1. Court’s decision
The Bombay High Court rejected the Section 34 petition filed by a trading client challenging a 2008 arbitral award passed under the Bombay Stock Exchange (BSE) Rules. The award had required the petitioner to pay ₹30,28,565.61 to the broker after finding the petitioner indebted on trades executed on the BSE platform. The Court held that the petitioner never objected to the constitution or jurisdiction of the arbitral tribunal during proceedings and therefore could not raise such objections for the first time under Section 34. The Court further held that the tribunal properly considered all submissions, rejected the counterclaim, and committed no patent illegality. A request for stay was denied.
2. Facts
The petitioner company opened a BSE trading account with the respondent broker under Client Code 6299. According to the broker, the petitioner incurred a debit balance, initially part-paid, and ultimately totaling ₹30,28,565.61 as of 30 September 2006. After issuing demand notices, the broker initiated arbitration on 20 October 2006 under BSE Rules.
The petitioner did not file its written statement initially, prompting the tribunal to close the matter. Upon the petitioner’s request, proceedings were reopened on payment of ₹25,000 in costs. The petitioner thereafter filed a written statement with a counterclaim of ₹46,06,547.25. The tribunal ultimately passed an award dated 27 March 2008 allowing the broker’s claim and rejecting the counterclaim, leading to the present Section 34 challenge.
3. Issues
The High Court examined two central questions:
• Whether a plea of lack of jurisdiction or incorrect tribunal constitution can be raised for the first time in a Section 34 petition.
• Whether the award suffered from “patent illegality” or misinterpretation warranting interference under Section 34(2).
Connected issues included allegations of violation of natural justice, failure to pierce the corporate veil between the broker and its associated company, and alleged suppression of material information.
4. Petitioner’s arguments
The petitioner argued that the arbitral tribunal was improperly constituted ex parte and without consultation, violating natural justice. It claimed the BSE failed to provide timely notice of proceedings and deprived it of a fair opportunity to nominate an arbitrator, present evidence, or examine witnesses.
The petitioner alleged that trading through the broker’s associated company (Angel Capital & Debt Market Ltd. on NSE) formed part of a composite course of dealings and that the tribunal erred by treating them as unrelated, thereby refusing to pierce the corporate veil. It also claimed misrepresentation, lack of proof of the broker’s monetary claim, and an improper rejection of its counterclaim. The petitioner sought setting aside of the award.
5. Respondent’s arguments
The broker argued that the petition was not maintainable because the BSE Regulations provide a 15-day period to file an internal appeal, which the petitioner never utilized. Furthermore, if the petitioner wished to challenge the tribunal’s constitution, it should have invoked Section 16 at the appropriate time.
On merits, the broker contended that the petitioner was given full opportunity to participate, submit documents, file its written statement, and present its counterclaim. The correspondence showed the petitioner knowingly avoided addressing the tribunal and instead wrote repeatedly to BSE officials. The broker argued that the award dealt with all issues, involved no bias, and contained no patent illegality. It relied on Gayatri Projects Ltd. and A.C. Choksy Share Broker Pvt. Ltd. to underline the limited scope of Section 34 review.
6. Analysis of the law
The Court reiterated that Section 34 does not permit a de novo review or reconsideration of evidence. Interference is restricted to recognized grounds, including patent illegality, lack of jurisdiction, or violation of natural justice—but only if such objections were preserved during arbitration.
The Court emphasized the kompetenz-kompetenz principle under Section 16: jurisdictional objections must be raised before the tribunal, not post-award. Under Section 4, if a party participates without raising timely objections, it waives the right to contest procedural defects. Reviewing the record, the Court found the petitioner was repeatedly notified, participated, filed pleadings, and never objected to the tribunal’s constitution or procedure.
On the merits, the tribunal’s refusal to pierce the corporate veil was justified since trades on NSE fell outside BSE’s jurisdiction. The counterclaim related solely to NSE dealings, properly excluded by the tribunal.
7. Precedent analysis
The judgment relied heavily on Supreme Court precedents:
• Union of India v. Pam Development (P) Ltd. (2014)
Held that jurisdiction pleas not raised before the tribunal are deemed waived under Sections 4 and 16. Applied directly to reject the petitioner’s late-stage challenge.
• GAIL v. Keti Construction (2007)
Reaffirmed that a party must justify why jurisdictional objections were not raised earlier; failure bars raising them under Section 34. The Court found no such justification here.
• Gayatri Projects Ltd. (2025)
Supreme Court endorsed Pam and GAIL, reaffirming strict limits on Section 34 jurisdictional challenges. Applied to dismiss the petition.
• A.C. Choksy Share Broker Pvt. Ltd. (2025)
Reinforced limited interference with stock-exchange arbitration awards. Cited by the broker and accepted by the Court.
8. Court’s reasoning
The Court found overwhelming evidence that:
• The petitioner was fully aware of the proceedings but chose to address letters to BSE officials rather than respond to the tribunal’s directions.
• Notices of hearings and documents were served, and the petitioner eventually filed its written statement and counterclaim—proving participation.
• No letter, application, or objection during arbitration alleged lack of notice, opportunity, or unfairness.
The Court rejected allegations of bias, noting that the tribunal considered all arguments, including the plea for corporate-veil piercing. It accepted the tribunal’s reasoning that NSE transactions could not be adjudicated in BSE arbitration.
Finding no procedural infirmity or substantive illegality, the Court refused to disturb a 17-year-old award. A post-judgment request for stay was denied due to extraordinary delay and absence of hardship.
9. Conclusion
The Section 34 petition was dismissed, with the Court holding:
• Jurisdiction objections were waived and cannot be revived after the award.
• No patent illegality or perversity existed in the tribunal’s reasoning.
• The counterclaim fell outside the tribunal’s jurisdiction and was rightly excluded.
• The award is final and executable; stay was refused.
The ruling reinforces strict adherence to arbitration procedure and underscores the waiver doctrine under Sections 4 and 16.
10. Implications
The judgment strengthens finality in stock-exchange arbitration and signals that courts will not entertain belated jurisdictional attacks. Parties must raise objections contemporaneously or lose the right to challenge.
The ruling also clarifies jurisdictional boundaries between BSE and NSE trades, preventing claimants from importing disputes from one platform into another’s arbitration system.
For brokers and market participants, the decision restores confidence in exchange-administered dispute resolution. For litigants, it is a warning against attempting to reopen long-concluded awards under broad allegations of unfairness.
CASE LAW REFERENCES
1. Union of India v. Pam Development (2014)
Held that jurisdiction challenges must be raised before the tribunal; otherwise waived. Applied directly.
2. GAIL v. Keti Construction (2007)
Reiterated the waiver principle and limits of Section 34 review. Applied to dismiss jurisdictional claims.
3. Gayatri Projects Ltd. (2025)
Supreme Court affirmed Pam and GAIL, limiting Section 34 interference. Relied on by the Court.
4. A.C. Choksy Share Broker Pvt. Ltd. (2025)
Reinforced judicial deference to stock-exchange arbitration awards. Applied to the present case.
FAQ SECTION
1. Can a party challenge arbitral tribunal jurisdiction for the first time under Section 34?
No. The High Court held that jurisdictional objections must be raised before the tribunal under Section 16; failure results in waiver under Section 4.
2. Why was the counterclaim rejected?
Because it concerned NSE transactions, which fall outside the jurisdiction of BSE arbitration. The tribunal had no authority to adjudicate those dealings.
3. Did the Court find any violation of natural justice?
No. Correspondence and conduct showed the petitioner received notices, participated, filed pleadings, and never alleged procedural denial until litigation.
