1999 (2) TMI 468 - HC - Companies Law

Summary

Issues Involved:

1. Validity of the constitution of the Arbitral Tribunal under the Exchange's byelaws vis-`a-vis Section 10 of the Arbitration and Conciliation Act, 1996.
2. Applicability of Section 2(4) of the Arbitration and Conciliation Act, 1996 to the Exchange's byelaws.
3. Whether the award is liable to be set aside under Section 34(2)(a)(v) of the Arbitration and Conciliation Act, 1996.

Detailed Analysis:

1. Validity of the Constitution of the Arbitral Tribunal:

The appellant, the Stock Exchange, Mumbai, challenged the Single Judge's decision that the Arbitral Tribunal constituted by two arbitrators was in contravention of Section 10 of the Arbitration and Conciliation Act, 1996, which mandates an odd number of arbitrators. The Exchange's byelaw 249(a) required disputes to be referred to two arbitrators, one appointed by each party. The Single Judge found this to be invalid and quashed the award. The High Court, however, concluded that byelaw 249(a) is a statutory byelaw and thus valid, as it is framed under the Securities Contracts (Regulation) Act, 1956 (SCR Act). The Court emphasized that the byelaw, being statutory, prevails over Section 10 of the Arbitration Act.

2. Applicability of Section 2(4) of the Arbitration and Conciliation Act, 1996:

Section 2(4) of the Arbitration Act states that the Act applies to every arbitration under any other enactment unless inconsistent with that enactment or any rules made thereunder. The High Court analyzed whether byelaw 249(a) falls under the phrase "any other enactment." The Court referred to previous judgments, including the Supreme Court's decision in Dr. Indramani Pyarelal Gupta v. W.R. Natu, which held that byelaws are subordinate legislation and thus fall under the phrase "under the Act." The High Court concluded that byelaw 249(a) is consistent with the SCR Act and prevails over Section 10 of the Arbitration Act.

3. Whether the Award is Liable to be Set Aside:

The Single Judge had set aside the award on the grounds that the constitution of the Arbitral Tribunal was invalid under Section 10 of the Arbitration Act. The High Court, however, held that the award was valid as it was passed by a Tribunal constituted under the statutory byelaw 249(a). The Court emphasized that the byelaw, being statutory, is saved by Section 2(4) of the Arbitration Act and thus the award is not liable to be set aside under Section 34(2)(a)(v).

Conclusion:

The High Court set aside the Single Judge's judgment, holding that byelaw 249(a) of the Exchange is a statutory byelaw and validly constitutes an Arbitral Tribunal of two arbitrators. The Court concluded that the byelaw prevails over Section 10 of the Arbitration Act due to the provisions of Section 2(4). Consequently, the award passed by the Tribunal was upheld, and the appeal was allowed. The Court also noted that the interpretation of law should not unsettle long-standing legal positions unless manifestly wrong or unfair.