Delhi High Court
Amarjeet Singh vs Shriram Insight Share Brokers ... on 11 January, 2019
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 08.10.2018
Date of decision : 11.01.2019
+ O.M.P. (COMM.) 226/2016 & IA No. 15604/2015 (Delay)
AMARJEET SINGH ..... Petitioner
Through: Mr.Sudhir K.Makkar, Sr. Adv. with
Mr.Gaurav Singh, Ms.Saumya Gupta,
Mr.Sudhanshu Suman, Mr.Abhishek
Chaudhary, Advs.
versus
SHRIRAM INSIGHT SHARE BROKERS LTD. ..... Respondent
Through: Mr.Raman Kapur, Sr. Adv. with
Mr.Rajinder Mathur, Mr.N.Sharma, Advs.
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
1. A common judgment has been passed with the lead case being
O.M.P. 418/2015 titled Surinder Kaur vs. Shriram Insight Share
Brokers Ltd. For the reasons stated therein, the present petition and all
pending applications are dismissed with no order as to cost.
2. A copy of the aforesaid order in O.M.P. 418/2015 is placed below.
NAVIN CHAWLA, J
JANUARY 11, 2019/rv/vp
O.M.P. (COMM.) 226/2016 Page 1
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 08.10.2018
Date of decision : 11.01.2019
+ O.M.P. 418/2015
+ O.M.P. (COMM.) 216/2016
+ O.M.P. (COMM.) 224/2016 & IA 15602/2015(delay)
+ O.M.P. (COMM.) 226/2016 & IA 15604/2015(delay)
+ O.M.P. (COMM.) 228/2016 & IAs 14981/2015,
14982/2015(delay)
SURINDER KAUR ..... Petitioner
ISHER SINGH ..... Petitioner
KULWANT KAUR ..... Petitioner
AMARJEET SINGH ..... Petitioner
RANBIR KAUR ..... Petitioner
Through: Mr.Sudhir K.Makkar, Sr. Adv. with
Mr.Gaurav Singh, Ms.Saumya Gupta,
Mr.Sudhanshu Suman, Mr.Abhishek
Chaudhary, Advs.
versus
SHRIRAM INSIGHT SHARE BROKERS LTD. ..... Respondent
Through: Mr.Raman Kapur, Sr. Adv. with
Mr.Rajinder Mathur, Mr.N.Sharma, Advs.
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
1. These petitions have been filed under Section 34 of the Arbitration
and Conciliation Act, 1996 (hereinafter referred to as the 'Act') praying
for setting aside of separate orders/Awards dated 17.02.2015 passed by
the Appellate Panel of Arbitrators appointed by the National Stock
OMP No.418/2015,
OMP (COMM.) Nos. 216/2016, 224/2016, 226/2016 & 228/2016 Page 1
Exchange of India Limited (NSEIL) for adjudicating the disputes that
have arisen between the parties.
2. The above petitions are being disposed of by this common order as
they involve identical questions of facts and law. The petitioners are all
family members. For convenience, facts are being taken from OMP
(COMM) 216/2016.
3. The respondent is a Trading Member of the NSEIL and the
petitioner is its Constituent/client.
4. On 04.08.2009 the petitioner had opened a Trading Account with
the respondent for trading in cash and derivative segment of the Stock
market by executing a Member Client Agreement.
5. The respondent, claiming that it had carried out various
transactions for and on behalf of the petitioner due to which as on
28.12.2010, there was an outstanding debit balance of Rs. 25,37,520.15
in the account of the petitioner maintained by the respondent, filed the
claim for the said amount before the panel of Arbitrators appointed by the
NSEIL.
6. The petitioner resisted the above claim of the respondent and also
raised a Counter Claim inter alia contending that the respondent had
carried out the transactions without any authorization from the petitioner.
7. The panel of Arbitrators vide Award dated 15.12.2011 held that all
trades were carried out in the account of the petitioner by the respondent
as per the instructions of the petitioner and that the loss was suffered by
the petitioner due to judgmental error in trade and not because of
unauthorized trading done by the respondent. The panel of Arbitrators,
therefore, by the Award dated 15.12.2011, allowed the claim of the
OMP No.418/2015,
OMP (COMM.) Nos. 216/2016, 224/2016, 226/2016 & 228/2016 Page 2
respondent for a sum of Rs. 25,37,520.15 directing the petitioner to pay
the said sum within thirty days from the date of the Award, failing which
pay interest at the rate of 10% per annum on the amount so awarded.
8. The respondent, claiming that the payment had not been made by
the petitioner on the expiry of thirty days from the date of the Award,
sold the shares / securities of the petitioner in the open market on
27.01.2012.
9. The petitioner being aggrieved of the above order/Award
challenged the same by way of filing of an appeal, on which NSEIL
appointed an Appellate Panel of Arbitrators. The Appellate Panel of
Arbitrators, vide its order dated 29.08.2012 dismissed the appeal filed by
the petitioner.
10. The petitioner thereafter filed a petition under Section 34 of the
Act before the Court of the District Judge, Patiala House Courts
challenging the Order dated 29.08.2012 passed by the Appellate Panel of
Arbitrators.
11. The above petition was, however, dismissed by the learned
Additional District Judge, Patiala House Courts vide Judgment/Order
dated 10.05.2013.
12. The petitioner being aggrieved of the said order, challenged the
same by way of an appeal before this Court. By the order dated
15.04.2014, the appeal was disposed of as not pressed and the Award
dated 15.12.2011 passed by the panel of Arbitrators of NSEIL was made
final. This order is the genesis of the present petitions and the entire
controversy in the present petitions revolves around the meaning and the
OMP No.418/2015,
OMP (COMM.) Nos. 216/2016, 224/2016, 226/2016 & 228/2016 Page 3
effect of the said order and the same is therefore, reproduced fully
hereinbelow:-
"1. During the course of arguments, it is pointed out on
behalf of the appellant that even assuming the appellant was
liable for the alleged trades, and respondent had to be
compensated for the losses suffered, losses have to be
calculated in terms of Clause 3.11 of Regulation-Part A
(Capital Market Segment) of National Stock Exchange of India
Ltd. by selling the securities/shares of the appellant lying with
the respondent not later than the fifth trading day reckoned
from the date of pay-in. What is essentially argued is that the
quantum of loss which the respondent can claim is restricted to
the loss by selling of the securities/shares of the appellant not
later than the fifth trading day of the disputed trades.
2. Counsel for the appellant contends that in the present
case the respondent/broker/trading member has sold the
shares/securities of the appellant around one year after the
trades in question were done on behalf of the appellant and
which trades according to the respondent made the appellant
liable for the losses suffered in the transactions conducted by
the appellant.
3. In my opinion, once the Award passed in this case
against the appellant is taken as final, and such loss has to be
recovered by the respondent, recovery of such loss has to be in
accordance with law including Clause 3.11 of National Stock
Exchange of India Ltd. Regulations-Part-A (Capital Market
Segment), if applicable, and which provision is applicable as
per the appellant.
4. In view of the above, while the appeal is dismissed as not
pressed and consequently the Award dated 15.12.2011 is taken
as final, however, whether the respondent has correctly
liquidated the shares/securities of the appellant for recovery of
the amounts due under the subject Award, will result in a fresh
cause of action to the appellant because if the shares/securities
OMP No.418/2015,
OMP (COMM.) Nos. 216/2016, 224/2016, 226/2016 & 228/2016 Page 4
have been sold by the respondent in violation of law including
National Stock Exchange Regulations as stated above, then in
such a case while taking the Award dated 15.12.2011 to be final
appellant is given liberty to invoke the arbitration proceedings
for claiming the amounts from the respondent on account of
alleged breach by the respondent by selling the
shares/securities of the appellant not on the dates/date as
required by law but at/on subsequent date(s) when the prices
were said to be lesser and hence causing loss as per the
appellant to the appellant.
5. The appeal is therefore dismissed as withdrawn and
liberty is granted to the appellant to invoke arbitration
proceedings for recovery of loss or of the amount/value of the
shares/securities which according to the appellant have been
illegally sold by the respondent at a lesser value by selling
appellant's shares/securities not on the date when the same
were legally required to be sold but on the later date/dates
when the prices of the shares/securities were as per the
appellant lesser. Parties are left to bear their own costs.
6. Interim orders passed in this case will continue for a
period of three weeks from today to enable the appellant to
obtain any interim order in the fresh proceedings which the
appellant proposes to initiate, however, it is made clear that
this Court is not observing one way or the other, for or against
either of the parties, qua the passing of the interim order in the
fresh arbitration proceedings to be initiated, as to whether or
not appellant is or is not entitled to an interim order, and if
entitled, of what nature.
FAO Nos. 454/2013, 455/2013, 456/2013 and 318/2013
These appeals will also stand dispose of in terms of above
observations and liberty granted as mentioned in FAO
453/2013." (Emphasis Supplied)
OMP No.418/2015,
OMP (COMM.) Nos. 216/2016, 224/2016, 226/2016 & 228/2016 Page 5
13. Relying upon the liberty given by this Court in the above order, the
petitioner filed a fresh claim before the panel of Arbitrators appointed by
NSEIL claiming a breach of Clause 3.11 of the National Stock Exchange
of India Regulations Part-A (Capital Market Segment) by the respondent
and as a result, claiming Rs.29,73,246.03 as loss suffered by the
petitioner as on 08.11.2010 and further inter alia claiming
Rs.36,22,629.35 as the value of the pending stocks as on 08.11.2010 with
the respondent.
14. The panel of Arbitrators by the Award dated 29.09.2014 dismissed
the claim of the petitioner holding Regulation 3.11 to have no application
to the facts of the present case. The relevant finding of the panel of
Arbitrators is reproduced hereinunder:-
"19. By no stretch of reasoning Regulation 3.11 can be
interpreted to be applicable at the time when the shares
retained by the trading member are sold by the trading member
for recovery of its dues from the Constituent. The representative
of the applicant has not questioned the right of the trading
member to sell the shares held in the name of the applicant for
liquidating the outstanding debit in the ledger account of the
Constituent. He has not been able to point out any Rules,
Regulations or Bye-laws of the Exchange or the terms and
conditions of the Member Client Agreement which bars the
trading member from selling the shareholding of the
Constituent in its custody for recovery of dues if the Constituent
had failed to discharge the trading and financial obligations.
The argument of the representative of the applicant is not that
the trading member has no right to sell the shares. His
contention is that though the trading member had right of sale
of the applicant's shares but the trading member could not have
sold it at a lower price after eight day of the trading day or at a
price lower than the close-out price fixed by the Exchange in
accordance with Regulation 3 .11. This argument has no merit
OMP No.418/2015,
OMP (COMM.) Nos. 216/2016, 224/2016, 226/2016 & 228/2016 Page 6
as Regulation 3.11 is not applicable to the liquidation
transaction, i.e., on selling of shares and securities of the client
in order to recover the dues against him. Regulation 3.11 is
confined to the determination of the liability of the Constituent
who is in default of pay-in of consideration on the purchase of
the shares when the trading member has either chosen to sell
the purchased shares within the prescribed period or has
retained the shares with it.
xxxxxx
21. It appears that the applicant had great misconception about
scope and import of the provision of the Regulation 3.11 that it
was applicable even at the stage of selling of the shares by the
trading member for recovery of the balance due against the
Constituent which is not correct. The trading member has
discretion to sell the shares and indeed it has to act fairly and
in the interest of the Constituent and try to sell the shares at the
highest price. The trading member sold the shares of the
applicant after the expiry of 30 days from the date of the receipt
of the award, i.e., after waiting for the expiry of the time of the
filing of the appeal as per the Bye-laws of the Exchange. It has
not violated any rules and Regulations of the Exchange or the
terms and conditions of the Member Client Agreement in doing
so. The shares were sold at the market price of that day. Before
the shares were sold by the trading member the applicant could
have himself sold them at a time when the prices of the scrip
were equivalent to the closed-out price declared by the
Exchange under Regulation 3.11 or higher than that to
discharge the financial obligations. He cannot blame the
trading member for selling the shares at the market price of the
day.
22. The applicant has filed a calculation sheet in which he has
given the loss which was incurred due to the selling of the
shares by the trading member at prices which were lower than
the close out price of the said scrips fixed by the Exchange
under Regulation 3.11. This statement could have been helpful
OMP No.418/2015,
OMP (COMM.) Nos. 216/2016, 224/2016, 226/2016 & 228/2016 Page 7
for determining the claim against the trading member had our
view been that Regulation 3.11 was applicable when the shares
were sold by the trading member for recovery of dues on
27.1.2012 and that the shares could not have been sold by the
trading member at a price lower than the close-out price
declared by the Exchange under Regulation 3.11 and the
trading member was liable to reimburse the difference between
the close-out price of the scrip and the lower selling price
which was realized by the trading member. In our considered
view, Regulation 3.11 does not support the claim of the
applicant. The question of granting any interest, as claimed,
will also not arise."
15. The petitioner being aggrieved of the above Award/Order
challenged the same by way of an appeal. The Appellate Panel of
Arbitrators constituted by the NSEIL, vide its Impugned Award/Order
dated 17.02.2015 has dismissed the said appeal inter alia holding as
under:-
"33. On bare perusal of the aforesaid Regulation 3.11, it is
clear that it was not mandatory for the Respondent Company to
liquidate the securities within T+2+5 days. This Regulation
clearly lays down that the Trading Member (Respondent
Company in this case) shall be at liberty to sell the securities
received in pay-out in proportion to the amount not paid by the
Constituent. In other words, this Regulation limits the liability
of the Constituent (Appellant in the present case) in respect of
the purchased shares to a price on a particular date in the event
the Constituent fails to pay within the time specified by the
NSEIL in respect of the shares purchased in his account. The
pay-in time fixed by the NSEIL for capital market segment is
Transaction+2 days (T +2). Therefore, it is clear that the
Constituent is under obligation to pay the price of the shares
purchased within T +2 days. If the Constituent fails to pay
within T +2 days, the trading member is at liberty to sell the
shares purchased in his account by 5th day reckoned from the
date of pay-in i.e. within T +2+5 days. In case trading member
OMP No.418/2015,
OMP (COMM.) Nos. 216/2016, 224/2016, 226/2016 & 228/2016 Page 8
has opted to retain the shares purchased and not dispose them
of within T +2+5 days, the pay-in liability of the Constituent in
respect of the shares purchased in his account shall be
determined by the close-out price declared by the NSEIL on 5th
trading day from the date of pay-in and loss, if any, on account
of the close-out shall be debited to the account of the
Constituent. This Regulation has accorded discretion to the
Trading Member to sell the shares purchased by the Constituent
within the stipulated time, meaning thereby the Trading
Member can also sell those shares after the stipulated day.
Now the question is whether the Respondent Company was
justified in disposing of those shares after more than one year
from the date of close-out. In this regard, it is significant to
mention that the Appellant has nowhere stated that he accorded
consent to the Respondent Company to liquidate the securities
in his account in proportion to the amount not paid by him. In
case the Appellant had communicated to the Respondent
Company about his inability to pay and advised them to
liquidate his securities in proportion to the amount not paid by
his, the Respondent Company was certainly bound to comply
with Regulation 3.11. On the other hand, it appears the
Respondent Company decided not to take coercive and
unilateral action against the Appellant assuming that the
Appellant may keep his commitment or meet his obligations.
When the Appellant failed to make payment, the Respondent
Company approached the Arbitration Forum for redressal of
their grievance and they decided to liquidate the securities of
the Appellant on 27/01/2012 only after passing of the award
dated 15/12/2011 in their favour and waiting till expiry of a
period of 30 days within which appeal against the award dated
15/12/2011 was expected to be filed by the Appellant in
accordance with para 6 of the SEBI Circular
No.CIR/MRD/DSA/24/ 2010 dated 11/08/2010.
xxxxxxx
OMP No.418/2015,
OMP (COMM.) Nos. 216/2016, 224/2016, 226/2016 & 228/2016 Page 9
35. The Appellate Arbitral Tribunal is of the opinion that an
award passed by the Arbitrator on 15/12/2011 in favour of the
respondent- trading member for an amount of Rs. 25,37,520.15
is final and the recovery of the said amount by the respondent
and trading member is as per the Rules & Regulation & Bye
laws of the NSEIL. The appellant in his appeal application filed
against the Award dated 29/09/2014 of Ld. Tribunal, has failed
to come up with any new findings and as such the appeal of the
appellant is hereby dismissed."
16. The present petitions have been filed challenging the above
Order/Award.
17. The learned senior counsel for the petitioner submits that the
Arbitral Tribunal has completely misconstrued the order dated
15.04.2014 passed by this Court in the appeals filed by the petitioner. He
submits that by the order dated 15.04.2014 this Court had given liberty to
the petitioner to raise the claim on whether the respondent has correctly
liquidated the shares/securities of the petitioner for recovery of the
amount due under the Award dated 15.12.2011. The petitioner, was,
therefore, within its rights to claim that the respondent should have
liquidated the shares/securities in terms of Regulation 3.11 by the fifth
trading day reckoned from the date of pay-in. Such date of pay-in being
two days from the date of purchase/transaction, the shares/securities
should have been liquidated for recovering the loss by T+2+5 days, T
being the date of purchase of the shares/securities, following which, even
if the shares/securities are not sold, the accounts have to be closed on the
close out price declared by the Exchange on this T+2+5th day. He
submits that the Award passed is therefore, in violation of not only the
OMP No.418/2015,
OMP (COMM.) Nos. 216/2016, 224/2016, 226/2016 & 228/2016 Page 10
liberty granted by this Court in its order dated 15.04.2014, but also
Regulation 3.11.
18. Regulation 3.11 is quoted hereinbelow:-
"3.11 CONSTITUENT IN DEFAULT
If a Constituent fails to make payment of consideration to the
trading member in respect of any one or more securities
purchased by him before the pay-in date notified by the
Exchange from time to time, the Trading Member shall be at
liberty to sell the securities received in pay-out, in proportion to
the amount not received, after taking into account any amount
lying to the credit of the Constituent, by selling equivalent
securities at any time on the Exchange not later than the fifth
trading day reckoned from the date of pay-in. If the trading
member has not sold the securities for any reason whatsoever,
such securities shall be deemed to have been closed out at the
close out price declared by the Exchange for the fifth trading
day. The loss, if any, on account of the close out shall be to the
account of the Constituent.
If a Constituent fails to deliver any one or more securities to the
pool account of the trading member in respect of the securities
sold by him before the pay-in date notified by the Exchange
from time to time, such undischarged obligation in relation to
delivering any one or more securities shall be deemed to have
been closed out at the auction price or close-out price, as may
be debited to the Trading Member in respect of the security for
the respective settlement, to the extent traceable to the
Constituent who has failed to deliver; otherwise the close out
price on the date of pay-out in respect of the relevant securities,
declared by the Exchange. The loss, if any, on account of the
close out shall be to the account of the Constituent.
Subject to what is stated above, no further claims shall lie
between the Constituent and Trading Member.
Explanation: If for any reason, schedule of pay-in and pay-out
is modified the above provision shall be made applicable
OMP No.418/2015,
OMP (COMM.) Nos. 216/2016, 224/2016, 226/2016 & 228/2016 Page 11
reckoning the actual date of pay-in and/or pay-out, as the case
may be."
19. A reading of the above Regulation would clearly show that if a
Constituent fails to make payment of consideration in respect of the
securities purchased by him before the pay-in date notified by the
Exchange, which in the present case admittedly was two days from the
date of the purchase, the Trading Member would be at liberty to sell the
securities in pay-out, in proportion to the amount not received, not later
than the fifth trading day reckoned from the date of pay-in. Incase the
Trading Member does not sell the securities for any reason whatsoever,
such securities shall be deemed to have been closed out at the close out
price declared by the Exchange for the fifth trading day.
20. Though the learned senior counsel for the respondent submitted
that Regulation 3.11 would have no application to a running account
being maintained by the Trading Member for a Constituent, in my
opinion, the said issue does not require any adjudication in the facts of
the present case.
21. In the present case, the shares/securities held by the respondent
were liquidated by the respondent for making recovery of the amount due
to it under the Award dated 15.12.2011, which had been upheld by the
order dated 29.08.2012 passed by the Appellate Panel of Arbitrators.
Though the petitioner had challenged the above Order/Award by way of a
petition under Section 34 of the Act, the same was also dismissed by the
Court of the learned Additional District Judge vide Judgment/Order dated
10.05.2013, and the appeal filed against it was dismissed as not pressed
OMP No.418/2015,
OMP (COMM.) Nos. 216/2016, 224/2016, 226/2016 & 228/2016 Page 12
by this Court. Infact, this Court in its order dated 15.04.2014 clearly
recorded that the Award dated 15.12.2011 shall be taken as final.
22. The Arbitral Award dated 15.12.2011 had held that the respondent
would be entitled to an amount of Rs.25,37,520.15 from the petitioner.
This amount had been arrived at by the panel of Arbitrators based on the
account statement of the petitioner furnished by the respondent before it.
The account statement contained the debit and credit entries with respect
to various transactions undertaken by the respondent for and on behalf of
the petitioner. The plea of the petitioner that the said transactions had
been carried out by the respondent unauthorizedly had been disbelieved
by the Arbitral Tribunal and the same was upheld by this Court. If the
contention of the learned senior counsel for the petitioner on the
interpretation of this Court's order dated 15.04.2014 is to be accepted, the
Award so far as it directed the petitioner to pay the sum of Rs.
25,37,520.15 has to be considered as being set aside by this Court, while
upholding the findings of the earlier Arbitral Tribunal on the transactions
having been conducted with the knowledge and consent of the petitioner.
The order dated 15.04.2014, on the other hand, expressly upheld the
Award dated 15.12.2011 passed by the Arbitral Tribunal and only left the
following question to be determined in the fresh proceedings:-
"4......however, whether the respondent has correctly liquidated
the shares/securities of the appellant for recovery of the amounts
due under the subject Award, will result in a fresh cause of action
to the appellant because if the shares/securities have been sold by
the respondent in violation of law, including National Stock
Exchange Regulations as stated above, then in such a case while
taking the Award dated 15.12.2011 to be final appellant is given
liberty to invoke the arbitration proceedings for claiming the
OMP No.418/2015,
OMP (COMM.) Nos. 216/2016, 224/2016, 226/2016 & 228/2016 Page 13
amounts from the respondent on account of alleged breach by the
respondent by selling the shares/securities of the appellant not on
the dates/date as required by law but at/on subsequent date(s)
when the prices were said to be lesser and hence causing loss as
per the appellant to the appellant.
5. The appeal is therefore dismissed as withdraw and liberty is
granted to the appellant to invoke arbitration proceedings for
recovery of loss or of the amount/value of the shares/securities
which according to the appellant have been illegally sold by the
respondent at a lesser value by selling appellant's
shares/securities not on the date when the same were legally
required to be sold but on the later date/dates when the prices of
the shares/securities were as per the appellant lesser."
23. The above order has been passed on the plea raised by the
petitioner in his appeal, being FAO 318/2013, to the effect that the
respondent should have sold the shares in 2010 instead and in place of
January, 2012. Ground A and B raised by the petitioner in its earlier
appeal are reproduced hereinbelow:-
"A. BECAUSE the Ld. Court below as well as the Ld.
Arbitrator Tribunal failed to appreciate that when the
arbitration clause was invoked by the Respondent, there was no
disputes as such w.r.t. the claim with the Appellant because
there was sufficient funds in the Appellant's demat account
[total amounting to Rs.42,796,17/- i.e. Rs.35,29,617.60 by way
of shares and Rs.7,50,000/- as margin money]. That it is
pertinent to mentioned that the total alleged claim of the
Respondent in the arbitration against the Appellant was of
Rs.25,37,520.15 however, an amount of Rs.42,796,17/- was
lying with the Respondent. That it is stated that if Respondent
can sell shares of the Appellant in 2012, without Appellant's
knowledge/consent, they can sell them in 2010 as well when
arbitration proceedings were initiated. The copy of letter
written by the Appellant objecting to the unauthorized sale of
shares is annexed herewith and marked as ANNEXURE A-17.
OMP No.418/2015,
OMP (COMM.) Nos. 216/2016, 224/2016, 226/2016 & 228/2016 Page 14
B. BECAUSE the Ld. Court below as well as Appellate
authority miserable failed to appreciate that the Respondent
has concealed the material fact till date that Appellant was
holding shares worth more than Rs.35,00,000/- and the same
was sold in January 2012 by the Respondent, without the
knowledge/consent and without any authority during pendency
of the appeal. This fact was deliberately not disclosed before
that Arbitral Tribunal or before any forum."
24. Once the order is read in light of the assertion made by the
petitioner in its earlier appeal, it would be evident that the Court left only
the question of the applicability of Regulation 3.11 on the liquidation of
the shares / securities of the petitioner by the respondent for recovering
the amount due under the Award, to be determined through the process of
fresh arbitration.
25. As noted above, the Arbitral Tribunal has held that Regulation 3.11
is not applicable at the stage of selling of the shares by the Trading
Member for recovering of the balance due against the Constituent in
terms of the Arbitral Award. Regulation 3.11 is confined to the
determination of the liability of the Constituent who is in default of
payment of consideration on the purchase of the shares when the Trading
Member has either chosen to sell the purchased shares within the
prescribed period or has retained the shares with it.
26. I am in agreement with the view expressed by the learned Arbitral
Tribunal. The intent of the order dated 15.04.2014 passed by this Court
was not to reopen the earlier proceedings as was sought to be done by the
petitioner through the process of fresh arbitration. The intention only was
for the determination on an appeal of the petitioner, that the shares could
have been sold by the respondent in 2010 itself, when the respondent
OMP No.418/2015,
OMP (COMM.) Nos. 216/2016, 224/2016, 226/2016 & 228/2016 Page 15
lodged its claim in the earlier arbitration proceedings. For this purpose
alone the petitioner placed reliance on Regulation 3.11. This question
alone was, therefore, left open to be determined through fresh arbitration.
A reading of the Regulation 3.11 clearly shows that it is not applicable at
the stage of final settlement of accounts. In any case, the respondent
having taken the correct remedy of having its claims adjudicated through
the arbitration process, cannot be faulted for having not sold the
shares/securities of the petitioner during the pendency of such arbitration
proceedings.
27. The issue raised by the petitioner can also be considered through
another angle. A perusal of the statement of accounts filed by the
respondent in the earlier round of arbitration would show that there were
various debit and credit entries with respect to sale and purchase of
shares by it on behalf of the petitioner. If the plea of the petitioner is to be
accepted, the entire transaction would have to be reopened and for each
transaction the effect of Regulation 3.11 will have to be considered. This
would make the earlier exercise resulting in the Arbitration Award dated
15.12.2011 and the appellate order dated 29.08.2012 redundant. A
perusal of the statement of accounts filed by the petitioner in support of
its claim in the second round of arbitration also shows that the petitioner
was seeking to selectively reopen the transaction. This certainly was not
permissible, as the Arbitral Award has become final.
28. The learned senior counsel for the petitioner further challenged the
Award on the ground that the Appellate Tribunal consisted of persons
who were on the panel of Arbitrators in the original arbitration
proceedings, though in a different matter. On the basis of the chart given
OMP No.418/2015,
OMP (COMM.) Nos. 216/2016, 224/2016, 226/2016 & 228/2016 Page 16
below, he submits that the original Arbitrator could not have confirmed
his own Award by being a member of the Appellate Panel of Arbitrators
and therefore, the Award is liable to be set aside on the ground of failure
to comply with the Principles of Natural Justice.
S.No. Party Name Name ofName of
Arbitrators inArbitrators in
claim petition Appellate stage
1. Ishar Singh (i) M.A. Khan, (i)Pankaj
(ii)Naseer Aggarwal,
Ahmed (ii)Avinash
(iii)Pramod Shukla
Kumar Gupta (iii)Jagvinder
Vir Singh
2. Amarjeet Singh (i) M.A. Khan (i)Pankaj
(ii)Diwakar Dev Aggarwal,
(iii)Vijay Kumar (ii)Avinash
Bhasin Shukla
(iii)Jagvinder
Vir Singh
3. Kulwant Kaur (i)V.S. Aggarwal (i) Jagvinder Vir
(ii) M.A. Khan Singh
(iii)Pramod (ii)P.K.
Kumar Gupta Banerjee
(iii)Bala
Subhramanium
4. Surinder Kaur (i) M.A. Khan (i)Anil Aggarwal
(ii)P.K. (ii)Naseer
Banerjee Ahmed
(iii)Bala (iii)Jagvinder
Subhramanium Vir Singh
5. Ranveer Kaur (i) M.A. Khan (i) Jagvinder
(ii) R.K. Ahuja Singh
(iii)Naseer (ii)P.K.
Ahmed Banerjee
(iii)Bala
Subhramanium
OMP No.418/2015,
OMP (COMM.) Nos. 216/2016, 224/2016, 226/2016 & 228/2016 Page 17
29. On a query being raised, the learned senior counsel for the
petitioner fairly admits that this plea was not taken before the Appellate
Panel of Arbitrators. The petitioner was well aware of the above defect in
the constitution of the Appellate Panel of Arbitrators as all the petitioners
are family members and have been jointly pursuing the appeals
throughout. The petitioner, therefore, is now estopped from challenging
the constitution of the Appellate Tribunal. As far as NSEIL was
concerned, all these appeals were separate matters and there is no
allegation that when considered separately, the members of the original
panel of Arbitrators have been appointed as the members of the Appellate
Tribunal. I therefore, find no force in the said contention as well.
30. In view of the above, I find no merit in the present petitions and
the same are accordingly dismissed, with no order as to cost.
NAVIN CHAWLA, J
JANUARY 11, 2019/rv/vp
OMP No.418/2015,
OMP (COMM.) Nos. 216/2016, 224/2016, 226/2016 & 228/2016 Page 18
