R C GOENKA Vs. CHASE TRADING CO

JUDGEMENT

(1.) PETITIONER by the present petition impugns the Award passed under the Arbitration and Conciliation Act, 1996 on 17th January, 2001. By the said Award, the Arbitral Tribunal upheld the objections of the respondents herein that the claim was barred by limitation and accordingly rejected the reference. That Award has been impugned on the ground that the transactions were transaction before the bye-laws of Stock Exchange came to be amended and consequently they would not apply to transactions or in respect of a cause of action which had arisen before the bye-laws were amended. The transactions between the parties were of the year 1991-1992. The amendment to the bye-laws was brought into force on 29-8-1998. Earlier, petition had filed an arbitration reference on 6-11-1997 in respect of the same subject matter. It was numbered as Reference No. 278 of 1997 and was withdrawn on 5-8-1998. It is subsequent to this that the fresh reference was made to the Arbitral Tribunal. As noted earlier, the material on record shows that the transactions between the parties were of the year 1991-92. The last entry in the books of accounts was on 22-3-1993.

(2.) AT the hearing of the petition, on behalf of the petitioner, it is contended that considering the findings by the Arbitral Tribunal itself that the last entry in the Books of Account being 22-3-1993, these would be transactions before the bye-laws were amended on 29-8-1998. The amended bye-laws would only apply to transactions after the amendment and not cover transactions in respect of which cause of action had arisen before the amendment. Considering the issue involved and as it would affect other references, notice was issued to the Bombay Stock Exchange as to their stand on the issue. It was the Bombay Stock Exchange that had framed the bye-law. On behalf of the Bombay Stock Exchange, their learned Counsel after taking instructions has made a statement to this Court that it is the stand of the Bombay Stock Exchange that only transaction which have been entered into after 29-8-1998 would be covered by the amended bye-laws. Transaction previous to that period, and completed before that period would be covered by the bye-laws as earlier existing. In other words if the cause of action had arisen before the bye-laws as amended had come into force, the bye-laws as amended would not apply.

(3.) LET me therefore, consider as to whether the bye-laws as amended would apply to transactions in respect of which cause of action had arisen before the amendment. Section 43 of the Arbitration Act, 1996, provides that the Limitation Act 1963 shall apply to arbitrations as it applies to proceedings in the Court. However, section 2 (4) of the Act of 1996 provides that Part I except sub-section (1) of section 40, sections 41 and 43 shall apply to every arbitration under any other enactment for the time being enforce, as if that other enactment were an arbitration agreement except in so far as the provisions of Part I are inconsistent with that other enactment or with any rules made thereunder. In other words, by virtue of section 2 (4), of the Arbitration Act, bye-laws of the Bombay Stock Exchange being arbitration under an enactment would not be covered by section 43 of the Act of 1996. This was noticed by this Court in (Smt. Ashalata S. Lahoti v. Hiralal Liladhar), 1999 (1) Bom. C. R. (O. O. C. J.)293 : 1999 (1) Mh. L. J. 352. A similar view had been taken in (Hemendra Shah v. Stock Exchange, Bombay), 1996 (1) Bom. C. R. 270 : 1995 (2) Mh. L. J. 770 under the Act of 1940. It is therefore, clear considering the Act of 1996, that provisions of the Limitation Act would not apply to arbitration under the bye-laws of the Bombay Stock Exchange. Limitation, if any, if provided by the bye-laws would apply. In so far as statutory bye-laws are concerned, their nature and the effect of the bye-laws was considered in (Dr. Indramani Pyarelal Gupta and others v. W. R. Natu and others), A. I. R. 1963 S. C. 274. They have been held to be an exercise in subordinate legislation. The bye-laws framed under the Bombay Stock Exchange have been held to be statutory in character by a number of judgments of this Court. The issue for consideration in Indramani (supra) was the validity of a notification issued under the Forward Contract (Regulation) Act, 1952 and as also the amendment of a bye-law under which the notification was issued. Another issue was the meaning of the expression Under this Act , in section 3 of the Forward Contract (Regulation) Act. The latter part of section 2 (4) of the Act of 1996 or section 46 of the Act of 1940 is not found in section 3 of the Forward Contract Act namely in consistent with that other enactment or rules made thereunder. The judgment in Indramani and others (supra) had come up for consideration in (Vinay Bafna v. Yogesh Mehta), 1998 (4) Bom. C. R. (O. O. C. J.)849, decided on 7th September, 1998. One of the issues in the said case was whether the Arbitral Tribunal having an even number of members as provided under the bye-laws framed by the Bombay Stock Exchange under the Securities Contract (Regulation) Act, 1956 as they then stood contravened the provisions of section 10 of the Arbitration Act of 1996. The issue arose as under the bye-laws as they then stood, the Arbitral Tribunal consisted of two members. The issue was whether after the 1996 Act came into force such a bye-law which was clearly in conflict with section 10 would be saved considering section 2 (4) of the Act of 1996. In this context, it was noticed that section 2 (4) used two expressions under any other enactment and inconsistent with that other reliance in support of the proposition was sought from the judgment of Indramani (supra ). The majority judgment therein had taken a view that under the Act would mean not only under the Act, but also the rules and bye-laws framed thereunder. The minority view taken by Subba Rao, J. was to hold that the expression under the Act meant only under the Act and not under the rules or bye-laws. The majority view was followed namely that the expression under the enactment would include under the Act, rules or bye-laws thereunder. However, while construing the expression inconsistent with that other enactment or with any rules made thereunder it was held that the bye-laws if they, were inconsistent would not be protected. What would be protected will be to the extent of inconsistency under the Act and the Rules. Therefore, the composition of arbitration Tribunal which provided for two arbitrators under the bye-laws was held to be contrary to section 10. The basis for that conclusion was that Parliament could not abdicate its essential legislative powers. A rule making power which provides for laying of the rules framed, in Parliament has been held to be an answer to abdication of essential legislative functions. Therefore, the expression inconsistent with that other enactment or with rules made thereunder was within legislative competence and did not amount to abdication of essential legislative functions. A bye-law on the other hand even if it was subordinate legislation could not be so protected. Even if the Parliament had included the expression bye-laws, it had to meet the test of abdication of essential legislative function. It may however, be noted that this was not explained in that judgment but in a subsequent judgment.