations of the 2nd respondent. The claim made by the petitioner before the Arbitral Tribunal was against the 1st respondent. On application made by the 1st respondent, the learned arbitrator directed the 3rd 9 respondent to file a reply. It is an admitted position that the 3rd respondent is a registered sub-broker of the petitioner and that the 1st respondent was availing services of the petitioner through the 3rd respondent. Infact, there are specific averments made in the petition to that effect. The 3rd respondent filed a reply before the learned Arbitrator pointing out that the said respondent had executed Member-Sub-broker-Client Agreement dated 27th December 2006 with the 1st respondent herein. The 1st respondent is an ordinary resident of Banglore and carries on business at Banglore. The 3rd defendant is carrying on business at Banglore. The reply filed by the 3rd respondent discloses that the instructions were given by the 1st respondent from time to time to the 3rd respondent at Bangalore. The 2nd respondent National Stock Exchange of India is a formal party to this petition in the sense that a reference was made to the arbitrator appointed under the Bye Laws, Rules and Regulations of the 2nd respondent. The 2nd respondent is not a party to the arbitral proceedings. 10. My attention was invited to page 104 of the petition which is a copy of letter dated 29th January 2007 sent by the petitioner to the 1st respondent which 10 shows that the petitioner is having an office at Bangalore. My attention was invited to documents at pages 95 and 96 which also record that the petitioner was having an office at Bangalore. The 1st respondent appearing in person has relied upon the decision of the Apex Court in the case of Patel Roadways (supra). The Apex Court has considered the scope of the exception to section 20. 11. Going by claim made by the petitioner before the learned arbitrator and the admitted position that the 1st respondent availed of the services of the petitioner through 3rd respondent which is stationed at Bangalore, it is not possible to accept the case made out by the petitioner that any part of the cause of action arose within the Ordinary Original Civil Jurisdiction of this Court. Reliance was sought to be placed on regulations of the 2nd respondent by contending that the proceedings against 2nd respondent need to be instituted only before the Courts in Mumbai. As stated earlier, the 2nd respondent is not a party to the arbitral proceedings and infact the arbitration was in terms of Bye Laws, Rules and Regulations of the 2nd respondent. In fact the 2nd respondent is neither a necessary nor a proper party to this petition. Therefore, the relevant clause 11 in the Regulation of the 2nd respondent will not help the petitioner. As stated earlier, the arbitral proceedings were conducted at Chennai and award was made at Chennai. However, it may not be a relevant factor for determining the issue of jurisdiction in view of clause (e) of sub section 1 of section 2 of the said Act. If the petitioner was to file a civil suit against the 1st respondent in this Court regarding the questions subject matter of arbitration, clause (c) of sub section 1 of section 20 of the said Code could not have been invoked by the petitioner. The petitioner is having an office at Banglore. The 1st respondent resides and carries on business at Banglore. Clauses (a) and (b) of section 20 are obviously not applicable. 12. In the circumstances, preliminary objection raised by the 1st respondent appearing in person will have to be upheld and the petition will have to be returned for presentation to proper Court. 13. Hence, I pass the following order: The petition is ordered to be returned to the petitioner for presentation before the appropriate Court. 12 (A.S.Oka,J)