HC allows defaulting brokers to file arbitration

The Bombay High Court has ruled that a broker who has been declared a defaulter can file arbitration to recover his dues while a non-member can also file arbitration to recover dues from the defaulter.

This ruling came as a result of a case betwen O P Roongta and S Jagannath Tibrewala.

In this particular case the High Court has held that if the settled interpretation is disturbed the welfare scheme of the stock exchange for the benefit of the defaulting member would also come into difficulty.

Tibrewala, one of the respondents was declared a defaulter by the Bombay Stock Exchange. He had entered into certain transactions with Roongta, as a result of which certain amounts became payable to him. The case finally went into arbitration. Lawyer Ravi Goenka, of Goenka Law Associates appeared for Tibrewala.

According to the ruling, though Tibrewala ceased to be a member during the pendency of the dispute, and though the dispute between him and the petitioner (Roongta) - which related to a transaction which was subject to the bye-laws, rules and regulations of the exchange - turned into one between a member and a non-member, it continued to be arbitrable and therefore for these reasons, "the arbitral tribunal does not lose jurisdiction to continue the reference."

The judgement has also given a wide interpretation to the Arbitration and Conciliation Act, holding that Section 12 of the Act casts a duty on the arbitrator to disclose all those facts which gives rise to the justificable doubts as to his independence and impartiality.

In the event that the arbitrator fails to disclose all such points giving rise to doubts about his impartiality then the award passed by such an arbitrator is likely to be set aside.