Arbitration is an alternative dispute resolution mechanism provided by a stock exchange to resolve disputes between the trading members and between trading members & constituents (i.e. clients of trading members), in respect of trades done on the Exchange. This process of resolving a dispute is faster than other means of redressal by civil courts. Arbitration comes under the Arbitration and Conciliation Act 1996. The Act allows two options— conciliation and arbitration. Conciliation is similar to an out-of-court settlement where the parties find acceptable resolution and a stamp of legal finality is marked on the case. Arbitration, on the other hand, is a quasi-judicial mechanism where arbitrators decide on a case (like a judge or a bench) and pass an order which is called an arbitration award. However, the byelaws of the exchange provide the procedure for Arbitration. The investor can procure a form for filing arbitration from the concerned stock exchange. All the cases have to be filed within 6 months of the dispute arising.
In the recent judgment of Delhi High court in SMT BIBA SETHI Vs DYNA SECURITIES LTD, OMP NO. 63/2007 decided on 17th March, 2009 Hon’ble Judge, RAJIV SAHAI ENDLAW held that “the part of Byelaw 3 of Chapter XI of NSE Byelaws, to the extend prescribing limitation of six months for reference of disputes/claims to arbitration is void. The time therefore will be governed by the limitation act.”
The Judgment shall provide a relief to the thousand of investors who has to file the suits in the civil courts on expiry of six Months time for filing the claim with the arbitration. Normally, the broker uses delay/dilatory tactics with the client resulting into loss of opportunity of clients to invoke the arbitration clause. The clients are left with no option but to file suit in the civil court where the adjudication process takes a couple of year. Now, the clients can invoke the arbitration clause within three years i.e. the time prescribed by the law of limitations. The decision of the High Court would also result into substantial reduction in the number of cases filed in the civil court in last two years as these cases can now be adjudicated/referred to the summery proceedings of the arbitral mechanism of the stock exchanges.