9911796707
TMI Blog2014 (12) TMI 1291X X X X Extracts X X X X X X X X Extracts X X X X ..... er of transactions, including purchase transactions, in the account of the claimant on the date of debit balance. It is thus clear that the claimant would not have given any such instructions to the respondent for carrying out such transactions on behalf of the claimant. The respondent has failed to produce any proof of any instructions from the claimant to carry out any such transactions or that the transactions were carried out by the claimant herself online or that she was personally present to carry out such transactions in the office of the respondent and also having failed to prove that the respondent had demanded any margin money, which the claimant had failed to deposit and, therefore, the respondent was justified in squaring off of the transactions, standing in the account of claimant. Since the respondent has carried out the transactions without demanding any margin money from the claimant and without any instructions from the claimant though there was debit balance, all such transactions carried out by the respondent, without any instructions and without any demand for margin money, were unauthorised and no such debit could have been made in the account of claimant in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 44,88,687.93 resulting in the net amount of ₹ 6,12,761.01, including tax alleged to be due from the claimant. It is held that the respondent was not able to show the authority of transactions on 25th November 2011 which was after the period when the claimant had formally registered her complaint about unauthorised trading in her account on 7th September 2011. In my view, the learned Counsel for the respondent could not demonstrate from various findings on record contained in paras 12 to 25 of the award as to how the same are perverse. In my view, since the findings of fact recorded by the arbitral tribunal are not perverse, this court cannot interfere with such findings of fact under section 34 of the Arbitration Act - ARBITRATION PETITION NO.854 OF 2012 WITH ARBITRATION PETITION NO.420 OF 2013 - - - Dated:- 17-12-2014 - R.D.DHANUKA, J. Mr. Sameer Sawant with Chandra Sekhar Jha for petitioner Mr. Krishnaraj Thaker with Suraj Iyer i/b. Ganesh Co., for respondent JUDGMENT:- 1] By consent of parties, both these petitions were heard together and are being disposed of by a common judgement. 2] In both the petitions, the parties have impugned the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er should be sent to her in physical form. 7] It is the case of the claimant that during the period between 14th March 2011 and 5th May 2011, the said Priotosh Ghosh on behalf of respondent collected an aggregate sum of ₹ 27,50,000/- from the claimant in five installments, last of such installment was on 5th May 2011. The said Priotosh Ghosh represented to the claimant that the claimant was a nett gainer from the handful trades which she had instructed him to make in her account. It is the case of the claimant that on or about 11th May 2011 to her shock and surprise the said Priotosh Ghosh informed her for the first time that there was a reduction in her account to the tune of ₹ 20 lakhs. The said Priotosh Ghosh attributed the said reduction to the fall in the global market in the aftermath of killing of Osama Bin Laden. 8] On 4th July 2011, the claimant joined her husband at Port Klang, Malaysia and returned to India on or about 25 th August 2011. It is the case of the claimant that on 5th September 2011, the claimant received a telephone call from a person who refused to disclose his identity and claimed that there had been huge volume of unauthorised trading in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imant, there were further unauthorized transactions i.e. intra day buy transactions amounting to ₹ 1132411.40 and intra day sell transactions amounting to ₹ 1096695.60 which were carried out in the account of the claimant. On 26th November 2011, the claimant informed the respondent of further unauthorized trading in her account carried out on 25th November 2011. The claimant informed about such unauthorized trading in her account also to MCX. There was no reply to the said complaint made by the claimant to the MCX by the respondent. 14] On 29th November 2011, the claimant filed her complaint with the grievance cell of MCX. The said complaint was treated as her statement of claim. The dispute was referred to the arbitration in accordance with the bye-laws and business rules of the MCX. The respondent filed its statement of defence before the arbitral tribunal on 17th November 2012, denying the claim made by the claimant on various grounds. The primary defence of the respondent in the reply was that the claimant could not run short of margin and as the claimant ran short of margin, the respondent did not have any option but to close out and cancel the claimant's po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e respondent has impugned the award of the arbitral tribunal directing respondent to pay various amounts by filing Arbitration Petition No.854 of 2012. 20] The learned Counsel appearing for respondent submits that though there was no statement of claim filed by the claimant and there was no money claim made before the arbitral tribunal, the arbitral tribunal has allowed the money claim in favour of the claimant. Since there was no statement of claim filed by the claimant, respondent could not file any proper written statement, being not aware of the claim made by the claimant. It is submitted that the impugned award is, therefore, liable to be set aside on this ground alone. 21] In support of this submission, the learned Counsel has invited my attention to the complaint made by the claimant against the respondent before the grievance cell on 29 th November 2011. It is submitted that the said complaint made by the respondent could not have been considered as a statement of claim on behalf of the claimant by the arbitral tribunal. There was no separate statement of claim filed by the claimant. 22] The learned Counsel has invited my attention to the criminal complaint filed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ors., reported in A.I.R. 2011 S.C. 2507 and in particular para 21, which reads thus:- 21. The term `arbitrability' has different meanings in different contexts. The three facets of arbitrability, relating to the jurisdiction of the arbitral tribunal, are as under : (i) whether the disputes are capable of adjudication and settlement by arbitration? That is, whether the disputes, having regard to their nature, could be resolved by a private forum chosen by the parties (the arbitral tribunal) or whether they would exclusively fall within the domain of public fora (courts). (ii) Whether the disputes are covered by the arbitration agreement? That is, whether the disputes are enumerated or described in the arbitration agreement as matters to be decided by arbitration or whether the disputes fall under the `excepted matters' excluded from the purview of the arbitration agreement. (iii) Whether the parties have referred the disputes to arbitration? That is, whether the disputes fall under the scope of the submission to the arbitral tribunal, or whether they do not arise out of the statement of claim and the counter claim filed before the arbitral tribunal. A dispute, even if it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has no jurisdiction. 27] The learned Counsel also places reliance upon the judgement of the Supreme Court in the case of Venture Global Engineer Vs. Satyam Computer Services Ltd. and Anr., reported in A.I.R. 2010 S.C. 3371 and in particular para 51 thereof which reads thus:- 51. Therefore, this court is unable to accept the contention of the learned Counsel for the respondent that the expression fraud in the making of the award has to be narrowly construed. This court cannot do so primarily because fraud being of infinite variety may take many forms, and secondly, the expression the making of the award will have to be read in conjunction with whether the award was induced or affected by fraud. 28] The learned Counsel for the respondent then submits that since the claimant had not kept sufficient margin as required under the bye-laws of MCX, the respondent was entitled to square up the transactions in her account and thus, no grievance could be made by the claimant for such transactions. It is submitted that though the claimant may have been out of India during the period 4 th July 2011 and 25th August 2011, she used to carry out transactions on telephone. Some of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 2011. 31] The learned Counsel for the claimant submits that in the written statement/ reply filed by the respondent before the arbitral tribunal, the respondent had placed reliance on 11 contract notes in support of the plea that the claimant had carried out such trading. It is also pleaded by the respondent that the account of the claimant was squared off in view of the claimant not paying margin money sufficiently. 32] The learned Counsel further placed reliance on bye-laws 8.4, 8.6.5 and 8.6.6 of the MCX which provide for payment of margin money and the right of the broker to close out open position of a constituent member in case of failure on the part of the constituent to comply with the call for further margin or if any payment is due by the constituent to the clearing member. By law 8.4, 8.6.5 and 8.6.6 of MCX are extracted as under:- 8.4 Members of the Exchange shall deposit initial margin in cash or may furnish Fixed deposit or bank guarantees or such other instruments as maybe specified by the Exchange from time to time to fulfill the initial margin requirement in respect of open positions. Variation margin shall be paid only in cash or cheque, or by elec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt shall also be obliged to pay the shortfall of the daily margin, if any, on the immediate succeeding business day when the Member raises such additional margin requirement. The Constituent shall not be permitted to create any new open positions, until receipt of such additional margin. If the Constituent defaults in paying the daily margin, the Member shall be entitled to liquidate/close out all or any of the Constituent's positions, without prejudice to the Member's right to refer the matter to arbitration. Any and all losses and financial charges on account of such liquidation/closing out shall be charged to and borne by the Constituent. The Member is permitted in its sole and absolute discretion to impose additional margin (even though not imposed by the Exchanges, the Clearing Corporation/Clearing House) and the constituent shall be obliged to fulfill such additional margin requirements. 34] The learned Counsel has invited my attention to the contract notes produced by the respondent themselves before the arbitral tribunal and would submit that even after 13 th July 2011, 19th July 2011 and 1st August 2011, the respondent had carried out large number of transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e respondent to deliver the contract notes by e.mail. The respondent could not produce any such ECN declaration alleged to have been submitted by the claimant. 36] In so far as e-mail address given on the client's registration form is concerned, it is submitted by the learned Counsel that the claimant had given correspondence address in the said form. The e.mail address of the husband of the claimant was given for the purpose of correspondence and not for delivery of any contract notes. The husband of the claimant was all through out on voyage. It is the case of the claimant that the claimant had specifically requested the representative of the respondent to send all the contract notes in physical form and not on the e.mail address of her husband. 37] The learned Counsel invited my attention to the various findings of the arbitral tribunal in the impugned award. It is submitted that the respondent never applied for leading any oral or documentary evidence before the arbitral tribunal to examine any witness including Mr.Priotosh Ghosh. 38] Insofar as the rejection of substantial part of the claim made by the claimant is concerned, my attention is invited to para 26 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Arbitration Act to postpone the hearing of the arbitration petition and to direct the arbitral tribunal to resume the hearing and record reasons so as to eliminate the grounds of challenge. Reliance is also placed by the learned Counsel on paras 26 to 28 of the said judgment, which read thus:- 26. In what we have discussed above, it cannot be said that the High Court was wrong in observing that no reasons have been assigned by the arbitral tribunal as to whether the period of completion extended by the employer for 18 months was due to reasons not attributable to the claimant. However, in our view, the High Court ought to have given the arbitral tribunal an opportunity to give reasons. This course is available under Section 34(4) of the Act which reads thus: 34. (1)-(3) * * * (4) On receipt of an application under sub-section (1), the court may, where ti is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deliberately refused to bear the loss, though such transactions were carried out by the claimant. It is submitted that the claimant herself has infused further amount for the purpose of carrying out trading. REASONS AND CONCLUSION : 44] Insofar as the submissions of the learned Counsel for the respondent that Mr. Priotosh Ghosh was a necessary party in the arbitration proceedings and without adding him, the arbitration could not be concluded is concerned, it is not in dispute that the said Priotosh Ghosh was not a party to the arbitration agreement. In my view, the said Priotosh Ghosh thus could not have been impleaded as a party to the arbitration proceedings, as necessary party or a proper party at all. There is no merit in this submission of the learned Counsel for the respondent. 45] Insofar as the learned Counsel's submission that the arbitral tribunal did not give any liberty to the respondent to cross examine the claimant and witnesses is concerned, it is matter of record that none of the parties led any oral evidence before the arbitral tribunal. Be that as it may, since the claimant did not examine any witness, including herself, there was no question of gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gains made by the clients. 49] The business rules of the MCX and in particular 27(2) provides that the contract notes must be delivered within 24 hours of the transaction made by and on behalf of the clients and proof of delivery of the same needs to be preserved by the member. The delivery of contract note to client must be in physical form only unless a client specifically indicates his preference for contract notes in electronic form. If any client needs electronic contract notes, he has to be provided with ECN declaration form via e.mail as per the format and procedure given at Annexure XXVII. It is further provided that such declaration has to be obtained from the client afresh before first April of every financial year by following the same procedure and the same shall be valid for that financial year only. A client can revoke the ECN facility and opt for the contract note in the physical form only by giving seven working day's notice to the member. It further provides that a detailed statement must be sent every month and proof of delivery of the same should be preserved by the member. 50] It is the case of the claimant that the claimant had not signed any such EC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the respondent that there were no money claim made by the claim before the arbitral tribunal or that there was no statement of claim filed by the claimant or that the respondent could not deal with the claim properly in the arbitration proceedings and on that ground the award should be set aside. 53] A perusal of the statement of defence filed by the respondent before the arbitral tribunal indicates that it was the case of the respondent that the claimant had never disputed any trading and/or transaction in her account till 6 th September 2011. According to the respondent, the account of the claimant had been running short of margin and she never made any endeavour to clear her margin, though demanded from time to time by the respondent and, therefore, the respondent had to liquidate/close out all positions of the claimant due to huge market requirement in the trading account of the claimant. In para 13 of the statement of defence it is alleged that the claimant always used to keep margin in the nature of shares and also in cash and upon satisfaction of the margin in the account, the claimant was given exposure to trade in the stock market. No unlimited exposure was given t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctly or indirectly enter into any arrangement or adopt any procedure for the purpose of evading or assisting in the evasion of the margin requirements prescribed under the bye-laws, rules and regulations or any orders issued thereunder. The clearing member has to account for the margin deposits received from the constituent. 56] Bye-law 8.6.5 clearly provides that an exchange broker may close out an open position of a client when the call for further margin or any other payment due is not complied with by the client. Bye- law 8.6.6 provides that a clearing member may close out an open position of a constituent member when the call for further margin or any other payment due is not complied with by the constituent member. Bye-law 8.7 provides that every clearing member shall collect from constituent members, with whom he has an agreement to provide clearing and settlement services as per these bye-laws, all such margins as specified by the relevant authority on the transactions executed by constituent members for clearing and settlement. 57] A perusal of record indicates that the respondents have failed to prove that any demand was made by the respondent on the claimant for de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... telephone talks between her and the respondent. It is also held by the arbitral tribunal that the respondent had expressed inability to produce any visitor's book to substantiate the allegations that the claimant used to visit its office frequently to instruct its agent Mr.Priotosh Ghosh about her trading. 60] Insofar as the issue of margin money is concerned, it is held by the arbitral tribunal that there was credit balance for the all the period, except on three dates. The respondent had admittedly not issued any call money notice to the claimant to make good the short fall on those three dates and on the other hand, had done brisk trading on those dates in her account, without any margin, which indicates that the allegations about trading in her account without her consent, can hardly be brushed aside. The arbitral tribunal also rendered a finding after perusal of the copy of the passport, showing that claimant was out of India from 5 th July 2011 till 24th August 2011 and there had been no communication between the parties and the respondent was not able to make out a case that the claimant had carried out online trading from abroad. The respondent had carried out 332 tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said judgement does not lay down any law that even if there are any allegations of fraud, the arbitral tribunal cannot decide any such allegations of fraud. Be that as it may, the respondent not having raised any such issue before the arbitral tribunal and in this petition, the respondent cannot be allowed to urge this plea across the bar. The said judgement thus, is of no assistance to the respondent. 66] In my view, there is thus no merit in any of the submissions made by the learned Counsel for the respondent insofar as Arbitration Petition No.854 of 2012 filed by the respondent is concerned. 67] The learned Counsel for the claimant invited my attention to the various findings rendered by the arbitral tribunal in favour of the claimant and also to the finding rendered in para 26 of the impugned award and would submit that the findings rendered by the arbitral tribunal in paras 12 to 25, though are rendered in favour of the claimant, the tribunal has rendered a findings which is inconsistent and contrary to the findings in para 26 of the impugned award. It is submitted that based on such perverse finding, the arbitral tribunal has rejected substantial part of the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 34(2) and has to be filed within the period of limitation as stated as reply under Section 34(3). The court may if it deems appropriate can pass orders as required under Section 34(4). In other words, the provisions of Section 34(4) have to be read with Section 34(1) and 34(2) to enlarge the jurisdiction of the court in order to do justice between the parties and to ensure that the proceedings before the arbitral tribunal or before the award are not prolonged for unnecessarily. In our humble view, the Division Bench appears to have placed entire reliance on para 52 by reading the same out of the context and findings which have been recorded by the Supreme Court in subsequent paragraphs. It is also true that there are no pari materia provisions like Sections 15 and 16 of the Act of 1940 in the 1996 Act but still the provisions of Section 34 read together, sufficiently indicate vesting of vast powers in the court to set aside an award and even to adjourn a matter and such acts and deeds by the arbitral tribunal at the instance of the party which would help in removing the grounds of attack for setting aside the arbitral award. We see no reason as to why these powers vested i ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
