Pre-Deposit Of Awarded Amount Through Bye-Laws For Entertaining Plea U/S 34 Of Arbitration Act Is Impermissible: Delhi High Court
The Delhi High Court bench of Justice Jasmeet Singh has held that Bye-laws may serve as operational guidelines, but they cannot impose conditions that conflict with statutory rights. The Court held that when there is no requirement of depositing the awarded amount as a precondition for filing an application under Section 34 of the Arbitration Act to set aside an award, any attempt...
The Delhi High Court bench of Justice Jasmeet Singh has held that Bye-laws may serve as operational guidelines, but they cannot impose conditions that conflict with statutory rights.
The Court held that when there is no requirement of depositing the awarded amount as a precondition for filing an application under Section 34 of the Arbitration Act to set aside an award, any attempt to introduce such a requirement through bye-laws is impermissible.
Brief Facts:
Dr. Agarwal, learned counsel for the respondent, relies on Bye-Law 15.40 of the Multi Commodity Exchange of India Ltd. (MCX).
The Respondent submitted that in view of Bye-Law 15.40.1, the petitioner is required to deposit the awarded amount before his appeal under Section 34 of the Arbitration and Conciliation Act, 1996 ( “Arbitration Act” ) is considered.
It was further submitted that the word “appeal” is a misnomer and any challenge to the arbitral award will fall within the purview of Bye-Law 15.40.1.
Observations:
The court at the outset observed that the right to appeal under Bye-Law 15.40 and the right to challenge an arbitral award under Bye-Law 15.41 must be interpreted harmoniously. Bye-Law 15.40.1 requires a party dissatisfied with an arbitral award to deposit the awarded amount with the Exchange before filing an appeal, reflecting an intent to ensure a genuine financial stake in the outcome.
It further added that however, the term “appeal” in this context can be misleading. A challenge under Section 34 of the Arbitration Act is not a conventional appeal but a statutory remedy to set aside an award on limited and specific grounds.
The court further said that Bye-Law 15.41 explicitly provides that an arbitral award may be set aside or modified by the court through an application under the relevant provisions of the Arbitration Act.
The court further observed that this position favors the stand of the petitioners that they can challenge the award without depositing the awarded amount. Based on the above, it held that the procedural safeguards provided in Bye Law 15.41 reinforces the notion that the court has the authority to set aside or modify awards, thereby allowing for a fair hearing without financial barriers imposed by the bye-laws.
in 'Dr. Indramani Pyarelal Gupta & Ors. v. W.R. Natu & Ors., (1963), the Supreme Court held that Bye-Laws can be helpful in providing operational guidelines but they cannot lay down any condition which contradicts the statutory rights provided under the Act like the Arbitration Act. Based on the above, it held that therefore, the argument that the bye-law mandates a deposit before challenging an award is untenable, as the Act does not prescribe any such precondition for filing a challenge under Section 34.
The court concluded that both Bye-Laws 15.40 and 15.41 expressly acknowledge the applicability of the Arbitration Act rendering any claim of the Act's non-applicability baseless. Therefore the argument of the Respondent with respect to Bye Law 15.40 cannot be accepted as it would render Bye-Law 15.41 meaningless. Accordingly, the present application was dismissed.
Case Title: Harshvardhan Metals Ltd & Anr. Versus ISF Commodities (P) Ltd
Case Number:'O.M.P. (COMM) 351/2020 & I.A. 14444/2021, I.A. 542/2024'
Judgment Date: 02/05/2025
For Petitioners: Mr. Tanmay Mehta, Mr. Rahul Shukla, Ms. BB Shukla, Mr. Ramandeep Singh, Advs
For Respondent: Dr. Anurag Kr. Agarwal, Mr. Praveen Kumar, Mr. Prateek Agarwal, Advs.