TaxTMI 
TaxTMI 
2009 (3) TMI 1106
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....f the petitioners had instituted suits in this court for recovery of monies from the respondent. The applications under Section 8 of the Act came to be filed in the said suits and which were disposed of vide common order dated 25th November, 2005. It was the contention of the respondent who was the defendant in the said suits that under the bye laws, there is arbitration clause and all matters and settlement have to be settled by the forum prescribed therein. The counsel for the petitioners who were the plaintiffs therein gave his no objection to abide by the terms of the arbitration clause as contained in the bye laws, subject to the court fees paid by the petitioners in the suits being refunded in accordance with the provisions of Section 89 of the CPC read with Section 16 of the Court Fees Act. The suits were disposed of with the directions that the petitioners would be entitled to approach the National Stock Exchange of India (NSE) under the provisions of the bye laws and as and when such request was received the NSE shall appoint an arbitrator as the petitioners had already filed the suits in the form of claims. Directions were also issued to the NSE to appoint an arbitrator w....
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.... estoppel against the statute/rules inasmuch as the byelaws had been framed under Section 9 of the Securities Contracts (Regulations) Act, 1956. Though neither was any application preferred by the respondent under Section 16 of the Arbitration Act nor a decision within the meaning of Section 16(5) of the Arbitration Act given, but the awards however refer to Section 16 to observe that under the said provision the question raised by the respondent could be gone into inasmuch as if the period of limitation to adjudicate the dispute through the premise of NSE is barred, the Arbitral Tribunal held that they could not go further in that regard. On facts, the Arbitral Tribunal found the references to be beyond six months. 6. The aforesaid awards led to the filing of these petitions under Section 34. The counsel for the respondent did not dispute that if Section 28 of the Contract Act was applicable, the byelaw 3 aforesaid restricting the period for reference of disputes to six months would be void to that extent. It was, however, his submission that Section 28 is applicable only to contracts/agreement. It was his contention that the byelaw 3 aforesaid is a special or a local law within ....
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....rst the argument of the counsel for the petitioners of the petitioners being entitled to pursue the suit if found not entitled to pursue the arbitration. In my view, it is not the legislative intent. Even if the contention of the counsel for the respondent is to be upheld, of Section 28 of the Contract Act being not applicable to the byelaws which are special or local law, it cannot be held that a claim which has become barred under the procedure agreed to between the parties can be agitated in a civil court. If the parties are found to have mandatorily agreed to the resolution of their disputes by arbitration, then the parties would be governed by the laws/rules of that arbitration only and it cannot be said that if the claim has become barred by time before the arbitrator, the party would have the remedy of a civil suit. If such interpretations were to be given it would make the arbitration agreement a contingent agreement and which is not permissible in law. In Wellington Associates Ltd Vs Kirit Mehta AIR 2000 SC 1379, though exercising powers under Section 11(6) of the Act it was held that an arbitration clause, to constitute an arbitration agreement within the meaning of Secti....
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....though feebly had also sought to challenge the finding of the Arbitral Tribunal that the arbitration was not by reference under Section 89 of the CPC but under the byelaws of the NSE. The said contention of the counsel for the petitioners also does not find favour with me. The parties did not make a new contract of reference of dispute to arbitration. The application under Section 8 of the Act was filed on the ground that the subject matter of the suit was the subject matter of an arbitration agreement and the counsel for the petitioners as aforesaid had conceded to the said position. Section 89 of the CPC was invoked merely to avail of a refund of court fees. 14. I also do not find the rejection by the Arbitral Tribunal of the plea of the petitioners of the respondent being not entitled to blow hot and cold, to be not erroneous though for different reasons. If the subject matter of the suit is the subject matter of an arbitration agreement, then on application being made in accordance with Section 8 of the Act, the court has no option but to refer the matter to arbitration. Merely by filing an application under Section 8 of the Act, the applying party is not precluded from taking....
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....or the respondent, it is stated that if validly made, the byelaw has the force of law within the sphere of its legitimate operation - byelaws are instrument in the nature of local enactments and are thus within the definition of local statutory provisions whether made under a public general or a local Act. The Queen Bench judgment is to the effect that in determining the validity of byelaws made by public representative bodies, the court ought to be slow to hold that a byelaw is void for unreasonableness. Chandrika Jha (supra) is an authority for the proposition that the functions of the Registrar Cooperative Societies under the byelaws are statutory functions. HCG Stock and Share Broker Limited (supra) merely affirms the judgment of the single Judge and the Division Bench of the Bombay High Court in turn affirming the arbitral award holding the claims preferred in that case before the Arbitral Tribunal constituted under the byelaws of NSE to be barred by time. The Apex Court in the said judgment was not concerned with the matter for adjudication in the present case though of course this judgment shows that the Apex Court upheld rejection of the claim as barred by time under the b....
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....l Tribunal has not held Section 28 to be not applicable for the reason of byelaw being a special law within the meaning of Section 29(2) of the Limitation Act. 20. However, soon after the coming into force of Arbitration Act, 1996 w.e.f. 22nd August, 1996, Section 28 of the Contract Act was amended w.e.f. 8th January, 1997. The purport and effect of the amendment was to make contracts providing for such forfeiture/extinguishment of rights or permitting the parties to prescribe their own periods of prescription, void to that extent. After the said amendment, the arbitrators are to themselves apply the amended Section 28 of the Contract Act and Section 43(3) of the Arbitration Act, 1996 cannot be understood as vesting such power in court only, notwithstanding amendment to Section 28. I have recently in Punj Lioyd Ltd Vs National Highways authority of India OMP 340/2008 and Arbitration Application 14/2008 decided on 17th February, 2009 dealt with this aspect. 21. Section 2(4) of the Arbitration Act, makes Part-I of the said Act (except Sections 40(1), 41 and 43) applicable to every arbitration under any other enactment also as if the arbitration were pursuant to an arbitration agree....
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.... retain it to prevent chaos. 26. I may notice that the Apex Court in Harinarayan G. Bajaj v. Rajesh Meghani (2005) 10 SCC 660 has in relation to the byelaws of NSE held that the arbitration proceedings as provided in the Byelaws and Regulations are subject to the provisions of the Arbitration and Conciliation Act, 1996 to the extent not provided for in the Byelaws and Regulation. Similarly, in Bombay Stock Exchange v. Jaya I. Shah AIR 2004 SC 55 the Apex Court in para 38 held that the Rules, Byelaws and Regulations made by the exchange, having regard to the scheme as also the purport and object thereof, have a statutory flavor; byelaws are required to be made for regulation and control of contracts, whereas rules relate to in general to the constitution and management of stock exchange. Again in para 58 of the said judgment it was held that the arbitration under the byelaws is governed by the provisions of the law of the country namely, the Arbitration Act earlier of 1940 and now of 1996. 27. However, the question posed by me in para 23 herein above does not appear to have been addressed in any of the said judgments. The Apex Court however in Jay I Shah (supra) noticed distincti....
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....e said that the byelaws, whether statutory or having a statutory flavor prescribe for preferring claims or for referring disputes to arbitration any period of limitation different from the period prescribed by the schedule to the Limitation Act. The Byelaw 3 of Chapter XI of NSE Byelaws providing time of six months for submission of claims, disputes to arbitration is for this reason also contractual and not statutory. 31. The statute of limitation is founded on public policy. It is enshrined in the maxim "interest reipublicae ut sit finis litum". Rules of limitation are not meant to destroy the rights of parties. They are meant to see that parties do not resort to dilatory tactics but seek their remedy promptly. The legislature has sought to balance public interest in providing limitation on the one hand and at the same time not to unreasonably restrict a right of the party to initiate proceeding on the other (see V.M. Salgaocar Vs Board of Trustees of Port of Marmugao (2005) 4 SCC 613) 32. Though the law of limitation is in some respects said to be procedural law, but the Division Bench of Bombay in the Employees' State Insurance Corpn. Vs Bharat Barrel & Drum Manufacturing Co. ....