Bombay High Court
Ranjana Nagpal vs Geojit Financial Services Ltd on 14 July, 2016
Bench: R.D. Dhanuka
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO. 47 OF 2009
Kritika Nagpal, )
of Mumbai, Indian inhabitant, residing at)
Bunglow No.36, Atur Park, )
Sion Trombay Road, Chembur, )
Mumbai 400 071 ) ..... Petitioner
VERSUS
Geojit Financial Services Ltd. )
a company incorporated under the )
provisions of the Companies Act, 1956
and having her Registered Office at
)
)
5th Floor, Finance Tower, Kaloor, )
Kochi 682 017 ) ..... Respondents
ALONGWITH
ARBITRATION PETITION NO. 56 OF 2009
Bombay Construction and Engineering Pvt.Ltd.,)
a company incorporated under the )
provisions of the Companies Act, 1956 )
and having its Registered office at )
104, Kritika Annexe, Main S.T.Road, )
Next to Union Park, Chembur, )
Mumbai 400 071 ) ..... Petitioner
VERSUS
M/s.Geojit Financial Services Ltd. )
a company incorporated under the )
provisions of the Companies Act, 1956 )
and having its Registered Office at )
5th Floor, Finance Tower, Kaloor, )
Kochi 682 017 ) ..... Respondents
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ALONGWITH
ARBITRATION PETITION NO. 48 OF 2009
Lalitkumar Nagpal )
of Mumbai, Indian inhabitant, residing at)
Bunglow No.36, Atur Park, )
Sion Trombay Road, Chembur, )
Mumbai 400 071 ) ..... Petitioner
VERSUS
Geojit Financial Services Ltd. )
a company incorporated under the )
provisions of the Companies Act, 1956 )
and having his Registered Office at )
5th Floor, Finance Tower, Kaloor,ig )
Kochi 682 017 ) ..... Respondents
ALONGWITH
ARBITRATION PETITION NO. 57 OF 2009
Kapil Lalitkumar Nagpal, )
of Mumbai, Indian inhabitant, residing at)
Bunglow No.36, Atur Park, )
Sion Trombay Road, Chembur, )
Mumbai 400 071 ) ..... Petitioner
VERSUS
Geojit Financial Services Ltd. )
a company incorporated under the )
provisions of the Companies Act, 1956 )
and having his Registered Office at )
5th Floor, Finance Tower, Kaloor, )
Kochi 682 017 ) ..... Respondents
ALONGWITH
ARBITRATION PETITION NO. 1148 OF 2012
Ranjana Nagpal, )
of Mumbai, Indian inhabitant, residing at)
Bunglow No.36, Atur Park, )
Sion Trombay Road, Chembur, )
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Mumbai 400 071 ) ..... Petitioner
VERSUS
Geojit Financial Services Ltd. )
a company incorporated under the )
provisions of the Companies Act, 1956 )
and having her Registered Office at )
5th Floor, Finance Tower, Kaloor, )
Kochi 682 017 ) ..... Respondents
Mr.Simil Purohit, a/w. Mr.Faran Khan, i/b. Purohit & Co. for the Petitioners.
Mr.Dipan Merchant, Senior Advocate, a/w. Mr.Vaibhav Bajpai, a/w. Mr.Gaurav
Jangle, i/b. I.V.Merchant & Co. for the Respondents.
CORAM : R.D. DHANUKA, J.
RESERVED ON : 16th JUNE, 2016
PRONOUNCED ON : 14th JULY, 2016
JUDGMENT :
By these five petitions, the petitioners have impugned the five
separate arbitral awards rendered by the arbitral tribunal constituted under the
provisions of bye-laws, the rules and regulations of National Stock Exchange of
India Limited (NSE) thereby allowing the claims made by the respondent and
rejecting the counter claims made by the petitioners. In view of the fact that the
facts in all the aforesaid matters are identical, learned counsel appearing for the
parties have agreed to make submissions in the Arbitration Petition No.47 of 2009
and state that the judgment in the said arbitration petition would conclude the
issues raised in the other four petitions. By consent of parties, all the five petitions
were heard together and are being disposed of by a common order. Since the
learned counsel have made submissions in the Arbitration Petition No.47 of 2009,
some of the relevant facts for the purpose of deciding the petitions based on the
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facts of the said petition setout are as under :-
2. The respondent herein is one of the broker registered with the
National Stock Exchange of India Ltd. (hereinafter referred to as the Stock
Exchange). It is the case of the petitioner that he was one of the high networth
client of the respondent for last several years and had been carrying on trading in
various transactions through the Chembur branch office of the respondent. The
petitioner started effecting the transaction through the said Chembur office w.e.f.
April 2007 on the F&O segment. The petitioner had provided 6500 shares of
Reliance Petroleum Ltd. with the respondent as a security.
3. It is the case of the petitioner that in the evening of 16 th January, 2008,
the respondent informed the petitioner that there was a shortfall of approximately
Rs.3,50,000/- in her account. To meet the said shortfall, the petitioner immediately
issued a cheque in favour of the respondent for a sum of Rs.4,00,000/-. In the
morning of 18th January, 2008, the respondent informed the petitioner that the said
cheque of Rs.4,00,000/-was misplaced in their office. The petitioner accordingly
instructed her bankers to mark stop payment of the said cheque and issued another
cheque for Rs.4,00,000/- in the name of the respondent. The said cheque had been
encashed by the respondent.
4. It is the case of the petitioner that during the course of the day on 18 th
January, 2008 the respondent informed the petitioner that there was a margin
shortfall in her account and asked the petitioner to pay a sum of Rs.5,00,000/-.
The petitioner accordingly paid a sum of Rs.5,00,000/- to the respondent on 18 th
January, 2008 to meet the margin shortfall in her account. The said cheque of
Rs.5,00,000/- had been admittedly encashed by the respondent.
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5. It is the case of the petitioner that in the afternoon on 21 st January,
2008 Mr.Sabreesh from Chembur branch of the respondent informed the petitioner
that the market had been souring, however assured the petitioner that in past also,
although in the morning the market had been soured, however, during the course of
the day and before markets closed the position had recovered. The petitioner
accordingly instructed the said Mr.Sabreesh not to square off her outstanding
position and assured him to pay whatever shortfall in her account immediately on
the next day. It is the case of the petitioner that in the evening of 21 st January,
2008, when the petitioner called the office of the respondent to know the shortfall
in her account if any, the petitioner was informed that the respondent had not
received the margin position from the Exchange and therefore the shortfall if any,
in her account would be intimated to the petitioner in the morning of 22 nd January,
2008.
6. It is the case of the petitioner that in the morning of 22 nd January,
2008, when the petitioner called the office of the respondent, the petitioner did not
receive any proper reply. The petitioner was informed that the market had
witnessed a drastic fall and they were in the process of obtaining shortfall in the
accounts of all their clients. The petitioner was however informed that there is a
margin shortfall of approximately Rs.15,00,000/- in her account. The petitioner
requested the office of the respondent not to square off the outstanding position in
her account and assured that the petitioner would be forwarding a cheque of
Rs.15,00,000/- immediately and assured the respondent that whatever would be the
shortfall in her account would be paid in the evening of 22 nd January, 2008 herself.
The petitioner forwarded a cheque of Rs.15,00,000/- immediately and the same
had been received and encashed by the respondent.
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7. It is the case of the petitioner that she was shocked and surprised
when in the evening of 22nd January, 2008 she received a call from the office of the
respondent and was informed that all the outstanding position in her account had
been squared off directly by the head office of the respondent on the instructions of
the Stock Exchange alleged to have been received in the noon on 22 nd January,
2008. It is the case of the petitioner that she protested the purported squaring off
effected by the head office of the respondent on the alleged instructions of the
Exchange and called upon the respondent to provide the proof regarding the
Exchange having given such alleged instructions to its member brokers, to enable
the petitioner to take up the matter with the Exchange. The respondent however
avoided to provide the details of such alleged instructions to the petitioner on one
or the other pretext.
8. It is the case of the petitioner that on 29 th January, 2008, the petitioner
came across an electronic contract note forwarded by the respondent to her e-mail
ID. The petitioner came to know from the said e-mail that the respondent had sold
her collateral security on 28th January, 2008.
9. By her letter dated 1st February, 2008 to the respondent, the petitioner
raised strong protest in respect of the transactions carried out by the respondent in
the account of the petitioner and called upon the respondent to restore her
outstanding position. Vide her letter dated 2nd February, 2008 the petitioner
reiterated her contentions which were raised in the letter dated 1st February, 2008.
10. On 8th February, 2008,the respondent replied to the letters dated 1 st
February 2008 and 2nd February 2008 addressed by the petitioner. In the said letter
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it was alleged by the respondent that the Branch Manager of the respondent at her
Chembur branch had informed the petitioner regarding outstanding position in her
account, however, the petitioner had failed to pay the alleged shortfall in her
account which compelled the respondent to square off all her transactions. In the
said reply the respondent alleged that a sum of Rs.35,82,216.64 was due and
payable by the petitioner to the respondent and called upon the petitioner to pay
the said amount.
11. The respondent vide their letter dated 12th February, 2008 called upon
the petitioner to pay an amount of Rs.36,01,536/-. The petitioner thereafter made a
complaint on 26th February, 2008 with the National Stock Exchange of India Ltd.
against the respondent. The respondent thereafter invoked the arbitration
agreement and made a claim against the petitioner for recovery of Rs.35,19,225.42
togetherwith interest at the rate of 12% per annum from the date of accrual of
alleged debit till realization and cost. The said statement of claim was resisted by
the petitioner by filing a written statement. The petitioner also made a counter
claim against the respondent for a sum of Rs.9,17,203.72 with interest thereon at
the rate of 18% per annum from the date of filing of the counter claim till payment
and/or realization togetherwith costs.
12. The learned arbitrator made an award on 24th September, 2008 and
directed the petitioner herein to pay a sum of Rs.35,19,225.42 to the respondent
with interest at the rate of 12% per annum from 25 th April, 2008 till the date of
payment. The arbitral tribunal rejected the counter claim made by the petitioner
and directed that both the parties shall bear their cost of arbitration. Being
aggrieved by the said arbitral award, the petitioner filed the Arbitration Petition
No.47 of 2009.
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13. The arbitral tribunal allowed the claims made by the respondent in
other four arbitration proceedings and rejected the counter claims made by the
petitioner. Those awards are subject matter of the Arbitration Petition No.46 of
2009, Arbitration Petition No.48 of 2009, Arbitration Petition No.57 of 2009 and
Arbitration Petition No.1148 of 2012. By an order and judgment dated 17 th
September, 2012, the learned Single Judge of this court was pleased to set aside
the impugned award dated 24th September, 2008 and remanded all the aforesaid
petitions for reconsideration on all the issues and keeping all the points open. This
court also directed the arbitral tribunal to reconsider the case after giving
opportunity to all the parties.
14. Being aggrieved by the said order and judgment dated 17 th September,
2012 passed by the learned Single Judge of this court, the respondent preferred
five separate appeals before the Division Bench of this court. By a common
judgment dated 25th June, 2013, the Division Bench held that once the arbitral
award was set aside by the learned Single Judge by taking a view on merits, it was
impossible to comprehend as to why the proceedings should be remanded back to
the arbitral tribunal for reconsideration of all issues and keeping all points open.
The Division Bench held that once an arbitral award is set aside under section 34,
that brings to a conclusion to the proceeding before the court. It is held that
section 34(4) does not contemplate or vest a power in the court to remand
proceedings back to the arbitral tribunal once the court has set aside the award.
The Division Bench accordingly set aside the impugned judgment of the learned
Single Judge dated 17th September, 2012 and directed that the arbitration petitions
be restored to file for fresh consideration. It was however clarified that the
Division Bench had not expressed any views on merits on the admissibility of the
grounds which had been raised in the challenge to the arbitration award under
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section 34 and left it open to be determined by the learned Single Judge on
remand.
15. Pursuant to the said order passed by the Division Bench of this court
referred to aforesaid, both the parties through their learned advocates addressed
this court on the merits for a fresh decision.
16. Mr.Purohit, learned counsel appearing for the petitioner invited my
attention to various correspondence annexed to the petition, statement of claim
filed by the respondent, statement of defence and counter claim filed by the
petitioner and the findings recorded by the arbitral tribunal. He also placed
reliance on various paragraphs of the judgment delivered by the Division Bench on
25th June, 2013 in Appeal No.35 of 2013 and other companion appeals arising out
of the judgment delivered by the learned Single Judge in these petitions. He
submits that since the Division Bench has remanded the matter for deciding afresh,
this court is empowered to decide the matter without being influenced by the
observations made if any made by the Division Bench in the judgment dated 25 th
June, 2013.
17. It is submitted by the learned counsel for the petitioner that the
petitioner was a constituent of the respondent since 2007. There was no dispute
between the parties that all margin money was paid by the petitioner from time to
time whenever demanded by the respondent. He submits that on the basis of such
demand made by the respondent, the petitioner had already a sum of Rs.4,00,000/-
on 18th January 2008, a sum of Rs.5,00,000/- on 18th January 2008 and a sum of
Rs.15,00,000/- on 22nd January 2008. He submits that the petitioner had sufficient
balance in her bank account to meet the alleged shortfall in margin money if any.
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He submits that since the demand for margin money made by the respondent on
22nd January, 2008 was only in the sum of Rs.15,00,000/-, the petitioner had
deposited the said amount with the respondent.
18. It is submitted that as a matter of fact the petitioner had made an
enquiry with the respondent that if there was any further shortfall, the petitioner
was ready and willing to pay, however the respondent did not inform any further
shortfall if any. He submits that though the petitioner was dealing with the
Chembur branch office of the respondent from April 2007, without raising any
further demand for alleged shortfall of margin money on 22 nd January, 2008 inspite
of the enquiry having been made by the petitioner, the head office of the
respondent without any instructions from the petitioner and without any authority
squared off the transaction of the petitioner on 22 nd January, 2008 around 11.51
a.m. He submits that the respondent had admittedly accepted the said cheque of
Rs.15,00,000/- from the petitioner on 22nd January, 2008 without any demur and
had deposited the said cheque in their bank account on 23 rd January, 2008. He
submits that though the petitioner had called upon the respondent to produce the
instructions if any, received by the head office of the respondent from the Stock
Exchange for squaring off the said transaction to enable the petitioner to take
action against the Stock Exchange, the respondent did not furnish any such alleged
instructions.
19. Learned counsel appearing for the petitioner invited my attention to
Regulation (F & O Segment) 3.10 framed by the Stock Exchange and would
submit that under the said Regulation, it was mandatory obligation on the part of
the respondent trading member to demand from the constituent the deposit of
margin money which the constituent had to provide under trading Regulations in
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respect of the business done by the member for such constituent. He submits that
under the said Regulation, trading member can buy or sell derivatives contracts on
behalf of the constituent only on the receipt of margin of minimum such
percentage as the relevant authority may decide from time to time, on the price of
the derivatives contracts proposed to be purchased, unless the constituent already
has an equivalent credit with the trading member. The trading member is
empowered to collect higher margins from the constituent as he deems fit. He
submits that under the said Regulation, trading member also has to obtain the
written undertaking from the constituent to provide margin deposit and/or furnish
additional margin as required under the Rules and Regulations in respect of the
business done for the constituent by and /or as agreed upon by the constituent with
the trading member as and when called upon to do so by the trading member.
20. It is submitted by the learned counsel for the petitioner that it is
mandatory obligation on the part of the trading member to demand from its
constituent the amounts arising in respect of daily settlement in accordance with
the Clearing Corporation Regulations for business done by the member on behalf
of such constituent or such higher amounts as the trading member deems fit. It is
submitted by the learned counsel for the petitioner that under Regulation 3.10(b),
the respondent trading member could have closed out the transactions of selling or
buying derivatives contracts only if the constituent would not have made payment
of daily settlement within the next trading day.
21. It is submitted that even if according to the respondent any demand
was made for the amount over and above the amount of Rs.15.00 lacs from the
petitioner on 22nd January, 2008 and such balance amount was not paid by the
petitioner to the respondent till 23rd January, 2008, the respondent had no liberty to
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close the transactions by selling derivatives contracts and securities of the
petitioner till 23rd January, 2008. He submits that admittedly the respondent in this
case had closed out the transactions of the petitioner on 22 nd January, 2008 itself
which was in violation of Regulation 3.10(b) and thus such transactions closed out
by the respondent were not binding upon the petitioner. He submits that the arbitral
tribunal however, did not consider the mandatory provisions of Regulations
3.10(a) and (b). The award is contrary to Regulations framed by the Stock
Exchange which were binding on both the parties.
22. It is submitted by the learned counsel for the petitioner that the
respondent admittedly had e-mail address of the petitioner. The respondent did not
produce any correspondence or any other communication sent by the respondent
to the petitioner through e-mail demanding any higher amount over and above
Res.15.00 lacs or alleging that the same was though demanded, but not paid by the
petitioner. He submits that the arbitral tribunal has rendered a finding in paragraph
4.8 of the impugned award that it was an admitted position that there was neither
any dispute about the transactions till 21st January, 2008 between the parties nor
about the receipt of the contract notes by the petitioner herein from the respondent.
23. The arbitral tribunal has also given a finding that it was an admitted
position that the market was volatile and was going downward. It is also held by
the arbitral tribunal that it was an admitted position that the margin call was made
on all days including the dates when alleged disputed / unauthorized / uninformed
transactions were allegedly executed by the respondent herein by closing out the
open positions of the petitioner herein.
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24. Learned counsel appearing for the petitioner invited my attention to
the statement of claim filed by the respondent herein before the arbitral tribunal
alleging that the debit balance arose in the account of the petitioner as a result of
trading transactions done by the petitioner in F & O on 16 th January, 2008, 17th
January, 2008, 21st January, 2008 and 22nd January, 2008 and at that time the
petitioner was holding the position in F & O with huge MTM and margin
requirement. It was also alleged by the respondent that the petitioner used to take
position of more than pledged amount which was allowed by the respondent due to
his requests and promises by making payment of MTM and market money in time.
25.
Learned counsel for the petitioner submits that it was the case of the
respondent in the statement of claim that the market had witnessed a very heavy
downfall and resulted crash on 18th January, 2008, 21st January, 2008 and 22nd
January, 2008 and the respondent had to take necessary steps to withstand
volatility in market and therefore, the respondent was forced to apply stringent
margin rules. He submits that it was the case of the respondent that while squaring
off open position in F & O in trading account of the petitioner and shares pledged
against the margin requirement, the account of the petitioner was having margin
violation and there was huge margin requirement and MTM debit in the account.
The respondent thus had alleged to have insisted all the clients of all branches to
ensure sufficient margin in their trading account to hold positions in F & O.
26. According to the respondent, on 18th January, 2008 opening balance in
the account of the petitioner was showing debit of Rs.27,45,689.70, including
margin debit of Rs.40,20,840.55 and a cheque payment of Rs.5.00 lacs. There was
MTM debit of Rs.11,83,035/- incurred on 18th January, 2008. According to the
respondent, on 21st January, 2008 there was opening debit of Rs.35,38,149.64,
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including margin debit of Rs.40,30,264.99. According to the respondent, on 22 nd
January, 2008, margin requirement due from the petitioner was due
Rs.50,82,738.76 and MTM requirement was Rs.61,06,224.60 including MTM
debit of Rs.21,69,848.49 incurred on 22nd January, 2008.
27. It was the case of the respondent in the statement of claim that a
cheque of Rs.15.00 lacs was received by the respondent from the petitioner on 23 rd
January, 2008. The value of pledged position (75% haircut) towards margin on 22 nd
January, 2008 was only Rs.7,16,625/- and debit balance after accounting MTM for
the trade day due from the petitioner was Rs.1,11,88,963.36, which was alleged to
have been informed to the petitioner but the petitioner did not make payment. It
was the case of the respondent that since the petitioner had not paid sufficient
margin money and MTM requirement in time so as to hold the position in the
market, and in order to reduce the loss that would have sustained by keeping the
position long, the respondent was constrained to liquidate the same.
28. In paragraph 5 of the statement of claim, it was the case of the
respondent that after squaring off that position on 22nd January, 2008, pledged
position of the petitioner was having only total value of Rs.8,23,631.25 on 23rd
January, 2008 and debit balance was Rs.46,15,139.99. It was alleged that in order
to minimize the debit balance that had accrued in the account of the petitioner to
avoid further increase in debit of that amount incurred, the respondent was forced
to invoke the pledge on 28th January, 2008. After invoking pledge on 28th January,
2008, according to the respondent, the petitioner owed an amount of
Rs.36,01,536/- to the respondent, which was demanded by the respondent from the
petitioner by their notice dated 12th February, 2008 sent to the petitioner.
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29. In paragraph 7 of the statement of claim, it was alleged by the
respondent that the respondent had spoken with the petitioner on couple of
occasions when the petitioner had admitted the payment to the respondent. It was
further alleged that the Branch Manager of the respondent had informed the
petitioner about volatility in market and also informed that it would be impossible
to hold the position unless arrangement of funds was immediately made for total
outstanding debit, margin and MTM requirement. It is submitted by the learned
counsel for the petitioner that the respondent however, made inconsistent
submissions before the arbitral tribunal at the time of hearing and took various
stands which were not pleaded by the respondent in the statement of claim or in
the re-joinder. The arbitral tribunal however, allowed the respondent herein to take
steps inconsistent and contradictory pleas and accepted such pleas which show
perversity in the impugned award.
30. It is submitted by the learned counsel for the petitioner that if the
respondent would have demanded any margin amount of Rs.15.00 lacs on 22 nd
January, 2008, the petitioner would have paid such margin money and in support
of this plea the petitioner had produced the bank account statement of the
petitioner showing sufficient credit balance in the account of the petitioner. The
arbitral tribunal however, did not consider such crucial document in the impugned
award and allowed the claims made by the respondent against the petitioner based
on no evidence. He submits that the respondent did not produce any proof or
evidence before the arbitral tribunal showing demand of margin money over and
above Rs.15.00 lacs. The entire award is based on presumptions and surmises and
by drawing adverse inference against the petitioner which shows non-application
of mind on the part of the arbitral tribunal.
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31. In support of this submission that even if there was any margin
requirement in the account of the petitioner since 16 th January, 2008 itself or
thereafter prior to 21st January, 2008, the respondent could not have waited for
closing out the transactions of the petitioner till 22nd January, 2008 thought the
petitioner had not alleged to have made payment of the margin money requirement
during that period and thus the alleged losses,if any, suffered by the respondent
could not have been recovered from the petitioner, the learned counsel placed
reliance on the judgment delivered on 16 th April, 2015 in case of Bonanza
Commodities Brokers Pvt. Ltd. Vs. Roshanara Bhinder in Arbitration Petition
No.195 of 2015 and in particular paragraphs 29, 35 and 36.
32. Learned counsel appearing for the petitioner placed reliance on the
judgment of this court in case of Ankit Bimal Deorah vs. Microsec Capital Ltd.
delivered on 6th August, 2015 in Arbitration Petition No.1174 of 2012 and more
particularly paragraphs 8, 11, 19 to 21 and 28 and would submit that the onus to
prove that the respondent had demanded the margin money on 22 nd January, 2008
over and above the sum of Rs.15,00,000/- and had demanded the margin money on
earlier occasion in accordance with the Regulation 3.10 and other provisions of
bye-laws and regulations of Stock Exchange or not was on the respondent. He
submits that the respondent had failed to discharge such onus before the arbitral
tribunal. It is submitted that the arbitral tribunal however has drawn a perverse
finding that it was on record that the respondent had made margin call and the
petitioner had made request not to square off her outstanding position. He submits
that this finding of the arbitral tribunal is totally based on presumption and
surmises and is without any evidence.
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33. Learned counsel appearing for the petitioner placed reliance on the
judgment of this court delivered on 29th July, 2011 in case of Idea International
Pvt.Ltd. vs. Motilal Oswal Securities Pvt. Ltd. in Arbitration Petition No.144 of
2007 and other connected matters in support of the submission that even if under
the agreement entered into between the parties, the respondent broker is given an
authority to sell all or any of the security held by it on behalf of the petitioner, such
discretion has to be exercised by the broker in a reasonable way or for the benefit
of its client. He submits that in this case, the respondent broker did not wait till
closing of trading hours on 22nd January, 2008 but squared off the transaction in the
morning hours of 22nd January, 2008 itself.
34. It is submitted by the learned counsel for the petitioner that though the
arbitral tribunal on one hand has rendered a finding that till 21st January, 2008
there was no dispute raised by the respondent in respect of the margin money
though there was a debit balance according to the respondent in the account of the
petitioner till 21st January, 2008, on the other hand the arbitral tribunal has dis-
believed the case of the petitioner that there was no demand for margin money on
22nd January, 2008 above Rs.15 lacs and thus the petitioner did not pay such
margin money over and above the sum of Rs.15 lacs. He submits that the findings
rendered by the arbitral tribunal in favour of the respondents is contrary to the
pleadings of the respondents in the statement of claim and the rejoinder filed in the
arbitral proceedings.
35. It is submitted that none of the documents produced by the respondent
would show that the respondent had made any demand of margin money upon the
petitioner on 22nd January, 2008 over and above Rs.15 lacs which demand also was
made orally. He submits that it was not the case of the respondent that the demand
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was made by the head office of the respondents upon the petitioner. He submits
that though the respondents had alleged in the arbitral proceedings that the
transactions were required to be squared off in view of the instructions from the
Stock Exchange and though the petitioner had called upon the petitioner to
produce such alleged instructions received from the Stock Exchange, the
respondent did not produce any such instructions. The arbitral tribunal therefore
ought to have drawn adverse inference against the respondents on this issue.
36. Mr.Merchant, learned senior counsel for the respondents on the other
hand invited my attention to various paragraphs of the order passed by the
Division Bench on 25th June, 2013 in Appeal No.35 of 2013 and other connected
appeals by which the Division Bench had set aside the order and judgment dated
17th September, 2012 delivered by the learned Single Judge in these petitions and
would submit that the Division Bench has already laid down the principles of law
on the powers of court under section 34 of the Arbitration Act to interfere with an
arbitral award.
37. It is submitted by the learned senior counsel that the arbitral tribunal
has rendered various findings of facts on the disputed question as to whether the
respondents had demanded the margin money from the petitioner or not and
whether the petitioner had paid the entire amount of margin money as demanded
and required. He submits that this court cannot go into the merits of the matter and
interfere with the findings of fact rendered by the arbitral tribunal. He invited my
attention to the paragraph 4.5 of the impugned award and would submit that even
according to the petitioner, the fact that the respondent had made a demand for
margin money to the petitioner was not disputed. He submits that the only dispute
raised by the petitioner was that the demand was made for margin money only for
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the sum of Rs. 15 lacs and not above the said amount. He submits that the
statement of account of the petitioner reflected shortfall of much higher amount
upto 21st January, 2008 and thus there was no question of the respondent
demanding the margin money only to the extent of Rs.15 lacs.
38. Learned senior counsel placed reliance on clause 29 of the Stock
Broker- Client Agreement dated 3rd April, 2007 entered into between the parties
and would submit that under the said clause, it was at the discretion of the
respondent broker to make demand for margin money as per the requirement from
time to time. He submits that in case of "mark to market loss", payment was not
required to be made by the constituent next day of the settlement. He submits that
the petitioner was required to pay margin money on the basis of the day to day
transaction. It is submitted that in any event the said clause 29 gave discretion to
the respondent broker to demand margin money or not. He submits that the fact
remains that there was huge shortfall in margin money in the account of the
petitioner and thus the respondent was entitled to square off the transactions in the
account of the petitioner.
39. It is submitted by the learned senior counsel that various findings
recorded by the arbitral tribunal and more particularly the findings on various
admissions made by the petitioner had not been challenged by the petitioner in the
arbitration petition. He submits that there was continuous debit in the account to
the petitioner since 16th January, 2008. He submits that if there was no shortfall of
the margin money in the account of the petitioner, the petitioner would not have
requested the respondent to inform the amount of shortfall of margin money and
would not have requested the respondent to square off or close out the transactions
of the petitioner. He submits that the stand of the petitioner itself was
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contradictory and inconsistent.
40. Learned senior counsel for the respondents distinguished the
judgment of this court in case of Bonanza Commodities Brokers Pvt.Ltd. vs.
Roshanara Bhinder in Arbitration Petition No. 195 of 2015 delivered on 16 th
April, 2015 on the ground that in the said judgment, this court had not considered
the provisions of the Stock Broker-Client agreement and more particularly the
clauses like clause 29 and thus the said judgment would not assist the case of the
petitioner and is distinguishable in the facts of this case.
41.
Insofar as judgment of this court in case of Ankit Bimal
Deorah(supra) relied upon by the learned counsel is concerned, the learned senior
counsel distinguished the said judgment on the ground that in the said matter, it
was an admitted position that there was no demand made by the broker upon the
constituent whereas in this case the demand was admittedly made by the
respondent broker upon the petitioner. He submits that the judgment of this court
in the said judgment is clearly distinguishable.
42. Learned senior counsel for the respondent placed reliance on the
judgment of Supreme Court in case of Ravindra Kumar Gupta and Company vs.
Union of India (2010) 1 SCC 409 and in particular paragraph 8 thereof. He
submits that this court cannot re-appreciate the evidence led by the parties before
the learned arbitrator.
43. Learned senior counsel placed reliance on the judgment of Supreme
Court in case of P.R.Shah, Shares and Stock Brokers Private Limited vs.
B.H.H.Securities Private Limited and others, (2012) 1 SCC 594 and in particular
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paragraph 21 and would submit that this court cannot sit in appeal over the award
by reassessing or re-appreciating evidence to find out whether different decision
could be arrived at against the findings of arbitral tribunal in absence of grounds
under section 34.
44. Mr.Purohit, learned counsel appearing for the petitioner in rejoinder
submits that the respondent could not have placed reliance upon clause 29 of the
Member Constituent Agreement which was ex-facie contrary to and inconsistent
with the Regulation 3.10 framed by the Stock Exchange. He submits that the only
the relation manager of the respondent could make a demand for margin money
which was admittedly not made by him. He submits that the squaring off of the
transaction was made by the head office and not by the Chembur Office. He
submits that insofar as F&O transactions are concerned, every day the settlement
of account takes place. He submits that the actual market to market loss can be
calculated at the end of the day. However the respondent has squared off the
transaction at 11.51 a.m. and did not wait till end of the day. Under Regulation
3.10(A) read with 3.10(B), the payment has to be made on the next day. He
submits that though according to the respondent there was shortfall in the margin
amount, neither any dispute was raised by the respondent admittedly till 21 st
January, 2008 nor the transactions were squared off on or before 21 st January,
2008. He submits that if according to the respondent, there was a debit balance in
the account of the petitioner since 16th January, 2008, it was duty of the respondent
to close down the transaction in the account of the petitioner immediately and was
not required to wait till 22nd January, 2008.
45. It is submitted that if the respondent has not closed out the transaction
till 22nd January, 2008, the respondent cannot recover the loss alleged to have been
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suffered from the petitioner. He submits that on the contrary the petitioner has
suffered a huge loss because of such close out of the transaction by the respondent
on 22nd January, 2008. The arbitral tribunal however has not considered this
crucial aspect in the impugned award and not only allowed the claims made by the
respondent but has also illegally rejected the counter claim made by the petitioner.
REASONS AND CONCLUSIONS
46. A perusal of the arbitral award indicates that the arbitral tribunal had
framed an issue for consideration that though the shortfall of margin money was
informed to the petitioner herein by the respondent on different dates, there was a
dispute concerning the amount of shortfall informed or margin call made to the
petitioner herein. A perusal of the impugned award however indicates that though
such issue was framed by the arbitral tribunal, no finding thereon is recorded by
the arbitral tribunal in the later part of the award that the petitioner was informed
about the shortfall of margin money by the respondent on different dates.
47. A perusal of the statement of claim filed by the respondent in the
arbitration proceedings clearly indicates that it was the case of the respondent that
the market had witnessed the heavy downfall and resultant crash on 18 th January
2008, 21st January 2008 and 22nd January 2008 and the respondent herein had to
take necessary steps to withstand the volatility in market and therefore was forced
to apply stringent margin rules. At that time the respondent had given instructions
to all its office branches to comply with the margin rules thoroughly. Only those
clients were allowed buying where there were sufficient credit balance in their
accounts and were not allowed to set limits on the basis of fresh pledge. Trading
was allowed only after collecting sufficient margins from clients. It was alleged in
the statement of claim that in view of situation of huge market volatility and
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resultant market crash, the respondent had insisted all clients at all branches to
ensure sufficient margin in their trading account to hold the position in F&O.
48. A perusal of the record indicates that even according to the respondent
herein, there was huge debit balance and the shortfall in margin amount in the
account of the petitioner since 16th January 2008 onwards till 22nd January 2008.
It was not the case of the respondent that the petitioner had made the payment of
Rs.4,00,000/- on 17th January, 2008 and a sum of Rs.5,00,000/- on 18 th January,
2008 to meet the exact amount of shortfall in the account of the petitioner. On the
contrary the case of the respondent was that even after payment of the said amount
of Rs.4,00,000/- and Rs.5,00,000/- on 17th January,2008 and 18th January, 2008,
there was substantial amount of shortfall and debit balance in the account of the
petitioner. Even according to the respondent on 22nd January,2008 the mark to
market loss of Rs.21st January, 2008 was Rs.40,28,241.46 and the margin
requirement at the opening of 22nd January, 2008 was Rs.40,30,264.99 thereby the
total debit in the account of the petitioner at Rs.71,28,135.05 at the end of the day
on 21st January, 2008 and opening of 22nd January, 2008.
49. It was not the case of the respondent in the arbitral proceedings that
the said sum of Rs.15,00,000/- paid by the petitioner on 22 nd January, 2008 was
part payment of the margin money. The respondent could not produce any proof
before the arbitral tribunal to show that the demand of margin money on 17 th
January, 2008 or 18th January, 2008 or 22nd January, 2008 was much more than
Rs.4,00,000/-, Rs.5,00,000/- and Rs.15,00,000/- respectively. On the contrary it
was pleaded in the statement of claim that on 18 th January 2008, 21st January 2008
and 22nd January 2008, the market had witnessed a heavy downfall and resultant
crash and thus the respondent had given instruction to all its branches to comply
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with the margin rules thoroughly.
50. Regulation 3.10 of the Regulation (F&O segment) framed by the
National Stock Exchange of India Limited is extracted as under :-
3.10 MARGIN FROM THE CONSTITUENTS
(a) The Trading Members must demand from its
constituents the Margin Deposit which the member has to
provide under these Trading Regulations in respect of the
business done by the Members for such constituents.
The Trading Members shall buy and/or sell derivatives
contracts on behalf of the constituent only on the receipt of
margin of minimum such percentage as the Relevant Authority
may decide from time to time, on the price of the derivatives
contracts proposed to be purchased, unless the constituent
already has an equivalent credit with the Trading Member.
The Trading member may collect higher margins from
constituents, as he deems fit.
The Trading Member shall obtain a written undertaking from
the constituents that the latter shall when called upon to do so
forthwith from time to time provide a Margin Deposit and/or
furnish additional Margin as required under these Rules and
Regulations in respect of the business done for the constituent
by and/or as agreed upon by constituent with the Trading
Member concerned.
The Trading Member shall demand from his constituents the
amounts arising in respect of daily settlement in accordance
with the Clearing Corporation Regulations for business done
by the Members on behalf of such constituents or such higher
amounts, as the Trading Member deems fit. The Trading
Member may, if so desire, for administrative convenience
maintain the daily settlement margin balance upto a pre-agreed
balance level to avoid collecting and paying daily settlement
amount on a daily basis, which may be referred to as
maintenance margin.
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The trading member may keep the unutilised margin deposits
of its Constituents in bank deposits and pay interest accrued
thereon to its Constituents or utilise the same as per the
instructions of such Constituents.
(b) Constituent(s) in default
In case of non-payment of daily settlement by the constituents
within the next trading day, the Trading Member shall be at
liberty to close out transactions by selling or buying the
derivatives contracts, as the case may be, unless the
constituent already has an equivalent credit with the Trading
Member. The loss incurred in this regard, if any, shall be met
from the margin money of the constituent.
In case of open purchase position undertaken on behalf of
constituents, the Trading Members shall be at liberty to close
out transactions by selling derivatives contracts, in case the
constituent fails to meet the obligations in respect of the open
position within next trading day for the execution of the full
contract or within next trading day of the contract note having
been delivered, unless the constituent already has an
equivalent credit with the Trading Member. The loss incurred
in this regard, if any, shall be met from the margin money of
the constituent.
In case of open sale position undertaken on behalf of the
constituents, the Trading Member shall be at liberty to close
out transactions by effecting purchases of derivatives contracts
if the constituent fails to meet the obligation in respect of the
open position within next trading day of the transaction having
been executed on the F&O Segment of the Exchange for the
concerned settlement period. Loss on the transaction, if any,
shall be deductible from the margin money of the constituent.
51. Clause 29 of the agreement of Stock Broker Client Agreement dated
3rd April, 2007 entered into between the petitioner and the respondent is extracted
as under :-
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29. Margins :
(c) Margin in derivatives trading :
In the derivatives segment, the CLIENT is liable to pay
an initial margin up-front on or before creating a position.
Such margin shall be decided upon by GEOJIT or the
Exchange from time to time. Furthermore, the CLIENT is
liable to pay (or receive) daily margins depending on whether
the price of Derivatives contract move for or against the
position undertaken. The CLIENT may also be liable to pay
withholding margins, special margins or such other margins as
are considered necessary by GEOJIT or the Exchange from
time to time. GEOJIT is permitted in its sole and absolute
discretion to collect additional margins (even though not
imposed by the Derivatives Segment, Clearing House or
SEBI) and the client shall be obliged to pay such margins.
I(i) Shortfall in Margin
If payments/securities towards the margin or shortfall in
margin is not received instantaneously to enable restoration of
sufficient margin in the CLIENT's account all or some of the
position of Client as as well as the securities placed as margin
may be liquidated by GEOJIT at its sole discretion, without
any reference or prior notice to the CLIENT. The resultant or
associated losses that may occur due to such squaring off or
sale of securities shall be borne by the CLIENT and GEOJIT
is hereby fully indemnified and held harmless by the CLIENT
in this behalf. Such liquidation or close out of positions shall
apply to any segment in which the CLIENT does business
with GEOJIT.
52. The arbitral tribunal has placed reliance on clause 29 of the agreement
entered into between the parties and has held that as per clause 29 of the said
agreement, the trading member was at its sole discretion to exercise his right to
liquidate position/ security on occurrence of shortfall in margin. It is held that the
trading member usually makes a margin call which his client is required to fulfill.
It is held that in the instance case it is on record that the respondent herein had
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made margin call and the petitioner had made a request not to square off her
outstanding position and had assured the respondent that whatever would be the
debit/shortfall would be paid. It is held that if any such request is made by the
constituent, the trading member usually considers the situation and may await the
payment from the client. It is held that it is on record that there was no payment
made between the time of Rs.4,00,000/- on 16th January, 2008 and payment of
Rs.5,00,000/- on 18th January, 2008 except the request of the petitioner not to
square off the outstanding position in her account by the respondent herein and
thus in such a situation, the squaring off the outstanding position by the respondent
herein on 22nd January, 2008 caused crash was justified. In my view the findings
rendered by the arbitral tribunal is based on presumption and surmises and not
based on evidence.
53. A perusal of Regulation 3.10 framed by the Stock Exchange clearly
indicates that it is mandatory obligation on the part of the trading member to
demand from its constituent the margin deposit which the member has to provide
under the trading regulations framed by the Stock Exchange in respect of the
business done by the members for such constituents. The trading member is
permitted to buy and/or sell derivatives contracts on behalf of its clients only on
the receipt of the margin of minimum such percentage as the relevant authority
may decide from to time at the price of the derivatives contracts proposed to be
purchased, unless the constituent was already having equivalent credit with the
trading member. It is further provided that the trading member shall demand from
its constituent the amounts arising in respect of daily settlement in accordance with
the Clearing Corporation Regulations for business done by the members including
such higher amount, as the trading member deems fit. The trading member can
maintain the daily settlement margin balance upto a pre-agreed balance level to
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avoid collecting and paying daily settlement amount on a daily basis, which may
be referred to as maintenance margin.
54. Under Regulation 3.10(b), the trading member is at liberty to to close
out transactions by selling or buying the derivatives contracts, in case of non
payment of daily settlement by the constituent within the next trading day.
Similarly in case of open sale position undertaken on behalf of the constituents, the
trading member is at liberty to close out transactions by effecting purchases of
derivatives contracts if the constituent fails to meet the obligation in respect of the
open position within next trading day of the transaction having been executed on
the F&O segment of the Exchange for the concerned settlement period. It is thus
clear that the demand of margin deposit from the constituent by the trading
member is mandatory in respect of the business done by the members for such
constituents at such percentage as the relevant authority may decide from time to
time unless the constituent has equivalent credit with the trading member.
55. It is note the case of the respondent that during the period between
16th January, 2008 and 22nd January 2008, the petitioner had already an equivalent
credit of the margin deposit or had pre-agreed balance with the respondent and
thus the respondent was not required to demand from the petitioner further margin
deposit. In my view, the obligation on the part of the respondent trading member
to demand margin from the constituent was mandatory and not discretionary. Since
according to the respondent themselves there was a substantial amount of debit
balance in the account of the petitioner with the respondent since 16 th January,
2008 which amount further increased day to day till 22nd January, 2008, the
petitioner not having paid the sufficient margin amount as required according to
the respondent, the respondent was bound to close out the transaction immediately
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and was not required to wait till 22nd January, 2008 with a view to mitigate the
alleged losses suffered by the respondent due to non-deposit amount of the margin
money as required under the regulation and also under the agreement entered into
between the parties.
56. A perusal of the impugned award indicates that the arbitral tribunal
has not referred to the said Regulation 3.10 or has not considered the effect thereof
which provision cast mandatory duty and obligation upon the trading member to
demand margin money in the circumstances setout therein. The arbitral tribunal
has only considered Clause 29 of the agreement entered into between the parties
and has rendered a perverse finding that the said provision of the agreement gave
an exclusive discretion upon the trading member to liquidate position/security on
occurrence of shortfall in margin. The arbitral tribunal has drawn an adverse
inference that the trading member always makes a margin call which the client is
required to fulfill and has further held that when a request is made to the trading
member by the constituents not to square off the outstanding position by the
constituent, the trading member usually considers the situation and may await the
payment by the client. In my view the inference drawn by the arbitral tribunal is
totally contrary to the mandatory duty and obligation under Regulation 3.10 cast
on the trading member.
57. Insofar as payment of Rs.15,00,000/- made by the petitioner on 22 nd
January, 2008 to the respondent is concerned, it was the case of the petitioner that
the said amount was paid by the petitioner as demanded by the respondent. It was
the case of the petitioner that there was no demand over and above Rs.15,00,000/-
orally made by the respondent. The petitioner had made assurance that if it was
found that any further amount of margin money was required, the petitioner would
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pay such amount when communicated by the respondent during the course of the
day. The respondent could not prove before the arbitral tribunal that there was a
demand for any amount over and above Rs.15,00,000/- from the petitioner. The
arbitral tribunal in such circumstances could not have drawn any adverse inference
against the petitioner.
58. In my view, the onus was on the respondent to prove that the demand
for amount of margin money as required under Regulation 3.10(a) was actually
made by the respondent from the constituent and was not paid by the petitioner.
Admittedly, the respondent had the e-mail ID of the petitioner. Not a single
document was produced by the respondent before the arbitral tribunal to show that
any demand for the margin money was made by the respondent member upon the
petitioner of the amount which was demanded but not paid by the petitioner. In
my view, the impugned award is without any evidence and thus deserves to be set
aside.
59. The conjoint reading of Regulation 3.10 which is statutory regulation
with clause 29 of the agreement entered into between the parties clearly indicates
that there is inconsistency between the said Regulation 3.10 and clause 29 of the
agreement insofar as duties and obligation of trading member to demand margin
money and to close out the transaction upon the constituent committing the default
is concerned. The Regulation 3.10 is more stringent and is mandatory which is
required to be followed by the trading member for demanding margin and to close
out the transaction mandatorily in case of a default whereas clause 29 of the
agreement between the parties gives a discretion upon the trading member to close
out the transaction or not in case of default of payment of margin money by the
constituent. In my view in view of the inconsistency between Regulation 3.10
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framed by the Stock Exchange which is a statutory regulation and clause 29 of the
agreement, Regulation 3.10 framed by the Stock Exchange would prevail over
clause 29 of the agreement entered into between the parties. In my view the
arbitral tribunal has totally overlooked the mandatory provisions of Regulation
3.10 in the impugned award and has committed a patent illegality.
60. This court in case of Bonanza Commodities Brokers Pvt.Ltd. (supra)
has considered the provisions similar to Regulation 3.10 framed by the Stock
Exchange and has held that since the respondent member had carried out the
transaction without demanding any margin money from the constituent and
without any instructions from the constituent though there was debit balance in his
account, the transaction carried out by the respondent member, without any
instruction and without any demand of margin money were unauthorized and no
debit could have been made in the account of the constituent in respect of such
unauthorized transaction. It is held that the trading member who had carried out
such transactions in breach of bye-laws of MCX could not make any claim against
the constituent and/or debit any amount to the account of the constituent in respect
of such unauthorized transactions. It is held that the member could not have
squared off the open position of the constituent due to mark to market loss in any
case before demanding additional funds. In my view the said judgment applies to
the facts of this case. I am respectfully bound by the said judgment.
61. A perusal of the Regulation 3.10 framed by the Stock Exchange
clearly indicates that the intent and purpose of demanding margin money in the
event of any debit balance in the account of the constituent or if the security
provided by the constituent is not sufficient for the purpose of carrying out the
derivatives contract and in case of such default to close out the transaction with a
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view to mitigate the loss, if any, which may be suffered by the trading member in
case of any volatile market condition or otherwise. If the trading member has
chosen not to demand margin money through it is mandatory in compliance with
Regulation 3.10 and permits the constituent to carry out further transaction, the
same would be at the risk and cost of the trading member and in such a situation,
the trading member cannot be allowed to recover any alleged loss suffered by the
trading member from the constituent or cannot make the constituent suffer any loss
due to the non-compliance of such mandatory provisions by the trading member.
62. In my view Mr.Purohit, learned counsel for the petitioner is right in
his alternate submission that under Regulation 3.10(b), the respondent broker
could not have closed out the transaction on 22nd January, 2008 in respect of the
alleged shortfall of the margin money in the account of the petitioner on 22 nd
January, 2008 without giving an opportunity to the constituent to make the
payment on the next trading day on F&O segment of the Exchange for the
concerned settlement period. It is not in dispute that the respondent broker had
closed out the transaction in the account of the petitioner in the morning trading
hours on 22nd January, 2008 itself. The arbitral tribunal has totally overlooked
these mandatory provisions of Regulation 3.10 in the impugned award and has
committed patent illegality.
63. This court in case of Ankit Bimal Deorah (supra) has considered a
case where the trading member was not able to produce any document or proof in
support of his plea that he had demanded any margin money on 22 nd January, 2008
before squaring off the co-laterals through the clearing member and thus could not
have recovered any alleged loss from the constituents. The facts of this case are
identical the facts before this court in case of Ankit Bimal Deorah (supra)
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squarely applies to the facts of this case. I am respectfully bound by the said
judgment.
64. In my view, even if Clause 29 of the agreement gave the discretion
upon the respondent member to demand margin money or not and to close out the
transaction or not, such discretion has to be exercised by a member in a reasonable
way and for the benefit of his client in relation to whom he acted as an agent. This
court in an unreported judgment dated 29th July, 2011 in case of Idea
International Pvt.Ltd. vs. Motilal Oswal Securities Pvt. Ltd. in Arbitration
Petition No.144 of 2007 and other connected matters has held that though under
the broker-client agreement, a broker has been given an authority to sell all or any
of the securities held by him on behalf of the client, but that discretion which is
vested by the bye laws in the broker is to be exercised by the broker in a
reasonable way and for the benefits of his client in relation to whom he acts as an
agent. It is held that the broker cannot exercise his discretion in such a way that the
client suffers loss. A perusal of the record indicates that the respondent broker did
not exercise such discretion in a reasonable way and for the benefit of the
petitioner.
65. Though the petitioner was carrying on transaction with the Chembur
Office of the respondent, without any knowledge of the petitioner and without any
intimation, the head office of the respondent had closed out the transaction
allegedly based on the instruction received from the respondent from the Stock
Exchange. No such instruction alleged to have been received by the respondent
from the Stock Exchange were produced on record by the respondent before the
arbitral tribunal. In my view the judgment of this court in case of Idea
International Pvt.Ltd. (supra) applies to the facts of this case. I am respectfully
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bound by the same.
66. Insofar as submission of the learned senior counsel for the respondent
that this court cannot interfere with the findings of fact rendered by the arbitral
tribunal in these petitions filed under section 34 of the Arbitration Act is
concerned, in my view since the arbitral tribunal has rendered various findings
which are perverse and are based on no evidence and since the award rendered by
the arbitral tribunal is in violation of and overlooking the mandatory regulation
framed by the Stock Exchange and is based on presumption and surmises, this
court has power to set aside such arbitral award under section 34 of the Arbitration
and Conciliation Act, 1996.
67. There is no dispute about the proposition of law laid down by the
Supreme Court in case of Ravindra Kumar Gupta and Company (supra) and in
case of P.R.Shah, Shares and Stock Brokers Private Limited (supra) holding that
this court cannot sit in appeal over an award by reassessing or re-appreciating
evidence to find out whether different decision could be arrived at against findings
of arbitral tribunal in absence of grounds under section 34. However, since the
impugned award rendered by the arbitral tribunal in this case shows perversity and
patent illegality, there is no bar in setting aside such award showing perversity and
patent illegality. The judgment of Supreme Court ion case of Ravindra Kumar
Gupta and Company (supra) and in case of P.R.Shah, Shares and Stock Brokers
Private Limited (supra) would not assist the case of the respondent and is
distinguishable in the facts of this case.
68. Insofar as submission of the learned senior counsel for the respondent
that the petitioner has not challenged the findings of various alleged admissions
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made by the petitioner in the arbitration petition is concerned, there is no merit in
this submission of the learned senior counsel. A perusal of the grounds raised in
the arbitration petition clearly indicates that such findings are challenged by the
petitioner in the arbitration petition.
69. Insofar as submission of the learned senior counsel that on one hand
the petitioner had alleged that there was no demand for margin money and on the
other hand had made a request to the respondent not to square off the transactions
which showed contradictions and inconsistency and which would indicate that the
petitioner was aware of the margin money required to be paid by the petitioner is
concerned, a perusal of the record indicates that it was the case of the petitioner
that the respondent had demanded only the margin money of Rs.15,00,000/- on
22nd January, 2008 which was paid by the petitioner and had requested to inform
the further shortfall, if any, to enable the petitioner to pay the shortfall, if any,
during the course of that day i.e. 22 nd January, 2008 and in that context had
requested the respondent member not to square off the transactions. The
respondent on the other hand could not prove before the arbitral tribunal that the
respondent had demanded margin money of the amount more than Rs.15,00,000/-
but was not paid by the petitioner.
70. Insofar as counter claim made by the petitioner before the arbitral
tribunal is concerned, the arbitral tribunal has rejected the counter claim on the
ground that the petitioner had alleged to have accepted the position as on end of
the day on 21st January, 2008. In my view this part of the award also shows patent
illegality. Since the arbitral tribunal has committed patent illegality in allowing the
claims made by the respondent broker for the reasons recorded aforesaid, the
rejection of counter claim made by the petitioner by the arbitral tribunal on the
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same basis also shows patent illegality and deserves to be set aside.
71. Insofar as other four petitions are concerned, since the parties have
agreed that the reasons and conclusions drawn by this court in Arbitration Petition
No.47 of 2009 would apply to those four petitions and have not addressed this
court separately in respect of other four arbitration petitions, this court has not
dealt with the facts in each of these four petitions separately. This court has
proceeded on the basis of the statement made by the learned counsel appearing for
the parties and have rendered a common judgment.
72.
I, therefore, pass the following order :-
(a) Arbitration Petition No. 47 of 2009, Arbitration Petition
No. 56 of 2009, Arbitration Petition No. 48 of 2009,
Arbitration Petition No. 57 of 2009 and Arbitration Petition
No. 1148 of 2012 of are allowed in terms of prayer clause (a)
of each of those arbitration petition.
(b) The impugned awards dated 24th September, 2008 which
are impugned in Arbitration Petition No. 47 of 2009, in
Arbitration Petition No.48 of 2009 and in Arbitration Petition
No.1148 of 2012 are set aside.
(c) The impugned awards dated 1st October, 2008 which are
impugned in Arbitration Petition No. 56 of 2009 and in
Arbitration Petition No.57 of 2009 are set aside.
(d) No order as to costs.
[R.D. DHANUKA, J.]
