R.V. Raveendran, J. - (1.) The Appellant and the first Respondent are members of the Mumbai Stock Exchange, the third Respondent herein (Exchange for short). The constitution, management and dealings of the Exchange are governed by the Rules, Bye-laws and Regulations of the Exchange. The Rules relate to the constitution and management of the Exchange. The Bye-laws regulate and control the dealings, transactions, bargains and contracts of its members with other members and non-members. The Regulations contain the detailed procedure regarding the various aspects covered by the Bye-laws. Though the Rules, Bye-laws and Regulations of the Exchange were not made under any statutory provision, they have a statutory flavour. Bye-laws 248 to 281D provide for and govern the arbitration between members and non-members and Bye-laws 282 to 315L provide for and govern the arbitration between members of the Exchange.
(2.) The first Respondent raised and referred a dispute against the second Respondent and the Appellant under the Rules, Bye-Laws and Regulations of the Mumbai Stock Exchange on 29.8.1998 (Arbitration Reference No. 242/1998) seeking an award for a sum of Rs. 36,98,384.73 with interest at 24% per annum on Rs. 35,42,197.50. In the said Arbitration Reference, the first Respondent alleged that Appellant and second Respondent are sister concerns with Ms. Kanan C. Sheth as a common Director; that Ms. Kanan C. Sheth approached the first Respondent to get the carry forward sauda in respect of 50,000 shares of BPL and 15,000 shares of Sterlite Industries Ltd. transferred with the first Respondent on behalf of the second respondent which was outstanding with the Appellant; that in pursuance of it, on 4.6.1998, the first Respondent got the sauda of 15,000 shares of BPL and 15,000 shares of Sterlite transferred to its account through a negotiated deal which is commonly known as all or none; that in respect of the said transactions, the first Respondent prepared, issued and delivered the contract and bill in favour of second Respondent (Contract No. F.11/4/002 dated 4.6.1998 and Bill No. A/11/0236 dated 11.6.1998 for Rs. 1,07,30,400/- and Bill No.A.11/0236 dated 11.6.1998 for Rs. 15,50,670/- ); that as the said amount remained due, the first Respondent approached the Appellant and second Respondent for clearing the said dues; that after several demands, the Appellant issued a credit kapli (Credit Slip No. 49147 dated 11.6.1998) for payment of Rs. 13 lakhs to first Respondent along with a copy of the balance-sheet (Form No. 31) for settlement (A11/98-99 for Rs. 13 lakhs); that the said kapli was rejected by the Exchange; that the first Respondent, therefore, immediately approached the Appellant and second Respondent and demanded a cheque for the said amount of Rs. 15,50,670/-; that in that behalf, the Appellant issued cheque (No. 992090 dated 11.6.1998) for Rs. 13 lakhs leaving a balance of Rs. 250,670/-; that thereafter prices of the said scripts were falling down and the first Respondent requested the Appellant and second Respondent to get the said souda re-transferred to their account; that they failed to do so, but kept on assuring that there was nothing to worry; that ultimately, at the request of the Appellant and second Respondent, the souda of 15000 shares of Sterlite was squared by selling the said shares and in respect of the squaring up of the said souda, a bill dated 19.6.1998 for Rs. 23,89,610.50 was raised by the first Respondent for the amount due by Appellant and second Respondent; that when the first Respondent demanded from Appellant and second Respondent the amounts due; they paid to the first Respondent a sum of Rs. 4.5 lakhs in cash on 18/19.6.1998; that as the souda for the 15,000 shares of BPL still remained outstanding despite requests of the first Respondent to square up the same, the first Respondent carried forward the said 15,000 shares of BPL to Settlement No. 13 and raised a bill dated 26.6.1998 showing Rs. 8,09,850/- as due to the first Respondent; and that the said carry forward purchase of 15,000 shares of BPL was again brought forward to Settlement No. 14 on 22.6.1998 and at the request of Appellant and second Respondent, the said outstanding purchase was sold on 24.6.1998 and 25.6.1998 and in that behalf, a sum of Rs. 5,42,065/- became due vide bill dated 1.7.1998. According to first Respondent, all the bills were drawn on second Respondent, as required by the Appellant, as the contract dated 4.6.1998 was in the name of second Respondent; that Ms. Kanan C. Sheth Director of Appellant and first Respondent accepted the said bills assuring payment and both were jointly and severally liable to pay the amounts due.
(3.) The first Respondent also alleged in the arbitration reference claim that in view of the non-payment of the amounts due, it wrote a letter dated 2.7.1998 to the Executive Director of the Exchange to prevail upon and direct the Appellant and second Respondent to pay the amount due, but in spite of the Exchange forwarding a copy of the said letter to appellant and second Respondent, the amount remained due; that therefore, the Executive Director of the Exchange through its Investors Service Cell permitted the first Respondent to file an arbitration claim against Appellant and second Respondent. As a sum of Rs. 35,42,197.50 remained due in spite of demands by adding interest, the total sum due as on 29.8.1998 was Rs. 36,98,384.73.;