No Pre-Deposit Needed To Challenge Arbitration Award | Bye-Law Cannot Override Statutory Rights Under Section 34 | Delhi HC Rejects ISF's Plea To Enforce MCX Condition
Safiya Malik
The High Court of Delhi Single Bench of Justice Jasmeet Singh held that the challenge to an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996 does not qualify as a conventional appeal and hence, cannot be subjected to conditions not prescribed under the statute. The Court dismissed the application seeking mandatory deposit of the arbitral award amount as a precondition for entertaining the challenge. The directive makes it clear that procedural requirements outlined in exchange bye-laws cannot override the statutory safeguards provided by the Act.
The matter arose from a dispute between the petitioners and the respondent, arising out of an arbitral award issued under the framework of the Multi Commodity Exchange of India Ltd. (MCX). The respondent filed I.A. 1298/2020 under Section 151 of the Code of Civil Procedure, 1908, praying for directions to the petitioners to deposit the awarded amount prior to the hearing of their petition challenging the award under Section 34 of the Arbitration and Conciliation Act, 1996.
The respondent relied on Bye-Law 15.40.1 of the MCX, which mandates that any party dissatisfied with an arbitral award must deposit the awarded amount with the Exchange before filing an appeal. It was submitted that such deposit was a prerequisite for maintaining the challenge and that the terminology "appeal" used in the bye-law should be construed to include a petition under Section 34.
The respondent's counsel cited the case of Dr. Indramani Pyarelal Gupta & Ors. v. W.R. Natu & Ors. (1963) 1 SCR 721 to argue that bye-laws made under an Act constituted subordinate legislation and thus had binding statutory effect. The submission was that the MCX Bye-Laws, though framed by the Exchange, were enforceable in the same manner as Rules under a statute.
To bolster the argument, reliance was also placed on Bombay Stock Exchange v. V.S. Kandalgaonkar & Ors., (2015) 2 SCC 1. Paragraph 33 of the said judgment was cited to underscore that rules framed by exchanges under statutory powers amounted to rules under the Act and were thus enforceable.
On the other hand, the petitioners relied on Bye-Law 15.41 of the MCX, which permits setting aside or modification of an arbitral award by the court under relevant provisions of the Arbitration and Conciliation Act. It was submitted that this provision recognizes the statutory procedure for challenging arbitral awards and does not impose any financial preconditions.
The petitioners contended that the remedy under Section 34 was a statutory one and not an appeal in the conventional sense. Therefore, imposing a precondition not envisaged under the statute would be in derogation of their right to challenge the award.
The Court recorded that "the right to appeal under Bye-Law 15.40 and the right to seek setting aside of the arbitral award and filing objections thereof under Bye-Law 15.41 have to be construed harmoniously." It further noted that "Bye-Law 15.40.1 mandates that a party dissatisfied with an arbitral award must deposit the awarded amount with the Exchange before filing an appeal." However, the Court clarified that "the term 'appeal' as used in this context may be misleading."
Justice Jasmeet Singh observed that "the challenge to an arbitral award under Section 34 of the Act is not a conventional appeal but a statutory remedy to set aside the award based on limited specific grounds." The Court also took note of Bye-Law 15.41 which "explicitly states that an arbitral award may be set aside or modified by the court on application under the relevant provisions of the Act." This, according to the Court, supports the position of the petitioners.
The Court remarked 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." It acknowledged that the judgments cited by the respondent established the statutory nature of bye-laws but clarified their scope by stating, "while bye-laws may provide operational guidelines, they cannot impose conditions that contradict the statutory rights granted under the Arbitration and Conciliation Act."
In evaluating the potential conflict between Bye-Laws 15.40 and 15.41, the Court held: "if the argument of learned counsel for the respondent as regards Bye-Law 15.40.1 is to be accepted, then, Bye-Law 15.41 will become otiose and meaningless."
The Court held that the condition requiring the deposit of the awarded amount prior to the hearing of a Section 34 petition is not supported by the Arbitration and Conciliation Act. It declared: "the present application is dismissed in the aforesaid terms."
Accordingly, I.A. 1298/2020 was dismissed, clearing the way for the petitioners to proceed with their challenge to the arbitral award without being required to deposit the awarded amount. The Court also directed that the main petition O.M.P. (COMM) 351/2020 be listed for hearing on 15 July 2025 at 2:30 p.m.
Advocates Representing the Parties:
For the Petitioners: Mr. Tanmay Mehta, Mr. Rahul Shukla, Ms. BB Shukla, Mr. Ramandeep Singh, Advocates
For the Respondents: Dr. Anurag Kr. Agarwal, Mr. Praveen Kumar, Mr. Prateek Agarwal, Advocates
Case Title: Harshvardhan Metals Ltd & Anr. vs ISF Commodities (P) Ltd
Neutral Citation: 2025: DHC:3776
Case Number: O.M.P. (COMM) 351/2020
Bench: Justice Jasmeet Singh
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