Court rules that despite earlier petition in Bombay, Madras High Court is the competent forum based on National Stock Exchange bye-laws and KYC address of claimant.
In a significant judgment delivered on October 12, 2026, the Division Bench of the Madras High Court, comprising Justices N. Sathish Kumar and GK. Muthukumaar, clarified the jurisdictional ambit under the Arbitration and Conciliation Act, 1996 concerning disputes arising from depository agreements governed by the National Stock Exchange (NSE) bye-laws and trading regulations. The judgment arose from a dispute between A.V. Vijayakumar, a senior citizen and practicing doctor from Thrissur, Kerala, and the Director of M/s. Sharekhan Limited, a stockbroker.
The claimant had alleged unauthorized sale of shares held in dematerialized form without his consent or duly authorized contract notes. Arbitration was invoked as per the depository agreement and NSE regulations, wherein the arbitral tribunal dismissed the claimant's claim. However, on appeal to the Panel of Appellate Arbitrators, the award was partially in the claimant's favour, directing Sharekhan to pay Rs. 12,50,053 with interest.
Subsequently, the claimant filed an application under Section 34 of the Arbitration and Conciliation Act challenging the arbitral award. The Single Judge of the Madras High Court dismissed the application on the ground of lack of jurisdiction, directing the claimant to approach the Bombay High Court, which had earlier entertained a Section 34 petition filed by the respondent.
Challenging this order, the claimant preferred an Original Side Appeal before the Division Bench contending that the Madras High Court alone had jurisdiction to entertain the Section 34 petition, as the appellate arbitral proceedings were conducted in Chennai, the regional centre nearest to the claimant's KYC address, as per NSE bye-laws and trading regulations.
The Court examined the relevant contracts, specifically:
- The depository agreement clause which granted exclusive jurisdiction to Mumbai courts but made it expressly subject to the NSE's bye-laws and trading regulations.
- Trading Regulation 5.3 and NSE Bye-law 17 which stipulated that Section 34 applications against appellate arbitral awards be filed in the competent court nearest the regional centre where the appellate arbitration took place or nearest to the constituent's KYC address.
The claimant's KYC address was in Thrissur, Kerala, with Chennai as the nearest regional centre where the appellate arbitral proceedings occurred. Thus, Madras High Court was the competent jurisdictional court. The Court also analyzed Section 42 of the Arbitration Act, which provides that if a Section 34 application has been made to a court, only that court shall have jurisdiction over all subsequent applications. The Court interpreted "court" in Section 42 to mean the court of competent jurisdiction as per the arbitration agreement. Since the Bombay High Court was not the competent court under the agreement and bye-laws, the prior filing there did not oust Madras High Court's jurisdiction.
Hence, the Division Bench set aside the Single Judge's order and held that Madras High Court had exclusive jurisdiction to entertain the Section 34 petition. The matter was remanded to the Single Judge for consideration of the petition on merits. Both parties were directed to bear their own costs.
This judgment is a crucial authority on jurisdictional issues in arbitration matters involving stock exchanges and depository agreements, emphasizing the primacy of contractual clauses in bye-laws and trading regulations over generic exclusive jurisdiction clauses. It also clarifies the interpretation of Section 42 of the Arbitration Act, promoting correct forum selection in arbitration challenges.
Bottom Line:
Arbitration and Conciliation Act, 1996 Section 34 jurisdiction - In disputes arising out of depository agreement, trading regulations and bye-laws of National Stock Exchange, jurisdiction to file Section 34 application lies before competent Court nearest to regional centre where appellate arbitral proceedings were conducted / nearest to constituent's KYC address, as provided in exchange bye-laws and regulations - Exclusive Mumbai jurisdiction clause in depository agreement being subject to bye-laws and regulations, Madras High Court had jurisdiction where appellate arbitral proceedings were held at Chennai - Mere prior filing of Section 34 petition before Bombay High Court would not attract Section 42 when that Court was not the Court of competent jurisdiction under arbitration agreement.
Statutory provision(s):
Arbitration and Conciliation Act, 1996 Sections 34, 37, 42; National Stock Exchange Bye-law 17; Trading Regulation 5.3; Depository Agreement Clauses 1.7.13, 1.7.18, 22
A.V.Vijayakumar v. Director, M/s. Sharekhan Limited, (Madras)(DB) : Law Finder Doc Id # 2995314
