1998 Supreme(Bom) 635

IN THE HIGH COURT OF BOMBAY
F.I. Rebello, J.
Smt. Ashalata S. Lahoti ..... Petitioners
Versus
M/s. Hiralal Lilladhar..... Respondent.
Arbitration Petition Nos. 82 83 of 1997, in Award No. 205 206 of 1996 and Arbitration Petition No. 318 of 1998, decided on 15-10-1998.
Advocate appeared :
P.K. Samdani with S.J. Purohil, for petitioner in A.P. No. 82 83/97.
D.Y. Chandrachud, S.A. with V.V. Joglekar and S.A. Merchant, I/b. N M. Legal Venture, for the respondent in A.P. No. 82 83/97.
Virag V. Tulzapurkar with C.S. Balsara i/b. Kanga and Co., for the petitioner in A.P. 318/98.
Sayeed Akhtar, for the respondent in A.P. 318/98.

Headnote:Section 28-Arbitration and conciliation-No reference to point out law whether provisions of Limitation Act applicable-Still Arbitrator decides on this point-Held, it amounts to error of law and award liable to be set aside.-Considering the law and the facts in the present case, it is clear that the dispute as to whether the provisions of Indian 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 could not amount to an error of law if the question was referred for decision of the Arbitrator unless the Arbitrator had proceeded illegally. In the instant case, it was not so referred. The proposition of law that Indian Limitation Act, 1963 applies, therefore, amounts to an error of law and the Award, therefore, is liable to be set aside on that count alone.

       Section 28-Award passed beyond prescribed time-No objection taken before Arbitrator-Parties continued with proceedings without any demur or protest-Time extended under Section 28 by Court.-No objection was taken before the Arbitrator that the time was not extended and that in the circumstances the arbitrator was rendered functus officio. On the contrary, the parties continued with the proceedings without any demur or protest. In these circumstances, it would be appropriate on the facts of the case to extend the time under Section 28 of the Arbitration Act, 1940.

       Section 30-Award-Wrong proposition of law laid down in Award-It amounts to error of law Award liable to be set aside.- The disputes as to whether the provisions of Indian Limitation Act apply or not was not referred to the decision of the Arbitrator and same was considered incidentally as a preliminary issue holding that the Limitation Act was applicable. The proposition of law that Indian Limitation Act, 1963, applies as held in the Award, amounts to an error of law. The Award on that count is liable to be set aside.

       Section 37-Arbitration and Conciliation Act, 1996, Section 43-Indian Limitation Act-Transactions on Bombay Stock Exchange between a member a non-member-Arbitration-Award-Holding applicability of law of limitation and hence claim time barred-Challenged-Held, by virtue of Sections 37 and 2(4) of Act 1940 and Section 43 of the Act, 1996 provisions of Limitation Act excluded- Thus, no question of time bar.-Considering Section 8 of the Securities Contracts (Regulation) Act, 1956 read with sub-sections 2(b) and 2(k) and (h), I have no doubt whatsoever that the provisions for arbitration is a provision under the bye-laws. Bye-law No. 226 makes it absolutely clear that transactions between a member and a non-member is deemed made subject 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. Byelaws Regulations and usages of the Exchange. I have, therefore, no hesitation in holding that contracts between a member and a non-member is pursuant to the bye-laws framed under Section 9 of the Securities Contracts (Regulation) Act, 1956 and that the provisions for arbitration contained in the contract is, therefore, under the Act, and as such falling within Section 46 of the 1940 Act and Section 2(4) of the Act of 1996. It is an Arbitration Agreement under the Act.

       Therefore, once held that this is an arbitration under the Act, 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 Indian Limitation Act in the Act of 1940 and by virtue of Section 2(4), the application of Indian Limitation Act as contained in Section 43 is excluded. Therefore, the provisions of the Indian Limitation Act, will not apply to arbitration between a member and a non-member in respect of transactions done under the Bombay Stock Exchange Act.

       Sections 10 and 14-Arbitration Tribunal constituted of even number of Arbitrators-Arbitrators de jure cannot proceed with Arbitration.-Under Section 14 of the Arbitration and Conciliation Act, 1996, the mandate of the Arbitrator shall terminate if he becomes de1acto or de jure unable to perform his functions. If the Tribunal is constituted contrary to Section 10 of the Act, 1996, 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. Where the composition of the Tribunal is of two members it will be contrary to Section 10 of the Act, as parties cannot derogate from the said provision. Treating, the present petition, as application under section 14(2), it is held that the arbitrators de jure cannot proceed with arbitration. 1998 (5) LJ 613. Rel.

       Sections 37(2) and 16(2)-Appeal lies only when the Arbitral Tribunal upholds the plea that it has no jurisdiction.

       Section 9-Arbitration Act (10 of 1940), Section 46, Arbitration and Conciliation Act (26 of 1996), Section 2(4)-Arbitration between a member and non-member in respect of transactions under Bombay Stock Exchange-Provisions of Limitation Act 1963 do not apply.-Where there is a contract between a member and nonmember pursuant to the bye-laws framed under Section 9 of the Security Contracts (Regulation) Act, 1956 the provision for arbitration contained in the contract is under the Securities Contracts (Regulation) Act and as such, falls within Section 46 of the Arbitration Act, 1940 and Section 2(4) of the Arbitration and Conciliation Act, 1996. It is an arbitration agreement under the Act. In view of Section 46 of the Arbitration Ad, 1940, the provisions of the Indian Limitation Act will not apply to arbitration between a member and non-member in respect of transactions transacted on the Bombay Stock Exchange.

       Section 9-Arbitration Act (10 of 1940), Section 46, Arbitration and Conciliation Act (26 of 1996), Section 2(4)-Arbitration between a member and non-member in respect of transactions under Bombay Stock Exchange-Provisions of Limitation Act 1963 do not apply.-Where there is a contract between a member and nonmember pursuant to the bye-laws framed under Section 9 of the Security Contracts (Regulation) Act, 1956 the provision for arbitration contained in the contract is under the Securities Contracts (Regulation) Act and as such, falls within Section 46 of the Arbitration Act, 1940 and Section 2(4) of the Arbitration and Conciliation Act, 1996. It is an arbitration agreement under the Act. In view of Section 46 of the Arbitration Ad, 1940, the provisions of the Indian Limitation Act will not apply to arbitration between a member and non-member in respect of transactions transacted on the Bombay Stock Exchange.