Mr Nitin Sethi vs Dyna Securities Limited
2009 Latest Caselaw 839 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                   OMP Nos. 63/2007

%17.03.2009                      Date of decision: 17th March, 2009

SMT BIBA SETHI                                   .......       Petitioner
                             Through: Mr Jagdeep Kishore, Advocate

                                    Versus

DYNA SECURITIES LIMITED                           ....... Respondent
                             Through: Mr Milanka Chudhary, Advocate.


                             And

                             OMP.No. 64/2007

MR NITIN SETHI                                            ..... Petitioner

                             Through: Mr Jagdeep Kishore, Advocate

                                    Versus

DYNA SECURITIES LIMITED                               .... Respondent
                             Through: Mr Milanka Choudhary, Advocate

CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.    Whether reporters of Local papers may
      be allowed to see the judgment?       Yes

2.    To be referred to the reporter or not?        Yes

3.    Whether the judgment should be reported
      in the Digest?                        Yes


RAJIV SAHAI ENDLAW, J.

1. Both these petitions under Section 34 of the Arbitration and

Conciliation Act, 1996 raise identical issues of facts and law and are

taken up together for consideration.

2. The challenge is to the arbitral awards both dated 6th

November, 2006 of an Arbitral Tribunal constituted under the

National Stock Exchange of India Byelaws, to the effect that the

reference to the Arbitral Tribunal of the claims of each of the

petitioners was beyond the period of six months prescribed in

Byelaw 3 of Chapter XI. The Arbitral Tribunal thus rejected the

reference without expressing any opinion on the merits of the matter

and about the right of the petitioners to re-agitate the matter by

filing civil suit and enforcing their rights, if any.

3. The factual controversy is relevant. Each of 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 byelaws,

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

byelaws, 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 byelaws 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 within a month from that

date and to the petitioners to approach the NSE by filing statements

of claim and copy of the order to enable the NSE to expeditiously

comply with the directions.

4. The petitioners thereafter approached the NSE and the

Arbitral Tribunal was constituted in accordance with byelaws of the

NSE. The respondent filed a reply to the claim/petition of the

petitioners and in which it was, inter alia, contended that under

byelaws 3 of Chapter XI, all claims, differences or dispute are

required to be submitted to arbitration within six months from the

date on which the claim, difference or dispute arose or shall be

deemed to have arisen; that the said period of six months had

elapsed in the present case.

5. The Arbitral Tribunal vide awards aforesaid, inter alia, rejected

the contention of the petitioners that the reference to arbitration

being under Section 89 of the CPC, the objection on the ground of

byelaw aforesaid could not be raised and, inter alia, held that the

order aforesaid of this court had expressly provided that the

appointment of the arbitrator shall be in accordance with the

byelaws and thus the arbitration was under the byelaws and not on

reference under Section 89 of the CPC. The tribunal also rejected

the contention of the petitioners that the period of limitation could

not be curtailed by an agreement and the law of limitation giving

three years time to prefer the claim must prevail. It was held that

byelaw 3 only gives limited period to enforce the claim by virtue of

arbitration through NSE; it in no event curtails the period of

limitation prescribed under the general law; a claim to enforce a

right is distinct from a claim to make references to arbitration and

though the period of limitation cannot be curtailed by agreement but

the parties are free to fix any period for making a reference to

arbitration by their contract. The plea of the petitioners that such a

contract was void owing to Section 28 of the Contract Act was

negatived relying upon Gas Authority Vs Spie Capag (1994) 1

Arbitration Law Reporter 431 holding that the parties were free to

restrict the period in this regard. The arguments of the counsel for

the petitioners that the respondent could not be permitted to blow

hot and cold inasmuch as the reference to arbitration was at the

insistence of the respondent was also rejected holding that there

could be no 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 the

meaning of Section 29(2) of the Limitation Act, 1963 and thus

nothing in the Schedule to the Limitation Act would apply and the

limitation for preferring a claim would be governed by the said

special/local law contained in the byelaws and not by the period

prescribed in the Schedule to the Limitation Act.

7. Reliance was placed on the meaning of byelaw as described in

para 1323 Volume 28 of Halsbury's Law of England 4th Edition,

Kruse Vs Johnson (1898) 2 Q.B. 91, Chandrika Jha Vs State of

Bihar (1984) 2 SCC 41, HCG Stock and Share Brokers Ltd Vs

Gaggar Suresh (2007) 2 SCC 279, S&D Securities (P) Ltd Vs

Union of India (2004) 62 CLA 303 (Calcutta) and Nirav Securities

(P) Ltd Vs Mrs Prabhuta Motiram (2002) 39 SCL 372 (Bombay).

Per contra, the counsel for the petitioners has argued that the

petitioners could not be left remediless and if held not entitled to

pursue the claim under the byelaws, ought to be permitted to

continue the suits earlier filed and of which though permitted to

withdraw the court fees have not done so. Reliance was placed on

the proceedings of the Law Commission of India leading to the

Amendment of Section 28 of the Contract Act and to the judgments

of the National Consumer Disputes Redressal Commission in Real

Laminates Pvt Ltd Vs The New India Assurance Com Ltd and in

M/s New India Assurance Co Ltd Vs K.A Abdul Hameed and also

on DDA Vs Happy Himalaya Construction Company 2009 1 AD

(Delhi) 383.

8. Though the respondent has in its reply and during the

arguments not raised any plea as to the maintainability of the

petitions under Section 34 of the Arbitration Act but the order sheet

shows that on 30th April, 2007 the matter was posted next for

arguments on the question of maintainability of the petitions.

Though no arguments appear to have been addressed thereafter on

maintainability but I presume that the court must have ordered for

hearing on maintainability for the reason of the awards being in the

nature of decision under Section 16 (5) of the Arbitration Act. If the

order is treated as under Section 16 of the Arbitration Act, an appeal

there against under Section 37 (2) of the Arbitration Act and not an

application under Section 34 would lie. However, since the said

appeal also would have, as per the roster, been heard on the original

side only, I do not deem it appropriate to deal further with this

aspect.

9. I will take up first 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 Section 7, the arbitration should be agreed to be resorted

to mandatorily and as a sole remedy without requiring any fresh

consent of the parties.

10. A Division Bench of this court in U.O.I. Vs. Bharat

Engineering Corpn. ILR (1977) 2 Delhi 57 was faced with a

question, "can there be an "arbitration agreement" which reserves

the right of reference to only one party? Or, in other words, which

only one party can invoke?" Justice T.P.S. Chawla concluded that the

provisions of the 1940 Act did not visualize an arbitration agreement

which only one party can invoke and hence that the law, neither

Indian, nor English, nor American does not contemplate an

arbitration agreement which is contingent or conditional or confers

an option.

11. Another Full Bench of this court in Ved Prakash Mithal Vs.

U.O.I. AIR 1984 Delhi 325 was faced with a clause of arbitration of

administrative head of Chief Engineer of CPWD and further

providing that if for any reason that was not possible, the matter is

not to be referred to arbitration at all. The question arose whether

in the face of such agreement, the court was empowered to appoint

the arbitrator. The judgment of Division Bench in Bharat

Engineering Corp. (supra) was not cited before the Full Bench.

The Full Bench held that the purpose of Section 20 of the 1940 Act

was to effectuate the intention of the parties of arbitration of

disputes and the parties could not have agreed to exclude the power

of court under Section 20.

12. I do not find any change in the 1996 Act to make the dicta of

Division Bench or Full Bench inapplicable. If it were to be held that

upon expiry of limitation for reference of claims to arbitration, a

party had an option of approaching the civil court, it would vest a

discretion in the party to either opt for arbitration by preferring the

claims within the period of limitation or to allow the said period of

limitation to lapse and thereafter approach the civil court. Such

discretion would be contrary to the arbitration being mandatory and

a sole remedy. Thus, I do not find any merit in the contention of the

counsel for the petitioners or for that matter even the observations

made in para 17 of the award that upon the arbitration being time

barred the petitioners may be entitled to maintain the suit. The

petitioners must sink or sail under the agreed adjudicatory

procedure.

13. The counsel for the petitioners 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 up any defence available to it. Section 16

(2) of the Arbitration Act is clear in this regard and provides that a

party shall not be precluded from raising a plea on the jurisdiction,

existence or validity of the arbitration agreement merely because he

has appointed or participated in the appointment of an arbitrator.

15. That brings me to the core question for adjudication in the

present case, i.e. whether the Byelaw 3 of Chapter XI providing for

claims, disputes and differences to be submitted for arbitration

within six months from the date on which the claim, difference or

dispute arose is a local/special law within the meaning of Section

29(2) of the Limitation Act or is a contract to be governed by Section

28 of the Contract Act. The plea of the byelaws being a law is raised

for the reason of the byelaws having been framed under Section 9 of

the Securities Contracts (Regulation) Act, 1956 (Securities Act). The

said Act was enacted to prevent undesirable transactions in

securities, by regulating the business of dealing therein and for

providing certain other matters connected therewith. The

recognition to the stock exchange is given under the said law.

Section 9 thereof, inter alia, provides:

"9. Power of recognized stock exchange to make byelaws -

(1) Any recognised stock exchange may, subject to the previous approval of the Securities and Exchange Board of India, make bye-laws for the regulation and control of contracts.

2. In particular and without prejudice to the generality of the foregoing power such byelaws may provide for -

(n) the method and procedure for the settlement of claims or disputes, including settlement by arbitration;

(3) The bye-laws made under this section may -

(a) specify the bye-laws the contravention of which shall make a contract entered into otherwise than in accordance with the bye-laws void under sub-section (1) of section 14;

(4) Any bye-laws made under this section shall be subject to such conditions in regard to previous publication, as may be prescribed, and, when approved by the Securities and Exchange Board of India, shall be published in the Gazette of India and also in the Official Gazette of the State in which the principal office of the recognised stock exchange is situate, and shall have effect as from the date of its publication in the Gazette of India."

16. In Halsbury relied upon by the counsel for 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 byelaws. However, the same

cannot be taken as a precedent for adjudicating the matter in

controversy here.

In S.N.D. Securities P Ltd (supra) a Division Bench of the Calcutta

High Court held that an inference of statutory deeming has to be

drawn in the scheme of the provisions of the Securities Act, Byelaws,

Rules and Regulations. However, the plea of limitation also raised in

that case was left open. Similarly, Nirav Securities P Ltd (supra) is

also not a judgment on the matter for adjudication.

17. I find that the question which has arisen for adjudication in the

present case was also raised before this court in Mr. Praveen

Gupta v. Star Share and Stock Brokers Ltd. 149 (2008) DLT 72

but since the matter was decided on other aspects this question did

not fall for adjudication.

18. Section 43(1) of the Arbitration Act makes the Limitation Act

applicable to the arbitrations, as it applies to the proceedings in

court. At the time of coming into force of Arbitration Act, 1996 w.e.f.

22nd August, 1996, Section 28 of the Contract Act as interpreted by

the Apex Court, though prohibited the parties to a contract from

substituting their own periods of limitation in place of the period laid

in general law of limitation, permitted the parties to substitute their

own periods of prescription i.e., to say the parties were free to

provide that if a party does not sue within specified period, then the

rights accruing under the contract shall be forfeited or extinguished

or that a party shall be discharged from all liability under the

contract. Most of the arbitration agreements also contained such

clauses of forfeiture/extinguishment of rights unless arbitration was

commenced within a period shorter than that under the Limitation

Act. Since arbitration was / is a specie of contract, on the

interpretation of then Section 28 Contract Act such clauses were

valid. The legislature, while enacting the 1996 Arbitration Act, while

providing for applicability of Limitation Act, also empowered the

court under Section 43(3), to relieve against such forfeiture in cases

of undue hardship.

19. In my view the arbitral awards in the present case rejecting

the contention of the petitioners of Section 28 of the Contract Act on

the basis of the judgment in Gas Authority (supra) of prior to the

amendment to Section 28 of the Contract Act suffers from fallacy. I

may notice that the Arbitral 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 agreement and as if that other enactment were an

arbitration agreement, except in insofar as the provisions of the part-

I are inconsistent with that other enactment or with any other rules

made thereunder. The effect of exclusion of Section 43 would be

that the provisions of Limitation Act would not be applicable to

arbitrations under any other enactment.

22. The question thus is, is the arbitration under the Byelaws of

NSE, an arbitration under any other enactment, within the meaning

of Section 2(4) of the Arbitration Act, so as to make Section 43

thereof and consequently the Limitation Act inapplicable to such

arbitration.

23. Instances of Arbitration under an enactment are to be found in

the Indian Telegraph Act, Antiquities and Art Treasures Act, 1972,

Major Port Trusts Act, 1963, Requisition and Acquisition of

Immovable Property Act, Electricity Act, National Highways Act,

1956. Search on the internet lists more than twenty five central Acts

providing for statutory Arbitration in India. The Securities Act

(supra) however does not provide for arbitration. It only provides for

making of byelaws inter alia as to method and procedure as to

settlement of disputes, including by arbitration, for the regulation

and control of contracts.

24. Here, the law is not providing for arbitration. The law is only

prescribing that wherever a person transacts with a stock broker

being a member of a Stock Exchange, the terms and conditions of

such transaction or contract shall be as prescribed in the byelaws.

So, the law here is forcing a contract to be on certain terms i.e.

whether the constituent and stock broker have entered into an

arbitration agreement or not, under the byelaws they are deemed to

have agreed to arbitration in terms of byelaws. Whether such a

contract ceases to be a contract and becomes an arbitration under

an enactment?

25. A host of judgments of Bombay High Court have held the

Arbitration under the Byelaws framed by Stock Exchanges under

Section 9 of the Securities Act (supra) to be a statutory arbitration.

Reference may be made to Kishor Jitendra Dalal Vs Jaydeep

Investments AIR 1996 Bom. 254, Himendra V. Shah Vs Stock

Exchange, Bombay (1997) 5 Comp LJ 193 and Stock Exchange,

Mumbai Vs Vinay Bubna AIR 1999 Bom 266 (DB). In fact in the

last of the aforesaid judgments the Division Bench after noticing the

consistent view for long, also felt the need to 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 hereinabove

does not appear to have been addressed in any of the said

judgments. The Apex Court however in Jay I Shah (supra) noticed

distinction between two sets of arbitration - one between a member

and non member and another between a member and another

member of the exchange. It was further held that a claim by non

member against a member must be considered from a different angle

having regard to the fact that although the same relates to a

contract, such arbitration is governed by the law of the country i.e.,

the Arbitration Act - a contract between a member and non member

is otherwise enforceable in a civil court and by reason of existence of

arbitration clause only the suit filed by a non member against a

member can be stayed and/or referred to arbitration. In

Harinarayan G Bajaj (supra) the argument was that arbitration was

a right of a member of the NSE against the non member and which

came to an end of cessation of membership. The Apex Court

however held that right was not part of privileges of membership but

arise out of contract and the parties remained parties to the

arbitration agreement despite cessation of membership.

28. It would thus be seen that the Apex Court recognized the

arbitration under the byelaws of NSE to be contractual, though

having a statutory flavor.

29. At this stage it is apposite to paraphrase Chagla C.J. speaking

for Division Bench in the Textile Labour Association Vs The

Labour Appellate Tribunal of India AIR 1956 Bom. 746, in

respect of para materia provisions of Section 46 of the Arbitration

Act, 1940.

"Section 46 deals with those statutory arbitrations where the statute itself is looked upon as an arbitration agreement and it may be said that as far as the case with which we are concerned it is not a statutory arbitration in the sense in which Section 46 intends it to be. We are dealing with an arbitration under Section 66 (of the Bombay Industrial Relations Act, 1946) where parties by a written submission go to arbitration by a private party. This is not a case where the state refers the dispute to arbitration and the statutory provisions itself constitutes an arbitration agreement."

30. There is yet another aspect of the matter. Section 9(2) of the

Securities Act (supra) does not provide for the byelaw to provide for

limitation within which the claims under the contracts are to be

preferred; it only provides for the byelaws regulating and controlling

the contract, as to the method and procedure for settlement of

claims or disputes. It cannot therefore be 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. Pvt. Ltd. AIR 1967 Bombay 472 and the Full

Bench of Punjab High Court in United India Timber Works Vs

Employees State Insurance Corporation AIR 1967 Punjab 166

held the rule prescribing limitation for preferring an application,

ultravires Section 96 of the Employees State Insurance Act 1948

empowering State Government to make rules inter alia in regard to

"the procedure to be followed in proceedings" before Employees

Insurance Courts. Justice Tarkunde speaking for Division Bench of

Bombay High Court held the rule prescribing period within which

application could be preferred operated at a stage prior to the

commencement of proceedings and thus was outside the ambit of

power to frame rules or procedure. It was further held that the

legislative intent was not to empower the State Government to while

framing rules prescribe the limitation for preferring claims; if such

was the intention, the State Government would have been

empowered to frame rules in relation to proceedings before such

courts.

33. I respectfully concur with the law as laid down which squarely

applies to this case. I also do not find any legislative intent in the

Securities Act (supra) also to enable Stock Exchanges to while

framing byelaws regulating and controlling contracts prescribe any

period of limitation for preferring claims. Thus, the byelaw to that

extent is purely contractual.

34. If the Byelaw 3 of Chapter XI to the extent prescribing limitation period for reference of claims/disputes for arbitration is contractual, then, Section 2(4) of Arbitration Act prescribes that Part-I thereof will apply including Section 43 making the Indian Limitation Act applicable to arbitration. Consequently, Section 28 of the Contract Act, declaring agreements by which a party is restricted absolutely absolutely from enforcing rights under a contract by usual legal proceedings in ordinary tribunal or which limits the time within which he may thus enforce his rights, as void to that extent comes into play. Thus, the part of Byelaw 3 of Chapter XI of NSE Byelaws, to the extent prescribing limitation of six months for reference of disputes/claims to arbitration is void. The time therefore will be governed by the Limitation Act.

35. This court recently in Pandit Construction Company Vs DDA 143(2007) DLT 270 held the clause in works contract requiring the demand for arbitration to be made within 90 days, to be violative of Section 28 of the Contract Act and thus void.

36. Section 28 of the Arbitration Act provides for decision by Arbitral Tribunal in accordance with substantive law of India and Section 34 thereof provides for setting aside of an arbitral award, if in conflict with public policy of India, which as held in SBP & Co. Vs Patel Engineering Ltd 2005(6) SCC 288 means the laws of India. The awards in the present case are found to be contrary to Section 28 of the Contract Act and are set aside.

37. Consequently, both these petitions are allowed and the arbitral awards holding that the claims of the petitioners are barred by time, are set aside. The petitioners shall be entitled to approach the NSE and / or the Arbitral Tribunal

for adjudication of the claims of the petitioners. In the facts of the case, the parties are left to bear their own costs.

RAJIV SAHAI ENDLAW (JUDGE) March 17, 2009 M