Holding

The arbitration clause is sufficiently broad to cover the plaintiff, a non‑member, and therefore the stay under Section 34 is valid.

Summary

Madan Mohan Rajgarhia, a non‑member trader, sued M/s Mahendra R. Shah & Bros., a broker and member of the Bombay Stock Exchange, for recovery of Rs.5,63,334. The respondents invoked Section 34 of the Arbitration Act, 1940, seeking a stay on the ground that the dispute fell within the arbitration clause printed on the exchange’s bill. The Delhi High Court stayed the suit, prompting the appellant to argue that the arbitration clause, which defines "non‑member" to include remisier, authorized clerk, employee or "any other person", does not cover him as he is none of those categories. The Supreme Court examined the language of the clause and held that it is wide enough to encompass the appellant, interpreting "any other person" in a comprehensive manner. Consequently, the Court found no merit in the appeal and dismissed it, upholding the stay of proceedings.

Issues considered

Whether the arbitration clause in the Bombay Stock Exchange bill applies to a non‑member who is not a remisier, authorized clerk, employee, or otherwise sharing brokerage with a member.
Whether Section 34 of the Arbitration Act, 1940 can be invoked to stay the suit in such circumstances.

Legislation cited

Arbitration Act, 1940s. 34

Subjects

ArbitrationSection 34Stock ExchangeNon‑memberArbitration clause interpretationStay of suitBombay Stock ExchangeArbitration Act 1940

Judgment

A MADAN MOHAN RAJGARHIA
v.
M/S. MAHENDRA R. SHAH & BROS. AND ANR.

JULY31,2003

B [V.N. KHARE, CJ., K.G. BALAKRISHNAN AND S.B. SINHA, JJ.]

Arbitration Act, 1940:

S. 34-Stay of suit-Stock exchange-Non-member filing a recovery suit
C against a member-Member filing an application before trial court for stay of
suit contending that the dispute was covered under the arbitration clause-
Contention ofplaintiff that as he was a non-member, arbitration clause does
not apply to the case-Held, a reading of the relevant clause in the Bill, as
a whole, would clearly.show that the clause is quite wide and comprehensive
D enough to cover the cause of the plaintiff-Contract-Clause in a Bill-Effect
of

Words and Phrases- 'any other person '-Meaning of

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 12645 of
E 1996.

From the Judgment and Order dated 4.8.1995 of the Delhi High Court
in F.A.O. (OS). No. 188 of 1995.

Arun K. Sinha, Rakesh K. Sinha for the Appellant.
F M.D. Adkar, S.D. Singh, Vijay Kumar and Anurag Kishore for the
Respondents.

The following Order of the Court was delivered:

The appellant herein was engaged in the business of purchase and sale
G of shares and for that purpose he had been utilizing the services of the
defendant, who is a broker at the Bombay Stock Exchange. The appellant
herein filed a suit for recovery of Rs. 5,63,334 against M/s. Mahendra R.
Shah & Bros., who are the respondents herein. The respondents herein on
receipt of the summons in the suit, filed an application under Section 34 of
H 52

I
M. M. RAJGARHIA v. MAHENDRA R. SHAH & BROS. 53
the Indian Arbitration Act, 1940 for staying the proceeding on the ground A
that there is a provision for arbitration as regards the dispute in the suit. The
learned Single Judge of the High Court accepted the contention of the
respondents herein and directed the stay of proceedings of the suit. Aggrieved,
the appellant filed the First Appeal from the said order, which was dismissed.
It is against the said order of the High Court, the appellant has filed this B
appeal by way of special leave petition.

Learned counsel appearing for the appellant urged that the arbitration
clause printed on the bills does not include the persons like plaintiff and,
therefore, the appellant being a non-member is not required to seek arbitration.
We do not find any merit in the contention. One clause of the Bill, which is C
printed on the front, reads as under :

"All the claims (whether admitted or not) difference and disputes
between a member and a non-member or a non-member (the terms
"non-member" shall include a remisier, authorized clerk or employee
} or any other person with whom the members shares brokerage) arising D
out of or in relation to dealing transactions and contracts made subject
to the rules and bye-laws and regulations or the Exchange or with
reference to anything incidental thereto or in pursuance thereof or
relating their construction, fulfillment or validity or relating to the
rights, obligation and liabilities ofremisier authorised clerk, employetis
or any other person with whom the member shares brokerage in E
relation to such dealing, transactions and contracts shall be referred
to and decided by arbitration as provided in the rules, bye-laws and
regulations of the Exchange."

Another clause of the Bill, which is printed on the back side, reads as
under; F

"In the event of any claim (whether admitted or not) difference or
dispute arising between you and us out of these transactions the matter
shall be referred to arbitration in Bombay as provided in the Rules,
Bye-laws and Regulations of the Stock Exchange, Bombay."
G
The learned counsel appearing for the appellant urged that a non-member
will only be covered if he falls under the definition of a non-member. Since
the appellant is neither a remisier or authorised clerk or employee or shares
any brokerage with the member, he cannot be covered by the said definition
and, therefore, the said rules, definition and bye-laws do not apply to him. H
54 SUPREME COURT REPORTS (2003] SUPP. 2 S.C.R.

A In fact, the argument is that the words 'any other person' should take colour
from the preceding words, namely, remisier, authorised clerk or employee'
and since the appellant is not one of those mentioned, he does not fallwithin
the expression 'any other person'. The reading of clause quoted above, as a
whole, would clearly show that this clause is quite wide and comprehensive
B enough to cover the case of the plaintiff. In order to make it comprehensive,
unauthorised clerk and employee and other persons like remisier, who are or
have been receiving brokerage from the Members of the Exchange have been
included in the definition of 'non-member' person. In fact by including these
categories, the definition of a 'non-member' has been widened. The inclusion
of such persons does not mean that no person like the appellant who is not
C a member of the Exchange .has been excluded from the definition of the non-
member. This aspect may be examined from another angle. The other clause
in the same bill puts the matter beyond doubt. The said clause shows that any
claim (whether admitted or not) difference or dispute arising between you
and us' out of these transactions, the matter shall be referred to arbitration in
Bombay as provided in the rules, bye-laws and regulations of the Stock
D Exchange. It does not show that what does it contemplate as regards arbitration
clause printed on the front of the bill, and tnat it provides for arbitration and
\ ..
the persons like appellant are included therein.

For the aforesaid reasons, we do not find any merit in the appeal. It,
...
E ·accordingly, fails and is dismissed. There shall be no order as to costs.
R.P Appeal dismissed.