HARINARAYAN G. BAJAJ versus RAJESH MEGHANI AND ANR.

Citation: [2004] SUPP. 6 S.C.R. 721 · Decided: 06-12-2004 · Supreme Court of India · Bench: RUMA PAL · Disposal: Dismissed

Judgment (excerpt)

HARINARA YAN G. BAJAJ 
v. 
RAJESH MEGHANI AND ANR. 
DECEMBER 6, 2004 
[RUMA PAL, ARIJIT PASAYAT AND C.K. THAKKER, JJ.] 
Securities Contract (Regulation) Act, 1956; Ss. 3(2), 8, 9/National 
Stock Exchange Rules and Byelaws; Rule 33, Byelaws 1, 1-C, 2 and 23 
of Chapter XI and Byelaws 19, 26 and 28 of Chapter XII : 
Trading in shares-Purchaser defaulted in making payment-Broker 
declared defaulter by National Stock Exchange-Claim-Arbitration-
Arbitral Tribunal awarded certain amount in favour of defaulter/broker-
Right of defaulting member/broker in filing claim-Held : .Ex-trading 
member/defaulter remains party to the arbitration agreement and Bye/aw 
1-C does not restrict the right of the defaulter to refer the claim for 
arbitration-Defaulter's Committee precludes from referring defaulters 
claim to arbitration-Since amount which may be realized by defaulter must 
'be made over to Defaulter Committee, purchaser's apprehension of 
misappropriation of the amount by the defaulter is without any basis-More 
so, Defaulter Committee competent to take action independently against the 
defaulter or his debtor or both-Further protection, if any required, could 
be provided by the Exchange by framing on appropriate Bye-law-
Arbitration and Conciliation Act, 1996; Section 34-/nterpretation of 
Statutes. 
Maxims 
Maxim "expressio unius est exclusio alterious"-Applicability of. 
Words and Phrases : 
'Parties to the arbitration agreement '-Meangin of 
A 
c 
D 
E 
F 
G 
Appellant started trading in shares through the respondent, a 
share-broker, however, he allegedly did not make payment to the broker. 
National stock Exchange (NSE) declared the broker defaulter. H 
721 
722 
SUPREME COURT REPORTS (2.004] SUPP. 6 S.C.R. 
A 
Respondent referred his claim against the appellant to Arbitration 
under the Byelaws of NSE. The Arbitral Tribunal passed an award in 
favour of the respondent. Challenging the award, the appellant filed an 
application under Section 34 of the Arbitration and Conciliation Act in 
the High Court. The High Court directed the Arbitral Tribunal to give 
B a finding on the issue as to whether the respondent was in a position to 
deliver the shares to appellant when he was declared defaulter by NSE 
and appellant was directed to deposit the awarded amount in the Court. 
Division Bench of the High Court se aside the direction of the Single 
Judge relating to the deposit of the awarded amount and directed that 
any amount which may be recovered by the respondent as a result of 
C the arbitration proceedings be made over to the Defaulters' Committee 
to be dealt with in accordance with the Rules/Byelaws of NSE. Hence 
the present appeal. 
It was contended by the appellant that although the dispute relating 
D to a defaulter member survived, he loses his right to refer the dispute 
to arbitrator in terms of Rule 33 of the NSE Rules; and that the dispute 
could only be raised by the Defaulter's Committee in terms of Bye-law 
11 of Chapter XI since estate of the defaulter could be represented by 
the Defaulters' Committee. 
E 
F 
Respondent submitted that Rule 33 of the NSE Rules could not be 
construed to cover the right to go to arbitration since the right is not 
part of the privileges of membership but arises out of the contract 
between the respondent and the appellant and, therefore, the respondent 
could not be deprived of this right under the Rules; that Rule 1-C of 
the Rules clearly indicates that the disputes arising out of a transaction 
prior to a trading member being declared a defaulter survived and could 
be referred to arbitration only by the parties to the arbitration agreement; 
that there was limited vesting of certain assets of the defaulting members 
in the Defaulters' Committee which did not cover contractual rights of 
a defaulting member against a non-member and that neither the 
G Defaulters' Committee nor NSE had ever asserted the right to refer the 
disputes of a defaulting member to arbitration or had they questioned 
the locus standi of the respondent to do so. 
Dismissing the appeal, the Court 
H 
HELD : I.I. Under the NSE Byelaws, the parties to the reference 
HARINARA YAN G. BAJAJ v. RAJESH MEGHAN! 
723 
are the parties to the agreement. This is also what is what is provided 
under Section 2(h) of the Arbitration and Conciliation Act and a 'party' 
is defined as "a party to an arbitration agreement". (730-B-C] 
1.2. Byelaw 1-C envisages claims, differences, disputes between the 
parties me

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