Delhi High Court
Satish Sharma vs India Infoline Limited on 24 July, 2017
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ FAO No.307/2017
% 24th July, 2017
SATISH SHARMA ..... Appellant
Through: Mr. P.S. Rana, Advocate.
versus
INDIA INFOLINE LIMITED ..... Respondent
CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA
To be referred to the Reporter or not?
VALMIKI J. MEHTA, J (ORAL)
C.M. No.25831/2017 (exemption)
1. Exemption allowed subject to just exceptions.
C.M. stands disposed of.
C.M. No.25830/2017 (for condonation of delay)
2. For the reasons stated in the application, delay of 25 days
in re-filing the appeal is condoned.
C.M. stands disposed of.
FAO No.307/2017
3. This first appeal under Section 37 of the Arbitration &
Conciliation Act, 1996 (hereinafter referred to as „the Act‟) impugns
the judgment of the court below dated 7.3.2017 which has dismissed
the objections filed by the appellant. The respondent/trading member
filed arbitration claim in the arbitration proceedings against the
appellant/constituent/client with respect to the debit balance of
Rs.3,57,227/- as on 3.1.2009 in the account of the appellant/objector.
This debit balance was on account of squaring off transactions on
account of short-fall in the margin in the account of the
appellant/client in the morning of 21.1.2008. The case of the appellant
in the arbitration proceedings was that he had made a number of calls
to the Relationship manager and the Branch manager of the
respondent and he was not getting a clear status report and thus he was
prevented from voluntarily squaring off his positions. In this regard,
the Arbitrator has rejected the defence of the appellant/objector noting
that the appellant/objector was an online member and he does not
dispute that there did exist a shortfall in his margin. Arbitrator
accordingly held that once there was a shortfall in the margin, hence
the respondent/trading member was justified in squaring off the
position by selling the holding of the appellant/objector, and which
resulted in the debit balance which was claimed in the arbitration
proceedings.
4. Since the Award is a short Award, I reproduce the same
as under:-
"1. The present application for Arbitration has been filed by India
Infoline Ltd., a Trading Member, against the respondent-constituent,
making a claim of Rs.5,24,233/-. The claim has been denied by the
respondent. The matter was fixed for oral hearing on two different dates on
which both parties were present/represented and made detailed submission.
Supporting details were also filed by both sides. The Award that follows
has been made after a consideration of the submissions so made and the
supporting material filed.
2. The case of the applicant, as it emerges from the Statement of case
and from submissions made, is that the respondent joined as a client in
September, 2006 and started regular trading in his account. As a result of
such trading, there was a debit balance in his account which stood at
Rs.3,57,227/- as on 03-01-2009. It is submitted that this amount has
remained un-paid, despite the issue of several reminders and even a legal
notice issued in December, 2010. It is this amount, together with interest on
this amounting to Rs.1,67,006/-, making a total of Rs.5,24,233/- which is
the subject matter of the present application. In support of its case, the
applicant has filed copies of the Member-client Agreement, SMS log, e-log
and a copy of the ledger account, together with a copy of the legal notice
issued in December, 2010. A copy of the Activity Log in respect of the
respondent was also filed to show that the respondent had been accessing
his account on the material dates.
3. The respondent has strongly disputed the claim. His case, as made
out in oral submissions and in the written reply, is that though there was a
margin shortfall in his account a-on the morning of 21-01-2008, he offered
to issue a cheque for the requisite amount, but this offer was not accepted by
the Relationship manager. His query on whether he could square off some
of his position himself also did not elicit a clear answer and though he made
a number of calls to the Relationship manager and the Branch manager, he
was not given a clear status report and thus he was prevented from
voluntarily squaring off some of his positions. It is further submitted that if
the Risk Management team of the applicant Trading Member had not
delayed the squaring off of some of the open positions, the loss could have
been contained. He has given, in support of his submissions, detailed
calculations of his holdings and the available margin.
4. I have very carefully examined the rival submissions and have
gone through the material brought on record. The fact that a debit exists in
the account which has remained outstanding is not disputed. What is to be
examined is whether the loss which arose on 22nd/23rd January, 2008 on
liquidation of the respondent‟s open positions can constitute a valid debit in
the account or not. Now it is seen that even the respondent admits that there
was a margin short fall in the account on the morning of 21st January, 2008.
It is not the case of the respondent that any payment was made to replenish
the margin. As regards the contention of the respondent that he was in
constant touch with the officials of the Trading Member but was not given a
clear-cut answer as to whether the Trading Member would square off the
positions or whether he should proceed to do so, I find the same to be
without merit. The reason is that the respondent was an on-line client, and
the Activity log of the relevant dates shows that he was continuously
accessing his account. There was nothing to prevent him from squaring off
his open positions to bring the available margin to the required level. The
plea of vague or evasive response from the Relationship manager/Branch
manger cannot be an adequate defence, for the simple reason that the onus
of keeping a watch on the margin requirement and of replenishing it
whenever there is a short fall is on the constituent, and not on the officials of
the Trading Member.
5. In the light of what is stated above, I find the claim of the applicant
to be in order. It is, however, noticed that the interest on the outstanding
amount has been calculated by the applicant @ 24%. This is excessive and
needs to be pegged at 12%, thus reducing the admissible amount to
Rs.4,40,730/- against Rs.5,24,233/- as claimed. Accordingly, I make the
following Award, viz. that the respondent will pay to the applicant a sum of
Rs.4,40,730/-. Delay in payment will involve interest @ 12% on the
amount till the date of actual payment." (underlining added)
5. (i) The court below has dismissed the objections under
Section 34 of the Act filed by the appellant by observing that once the
Arbitrator gives reasons for his Award as per para 4 of the Award,
then, a court hearing objections under Section 34 of the Act cannot sit
as an appellate court. It is only an appellate court which can re-assess
the evidence and re-apprise the findings of facts and conclusions
arrived at by the Arbitrator provided the same are not illegal or
perverse or violative of the ingredients contained in Section 34 of the
Act.
(ii) I completely agree. Once the Award is passed on valid
reasoning, and the fact is not in dispute that the appellant/objector was
an online member, hence there was no merit in the objections under
Section 34 of the Act filed by the appellant and which have therefore
been rightly dismissed by the impugned order dated 7.3.2017.
6. Dismissed.
JULY 24, 2017 VALMIKI J. MEHTA, J
Ne
