2003 (1) TMI 552 - HC - Companies Law

Issues Involved:
1. Validity of the arbitral award under section 34 of the Arbitration and Conciliation Act, 1996.
2. Privity of contract between the Petitioners and the First Respondent.
3. Title to the shares in question.
4. Alleged inconsistencies and contradictions in the Petitioners' claims.
5. The role and actions of M.K. in the transaction.
6. The jurisdiction and scope of judicial intervention under section 34 of the Arbitration and Conciliation Act, 1996.

Issue-wise Detailed Analysis:

1. Validity of the Arbitral Award:
The proceedings were initiated under section 34 of the Arbitration and Conciliation Act, 1996, challenging the award dated 31st January, 2002, by the Appellate Forum of the Stock Exchange, Mumbai. The Petitioners, original claimants, contested the award which arose from an earlier award dated 21st March, 2001, by the Arbitral Tribunal. The Tribunal had directed the First Respondent to deliver 3,73,400 shares and pay Rs. 25,32,000 with interest to the Petitioners. The Appellate Bench, however, held that the First Respondent was not liable to pay anything towards the balance 1,26,600 shares but must deliver 3,73,400 shares.

2. Privity of Contract:
The Petitioners argued that the Appellate Bench erred in holding no privity of contract existed between them and the First Respondent. They claimed the First Respondent admitted the transaction. However, the Appellate Bench found no contract note or bill issued by the First Respondent in favor of the Petitioners, no evidence of a client relationship, and no privity of contract.

3. Title to the Shares:
The Petitioners contended that the Appellate Bench wrongly held they had no title to the shares. The First Respondent had admitted the delivery of shares, which should have sufficed to establish title. However, the Appellate Bench noted the Petitioners' failure to produce evidence of title, and the shares were not routed through the BOLT system of the Stock Exchange.

4. Alleged Inconsistencies and Contradictions:
The Petitioners initially claimed the shares were delivered to the First Respondent for open market sale but later alleged they were sold to the First Respondent. The Tribunal noted this inconsistency and the lack of supporting documents like a contract note or bill. The Appellate Bench also highlighted discrepancies in the delivery memos and the Petitioners' failure to produce originals.

5. Role and Actions of M.K.:
The First Respondent claimed it acted as a conduit for the transaction between the Petitioners and M.K., a broker firm. The Tribunal found the First Respondent's complaint against M.K. and the return of 3,73,400 shares by M.K. significant. The Appellate Bench accepted the First Respondent's contention that the transaction was between the Petitioners and M.K., who must account for the shares.

6. Jurisdiction and Scope of Judicial Intervention:
The court reiterated the limited scope of intervention under section 34, emphasizing that judicial interference is minimal and only on specific grounds like breach of public policy. The court cited precedents, including Vijaya Bank v. Maker Development Services (P.) Ltd. and BFIL Finance Ltd. v. G. Tech Stone Ltd., to underline that mere errors of law or differing views do not warrant intervention. The court found no merit in the Petitioners' claims and noted their lack of bona fides, ultimately rejecting the Arbitration Petition.

Conclusion:
The court upheld the findings of the Appellate Bench, noting the Petitioners' inconsistencies, lack of evidence, and failure to establish privity of contract or title to the shares. The court emphasized the limited jurisdiction under section 34 and the absence of any breach of public policy, leading to the rejection of the Arbitration Petition.

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