9911796707
TMI Blog1998 (10) TMI 435X X X X Extracts X X X X X X X X Extracts X X X X ..... ard pertains to certain transactions, transact- ed on the Bombay Stock Exchange. The transactions are between a member and a non-member. By an award dated 22-12-1995, the arbitrator held that the law of limitation, namely, the Limitation Act, 1963 is attracted and consequently, the claims were time-barred and cannot be enter- tained. The grounds to challenge the award are as under: ( a )the award discloses an error of law apparent on the face of the record inasmuch as the arbitrator has held that the Limitation Act is applicable to contracts based on the bye-laws framed pursuant to the power conferred by section 9 of the Securities Contracts (Reg-ulation) Act, 1956 ( the SCRA ); and ( b )that the award was passed beyond the time specified for making the award. The parties did not consent for extension of time and consequently, the award is liable to be set aside. 3. In Arbitration Petition No. 83 of 1997, the petitioners have impugned the award dated 22-12-1995. The claims were referred to the arbitrator in respect of transactions between a member and a non-member done on the Bombay Stock Exchange. The learned arbitrator held that the provi-sions of the Limitation Act are a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een a member and a non-member. It is contended that at the highest, the agreement for arbitration can be said to be by way of incorporation whereby the procedure as laid down under the bye-laws of the Bombay Stock Exchange has been adopted. Adopting such procedure, it is contended, does not mean that the arbitra-tion is pursuant to a provision in a statute. It is, therefore, contended that such a transaction between a member and non-member is not controlled by the bye-laws framed under the SCRA and as such, the provisions of the Limitation Act will apply. In support, it is contended that such an issue arose, though not exactly on the same point, in the case of Collector of Aurangabad v. Central Bank of India AIR 1967 SC 1831. In that case tax dues were sought to be recovered as arrears of land revenue as the Act itself so provided. If the arrears were arrears of land revenue, it had first priority over other dues. The Apex Court had to consider the question as to whether the tax dues which could be recovered as arrears of land revenue could be said to be land revenue . The Apex Court, negating the contention, held that merely because the procedure for recovering the tax was as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to arbitration of a private party. Therefore, a distinction was sought to be made between a statutory arbitration and a private arbitra- tion. In Hemendra Shah v. S tack Exchange [1996]21CLA (Snr.) 3 a learned Single Judge of this Court was considering the bye-laws framed under SCRA and the provisions of the 1940 Act. In para 14, the learned Single Judge observed that section 37 does not apply to an arbitration under the rules, bye-laws and regulations of the Bombay Stock Exchange. In para 19, the learned Single Judge observed that bye-laws 226( a ) and 226( c ) make it very clear that all such contracts or dealings irrespective of the fact that there may be no contract notes are deemed to be subject to these rules, bye-laws and regulations. It is, therefore, clear that these rules, bye-laws and regulations will govern such contracts and dealings. This judg-ment is sought to be distinguished on the ground that it was not a judgment between a member and non-member. On a perusal of the facts, it will be observed that it was a dispute between a member and a non-member. Hence, the ratio of that judgment would be applicable to the case in question. However, I proceed on the foot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts or between a member and a person who is not a member and the consequence of default or insolvency on the part of seller or buyer or intermediary. The consequences of breach of omission buyer or intermediary the consequences of breach of omission by a seller or buyer and the responsibility of the members who are not party to such contracts." 9.1 Section 2( n ) reads as under : "The method and the procedure for settlement of claims or disputes including settlement by arbitration." 9.2 While considering the language of the expression under the SCRA, I had occasion to consider the judgment of the Apex Court in Dr. Indrakumar Gupta v. U. R. Nath AIR 1963 SC 274. Before the Apex Court what was under consideration was the expression by the Act, under the Act, or prescribed under the provisions of Forward Contracts (Regulations) Act, 1952. Relying on the said judgment, I have held that the expression under the enactment would include the provisions of arbitration made by the bye-laws framed under the SCRA. Therefore, considering the abovesaid judgment, the expression under the Act in section 46 of the 1940 Act, and section 2(4) of the 1996 Act,! have held that the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partners or the sole proprietor of a firm shall be printed on the contract notes. The contract notes shall also be in such form as will provide that the words member(s) of the Stock Exchange, Bombay shall immediately follow the signature. Bye-law No. 220 provides that the contract notes rendered by members to non-members in respect of bargains made for and on behalf of such non-members account may be in the form prescribed in the relative regulation or in such other form or forms as the governing Board may from time to time prescribe in addition thereto or in modification or substitution thereof. Such contract notes shall state the brokerage at rates not exceeding the official scale of brokerage that has been charged and allowed for in the price. Bye-law No. 226 provides that all contracts made by a member for or with a non- member for the purchase or sale of securities in which dealings are permitted on the exchange shall in all cases be deemed made subject to the rules, bye-laws, regulations and usage of the exchange which shall be a part of the terms and conditions of all such contracts and they shall be subject to the exercise by the governing Board and the President of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject to the rules, bye-laws, regulations, usage of the exchange. Bye-law No. 219 makes it mandatory that the contract notes provide that the contract is subject to the rules, bye-laws, regulations and usages of the exchange. I have, therefore, no hesitation in holding that contracts between a member and non-member is pursuant to the bye-laws framed under section 9 of the SCRA and that the provisions for arbitration contained in the contract is, therefore, under the SCRA and as such, falling within section 46 of the 1940 Act and section 2(4) of the 1996 Act. It is an arbitration agreement under the SCRA. 12. Therefore, once I hold that this is an arbitration under the SCRA, the first contention of the petitioners must be rejected. By virtue of section 46 of the 1940 Act, section 37 excludes the provisions of the Limitation Act in the 1940 Act and by virtue of section 2(4) of the 1996 Act the application of the Limitation Act, as contained in section 43, is excluded. Therefore, the provisions of the Limitation Act will not apply to arbitration between a member and non-member in respect of transactions done under the Bombay Stock Exchange Act. 13. It is true that the interpre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be a wrong proposition of law laid down in the award as the basis of the award. 16. On behalf of the respondents, it is contended that in the instant case what was referred to the arbitrators was not a question of law but claims made by the respondents. It is, therefore, contented that if the incidental questions are considered, that would not be a question of law referred for decision of the arbitrators. Reliance for that purpose has been placed on judgments of the High Court of Madras in Easun Engg. Co. Ltd v. Fertilisers and Chemicals Travancore Ltd AIR 1991 Mad. 158 and of the Karnataka High Court in State of Karnataka v. R.H. Shetty Co. AIR 1991 Kar. 96. 17. Considering the law and the facts in the present case, it is clear that the dispute as to whether the provisions of the Limitation Act apply or not was not referred to the decision of the arbitrator. That was considered incidentally as a preliminary issue and it is in these circumstances that the issue was decided. It is true that the Apex Court has gone to the extent of holding that even if the arbitrator has decided the question contrary to the judgment of the courts, that by itself would not amount to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate if he becomes de facto or de jure unable to perform his functions. The arbitrator or arbitrators must, therefore, be able to proceed with the arbitration proceedings. If the Tribunal is constituted contrary to section 10 of the 1996 Act, the arbitrators de jure will not be able to perform those functions. In that event the parties can move the court for decision to decide whether the mandate has terminated. One of the grounds raised is regarding the termination of the proceedings. The matter is still pending before the arbitral Tribunal and proceedings have not yet been terminat- ed. In view of that, this court will have jurisdiction under section 14(2) to decide the question. I am aware that a similar question had come up before me earlier. I had upheld the contention under section 10 of the 1996 Act but refused to interfere with the proceedings considering the lan- guage of sections 16 and 37(2). Under section 37(2) appeal lies only when the arbitral Tribunal upholds the plea that it has no jurisdiction. Section 14(2) had not been considered. The present petition can, therefore, be treated as an application under section 14(2). Once it is so treated, it will be held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
