9911796707
TMI Blog2003 (1) TMI 552X X X X Extracts X X X X X X X X Extracts X X X X ..... the name of Rhutu Bearing and Estates (I) Limited ("the company") together with duly executed transfer documents under two delivery memos bearing Nos. 451 and 452. The case of the Petitioners was that these shares were delivered to the First Respondent for the purpose of sale in the open market. According to the Petitioners, the First Respondent acknowledged receipt of the shares by embossing its rubber stamp and a signature on its behalf. The First Respondent, according to the petitioners, in turn, sold and delivered the aforesaid 5 lakh shares to one Messrs. Mahesh Kothari (M.K.) upon whom the First Respondent raised Bill Nos. 159 and 160. M.K. is alleged to have accepted the delivery of these 5 lakh shares and to have acknowledged it by a receipt dated 2nd August, 1996. The Petitioners, rely upon a compilation of documents which includes ( i ) Bill Nos. 159 and 160 of the First Respondent on M.K. recording that on 1st August, 1996, 3,25,600 shares and 1,74,400 shares had been bought from the First Respondent by the latter; ( ii ) A letter dated 23rd August, 1996 of the First Respondent to M.K. recording that the transaction had been carried out on 1st August, 1996 for which Bill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is a firm of brokers on the Bombay Stock Exchange. This transaction related to the proposed placement of 5 lakh shares of the Company in question. According to the First Respondent, the trading time was over whereupon the Petitioners represented that they did not desire that there should be any delay in the transaction. The case of the First Respondent is that the Petitioners stated that they had shares along with transfer deeds and a list of shares ready which should be directly delivered to M.K. However, since it was necessary to put the said transaction through a broker on the Stock Exchange, the First Respondent was requested to depute a member of its staff together with a rubber stamp of the First Respondent to be affixed on the reverse of the transfer deeds. According to the First Respondent, it was the Petitioners who requested it to raise two bills on M.K. for the aggregate sale of 5 lakh shares at the rate of Rs. 20 per share, in a total amount of Rs. 1 crore, following which this was done by the First Respondent. Thereafter, the First Respondent at the behest of the Petitioners deputed a member of its staff along with the bills for collection of payment from M.K. o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the First Respondent and signed the transfer deeds on behalf of the First Respondent; ( iv ) The contract was between the First Respondent and M.K. and, therefore, the First Respondent was entitled to take all necessary steps for recovering the sale price of the shares. The First Respondent had failed in the arbitration initiated against M.K. on the ground that the transaction had been carried on beyond the trading hours and had not been reported to the Stock Exchange. Equally, the Arbitral Tribunal found the case of the Petitioners that they had delivered 5 lakh shares of the Company to the First Respondent for the purpose of selling the same in the open market as unacceptable. The Tribunal noted that this was directly inconsistent with what had been set up by the Petitioners in the rejoinder which was that the shares had been sold to the First Respondent, that this transaction was a spot transaction and hence the First Respondent was bound to pay the price within 15 days of the sale. The Tribunal noted that the theory of there being a transaction of sale by the Petitioners to the First Respondent was not supported by any agreement between the parties, a contract note or bill. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in these circumstances that the Arbitral Tribunal ultimately directed the First Respondent to return 3,73,400 shares and to pay an amount of Rs. 25.32 lakhs to the Petitioners towards the cost of 1,26,600 shares. 5. Appeals were thereafter filed before the Appellate Bench constituted under the Rules. Bye-laws and Regulations of the Stock Exchange, Appeal No. 15A of 2001 was filed by the First Respondent while Appeal No. 18A of 2001 was filed by the Petitioners. In so far as the appeal that was filed by the First Respondent was concerned, the Appellate Bench held that the First Respondent was not liable to pay anything whatsoever to the Petitioners towards the balance 1,26,600 shares. Appeal No. 18A of 2001 filed by the Petitioners was rejected. The First Respondent has, however, been directed to deliver to the Petitioners 3,73,400 shares of the Company which admittedly had been received by the First Respondent. In arriving at its findings, the Appellate Bench of the Stock Exchange has placed reliance on the following circumstances; ( i ) The Petitioners had not produced any bill or contract supposed to have been issued by the First Respondent in their favour; (2) There was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the First Respondent put a seal on the transfer deeds for delivery of the shares to M.K. It was for the First Respondent to examine witnesses on its behalf; ( iv )The originals of the delivery memos had not been called for though they were seen and verified by the Deputy General Manager of the Stock Exchange; ( v )The finding that M.K. is liable to account for 1,26,600 shares is perverse. 7. On the other hand, it has been urged on behalf of the First Respondent that in the present case ( i ) There was a total absence of any contract note or any other document suggesting any contract for the sale or purchase of shares or any other transaction between the Petitioners and the First Respondent; ( ii ) Inconsistent and contradictory pleas were set up by the Petitioners in respect of the alleged transaction. In the statement of claim, the Petitioners had alleged that they delivered to the First Respondent, the said shares with duly executed transfer documents for the purpose of selling the same in the open market. A patently inconsistent case was subsequently set up this the shares had been sold to the First Respondent; ( iii ) The Petitioners had not mentioned in the statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s substituting his own views over that of the Arbitrator. That was clearly outside his jurisdiction. It is quite possible that the learned Single Judge had another view of the matter. That is not the jurisdiction which is vested while looking into the question of the legality or validity of the award when it is challenged under section 34 of the Act. Similarly as far as the question of public policy is concerned, by linking it with natural justice and thereafter linking it to law of limitation, the learned Judge has found fault with the majority judgment. This very approach has been criticised by a Division Bench of this Court in the case of Vijaya Bank ( supra ). In that judgment, the Division Bench clearly observed that the expression public policy cannot mean contravention of law simpliciter. That being the judgment rendered by a Division Bench, we are bound by the same and we have no reason to differ therefrom." The contention of the Learned Counsel appearing on behalf of the Petitioners is that the arbitral award is in breach of the public policy of India and that the reasons which have weighed with the Appellate Bench are perverse and would warrant the interference of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons relating to the shares of the Company in question and the price was far below Rs. 20 per share which was the alleged price reflected in the transaction in dispute. The Tribunal was, therefore, of the view that this was really a transaction which was entered into perhaps in collusion with M.K. in order to artificially raise the price of the shares of the Company. Apart from this circumstance, there are significant discrepancies in the two lists of shares produced by the Petitioners. The Arbitral Tribunal has adverted to these discrepancies in its award. The Learned Counsel appearing on behalf of the Petitioners has assailed the findings of the Arbitral Tribunal in so far as the failure of the Petitioners to prove their title to the shares is concerned. However, it would be material in this context to advert to an order dated 7th December, 1999 that was passed by a Division Bench of this Court in Writ Petition No. 1899 of 1999 to which the Petitioners herein were parties. In the order of the Division Bench, the Court recorded the statement on behalf of the Securities and Exchange Board of India (SEBI) that the authority will complete the enquiry against the Petitioners within 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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