2007 (7) TMI 406 - HC - Companies Law

Arbitral award - Held that - Under bye-law 260, an Award made by the Tribunal is subject to a challenge under section 34 of the Arbitration and Conciliation Act, 1996. Insofar as bye-law 274A is concerned, it is the nature of an additional submission or a second arbitration. It is open to the parties to the contract, either to opt for the same or not to opt for the same. If they opt for a second arbitration under the bye law 274A, then it is the Award passed in the second arbitration under bye law 274A which would be an award, which would be capable of being challenged under section 34 of the Act. So read, there would be no conflict. In the instant case, however, the challenge to the party was available under section 37(2) of the Act, 1996. Once that be the case, the second arbitration as invoked, was without the authority of law and as such the order dated 19-10-2006 would have to be set aside. It will be open to the respondent, considering the power conferred under section 37(2) to challenge that order by preferring an appeal.Rule is made partly absolute accordingly. There shall be no order as to costs.

Summary

Issues Involved:
1. Maintainability of the writ petition.
2. Whether Bye-law 274A is ultra vires the Arbitration and Conciliation Act, 1996.
3. Maintainability of the appeal preferred by respondent No. 1 against the order rejecting the reference before the Appellate Tribunal.

Detailed Analysis:

1. Maintainability of the Writ Petition:
The court examined whether the writ petition was maintainable, considering one of the reliefs sought was to declare Bye-law No. 274A and Regulation No. 15.23 as ultra vires Article 14 of the Constitution of India and the Arbitration Act, 1996. The court noted that respondent No. 4 is considered a "State" under Article 12 of the Constitution, and the Bye-laws were framed under the Securities Contracts (Regulation) Act, 1956. The petition was deemed maintainable as it challenged the jurisdiction of the Appellate Tribunal and the validity of the Bye-law permitting an appeal. The court referred to the judgment in Anuptech Equipments (P.) Ltd. v. Ganpati Co-op. Housing Society Ltd. and Dr. Vimal Madhukar Wasnik v. Sole Arbitrator to support the view that writ jurisdiction can be invoked if no remedy is available under the Arbitration Act, 1996.

2. Whether Bye-law 274A is Ultra Vires the Arbitration and Conciliation Act, 1996:
The court analyzed the compatibility of Bye-law 274A with the Arbitration Act, 1996. Historical judgments from various High Courts, including Heeralal Agarwalla & Co. v. Joakim Nahapiet & Co. Ltd., Fazalally Jivaji Raja v. Khimji Poonji & Co., and M.A. & Sons v. Madras Oil & Seeds Exchange Ltd., were considered, which upheld the validity of second submissions or appeals in arbitration agreements. The court also referred to the English Arbitration Act, 1996, which recognizes the validity of second submissions. The court concluded that Bye-law 274A, which allows a dissatisfied party to appeal to an appellate bench, is not ultra vires the Arbitration Act, 1996, as it forms part of the contractual terms between the parties.

3. Maintainability of the Appeal Preferred by Respondent No. 1:
The court examined whether the appeal against the order rejecting the reference was maintainable. It was argued that the order dated 19-10-2005 was not an Award but an order under Section 16 of the Arbitration Act, 1996, which is appealable under Section 37(2) of the Act. The court referred to the judgment in Anuptech Equipments (P.) Ltd. v. Ganpati Co-op. Housing Society Ltd., which distinguished between "Award" and "Order." The court held that the decision of the Arbitral Tribunal was an order, not an Award, and thus, the appeal under Bye-law 274A was not maintainable. The proper remedy was to appeal under Section 37(2) of the Act. Consequently, the order of the Appellate Tribunal dated 17-3-2006 was set aside as it was without jurisdiction.

Conclusion:
The writ petition was deemed maintainable. Bye-law 274A was held not to be ultra vires the Arbitration and Conciliation Act, 1996. The appeal preferred by respondent No. 1 against the order rejecting the reference was not maintainable under Bye-law 274A but should have been challenged under Section 37(2) of the Arbitration Act, 1996. The order dated 17-3-2006 by the Appellate Tribunal was set aside, and the respondent was allowed to challenge the order under Section 37(2).