Delhi High Court
M/S Angel Broking Ltd. vs Mohit Mittal on 29 January, 2014
Author: Valmiki J. Mehta
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ FAO No. 36/2014
% 29th January, 2014
M/S ANGEL BROKING LTD. ......Appellant
Through: Mr. Vikas Tomar, Advocate.
VERSUS
MOHIT MITTAL ...... Respondent
Through:
CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA
To be referred to the Reporter or not?
VALMIKI J. MEHTA, J (ORAL)
CM No.1849/2014(Exemption)
Exemption allowed subject to just exceptions.
CM stands disposed of.
FAO 36/2014
1. This first appeal is filed under Section 37 of the Arbitration and
Conciliation Act, 1996 (in short 'the Act') challenging the impugned order
of the court below dated 24.9.2013 which has dismissed the objections filed
by the appellant under Section 34 of the Act.
2. The facts of the case are that the respondent herein was the customer
of the appellant who is a trading member not only for the Commodities
FAO 36/2014 Page 1 of 6
Exchange (MCX) but also for the National Stock Exchange (NSE).
Respondent filed a claim in the arbitration that on 3.1.2012, appellant did
unauthorized/illegal trading in NSE cash market segment by selling shares
of the respondent which were 2000 in number of EXIDEIND Eq and 576
holdings of LOVABLE LINGERIE LTD., and which was said to have been
done without any instructions from the respondent herein. The case of the
appellant was that it had a right to square off the outstanding debit in the
commodities segment MCX with the dues of the respondent herein in the
NSE segment. It was the case of appellant that since the respondent failed to
clear his outstanding balance, and did not meet his obligation, therefore the
appellant herein was constrained to sell his shares on 3.1.2012 to recover the
dues.
3. The court below has dealt with the respective contentions of the
parties in this regard in para-6 of the impugned judgment and which reads as
under:-
"Perusal of the record shows that arbitration proceedings were
conducted by the Arbitrator in the presence of both the parties. It was
the case of the respondent No.1 that he wanted to do online trading
from 11.11.2011 which was denied by petitioner. On 16.11.2011, the
respondent No.1 was informed about his margin shortfall in his
account but petitioner refused to accept payment in this regard. It was
also informed that no payment through cheque or cash would be
accepted and due to market volatility, they were constrained to
liquidate the position open in Crude Oil. It has been shown that the
FAO 36/2014 Page 2 of 6
act of petitioner was unjustified for the reasons that if was not ready to
accept the payment through cash or cheque but was adamant to get the
payment through net banking only. It has also been shown that the
shares and holdings of the respondent No.1 were sold by petitioner
without intimation or seeking prior permission of the respondent
No.1. Though it is apparent that the petitioner was having lien over
the shares of the respondent No.1 but it was entirely unethical to
dispose of his shares without informing the respondent No.1."
(underlining added)
4. In the impugned Award dated 21.6.2013, the Arbitrator has given the
following conclusions for awarding a sum of Rs.6,20,000/- to the respondent
herein:
"10. On closer perusal and examination of the submissions of
the parties, it is revealed that:
it is a case of mixing the matters of multiple systems, and
deriving benefit out of such an exercise; debits/credits of NSE
cash, F&O and commodities have been put together, and the
respondent have, under the provisions of MCA, recovered their
dues by disposing off the shares of the applicant without even
informing them beforehand and seeking their instructions;
it is surprising that they were not ready to accept
replenishment of margin requirement in cash nor through
cheques, leaving no alternative to the applicant for replenishing
it; clamping a requirement of online payment without having an
online trading facility appears illogical and also irrational; there
is generally a provision for multiple modes of payment,
including under the banking system; choking the applicant to be
faced with squaring off his positions/shares, and that too,
without alerting him beforehand, is irregular, and also
unethical; it cuts at the root of investment by the members of
the general populace;
in specific terms, he did not have debit in the NSE
account; a small debit of Rs.6,760.07/- in the said account
should have been offset by credits in the said account; debit
actually lay in the commodities segment, for which not only his
FAO 36/2014 Page 3 of 6
open positions were squared off, but also some of his shares
were disposed of in the NSE account. As a simple trading
practice, without any prejudice to the provision of the MCA, it
would be proper to keep the affairs and transactions of the
different segments separate;
- it different segments are clubbed, and credits and debits
of all these segments are jumbled up, the investor will always
be in a blind alley, not knowing what to do and where to go;
- as a fair play, the award of the Hon'ble Commodity
Exchange Arbitral Tribunal should have been awaited, instead
of precipitating the application of the provisions of the MCA,
and squaring off the positions/shares of the applicant, without
giving him an opportunity to address his liabilities in an
appropriate alternative manner;
- hypothesizing on the outcome of the Commodity
Exchange Arbitral Tribunal is unwarranted, and, to proceed on
that hypothesis is unfair; and,
- incidentally, the respondent have taken their action for
their sister concern and, not for themselves. This, again, is a
matter of concern."
5. I repeatedly put to counsel for the appellant to show that where
is the contractual provision favouring the appellant that two separate trading
accounts, one in the MCX segment and another in the NSE segment, can be
urged for squaring off, and to which counsel for the appellant showed to me
clauses of the agreement which entitled the appellant to sell the securities of
the respondent, however, no specific clause has been pointed out to me that
two separate accounts of dealing with the shares and commodities of two
separate exchanges can be merged and squared off as claimed by the
appellant. Not only that, in law, before the securities have to be sold, a
FAO 36/2014 Page 4 of 6
specific notice will have to be issued asking the respondent to liquidate the
outstanding debit and only failing which securities can be sold and in this
regard it is admitted that no written notice was sent. On this aspect, the
Arbitrator has noted that respondent was ready to pay the amount even by
cash, but the appellant refused to accept cash to square off all the
outstanding debit in the NSE segment, and that there was no contract that the
appellant will not accept cash for the respondent to liquidate his dues.
6. In view of the above, I do not find any error in the impugned
judgment. The scope of hearing of objections under Section 34 of the
Arbitration and Conciliation Act are limited and object of a Court hearing
objections is not to sit as an Appellate Court to re-apprise all the findings
and conclusions of the Arbitrator. If the scope of hearing of objections is
limited, then the scope of hearing in an appeal against the judgment which
has dismissed the objections is still further limited. This present appeal
therefore is misconceived and not maintainable and the same is therefore
dismissed, with costs of Rs.10,000/- which shall be deposited in the Delhi
High Court Legal Aid Services Committee within a period of six weeks
from today.
FAO 36/2014 Page 5 of 6
7. List before the Registrar General on 25th February, 2014 to
ensure that costs are deposited, failing which, costs can be recovered from
the appellant-Broking Company as arrears of land revenue.
JANUARY 29, 2014 VALMIKI J. MEHTA, J.
ib
