Case Note & Summary
The Petitioner, Hansraj Sohanlal Gouthi, HUF, through its Karta Ravi Gouthi, challenged an arbitral award dated 13 July 2009 passed by the Arbitral Tribunal constituted under the Rules, Byelaws and Regulations of the Bombay Stock Exchange (BSE). The dispute arose from transactions between the Petitioner and Respondent No.1, Standard Chartered STCI Capital Markets Ltd. (formerly UTI Securities Ltd.), and Respondent No.2, Ayush Securities. On 23 October 2007, Respondent No.1 filed an arbitration application before the BSE claiming Rs.40,98,609.08 against the Petitioner. The Petitioner denied the claim, alleging fraudulent transfers, and on 25 February 2008 filed a reply/counterclaim seeking payment of Rs.33,50,814.02. The Arbitral Tribunal rejected both the claim of Respondent No.1 (on the ground that they failed to substantiate authorization of transactions) and the counterclaim of the Petitioner (on the ground of limitation under BSE Byelaw 252(2)). The Respondent Bank did not challenge the rejection of its claim. The Petitioner filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging only the rejection of its counterclaim. The Court considered the issue of limitation for counterclaims in arbitration. It held that the limitation for a counterclaim should be computed from the date of filing of the claim, not from the date of accrual of the cause of action, as the counterclaim is in the nature of a defence. The Court found that the Arbitral Tribunal's decision on limitation was patently illegal and against the public policy of India. Consequently, the Court set aside the impugned award to the extent of rejection of the counterclaim and remitted the matter to the Arbitral Tribunal for fresh consideration on merits. The petition was partly allowed.
Headnote
A) Arbitration - Limitation for Counterclaim - BSE Byelaw 252(2) - The Arbitral Tribunal rejected the counterclaim solely on the ground of limitation under BSE Byelaw 252(2). The Court held that the limitation for a counterclaim in arbitration should be computed from the date of filing of the claim, not from the date of accrual of the cause of action, as the counterclaim is in the nature of a defence. The Court set aside the award to the extent of rejection of counterclaim and remitted the matter for fresh consideration on merits. (Paras 1-10) B) Arbitration - Section 34 of Arbitration and Conciliation Act, 1996 - Challenge to Arbitral Award - The Petitioner challenged the impugned award under Section 34 of the Arbitration Act. The Court found that the Arbitral Tribunal's decision on limitation was patently illegal and against the public policy of India, warranting interference under Section 34. (Paras 1-10)
Issue of Consideration
Whether the rejection of the Petitioner's counterclaim by the Arbitral Tribunal on the ground of limitation under BSE Byelaw 252(2) is sustainable in law.
Final Decision
The Court partly allowed the petition, set aside the impugned award to the extent of rejection of the counterclaim, and remitted the matter to the Arbitral Tribunal for fresh consideration on merits.
Law Points
- Limitation for counterclaim in arbitration
- BSE Byelaw 252(2)
- Section 34 of Arbitration and Conciliation Act
- 1996
- Counterclaim as defence
- Date of filing of claim as starting point for limitation
