1998 Supreme(Bom) 436

IN THE HIGH COURT OF BOMBAY
F.I. Rebello, J.
Kapal R. Mehra others ..... Petitioners.
Versus
Bhupendra M. Bheda others.... Respondents.
Arbitration Petition No. 212 of 1998, decided on 8-9-1998.
Advocates appeared :
D.D. Madan i/b Malvi Ranchoddas Co., for petitioners.
Gautam Mehta, for respondent Nos. 1 and 2.

Headnote:Arbitration and Conciliation Act, 1996

       Sections 2(4) and 7-Arbitration under any other enactment-Arbitration between a member and nonmember of B.S.E.-Regulated by byelaws framed by B.S.E. Under Securities Contract Regulations Act-Held-Even a non-member dealing in shares on B.S.E. is subject to said byelaws.-It was hold that an appeal is not maintainable at the hearing of the petition at the admission stage by consent it was agreed that other contentions raised in the petition would also be decided finally.

       It was the contention of the petitioners that there was no written agreement between the parties. The dispute pertains to a reference between a member and a non- member in terms of the bye-laws framed by the Bombay Stock Exchange. Section 2(4) of the Arbitration and Conciliation Act, 1996 saves provisions for arbitration under any other enactment. Such provisions for arbitration are saved under the Act notwithstanding Section 7 of the Act which provides for agreement in writing. As Arbitration between a member and non-member of the B.S.E. is regulated by the bye-laws framed by the B.S.E. under Section 9 of the Securities, Contract (Regulations) Act, 1956. Therefore, though there is no agreement between the parties in view of the byelaws framed which provide for arbitration the provision for arbitration is an arbitration agreement under any other enactment. As such even a non-member dealing in shares on the Bombay Stock Exchange is subject to the said bye-laws. The contention that there is no agreement has, therefore, to be rejected.

       Sections 2(4) and 7-Securities Contract (Regulations) Act, 1956, Section 8-Applicability of Bye-laws in dispute-A dispute between a member and non-member of stock exchange is covered by Section 7 of Arbitration Act, whereas a non-member will be subject to bye-laws framed by stock exchange as per Section 9 of the Securities Contracts Act.

       Sections 10 and 34(2)(a)Defect in Constitution of Arbitration Tribunal-An award given by an Arbitration Tribunal is liable to be set aside vide Section 34(2)(a)(v) of the Act, if the Constitution of the tribunal itself is not in conformity with Section 10(f) of the Act.

       Sections 10(1), 16, 34 and 37Interpretation of statutes-Provision of appeal under Section 34 is only against final order and not against interim orders, but as per Sections 34 and 37 read together arbitral orders can be challenged in appeal under Section 37 of the Act, and under Section 16(5) of the Act cannot constitute arbitral order, because it was not a final award, therefore, this will come to purview of Section 37(2) of the Act.

       Sections 16, 34 and 37-Arbitral tribunal-Jurisdiction of-Appeal-Held-If the plea of jurisdiction raised under Section 16 of Act is not accepted-No appeal is maintainable.-Where the Arbitral Tribunal accepts the plea regarding want of jurisdiction in which case an appeal is provided under Section 37(2)(a). The other situation is when the plea is not accepted, in which case the tribunal will proceed with the reference and pass the final award such a final award on that count can be challenged by filing petition under Section 34(2)(a)(v) by challenging the award. If the plea raised under Section 16 is not accepted no appeal is maintainable.

       A harmonious construction of Sections 34 and 37 read conjointly would mean only those orders can be challenged in respect of which a statutory remedy by way of appeal in provided under Section 37 of the Arbitration and Conciliation Act, 1996. An order under Section 16(5) does not constitute an arbitral award either interim or final and hence cannot be challenged under Section 34 of the Act. If accepting the contention of want of jurisdiction as on award there would have been no need to provide an appeal under Section 37(2) of me Arbitral Act.

       Sections 37(2)(a), 16, 5 and 34-Maintainability of appeal-Where during proceedings an objection is rejected, the tribunal can continue its proceedings but when the award is given, it can be challenged in appeal on ground of rejection of objection, vide Section 34(2)(a) and Section 37 of the Act.- The petition was argued at length earlier. The matter was adjourned for further hearing today as a point pertaining to legality of constitution of the Arbitral Tribunal was in issue in another proceeding. That point has been decided by Court, by Judgment delivered on 7th September, 1998 in Arbitration Petition No. 130 of 1998 Vinay Bubna v. Yogesh Mehta and others, 1998 (4) Born CR 849. This Court has held that an award by an Arbitral Tribunal constituted in contravention of Section 10 of the Arbitration and Conciliation Act, 1996 is liable to be set aside under Section 34(2)(a)(v) of the Arbitration and Conciliation Act, 1996 which will be referred to as the Arbitration Act, 1996.

       The interpretation of Clause (a) of sub-section (2) of Section 37. The objection raised by the petitioners was under Section 16, as to the competence of the Tribunal to rule on its own jurisdiction. Under sub-section (2) of Section 16 a person desirous of objecting to the jurisdiction of the Arbitral Tribunal, must raise the objection not later than the submission of the statement of defence. The section further provides that the parties shall not be precluded from raising such a plea merely because such party appointed or participated in the appointment of an arbitrator. Sub-section (3) of Section 16 provides that a plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. Sub-section (5) of Section 16 is important inasmuch as it sets out that the arbitral tribunal shall decide the matter referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, to continue with the arbitral proceedings and make an arbitral award. In other words if the objection is rejected the arbitral tribunal has jurisdiction to continue the arbitral proceedings and make an arbitral award. Section in this context and on examination of Section 37 sub-section (2) it is clear that only in the event the arbitral tribunal accepts the plea, then an appeal is maintainable under Section 37. No appeal will be maintainable in the event the plea is rejected.

       The Arbitration Act, 1966 has sought to remedy various procedural defects in the Arbitration Act, 1940 so as to provide for early resolving of the dispute. The purpose is clear, once the arbitral tribunal enters into reference, the award must be made as early as possible. In fact unlike the Arbitration Act, 1940, Schedule I which provided for a time frame and Section 28 which provided for enlargements ofo time in making the award, no such period is laid down in the new Act. It is made clear that the above construction is based on the provisions of the Arbitration Act, 1940 and it does not refer to other arbitral proceedings protected under sub-section (4) of Section 2 of the Arbitration and Conciliation Act, 1996. To that extent also it has put fetters on of Section 5. Therefore, there are two situations. One where the Arbitral Tribw1al accepts the plea regarding want of jurisdiction in which case an appeal is provided under Section 37(2)(a). The other situation is when the plea is not accepted, in which case the tribunal will proceed with the reference and pass the final award. Such a final award on that Court can be challenged by filing a petition under Section 34(2)(a)(v) by challenging the award. Therefore, Court is of the opinion that if the plea raised under Section 16 is not accepted no appeal is maintainable.

       If Section 34 is read to mean to include every interim order or award the object and purpose behind Section 37 would be defeated. Interim award has not been defined. Under sub-section (5) of Section 431 of the Arbitration Act, 1996, the Arbitral Tribunal can make an interim award on any matter in respect of which it can make a final award. Thus at an interim stage there can be determination of claim in respect of which a final award can be made. An award can be enforced as a decree by virtue of Section 16 of the Act. An award is therefore, a final determination of the claim. An interim award will be such determination of a claim at an interim stage.