Angel Broking Ltd. vs Arti Jain & Anr.
2014 Latest Caselaw 1176 Del

*             IN THE HIGH COURT OF DELHI AT NEW DELHI

+                         FAO 65/2014 & CM No. 4232/2014

%                                              5th March, 2014

ANGEL BROKING LTD.                                        ......Appellant
                 Through:                Mr. Vikas Tomar, Adv.

                          VERSUS

ARTI JAIN & ANR.                                      ...... Respondents

Through:

CORAM:

HON'BLE MR. JUSTICE VALMIKI J.MEHTA

To be referred to the Reporter or not?

VALMIKI J. MEHTA, J (ORAL)

1. This first appeal is filed by the appellant-broking company against the

impugned order of the court below dated 16.1.2014 which had dismissed the

objections under Section 34 of the Arbitration and Conciliation Act, 1996

(hereinafter 'the Act') filed by the appellant against the Award passed by the

sole arbitrator Justice (retired) M.A.Khan allowing the claim petition filed

by the respondent and awarding a sum of Rs.9,80,000/- alongwith interest at

10% p.a.

2. The case which was pleaded before the arbitrator by the

respondent/claimant was that the Branch Manager of the appellant one Sh.

R.Vishwanath carried out illegal trades from her capital segment account by

utilizing the credit in that account for trades in the future and options

segment and consequently her portfolio was reduced from Rs.10,01,200/- to

Rs.13,125/-.

3. The Branch Manager R. Vishwanath after conducting illegal trades

confessed in writing to the appellant, and which confession has been used by

the arbitrator to pass the Award in favour of the respondent/claimant. The

arbitrator has dealt with the relevant aspects in paras 8 to 10 of the Award

and which read as under:-

"8. The respondent has not been able to produce any evidence that the applicant had been placing orders for the F&O trades which were executed in her trading account since 2.3.2012. It has also not been stated that they are pre-trade confirmation calls were made to her in which she approved the execution of any F&O trades in the account. The whole thrust of the defence of the respondent in the statement of defence and during the course of arguments is that the respondent had supplied contract notes and all other trade related information to the applicant in due course regularly and that the applicant had also confirmed those trades during confirmation calls. Furthermore, the applicant could not have been misled and duped by any information, statement or document (s) received from Sh. R.Vishwanath through his private Email ID since she was also receiving the information concerning her trades from the respondent and if any discrepancy was found by her she could have promptly brought it to the notice of the respondent which has not been done by her. In reply or during the hearing of the case, the respondent has not denied that Shri R. Vishwanath, its Branch Manager, had given confessional writing to the applicant. However, it was alleged that the applicant and Shri R. Vishwanath seems to be in league and Shri R. Vishwanath had informed the respondent that he was under pressure and coercion

from the applicant to make this writing. The fact remains that Sh. R.Vishwanath was a Branch Manager working at NOIDA branch of the respondent and the allegation of the applicant that he was assigned Relationship Manager to the applicant has not been denied. As regards the post trade confirmation, the respondent has relied upon the conversation between the husband of the applicant and the employees of the respondent recorded by it. The applicant has specifically stated that information relating to the trades contained in the contract notes and the information given in the documents sent by Shri R. Vishwanath on 26.6.2012 were discrepant. The respondent although has filed recording of some of the trading from 2.3.2012 but there is no confirmation call of the trades which was carried out on 31.5.012, the crucial date. Even assuming that the respondent was confirming the trades which were carried out in her account during confirmation calls received after the trades had been executed there is admittedly no evidence that the orders for those calls were placed by the applicant and also that Shri R. Vishwanath who executed the trades in the account had executed it after receiving an order from the applicant or after getting pre trade confirmation from her. Shri R. Vishwanath was a senior officer of the respondent.

9. All the calls recordings were not produced by the respondent. The respondent could have also produced the recording of all those calls which had taken place between the applicant and Shri R. Vishwanath/dealer of the applicant during the day when the trades were under execution . Shri R. Vishwanath has confessed that the applicant had suffered loss because of his fault in executing trades in her account and that it had caused loss of Rs.10 lakhs to the applicant. It is not understood what coercion or pressure could have been exerted by the applicant on Shri R. Vishwanath to make such a confessional writing dated 7.7.2012. It has also not been explained as to why Shri R. Vishwanath will succumb to the pressure of the applicant or will be cowed down by the intimidation of the applicant to make such a writing impleading him in the fraudulent practice and which also jeopardized his employment with the respondent. Therefore, in the facts and circumstances, it is difficult to discard and ignore the confession recorded by Shri R. Vishwanath on 7.7.2012. To be precise Shri R. Vishwanath has made the following writing in his own hand:-

"Dear Madam,

I undersigned, the branch Manager (R. Vishwanath, Email ID -E-40803) of Noida branch of M/s Angel Broking Ltd... I am responsible for Noida branch revenue clients demat accouint and other branch responsibilities and reporting to Mr. Achin Gumber (the cluster Head) for day to day branch activities. I am also looking after your account NOIDA/350 (Mrs. Arti Jain). I know you were purely equity investor and do not have any knowledge about F&O market. In the month of March, 2012 I have convinced you that we will take care your account for F&O trading. I have started F&O trading in above account-NOIDA/1350 and informed to you (client) on phone of traded contracts. I have never taken the pre-trade confirmation from you (etc. regarding the trading contracts as per company guidelines. I have taken F&O positions on NIFTY and various stock in anticipation of making profit but turned into loss. Again I have taken some other F&O positions to cover the loss but again it was converted into loss. I have never informed to you (client) regularly these losses and also provided the wrong information on mobile / official landline phone and statement / contracts regarding these trades through my personal Gmail ID / official ID of Angel Broking Ltd.

I have a loss of daily / weekly revenue pressure from the company to earn more brokerage form clients trading as a result, I have taken high value F&O positions in Nifty, Tata Motor DVR and other various stocks in April / May, 2012 in your account without pre-confirmation form you (clients). Due to bad market on date all the positions turned into loss and I have wiped off your (client) money and done approx. Rs. 10 Lakh loss.

Sd/-R.Vishwanath/"

10. A bare reading of this letter will indicate that Shri R. Vishwanath and carried our F&O trades without pre confirmation from the applicant and had also given her wrong information and traded in high value position in which loss has been caused to the applicant. The writing further shows that Shri R. vishwanath has indulged in high value F&O and nifty position simply because he was under pressure to generate high brokerage for the respondent. Furthermore, it also shows that Shri R. vishwanath was

representative of the respondent when he had carried out these trades and had caused loss to the applicant by his trading in her account. In view of this, the respondent cannot avoid its responsibility to the acts of commission and omission of its employee and representative. Shri R. Vishwanath has admitted that loss of Rs. 10 lakhs has been caused to the applicant in these trades. According to the applicant, the value of her shareholding in March, 2012 when the F&O trades were started by Shri R. Vishwanath was around Rs. 13,25,000/- which has reduced to Rs. 13,125/- as on 25.6.2011. The applicant has claimed a sum of Rs 9,80,000/- as her loss suffered in the trades done by Shri R. Vishwanath wrongfully with a view to earn higher brokerage for the respondent. Therefore, the respondent should compensate the applicant by paying this loss of Rs. 9,80,000/- to the applicant.

(underlining added)

4. Surely, there is a concept known as vicarious liability and

appellant cannot wriggle out of the illegal actions of its branch Manager

merely by making a self serving plea of collusion with the branch Manager

and the respondent/claimant. Such a defence has rightly been disbelieved by

the arbitrator by giving reasoning in para 9 of the Award which has been

reproduced above. In any case, entitlement to interfere with the Award is

limited, and there has to be shown clear cut illegality or perversity for the

court hearing objections to interfere and which is not there in this case and at

best it is a case where two views are possible. Taking one of two views is

not perversity for holding that objections can be entertained under Section

34 of the Act. If the jurisdiction of the court hearing objections under

Section 34 is limited then the jurisdiction of this Court in first appeal would

be further limited. Merely because two views are possible from the facts

which appear on record cannot mean that arbitrator was not entitled to pass

the Award or that there is any perversity or illegality or violation of public

policy doctrine for a court to interfere under Section 34 or much less for the

appellate court to interfere under Section 34.

5. Learned counsel for the appellant argued that the appellant was

not given an opportunity to lead evidence, however, when asked to show

whether this objection has been raised in the objection petition under Section

34, no part of the objection petition could be pointed out to this Court that

such an objection was raised in the court below that arbitrator had wrongly

refused to permit the appellant to lead evidence. In any case, even the

objection under Section 34 could have been raised if it was the case of the

appellant before the Arbitrator that it wanted to lead evidence but was

prevented from doing so. Nothing was pointed out to me by the appellant

that any request was made to the arbitrator for leading evidence. In fact, if

the objections filed under Section 34 when are carefully scrutinized, they

show that the appellant in fact seems to object that the Award should have

been in its favour on the basis of the evidence which existed before the

arbitrator i.e it was not the case that the appellant wanted to lead any further

evidence and was prevented from doing so.

6. It may be noted that appellant-Broking Company should not be

allowed to perpetrate injustice and fraud upon its customers as per the illegal

actions of its Manager, and thereafter endeavoring to simply walk away by

pleading alleged collusion between the Manager and

claimant/respondent/customer. It also bears note that there is no plea or

evidence that any FIR was filed against the Branch Manager if the Branch

Manager in fact had illegally colluded with customer/respondent.

7. In view of the above, there is no merit in the appeal, and the

same is therefore dismissed, leaving the parties to bear their own costs.

MARCH 05, 2014                                VALMIKI J. MEHTA, J.
ib