2002 (5) TMI 814 - HC - Companies Law

Issues Involved:
1. Existence of an arbitration agreement between the petitioner-company and respondent No. 5.
2. Applicability of NSE bye-laws and regulations to the dispute.
3. Limitation period for initiating arbitration proceedings.
4. Impact of pending civil and criminal proceedings on arbitration.
5. Validity and mutuality of the arbitration clause.

Detailed Analysis:

1. Existence of an Arbitration Agreement:
The petitioner-company contested the existence of an arbitration agreement with respondent No. 5. The petitioner-company argued that no agreement was entered into as mandated by Regulation 4.3.1 of the Capital Market Regulations, which requires a trading member to enter into an agreement with its constituents before placing orders. The petitioner-company also claimed that the arbitration clause in Chapter XI of the NSE bye-laws was not applicable in the absence of such an agreement.

Respondent No. 5 countered by asserting that an agreement was indeed executed through its director but was not provided a copy by the petitioner-company. The court noted that the petitioner-company did not specifically deny this assertion in its affidavits. The court held that the factual assertion by respondent No. 5 was thus accepted.

2. Applicability of NSE Bye-Laws and Regulations:
The petitioner-company argued that the NSE bye-laws, including the arbitration clause, do not apply to disputes between a trading member and its constituents in the absence of an agreement. However, the court referred to various deeming clauses in the NSE bye-laws, which state that all dealings and transactions by trading members are subject to the bye-laws, rules, and regulations of the exchange. The court concluded that these deeming clauses ensure that the arbitration clause applies to the disputes in question, regardless of whether an agreement was executed.

3. Limitation Period for Initiating Arbitration Proceedings:
The petitioner-company argued that the arbitration clause was not attracted due to the limitation period specified in Clause 3 of Chapter XI of the NSE bye-laws, which requires disputes to be submitted to arbitration within six months from the date they arose. The court noted that this issue could be raised before the arbitral tribunal, which has the competence to rule on its own jurisdiction, including the existence and validity of the arbitration agreement, as per Section 16 of the Arbitration and Conciliation Act, 1996 (ACA 96).

4. Impact of Pending Civil and Criminal Proceedings on Arbitration:
The petitioner-company contended that the pending civil suit and criminal proceedings should bar the arbitration. The court observed that Section 8(3) of the ACA 96 allows arbitration proceedings to continue and an award to be made despite the pendency of a civil suit. The court also noted that the criminal proceedings do not preclude arbitration as they serve different purposes-arbitration for resolving commercial disputes and criminal proceedings for awarding punishment.

5. Validity and Mutuality of the Arbitration Clause:
The petitioner-company argued that the arbitration clause lacked mutuality and was one-sided, allowing only the petitioner-company to refer disputes to arbitration. The court referred to the case of Pittalis v. Sherefettin [1986] 2 WLR 1003, where the Court of Appeal held that an agreement conferring the right to refer disputes to arbitration on one party alone does not invalidate the arbitration clause. The court found no lack of mutuality in the arbitration clause and held it to be valid.

Conclusion:
The court dismissed the writ petition, holding that the arbitration clause in the NSE bye-laws applies to the dispute between the petitioner-company and respondent No. 5. The court ruled that the arbitral tribunal is competent to decide on jurisdictional issues, including the existence and validity of the arbitration agreement and the issue of limitation. The pending civil and criminal proceedings do not bar the arbitration. The arbitration clause was found to be valid and applicable. All interim orders were vacated, and no order as to costs was made.

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