1998 (10) TMI 435 - HC - Companies Law

Summary

Issues Involved:

1. Applicability of the Limitation Act to arbitration between a member and a non-member of the Bombay Stock Exchange.
2. Validity of the award passed beyond the prescribed time without consent for extension.
3. Composition of the Arbitral Tribunal under the Arbitration and Conciliation Act, 1996.

Issue-wise Detailed Analysis:

1. Applicability of the Limitation Act:

The common question in all three petitions was whether the provisions of the Limitation Act apply to transactions between a member and a non-member conducted on the Bombay Stock Exchange under the bye-laws framed by the Bombay Stock Exchange pursuant to section 9 of the Securities Contracts (Regulation) Act, 1956 (SCRA). The petitioners argued that the arbitration agreement between a member and a non-member is independent of the bye-laws framed under the SCRA and, therefore, the Limitation Act should apply. They cited various precedents to support their contention, including the case of Collector of Aurangabad v. Central Bank of India, where the Supreme Court held that the procedure for recovering tax as arrears of land revenue does not convert tax into land revenue. However, the court held that the arbitration provision is under the bye-laws of the Bombay Stock Exchange, which are framed under section 9 of the SCRA. Consequently, the arbitration agreement falls within section 46 of the Arbitration Act, 1940, and section 2(4) of the Arbitration and Conciliation Act, 1996. Therefore, the provisions of the Limitation Act do not apply to arbitration between a member and a non-member in respect of transactions done under the Bombay Stock Exchange Act.

2. Validity of the Award Passed Beyond Prescribed Time:

The petitioners contended that the award was passed beyond the time specified for making the award without the parties' consent for an extension, making the award liable to be set aside. However, the court noted that the parties continued with the proceedings without any demur or protest. The Supreme Court, in the cases of State of Punjab v. Hardyal and Hindustan Steel Works Constructions Ltd v. C. Rajasekhar Rao, has held that the court can extend the time on the facts of the case. Therefore, the court extended the time under section 28 of the Arbitration Act, 1940, and rejected the petitioners' contention.

3. Composition of the Arbitral Tribunal:

In Arbitration Petition No. 318 of 1998, the petitioners argued that the composition of the Arbitral Tribunal was contrary to section 10 of the Arbitration and Conciliation Act, 1996, which requires an odd number of arbitrators. The court upheld this contention, noting that the tribunal consisted of two members, which is contrary to section 10 of the 1996 Act. The court also addressed the issue of maintainability of the petition, stating that under section 14 of the 1996 Act, the mandate of the arbitrator shall terminate if he becomes de facto or de jure unable to perform his functions. Since the tribunal was not properly constituted, the arbitrators de jure could not perform their functions, and the court had jurisdiction under section 14(2) to decide the question. Consequently, the proceedings were terminated.

Conclusion:

- Arbitration Petition Nos. 82 of 1997 and 83 of 1997: The awards were set aside, and the matters were remitted back to the arbitrators for fresh decisions within four months.
- Arbitration Petition No. 318 of 1998: The proceedings were terminated due to improper composition of the Arbitral Tribunal.

Each party was ordered to bear their own costs.