Three-Month Deadline For Passing Arbitral Award Under NSE Byelaws Is Directory And Not Mandatory: Bombay High Court

Facts

The present petition was filed under Section 34, ACA challenging an arbitral award dated September 25, 2013 (“Second Award”) passed by an arbitral tribunal constituted under the bye-laws of NSE, which, in turn, was an appellate arbitral award passed in challenge to an arbitral award dated April 27, 2013 (“First Award”) passed by another arbitral tribunal in the first instance.

The Petitioner had been trading with Respondent No. 1, Motilal Oswal Securities Limited (“Motilal”) through sub-broker, Respondent No. 2, Natwarlal Parekh Securities P. Ltd. (“Natwarlal”) since 2004 without any dispute until disputes broke out in January 2008.

Contentions

The First Award was passed by an Arbitral Tribunal on April 27, 2013. The Arbitral Tribunal supposedly scheduled the first hearing for December 3, 2012. According to the Counsel for the Petitioner, the calculation of the statutory period of three-months within which the award must be passed under Rule 13 (b), NSE Byelaws should be calculated from this date.

The Counsel for the Petitioner also contended that the First Award was back-dated since the date of the First Award was merely entered by hand by the Presiding Arbitrator with the other two arbitrators not having set the dates on which they signed the First Award.

It was also contended by the Petitioner that NSE had written to him that they received the First Award on May 06, 2013 and they forthwith released it to the parties. It was contended that the NSE had verbally asked him for consent for an extension of time and while he was considering it, the First Award was delivered to him, thus there was more than met the eye in the process.

The Counsel for Petitioner also levelled allegations of bias on the part of one of the arbitrators on the basis of the sympathetic views towards brokers purportedly expressed by the Arbitrator.

As to the Second Award, which was an appellate award and which upheld the First Award, the Petitioner's main argument was the merits of the case were not properly examined as arbitral tribunals comprising former High Court judges were not equipped to handle the nuances of capital markets disputes.

Observations

The Court observed that there is a provision in the bye-laws for extensions of the mandate of the arbitral tribunal by the Managing Director or Relevant Authority in the NSE and such extensions too are capped by an overall time limit of another three months. However, it was submitted by the Petitioner that there was nothing on the record, to show that such extensions were sought and were granted. The Court initially considered factually verifying the same but held that such an exercise was not necessary.

The Court went on to analyse Rule 13, NSE Byelaws. The Court observed that from a plain reading of Rule 13(b) the time for completion of arbitration is set out as normally three months from the date of entering upon the reference. Under Rule 13(d), the date of entering upon a reference is defined as the date on which the arbitral tribunal has held the first hearing.

From an analysis of the provision, the Court held that what is expected in the byelaws is that once hearings have been held, the clock should start ticking and the arbitration must be conducted expeditiously. Therefore, if on a given date, when the parties first convene upon a hearing being scheduled but the hearing is not held because the parties seek an adjournment and the arbitral tribunal in its wisdom grants such accommodation, then the date on which the first hearing is actually held would be the date of entering upon the

reference. Applying this understanding of the provision to the facts of the case, the Court held that on December 3, 2012, the first hearing was scheduled but was not held. The arbitral has held the first hearing on January 28, 2013, and the clock started ticking from that date.

Additionally, the Court observed that since the three-month deadline was qualified by the word normally, the three-month deadline is an indicative directory deadline and not a mandatory deadline. As a matter of fact, the second paragraph of Rule 13(c) would indicate that the three-month deadline is directory in nature and it is the six-month overall deadline after extension of time, that could potentially be regarded as mandatory since it has prohibitive language.

The Court further observed that if on the first scheduled date of hearing, no hearing has been held then it would result in the event becoming a meeting and not a hearing. That was why that deadline had been made directory with scope for extensions. The use of the word “normally” for the deadline and the allowance for extensions, in the Court's opinion would inexorably result in the three-month deadline being directory and not mandatory.

As to the contention of the Petitioner, regarding the Award being back dated, the Court observed that ideally all arbitrators could have signed with the date written by hand, but not doing so would not be adequate to accept such a serious charge of manipulation of the record and back-dating by the Presiding Arbitrator.

As to the other contentions regarding the merits of the case, the Court found that the impugned awards had returned reasonable and plausible findings that did not warrant interference.

Accordingly, the Court dismissed the petition holding that there was no need for interference with the impugned award. Considering the manner of conduct in the proceedings below, the Court imposed costs amounting to Rs. 10,000 upon the Petitioner.

Case Title – Bhanuchandra J Doshi v Ms Motilal Oswal Securities Ltd. & Anr.

Case No. – Arbitration Petition No. 1341 of 2015

Appearance-

For Petitioner – Mr. Vijay M Vaghela

For Respondent – Mr. Rahul Karnik, Ms. Jagruti Vemula

Date – 14.08.2025

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