TMI Blog1999 (2) TMI 468X X X X Extracts X X X X X X X X Extracts X X X X ..... was in contravention of section 10 of the Arbitration and Conciliation Act, 1996 ('the Arbitration Act'). The arbitrators in consultation, with the Exchange held that the constitution of their panel of arbitrators was valid and was properly constituted. Opponent No. 1 was given an opportunity either to contest the interim order or proceed with the case. Opponent No. 1 decided to proceed ahead with the case. On 22-1-1998, an Award was passed rejecting the claim of respondent No. 1. Taking exception to the Award respondent No. 1 on 30-4-1998 filed an arbitration petition being Arbitration Petition No. 130 of 1998 for setting aside the Award. 3. Before the learned Single Judge, by an interim order passed on 4-8-1998, Exchange was directed to be impleaded as a party respondent to the petition for the purpose of effectively deciding the issue whether section 10 is attracted to arbitrations under the rules byelaws and regulations framed by the Exchange. The appellant - Exchange - was accordingly impleaded in the petition as any order passed on the aforesaid issue regarding the validity or otherwise of the constitution of the Arbitral Tribunals under the rules, byelaws and regulation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to be referred to odd number of arbitrators under the aforesaid regulation, the dispute is required to be referred to an even number of arbitrators. The short contention which was raised before the learned Single Judge and which has found favour with him, is that the reference of the dispute between respondent Nos. 1 and 2 to an even number of arbitrators is invalid in view of the provisions of section 10 of the Arbitration Act and hence Award is liable to be quashed and set aside. 8. The entire controversy between the parties revolves on the interpreta- tion of the provisions of section 2(4) which reads as under : "(4) This Part except sub-section (1) of section 40, sections 41 and 43 shall apply to every arbitration under any other enactment for the time being in force, as if the arbitration were pursuant to an arbitration agreement and as if that other enactment were an arbitration agreement, except insofar as the provisions of this part are inconsistent with that other enactment or with any rules made thereunder." The aforesaid sections after deleting the portions are not relevant for resolving the controversy at hand would read as under : "This part shall apply t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ularly byelaw 249( a ) has been made in exercise of the powers conferred under the aforesaid provision of clause ( n ) of sub-section (2) of section 9. The aforesaid byelaw, therefore, has been made under an authority of law. 12. Before the learned Single Judge a contention was raised on behalf of respondent No. 1 that the constitution of Arbitral Tribunal is contrary to the provisions of section 10 and the very same contention has been reiterated before us. Based on the said contention the learned Single Judge has proceeded to frame the following issues : "( a )Whether an Arbitral Tribunal having even number of members constituted under the Byelaws framed by the Bombay Stock Exchange under the Securities Contracts (Regulation) Act, is in contravention of the provisions of section 10 of the Arbitration Act, 1996? ( b )Whether the constitution of such Arbitral Tribunal is saved by section 2( 4 ) of the Arbitration Act, 1996 ? ( c )Whether such an award is liable to be set aside under section 34(2)( a )( v ) of the Arbitration Act, 1996 ?" The learned Single Judge has, after considering the rival contentions, answered the aforesaid issues ( a ) and ( c ) in the affirmati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Arbitration Act, 1940. Both the provisions, insofar as are material, provide that provisions of the Act shall apply to an arbitration under any other enactments for the time being in force except insofar as the Act is inconsistent with that other enactment or with any rules made thereunder. 16. In the case of Shivchandrai Jhunjhunwalla v. Mt. Panno Bibi AIR 1943 Bom. 197, this Court considered the provisions of section 28 of the Arbitration Act, 1940 which deal with the powers of the Court to enlarge the time for making the Award. Sub-section (1) of section 28 empowers the Court, if it thinks fit, whether the time for making the award has expired or not and whether the award has been made or not, to enlarge from time to, time the time for making the award. Sub-section (2) of section 28 empowers the arbitrator to enlarge the time for making the award with the consent of all the parties to the agreement. No other mode for extending the time for making the Award has been provided in section 28. The question which arose for consideration in the aforesaid case was whether the Chairman of the East India Cotton Association or the Umpire had jurisdiction to extend the time for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... byelaws by reason of the provisions of section 4(7) of the said Act. One of the conditions of the contracts which is settled by the Board of Directors with the sanction of the Governor-in-Council as required by section 6 is that there shall be compulsory arbitration. If so, it seems to me that within the meaning of section 46. Arbitration Act such special provisions as are contained in the byelaws framed by the East India Cotton Association Ltd. are operative, in spite of the provisions of the Arbitration Act. It is not disputed that the action of the umpire in requesting the Chairman to extend time was according to the byelaws. Byelaw 38A (last paragraph) provides as follows : The umpire shall make his award within ten days from the date of his appointment unless the time is extended by the Chairman. It may be noted that if this byelaw is inapplicable it must be conceded also that the byelaw which limits the time within which the arbitrators and the umpire had to make the award should also be considered inapplicable, and if the time fixed by the Arbitration Act alone was taken into consideration, for deciding whether the award of the umpire was within time, it seems that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 46 of the Arbitration Act. Consequently, the provisions of section 28 of the Arbitration Act would not come into play. Hence, the extension of time by the Executive Director of the Stock Exchange is perfectly valid and legitimate." 18. In the case of Hemendra V. Shah v. Stock Exchange 1995 (2) Mah. LJ 770, a contention was raised that the arbitration proceedings in that case had become time barred in view of the provisions contained in section 37 of the Arbitration Act, 1940 which makes the provisions of the Indian Limitation Act applicable as they apply to the proceedings in the Court. Byelaws Nos. 254 and 261 of the Bombay Stock Exchange which fell for consideration in that case are as follows : "254 The arbitrators shall make their award within four months after entering on the reference or after having been called upon to act by notice in writing from any party or within such extended time as the arbitrators may fix with the consent of the parties to the reference or as the Governing Board or the President may allow. 261. The Governing Board or the President may if deemed fit whether the time for making the award has expired or not and whether the award has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve the consent of either party to the reference. By reason of section 46 the provisions contained in the statutory byelaws of the Exchange enabling the Governing Board or the President of the Exchange to extend the time for the arbitrators or the umpire, as the case may be, though inconsistent with the provisions of section 28 prevail and as such, though section 28 contemplates mutual consent of the parties to enable the arbitrators to enlarge the time to make the award in view of byelaws 254 and 261 of the byelaws of the Exchange, such consent was not condition precedent for the governing board or the President of the Exchange to enlarge the time for the arbitrators to make the award. In the aforesaid case, it was not even disputed that the rules and byelaws of the Exchange are statutory rules and byelaws and the Exchange is duly recognized under the provisions of the SCR Act. In the light of the aforesaid contention, this Court observed as under : "However, the question which still requires consideration is whether in view of Rules and Byelaws of the Exchange being statutory, sub-section (2) of section 28 of the Act would apply to the facts of the present case. Section 46 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . are statutory in nature. They are framed under the Bombay Cotton Contracts Act, 1932. Hence the extention of time by the Chairman of the Association without consent of the parties was quite legal and valid." 22. The aforesaid catena of decisions has taken a consistent stand that rules and byelaws framed by the Exchange are framed under an authority conferred by an enactment, i.e., SCR Act and have statutory force of law and the same prevailed and the provisions of section 46 of 1940 Act was no impediment in following the provisions of the byelaws. 23. Reliance has been placed on the case of Dhanrajamal Gobindram v. Shamji Kalidas Co. AIR 1961 SC 1285. Seller in respect of the contract in that case, had invoked the arbitration clause of the agreement as also byelaw 38A of the byelaws of East India Cotton Association Ltd. Bombay and moved the Court under section 20 of the Indian Arbitration Act requesting that the agreement be filed in the Court and the dispute referred to the arbitration. The buyers appeared and resisted the petition on the ground that byelaw 38A was a statutory byelaw and that section 46 of the Arbitration Act was applicable. Since the byelaws o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocedure for the Chairman and the appointed arbitrator or arbitrators to follow and that procedure, if inconsistent with the Arbitration Act, prevails. In our opinion, there is no impediment to action being taken under section 20(4) of the Arbitration Act." 24. Aforesaid decision thus recognises that, the byelaws if inconsistent with the Arbitration Act, prevails. 25. In the case of Dr. Indramani Pyarelal Gupta v. W.R. Natu AIR 1963 SC 274 the Supreme Court it has been observed as under : "15. A more serious argument was advanced by learned counsel based upon the submission that a power conferred by a byelaw framed under section 11 or 12 was not one that was conferred 'by or under the Act or as may be prescribed'. Learned Counsel is undoubtedly right in his submission that a power conferred by a byelaw is not one conferred 'by the Act', for in the context the expression 'conferred by the Act' would mean 'conferred expressly or by necessary implication by the Act itself. It is also common ground that a byelaw framed under section 11 or 12 could not fall within the phraseology 'as may be prescribed', for the expression 'prescribed' has been defined to mean 'by rules unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by necessary implication from the provisions of the Act. As an instance learned Counsel referred us to the power of the Central Government to direct the Commission to inspect the accounts and other documents of any recognised association or of any of its members and submit its report thereon to the Central Government under section 8(2)( c ) and suggested that this would be a case of a power or duty which would be covered by the words 'under the Act'. We find ourselves wholly unable to accept this argument. If without the reference to the phrase 'as may be prescribed' the words 'under the Act' would comprehend powers which might be conferred under 'byelaws' as well as those under rules 'we are unable to appreciate the line of reasoning by which powers conferred by byelaws have to be excluded, because of the specific reference to powers conferred by 'rules'. Undoubtedly, there is some little tautology in the use of the expression 'as may be prescribed' after the comprehensive reference to the powers conferred 'under the Act' but in order merely to avoid redundancy you cannot adopt a rule of construction which cuts down the amplitude of the words used "except, of course, to avoid the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words by or under this Act, or as may be prescribed as follows: 'by this Act' applies to powers assigned proprio vigore by the provisions of the Act; 'under this Act' applies to an assignment made in exercise of an express power conferred under the provisions of the Act; and 'may be prescribed' takes in an assignment made in exercise of a power conferred under a rule. This construction gives a natural meaning to the plain words used in the section and avoids stretching the language of a statutory provision to save an illegal byelaw. 27. Aforesaid decision thus lays down that 'By an Act' means by a provision directly enacted in the statute itself. The words 'under the Act' means what is not directly found in the statute but is conferred or imposed by virtue of rules or byelaws which are framed by a subordinate law making authority which is empowered by the Parent Act. Byelaws of the Exchange are framed in exercise of power conferred under section 9 of the SCR Act. Hence, they are statutory, They would thus squarely fall under the phrase 'under any other enactment' appearing in sub-section (4) of section 2 of the Arbitration Act, and the same insofar as are inconsistent with pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in respect of all arbitrations under the Regulation Act and the same will not be hit by the provisions of section 10 of the Arbitration Act, 1996. Aforesaid byelaw will be saved by the provisions of section 2(4) of 1996 Act and will prevail over the provisions of section 10 of the Act. The decision of the learned Single Judge taking a contrary view is thus liable to be set aside. The Award passed by the Arbitral Tribunal consisting of an even number of arbitra- tors as provided under the byelaw would be valid and the same will not be rendered void by virtue of the provisions of section 10 of 1996 Act. 31. In our view, the impugned judgment suffers from the following errors. 1. The foundational basis for the ratio of the impugned judgment is that 'byelaws' are not 'enactment' or 'rules' and that the saving clause of sub-section (4) of section 2 of the Arbitration Act refers only to 'enactment' and 'rules' and not 'byelaws' and the Exchange's byelaws relating to arbitration are not therefore within the purview of the said section or saved thereby. The said finding is found to be erroneous for the following reasons. It is contrary to the judgments in ( i ) Hemendra V. Sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. A decision rendered long ago can be overruled only if this Court comes to the conclusion that it is manifestly wrong or unfair and not merely on the ground that another interpretation is possible and the Court may arrive at a different conclusion. We should remember that the law laid down by the High Court in the above decision has not been doubted so far. The act in question is a State enactment. These are weighty considerations to hold that even if a different view is possible, if it will have the effect of upsetting or reopening past and closed transactions or unsettling titles all over the State, this Court should be loathe to take a different view. On this ground as well, we are not inclined to interfere with the judgment under appeal." (p. 120) 33. Having regard to the aforesaid discussion, we are constrained to hold that the impugned judgment and order passed by the learned Single Judge cannot be sustained and the same is accordingly set aside. We hold that arbitrations under the byelaw 249( a ) of the Byelaws of the Exchange are valid. 34. (Per A.V. Savant, J.) While, I am in respectful agreement with the views expressed by my learned brother, I wish to add my ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uoted with approval, the observations of Lord Asquith in East India Dwellings Co. Ltd.'s case ( supra ). 37. It is well settled that subordinate or delegated legislation takes different forms. Subordinate legislation is divided into two main classes, namely, ( a ) statutory rules and ( b ) byelaws or regulations made by ( i ) authorities concerned with local Government and ( ii ) persons, societies or Corporation, This is clearly enunciated in the judgment of the Apex Court in Dr. Indramani Pyarelal Gupta's case ( supra ) to which a reference has been made in paras 26 and 27 above. Again, in the case of Trustees of the Port of Madras v. Aminchand Pyarelal AIR 1975 SC 1935, the Apex Court observed that a byelaw is an ordinance affecting the public, or some portion of the public, imposed by some authority clothed with statutory powers, ordering something to be done or not to be done, and accompa- nied by some sanction or penalty for its non-observance. 38. We may at this state refer to the dictionary meaning of the word 'enactment'. In ' The Oxford Companion To Law' by David M. Walker, 1980 edn. at page 401, the word "'enactment' has been defined to include a statuto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Resolutions. Rule corresponding to bye- law 249( a ) of the present byelaws was rule 106( a ) dealing with the appointment of arbitrators. Rule 106( a ) of the Rules of the Native Share Stock Brokers' Association, 1939, provided that whenever any dispute was referred to the Arbitration Committee, it should be heard by two of its members acting as arbitrators with reference to such dispute. On coming into force of the SCR Act, an application was made by the Native Share Stock Brokers' Association on 9-4-1957, followed by another application dated 25-4-1957, praying for recognition of the Stock Exchange under section 3 of the SCR Act. The said section 3 requires an application to be made by the Stock Exchange which is desirous of being recognised for the purpose of the SCR Act. Alongwith an application for recognition, the Stock Exchange has to submit a copy of the byelaw of the Stock Exchange for Regulation and Control of the contracts. Section 4 of the SCR Act deals with the grant of recognition to the Stock Exchange. It is the Central Government which, after making such enquiry as may be necessary in that behalf, may grant recognition to the Stock Exchange. 41. In the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a decision of a learned single Judge of this Court in V.V. Ruia v. S. Dalmia AIR 1968 Bom. 347. The question arose as to whether the byelaws of the appellant Exchange which were made prior to its recognition under section 4 needed publication under sub-section (4) of section 9 of the SCR Act. The learned Judge held that the byelaws made by the appellant Exchange prior to its recognition did not require publica-tion in the Official Gazette. This is obvious because for obtaining recog-nition from the Central Government, the Stock Exchange has to submit a copy of the byelaws and rules. It is after scrutiny of the said byelaws and rules that the recognition is granted under section 4. If, however, after recognition any subsequent byelaw is made, under section 9, then by virtue of sub-section (4) of section 9, such a post recognition byelaw requires publication. Byelaw 249( a ) being a prerecognition byelaw would not require any publication but would still be valid and enforceable. 43. In view of the above, we have no hesitation in coming to the conclusion that byelaw 249( a ) of the appellant Exchange is a statutory byelaw and having regard to the series of judgments of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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