Interface Brokerage And Research Ltd. vs Dilipbhai L. Shah on 30 July, 2018

[Cites 30, Cited by 0]

Gujarat High Court

Interface Brokerage And Research Ltd. vs Dilipbhai L. Shah on 30 July, 2018

Bench: J.B.Pardiwala

          C/FA/834/2018                                        JUDGMENT




            IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                          R/FIRST APPEAL NO. 834 of 2018


FOR APPROVAL AND SIGNATURE:


HONOURABLE MR.JUSTICE J.B.PARDIWALA

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1     Whether Reporters of Local Papers may be allowed to                 NO
      see the judgment ?

2     To be referred to the Reporter or not ?                         YES

3     Whether their Lordships wish to see the fair copy of the            NO
      judgment ?

4     Whether this case involves a substantial question of law            NO
      as to the interpretation of the Constitution of India or any
      order made thereunder ?


      Circulate this judgement in the subordinate judiciary.
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              INTERFACE BROKERAGE AND RESEARCH LTD.
                                Versus
                          DILIPBHAI L. SHAH
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Appearance:
MR GM JOSHI(370) for the PETITIONER(s) No. 1
MR.ANKIT M TALSANIA(7300) for the RESPONDENT(s) No. 1
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    CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA

                                 Date : 30/07/2018

                                ORAL JUDGMENT

1. This first appeal under section 37 of the Arbitration and Conciliation Act, 1996 is at the instance of the original applicant and is directed against the judgment and order dated Page 1 of 30 C/FA/834/2018 JUDGMENT 22nd January, 2018 passed by the Judge of the City Civil Court, Court No.26, Ahmedabad in the Civil Misc. Application No.909 of 2010 filed by the appellant herein under section 34 of the Act, 1996 for setting aside the arbitral award passed by the Sole Arbitrator in the Arbitration Matter No.CM/M-40/2010 dated 27th July, 2010.

2. It appears from the materials on record that the applicant herein is in the business of trading of shares/securities. The respondent wanted to purchase 50 shares of the Maruti Udhyog Ltd. through the appellant herein. It is not in dispute that an amount of Rs.83,407.50/-, being the market price of the 50 shares at the relevant point of time, was paid by the respondent herein to the appellant and a contract note to that effect was also issued by the appellant in favour of the respondent herein. It is also not in dispute that the appellant failed to deliver the 50 shares to the respondent. The explanation offered by the appellant for non-delivery of the shares is that the CDSL freezed the depository account of the appellant with effect from 3rd October, 2009.

3. The respondent herein filed a claim before the NSE (National Stock Exchange), which culminated in the Arbitration No.CM/M-0040/2010.. Shri S. Srinivasan, was appointed as the Sole Arbitrator. The award passed by the Sole Arbitrator reads as under;

"1. Claim 1.1 The Applicant, Mr. Dilipbhai L. Shah (Constituent), has filed a claim for delivery of 50 shares of Maruti Udyog Ltd., valued as per price as on 24.02.2010, at Rs.67,850/- (Rupees Sixty Seven Thousand Eight Hundred Fifty Only, from Interface Brokerage and Research Ltd., the Page 2 of 30 C/FA/834/2018 JUDGMENT Respondent, vide his Arbitration Application dated 24.02.2010 to N.S.E.

2. STATEMENT OF THE CASE:

The Applicant, who was a Constituent of the Respondent had purchased from the market through the Respondent 50 equity shares of Maruti Udyog Ltd. On 01.10.2009.

The market value of shares (Rs.83,407.50 @ Rs.1668.10 per share) was paid by him to the Respondent as per the concerned contract note. However, the Respondent has not delivered the shares in spite of his request and the Respondent's assurance of delivery. He has furnished a copy of the relevant contract note and the ledger evidencing purchase of the said shares and payment thereof respectively. It is understand by him that due to some reasons, the Central Depository Service (India) Ltd. (CDSL) has frozen the depository a/c. Of the Respondent from 03.10.2009 and the Respondent had therefore, pleaded inability to deliver the shares until CDSL released the same. Since the dispute between the Respondent and CDSL had to be resolved amongst them, the interest of the Applicant can not be sacrified. He cannot be made to wait in the regard. He has, therefore, approached NSE for arbitration.

3. HEARINGS:-

(I) The process was initiated by NSE bhy issue of letter dtd. 30.03.2010. 3 hearing were held viz. On 03.05.2010 (shifted from the earlier scheduled date of 16.04.2010 on the request of the Respondent) 04.06.2010 and 02.07.2010.

(ii) The applicant was present in all the hearings accompanied by his wife M/s. Shah in the first hearing. In the first hearing held on 03.05.2010, the Respondent was sought to be represented by Advocate Mr. B.A. Parmar. But since consent for engaging an advocate was required from the Constituent as per the regulation of NSE and the Applicant-Constituent objected to his engagement, the Advocate was asked not to participate in the deliberations. His daughter M/s. Divya Parmar was also present and authorized by the Respondent.

(iii) The respondent gave a reply dated 24.04.2010.

(iv)      While denying the allegations and claim of the

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      C/FA/834/2018                          JUDGMENT

Applicant, the Respondent has mentioned that :-

"1. Claim 1.1 The Applicant, Mr. Dilipbhai L. Shah (Constituent), has filed a claim for delivery of 50 shares of Maruti Udyog Ltd., valued as per price as on 24.02.2010, at Rs.67,850/- (Rupees Sixty Seven Thousand Eight Hundred Fifty Only, from Interface Brokerage and Research Ltd., the Respondent, vide his Arbitration Application dated 24.02.2010 to N.S.E.

2. STATEMENT OF THE CASE:

The Applicant, who was a Constituent of the Respondent had purchased from the market through the Respondent 50 equity shares of Maruti Udyog Ltd. On 01.10.2009.

3. HEARINGS:-

(I) The process was initiated by NSE bhy issue of letter dtd. 30.03.2010. 3 hearing were held viz. On 03.05.2010 (shifted from the earlier scheduled date of 16.04.2010 on the request of the Respondent) 04.06.2010 and 02.07.2010.

(ii) The applicant was present in all the hearings accompanied by his wife M/s. Shah in the first hearing. In the first hearing held on 03.05.2010, the Respondent was sought to be represented by Advocate Mr. B.A. Parmar. But since consent for engaging an advocate was required Page 4 of 30 C/FA/834/2018 JUDGMENT from the Constituent as per the regulation of NSE and the Applicant-Constituent objected to his engagement, the Advocate was asked not to participate in the deliberations. His daughter M/s. Divya Parmar was also present and authorized by the Respondent.

(v) The respondent gave a reply dated 24.04.2010.

(vi) While denying the allegations and claim of the Applicant, the Respondent has mentioned that :-

(a) Excess deliveries of various scrips were given to the Applicant by the Respondent.

(b) CDSL has terminated the Respondent's DP operations from 03.10.2009. CDSL has not sent the final data of the Respondent DP a/c in spite of several requests. In its absence, it is not able to update to beneficiary accounts.

(c ) The Applicant has suppressed certain documents in this arbitration proceedings.

(d) The Applicant has authorized Respondent to adjust his positive balance and shares towards dues, if any, from other family accounts of the Applicant.

(e) It is a practice of the Applicant to open 3 or 4 family accounts, make internal transfers/ appropriation and cross transactions ultimately leading to a confusion.

(f) The Applicant's claim is not maintainable in the arbitration.

(g) It should be given permission to inspite and examine the documents of the Applicant after which it would give additional replies.

(B) It has sought award from the Arbitration towards cost of the arbitration and other incidental expenses.

(iv) The Respondent was asked to clarify/provide copies of some documents. These are minuted and conveyed to both the parties vide NSE's letter dtd. 05.05.2010.

(v) Pursuant to the requests of the Respondent, vide its letter dtd. 12.05.2010, to allow it to be represented by an Page 5 of 30 C/FA/834/2018 JUDGMENT Advocate, it was advised, vide NSE's letter dtd. 20.05.2010, to conform to the requirements of the NSE's bye laws/regulations , in terms of which a Trading member (in the event of objection by the Constituent for representation by an Advocate) can be represented only by its authorized officials, a Director etc.. An extract of the concerned regulation (1:3:3) of NSE in this regard was also given by NSE in the said letter.

(vi) The Respondent's request, vide its letters dtd. 19.05.2010, 25.05.2010 and 27.05.2010 for postponing the 2nd hearing scheduled on 04.06.2010 to 28.06.2010 and further to 02.07.2010 on account of its convenience was not acceded to.

(v) The Applicant, vide his letter dtd. 20.05.2010 , had objected to the engagement of an Advocate or anybody not permitted by the bye laws/regulations of NSE by the Respondent.

(vi) The Applicant, vide his letter dtd. 15.05.2010 has given certain clarifications to his claim. He has also enclosed a handwritten admission dtd. 07.12.2009 by the Director of the Respondent indicating its liability to delivery 250 shares of Maruti Udyog Ltd. to the various group accounts of the Applicant.

(vii) By another letter dtd. 15.05.2010, the Applicant has denied the allegations of the Respondent. He has also mentioned that the group authority letter can not be misused by the Respondent.

(viii) In the 2nd hearing held on 04.06.2010, the Respondent was absent. The Applicant was present himself. There was also no reply from the Respondent to the points raised by me in the previous hearing held on 03.05.2010. The Applicant made some submissions. The hearing was adjourned to 02.07.2010 to give one more chance to the Respondent to place his defence with a caution that in the event of its absence, the case would be disposed of ex-parte. The Applicant was asked to produce a copy of his letter allegedly written by him in December, 2009 to the Respondent (demanding delivery of shares) which was allegedly refused acceptance by it.

(ix) Thereafter the Respondent sent a reply dtd.

18.06.2010. The     Applicant also gave a reply on

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      C/FA/834/2018                         JUDGMENT

01.07.2010. The Respondent's reply was a repetition of its earlier stand. The Applicant had given some clarifications and had reiterated his claim.

(x) In the hearing held on 02.07.2010, the Applicant was present himself. The Respondent's authorised officials Mr. Hitesh Patel represented it. The Respondent mentioned that he would check the records of CDSL to ascertain the status of 50 shares of Maruti purchased by the Applicant through it on 01.10.2009 and take further action. Its representative sought a week's time in his regard.

(xi) Time was granted. The Applicant was asked to wait upto 10.07.2010. Both the parties were asked to report back the outcome after 10.07.2010. The hearing was closed.

(xii) Thereafter the Respondent gave two letters both dated 07.07.2010 mentioning that in spite of its several reminders, CDSL did not provide final data without which it can not submit any reply. It has requested the NSE to intervene and inform CDSL to provide the data. In one of the letters it has mentioned that the next hearing was fixed on 16.07.2010. This is a mistake, as no such hearing was scheduled.

(xii) The Applicant, vide his letter dtd. 11.07.2010, has informed that the said shares were not received by him till 01.10.2010.

4. Conclusion and Reasoning:-

(I) The Applicant has given adequate proof of purchase of 50 shares of Maruti Udyog on 01.10.2009 through the Respondent, payment thereof and non-receipt of shares.

The copies of the Contract Note, ledger statement and the handwritten remarks of the Director of the Respondent dtd. 07.12.2009 admitting its liability in this regard are acceptable to prove the Applicant's claim.

(ii) The Respondent's replies were vague and not satisfactory.

(iii) The Respondent's dispute with CDSL can not come in the way of the Applicant getting the shares which are Page 7 of 30 C/FA/834/2018 JUDGMENT legitimately due to him. By now nearly 10 months have elapsed. The Applicant can not be expected to wait further. Continued delay will deny him the opportunity to sell the shares at a price acceptable to him.

(iv) it is not required of NSE to sort out the Respondent's issues with CDSL.

(v) The Respondent is therefore liable to deliver 50 shares of Maruti Udyog to the Applicant together Corporate benefits (viz. Bonus shares and dividends, if any) declared by Maruti Udyog with respect to record date commencing from 06.10.2009 (T+2, 2nd, 3rd & 4th being holidays) and upto the date of delivery of shares by the Respondent. Delay of delivery beyond 20.08.2010 will also attract fine of Rs.1000/- per month or part thereof.

5. AWARD (I) The Respondent is directed to deliver to the Applicant 50 equity shares of Maruti Udyog Ltd. By 20.08.2010 along with Corporate benefits (bonus issue, dividend and other pay cuts, if any) which may be or may have been declared with record date of 6.10.2009 and after upto the date of delivery of the shares.

(ii) In any case, if the delivery of the shares with Corporation benefits, if any, is delayed beyond 20.8.2010, the Respondent is directed to also pay to the Applicant a fine of Rs.1,000/- per month or a part thereof until delivery of the said shares in toto, and

(iii) The cost of arbitration has to be entirely borne by the Respondent.

6. The award is signed and issued in the originals."

4. The appellant, being dissatisfied with the award passed by the Sole Arbitrator, preferred the Civil Misc. Application No.909 of 2010 under section 34 of the Act in the City Civil Court at Ahmedabad and prayed that the award be quashed.

5. The City Civil Court adjudicated the application filed by Page 8 of 30 C/FA/834/2018 JUDGMENT the appellant herein under section 34 of the Act, and by the impugned order, rejected the same. The findings recorded by the City Civil Court, in the impugned order, are extracted hereunder;

"(6) I have heard the Ld. Advocate for the both the parties and gone through the award passed by the Ld. Arbitrator in Arbitration matter No. CM/M-0040/2010 and the documentary evidence adduced before the Ld. Arbitrator as well as the argument advanced before me alongwith the citation of Hon'ble Higher court. In the present case it is undisputed fact that the present opponent who is the original applicant before the Ld. Arbitrator and who had purchased 50 equity shares of Maruti Udhyog Ltd on dated 01.10.2009 from the present applicant and paid to the applicant as per the concerned contract note It is also undisputed fact that applicant has not de1ivered the share in spite of request made by the opponent so, the present opponent has f1led a claim for delivery of 50 shares before the NSE and NSE has appointed Arbitrator and the Arbitrator S.Srinivasan and after hearing both the parties, the Ld. Arbitrator has passed an award on dated 27.07.2010 in respect of passing the award and directed to deliver the respondent 50 equity shares to the applicant alongwith the penalty of Rs.1,000/- per month, if any delay for the delivery of shares with the corporate benefits.

Against that order, the present applicant has challenged the award of the Ld. Arbitrator under Section 34 of Arbitration and Conciliation Act, 1996 before this court. The main contention raised by the present applicant that the award of the Ld. Arbitrator is against the settled principle of law and Ld. Arbitrator has failed to adhere to the principle of natural justice and has not afforded sufficient opportunities to the applicant to make its submission. Ld. Arbitrator has not considered the contents of the rejoinder affidavit and wrongly relied upon the statement of accounts produced by the opponent so, the present application has been preferred by the applicant to set-aside the award passed by the Sole Arbitrator Shri S. Srinivasan on dated 27 07.2010 in Arbitration Matter No. CM/M 0040/2010. Now, if I peruse Page 9 of 30 C/FA/834/2018 JUDGMENT the award passed by the Ld Arbitrator in Arbitration Matter No. CM/M- 0040/2010 alongwith the R & P of the Arbitration proceedings, it clearly transpires that the process was initiated by the NSE on dated 30 03 2010 and the hearing were held 4 times on 03.05.2010, 16.04.2010, 04.06.2010 and 02.07 2010. The Ld. Advocate for the applicant vehemently stated that Arbitrator has not awarded sufficient opportunities to the applicant and on the very first date of the hearing i.e 02.07.2010, Ld. Arbitrator has ordered to close the right of hearing of the applicant, but looking to the record of the arbitration and award, it clearly transpires that the Ld. Arbitrator has specifically mentioned the reply filed by the present applicant on dated 24.04.2010 and narrated the whole version of the reply at page 2 of the award and if I further peruse the page 3 of the award in Para 3(b)(vi), the Ld. Arbitrator has observed that present applicant has requested vide its letter dated 19.05.2010, 25.05.2010 and 27.05.2010 for postponement of hearing scheduled on 04.06.2010 to 28.06.2010 and further to 02.07.2010 on account of inconvenience so, looking to this observation of the Ld. Arbitrator, it clearly transpires that as per the request of the present opponent, hearing was postponed time by time as per the convenience of the present applicant so, the contention raised before me that enough opportunities were not granted to the present applicant has no force. Now, if I further peruse the Para 3(b)(viii), it clearly transpires that the date of 2nd hearing was held on dated 04.06.2010 and on that date, the present applicant was absent and further, it transpires from the award that on page 4(X), the Hon'ble Arbitrator has observed that the hearing held on 02.07.2010 and the authorized person of present applicant Mr Hitesh Patel represented there and he mentioned that he would check the record of CDSL to ascertain the status of 50 shares of Maruti purchased by opponent through it on dated 01.10.2009, and he sought a weeks time in that regard so, looking to the above observation made by the Ld Arbitrator in his award, it transpires that sufficient opportunities have awarded to the present applicant to produce his case and further, it transpires that Ld. Arbitrator has also gone through the contract note, ledger statement and the reply filed by the present applicant before the Ld. Arbitrator and after going through the documentary evidence adduced by the both the parties, came to the just conclusion so, under Page 10 of 30 C/FA/834/2018 JUDGMENT Section 34 of the Arbitration and Conciliation Act, this court has not inclined to make interference with the award.

In the present case, there is no dispute regarding the contractual terms between the both the parties and the award passed by the Ld. Arbitrator is not erroneous and illegal one and it is reasoned order so, it is not liable to set aside. As per the above observation made by the Hon'ble Apex Court in the above judgment.

I have perused the record and discussed above, there is noting found on record that Ld. Arbitrator has passed the award during the scope of reference, not only that, there is no breach of provision of any law. So, award can be passed by the Ld. Arbitrator is within the provision of law and considering all the factual aspects, giving reasonable opportunity of being heard and in the legal preposition of law. So, it is not needed any interference in the award passed by the Ld. Arbitrator. I have gone through the award and reasons assigned by the Ld. Arbitrator, the Ld. Arbitrator has discussed the facts, evidence and law at length and documentary evidence on record and has given sufficient, genuine and bona fide reasons for the purpose of coming to the conclusion. No other award is made against the claims. Thus, in my view, the applicant could not be able to point out as to how and in what manner, the award passed by the Ld. Arbitrator is illegal, perverse and against the sound principles of law. "

6. Being dissatisfied with the judgment and order passed by the court below, the appellant is here before this Court with this appeal under section 37 of the Act.

7. Mr. Gautam Joshi, the learned counsel appearing for the appellant submitted that adequate opportunity of hearing was not given by the Arbitrator to his client. According to Mr. Joshi, although time was prayed for, yet, the same was declined and the Arbitrator proceeded with the adjudication of the claim and Page 11 of 30 C/FA/834/2018 JUDGMENT passed an award against the appellant. The second submission of Mr. Joshi is that the shares could not be transferred in the account of the respondent as the NSDL ordered to freeze the depository account of the appellant. According to Mr. Joshi, it was something beyond the control of his client to do anything as regards the transfer of the shares in favour of the respondent. It is submitted that the case falls within section 34(2)(a)(i) of the Act. These are the only two submissions canvassed. No other submissions have been canvassed.

8. On the other hand, this appeal has been vehemently opposed by the learned counsel appearing for the respondent. The learned counsel appearing for the respondent would submit that no error, not to speak of any error of law, could be said to have been committed by the court below in passing the impugned order. It is submitted that there is no merit in the submission canvassed on behalf of the appellant that no opportunity of hearing was given by the Arbitrator. It is also submitted that much before the NSDL freezed the depository account of the appellant, the contract was entered upon and concluded. The learned counsel appearing for the respondent argued that the scope of appeal under section 37 of the Act is very restricted. To put it in other words, the argument of the learned counsel appearing for the respondent is that, whatever was submitted before the Court below, was something beyond the scope of section 34 of the Act. If that be so, then the scope of appeal under section 37 is even more restricted. In such circumstances, the learned counsel appearing for the respondent prays that there being no merit in this first appeal, the same be dismissed.

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C/FA/834/2018 JUDGMENT

9. Having heard the learned counsel appearing for the parties and having considered the materials on record, the only question that falls for my consideration is whether the court below committed any error in passing the impugned order.

10. Section 34 of the Arbitration and Conciliation Act reads as follows-

"Application for setting aside arbitral award.-(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3). (2) An arbitral award may be set aside by the Court only if-

(a) the party making the application furnishes proof that-

(i) a party was under some incapacity; or

(ii) The arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or

(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:

Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or

(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of Page 13 of 30 C/FA/834/2018 JUDGMENT the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or

(b) the Court finds that-

(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or

(ii) the arbitral award is in conflict with the public policy of India.

Explanation.-Without prejudice to the generality of sub- clause (ii), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81.

(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under Section 33, from the date on which that request had been disposed of by the arbitral tribunal:

Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.

(4) On receipt of an application under sub-section (1), the Court may, where it 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 arbitral award."

This Section in conjunction with Section 5 makes it clear that an arbitration award that is governed by part I of the Arbitration and Conciliation Act, 1996 can be set aside only on grounds mentioned under Section 34 (2) and (3), and not otherwise. Section 5 reads as follows:

"5. Extent of judicial intervention.-Notwithstanding anything contained in any other law for the time being in Page 14 of 30 C/FA/834/2018 JUDGMENT force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part."

11. It is important to note that the 1996 Act was enacted to replace the 1940 Arbitration Act in order to provide for an arbitral procedure which is fair, efficient and capable of meeting the needs of arbitration; also to provide that the tribunal gives reasons for an arbitral award; to ensure that the tribunal remains within the limits of its jurisdiction; and to minimize the supervisory roles of courts in the arbitral process.

12. The intendment of the new Act is to minimise the scope for intervention of Courts in arbitration matters. The Arbitral Tribunal has been given a free hand to deal with the disputes between the parties and to arrive at its resolution. A finality has been attached to an arbitral award under Section 35 of the Act and the law has turned a full circle as an award by itself has become enforceable as a decree of a Court. The award is not open to challenge on the ground that the arbitrator has reached a wrong conclusion or has failed to appreciate the facts. On the other hand, under Section 34 or under Section 9 of the Act, when a Court is called upon to decide the objection raised by a party against an arbitral award or to make interim measures of protection, the jurisdiction of the Court is limited as expressly indicated in the said provisions. It has no jurisdiction to sit in appeal and examine the correctness of the award on merits with reference to materials produced before the Arbitral Tribunal or to issue an order of injunction, which may result in obstructing the proceedings before the Arbitral Tribunal. The Court cannot sit in appeal over the views of the Page 15 of 30 C/FA/834/2018 JUDGMENT Arbitrator by re-examining and reassessing the materials, in exercise of its power under Section 34 of the Act and similarly under the garb of interim measures of protection it cannot put impediments in the progress of the arbitral proceeding.

13. Arbitration is intended to be a faster and less expensive alternative to the courts. If this is one‟s motivation and expectation, then the finality of the arbitral award is very important. The remedy provided in Section 34 against an arbitral award is in no sense an appeal. The legislative intent in Section 34 was to make the result of the annulment procedure prescribed therein potentially different from that in an appeal. In appeal, the decision under review not only may be confirmed, but may also be modified. In annulment, on the other hand, the decision under review may either be invalidated in whole or in part or be left to stand if the plea for annulment is rejected. Annulment operates to negate a decision, in whole or in part, thereby depriving the portion negated of legal force and returning the parties, as to that portion, to their original litigating positions. Annulment can void, while appeal can modify. Section 34 is found to provide for annulment only on the grounds affecting legitimacy of the process of decision as distinct from substantive correctness of the contents of the FAO(OS) No.285/2014 Page 6 of 22 decision. A remedy of appeal focuses upon both legitimacy of the process of decision and the substantive correctness of the decision. Annulment, in the case of arbitration focuses not on the correctness of decision but rather more narrowly considers whether, regardless of errors in application of law or determination of facts, the decision resulted from a legitimate Page 16 of 30 C/FA/834/2018 JUDGMENT process.

14. In the case of arbitration, the parties through their agreement create an entirely different situation because regardless of how complex or simple a dispute resolution mechanism they create, they almost always agree that the resultant award will be final and binding upon them. In other words, regardless of whether there are errors of application of law or ascertainment of fact, the parties agree that the award will be regarded as substantively correct. Yet, although the content of the award is thus final, parties may still challenge the legitimacy of the decision-making process leading to the award. In essence, parties are always free to argue that they are not bound by a given "award" because what was labeled an award is the result of an illegitimate process of decision.

15. Arbitration under the 1940 Act could not achieve the savings in time and money for which it was enacted and had merely become a first step in lengthy litigation. Reference in this regard can be made to para 35 of Bharat Aluminium Company Vs. Kaiser Aluminium Technical Services Inc. (2012) 9 SCC 552. It was to get over the said malady that the law was sought to be overhauled. While under the old Act, the award was unenforceable till made rule of the court and for which it had to pass various tests as laid down therein and general power/authority was vested in the court to modify the award, all this was removed in the new Act. The new Act not only made the award executable as a decree after the time for preferring objection with respect thereto had expired and without requiring it to be necessarily made rule of the court Page 17 of 30 C/FA/834/2018 JUDGMENT but also did away with condonation of delay in filing the said objections. The reason/purpose being expediency. The grounds on which the objections could be filed are also such which if made out, the only consequence thereof could be setting aside of the award. It is for this reason that under new Act there is no power to the court to modify the award or to remit the award etc. as under the old Act. A perusal of the various grounds enunciated in Section 34 will show that the same are procedural in nature i.e., concerning legitimacy of the process of decision. While doing so, the ground, of the award being in conflict with Public Policy of India, was also incorporated. However the juxtaposition of Section 34(2)(b)(ii) shows that the reference to „Public Policy‟ is also in relation to fraud or corruption in the making of the award. The new Act was being understood so [see Konkan Railway Corporation Ltd. Vs. Mehul Construction Co. (2000) 7 SCC 201 (para 4 and which has not been set aside in S.B.P. & Co. Vs. Patel Engineering Ltd. (2005) 8 SCC 618)] till the Supreme Court in Saw Pipes Ltd. (supra) held that the phrase "Public Policy of India‟ is required to be given wider meaning and if the award on the face of it is patently in violation of statutory provisions, it cannot be said to be in public interest and such award/judgment/decision is likely to adversely affect the administration of justice. In para 37 of the judgment it was held that award could be set aside if it is contrary to fundamental policy of Indian Law or the interest of India or justice or morality or if it is patently illegal. A rider was however put that illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that the award is against the public policy. Yet another test laid down is of the award being so unfair and unreasonable that it shakes the conscience of the court.

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16. The courts have thereafter been inundated with challenges to the award. The objections to the award are drafted like appeals to the courts; grounds are urged to show each and every finding of the arbitrator to be either contrary to the record or to the law and thus pleaded to be against the Public Policy of India. As aforesaid, the courts are vested with a difficult task of simultaneously dealing with such objections under two diverse provisions and which has led to the courts in some instances dealing with awards under the new Act on the parameters under the old Act.

17. The result is that the goal of re-enactment has been missed.

18. The re-enactment was not only to achieve savings in time and prevent arbitration from merely becoming the first step in lengthy litigation but also in consonance with the international treaties and commitments of this country thereto. Since the enactment of the 1940 Act, the international barriers had disappeared and the volume of international trade had grown phenomenally. The new Act was modeled on the model law of international commercial arbitration of the United Nations Commission on International Trade Law (UNICTRAL). It was enacted to make it more responsive to contemporary requirements. The process of economic liberalization had brought huge foreign investment in India. Such foreign investment was hesitant, owing to there being no effective mode of settlement of domestic and international disputes. It was with such lofty ideals and with a view to attract foreign investment that the re-enactment was done. If the courts are Page 19 of 30 C/FA/834/2018 JUDGMENT to, notwithstanding such re-enactment, deal with the arbitration matters as under the old Act it would be a breach of the commitment made under the treaties on international trade. (see Delhi Development Authority vs. M/s. Bhardwaj Brothers, AIR 2014 DELHI 147)

19. The Supreme Court as far back as in Union of India Vs. A.L. Rallia Ram, AIR 1963 SC 1685 held that:-

"An award being a decision of an arbitrator whether a lawyer or a layman chosen by the parties, and entrusted with power to decide a dispute submitted to him is ordinarily not liable to be challenged on the ground that it is erroneous. In order to make arbitration effective and the awards enforceable, machinery is devised for lending the assistance of the ordinary Courts. The Courts are also entrusted with power to modify or correct the award on the ground of imperfect form or clerical errors, or decision on questions not referred, which are severable from those referred........The Court may also set aside an award on the ground of corruption or misconduct of the arbitrator, or that a party has been guilty of fraudulent concealment or willful deception. But the Court cannot interfere with the award if otherwise proper on the ground that the decision appears to it to be erroneous. The award of the arbitrator is ordinarily final and conclusive, unless a contrary intention is disclosed by the agreement. The award is the decision of a domestic tribunal chosen by the parties, and the civil courts which are entrusted with the power to facilitate arbitration and to effectuate the awards, cannot exercise appellate powers over the decision. Wrong or right the decision is binding, if it be reached fairly after giving adequate opportunity to the parties to place their grievances in the manner provided in the arbitration agreement."

20. Of course the said judgment being under the Arbitration Act, 1940 proceeds to hold that an award is bad on the ground of error of law on the face of it. However the legislature while re-enacting the arbitration law has removed the ground of Page 20 of 30 C/FA/834/2018 JUDGMENT challenge of error of law on the face of the award. In Mc. Dermott International Inc. (2006 AIR SCW 3276) also it was held that the parties to the Arbitration Agreement make a conscious decision to exclude the Courts jurisdiction as they prefer the expediency and finality offered by arbitration. We are bound to respect the said change brought about by the legislature and cannot dogmatically review the awards on the grounds of challenge which have been intentionally taken away by the legislature.

21. Arbitration will not survive, much less flourish, if this core precept is not followed through by the Courts. The integrity and efficacy of arbitration as a parallel dispute resolution system will be subverted if the Courts appear unable or unwilling to restrain themselves from entering into the merits of every arbitral decision that comes before it. The power to intervene must and should only be exercised charily, within the framework of the Arbitration Act. Minimal curial intervention is underpinned by need to recognise the autonomy of the arbitral process by encouraging finality, so that its advantage as an efficient alternative dispute resolution process is not undermined. The parties having opted for arbitration, must be taken to have acknowledged and accepted the attendant risks of having only a very limited right of recourse to the Courts. It would be neither appropriate nor consonant for the Court to lend assistance to a dissatisfied party by exercising appellate function over arbitral awards, save to the extent statutorily permitted. (see M/s. National Highways Authority of India vs. M/s. Oriental Structural Engineers Pvt. Ltd., AIR 2015 DELHI 79.

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22. I am not, at all, impressed with the submission of the learned counsel as regards the opportunity of hearing not being given by the Arbitrator. The findings recorded by the Arbitrator in the award speak for themselves. As regards the opportunity of hearing in the matters arising from the arbitration proceedings, I may refer to and rely upon a decision of the Supreme Court in the case of Sohanlal Gupta (Dead) Through Lrs. & Ors. vs. Asha Devi Gupta (Smt.) & Ors., (2003) 7 SCC 492. The relevant observations are as under;

"20. There cannot be any dispute with regard to the proposition of law that the parties would be entitled to a reasonable opportunity of putting their case. [See Montrose Cannel Foods Ltd. v. Eric Wells (Merchants) Ltd. [(1965) 1 Lloyd's Report 597]. A reasonable opportunity would mean that a party must be given an opportunity to explain his arguments before the Tribunal and to adduce evidence in support of his case. However, under the old Act, an oral hearing would only be permitted if a party requested one, unless there was some agreement to the contrary [See Henry Southeran Ltd. vs. Norwich Union Life Insurance Society (1992) 31 E.G. 70].

21. What would constitute a reasonable opportunity of putting case as also qualification of the right has been stated in 'Russell on Arbitration', 22nd Edition, paragraphs 5-053 and 5-054 which are in the following terms :

"5-053 A reasonable opportunity of putting case. Each party must be given a reasonable opportunity to present his own case. This means he must be given an opportunity to explain his arguments to the tribunal and to adduce evidence in support of his case. Failure to comply with this requirement may render the award subject to challenge under section 68 of the Arbitration Act 1996. It is also a ground for refusing enforcement of the resulting award under the New York Convention.

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C/FA/834/2018 JUDGMENT 5-054 Qualification of the right. The need to allow a party a reasonable opportunity to present his case can give rise to difficulties. To what extent can the tribunal intervene where, for example, a party's submissions or evidence is needlessly long, repetitive, focuses on irrelevant issues or is sought to be made over an extended period of time? What if a party ignores procedural deadlines imposed by the tribunal but maintains he still has points to put before it in support of his case? Inevitably each situation has to be dealt with in its own context but the following general considerations should be taken into account."

22. There cannot, therefore, be any doubt that a party does not have an unfettered right. The arbitrator can not only ask a party to comply with procedural orders and directions including those imposing limits as to time and content of submissions and evidence but also the arbitrator has a right of managing the hearing. In 'Russell on Arbitration', 22nd Edition the law is stated thus :

"5-057 Managing the hearing. Similarly, a tribunal cannot be expected to sit through extended oral hearings listening to long-winded submissions on irrelevant matters. The tribunal is entitled, and under section 33 is obliged and encouraged, to avoid the unnecessary delay and expense that would be caused by such an approach. The tribunal should take a grip on the proceedings and indicate to the parties those areas on which it particularly wishes to be addressed and those which it does not consider relevant to the real issues in dispute. If a party fails to heed such guidance, the tribunal might seek to focus the proceedings by allocating the remaining hearing time between the parties. This the tribunal is entitled to do, provided it will allow a reasonable time for both parties to put forward their argument and evidence."

23. For constituting a reasonable opportunity, the following conditions are required to be observed :

1. Each party must have notice that the hearing is to take place.

2. Each party must have a reasonable opportunity to be present at the hearing, together with his advisers and Page 23 of 30 C/FA/834/2018 JUDGMENT witnesses.

3. Each party must have the opportunity to be present throughout the hearing

4. Each party must have a reasonable opportunity to present evidence and argument in support of his own case.

5. Each party must have a reasonable opportunity to test his opponent's case by cross-examining his witnesses, presenting rebutting evidence and addressing oral argument.

6. The hearing must, unless the contrary is expressly agreed, be the occasion on which the parties present the whole of their evidence and argument.

24. The objectors do not say that Ghanshyamdas Gupta has an interest adverse to or independent of them. Ghanshyamdas Gupta himself has not stated as to whether his interests were not safeguarded by other co- sharers who were present in the meeting.

25. The minutes of the meeting referred to hereinbefore clearly show that not only he had notice of arbitration proceedings but also took active part therein days after days. The circular letter dated 12.5.1976 was issued by the arbitrator so as to give a notice of caution that the arbitration proceedings shall be held and continued at Kolkata.

26. Can it be said having regard to the magnitude of the problem and the number of parties involved, the extent of the properties in dispute and the disputes not only between the two groups but also some members of the same group that the arbitrator was not entitled to take recourse thereto ? If the arbitrator is to manage the arbitration proceedings, in our opinion, he would be entitled to give direction to the parties to be present on the particular date, particular time and particular place which would be sufficient compliance of the requirements of law. Ghanshyamdas Gupta does not say that he did not receive the circular letter dated 12.5.1976. He did not make out a case that the said dates did not suit him. As despite receiving the said circular letter from the arbitrator, he did not choose to make himself available Page 24 of 30 C/FA/834/2018 JUDGMENT on 8.6.1976 at his own, the arbitrator sent him a telegram dated 12.7.1976. The said telegram was sent ex abundanti cautela.

27. The arbitrator, as appears from the minutes of the meeting, proceeded only on the documentary evidences. No party appears to have presented oral evidence. Thus, the question of cross-examination the witnesses appearing on behalf of the other parties did not arise. Submissions must have been made by the parties themselves. Ghanshyamdas Gupta does not say that he had difficulty in appearing on 15.6.1976 or any subsequent date and he had asked for adjournment. Even otherwise, a party has no absolute right to insist on his convenience being consulted in every respect. The matter is within the discretion of the arbitrator and the Court will intervene only in the event of positive abuse. [See Montrose Cannel Foods Ltd. (supra)]. If a party, after being given proper notice, chooses not to appear, then the proceedings may properly continue in his absence. [See British Oil and Cake Mills Ltd. vs. Horace Battin & Co. Ltd. (1922) 13 LI L Rep. 443].

28. In D.L. Miller (supra) the law is stated in the following terms :

"The doctrine of Arbitrators' legal misconduct has been so over-worked in recent years that across the whole branch of case law on this point one finds the blazing trial of principles of natural justice. They are discussed and agitated in an atmosphere of complete unreality and divorced from the facts of each case.

Somehow the obvious point is missed in most of such cases that when the parties agree to go to arbitration they stipulate not so much for vague principles of natural justice as for concrete principles of contractual justice according to the contracts of the parties and their specific stipulations. Where the contract of arbitration itself prescribes a private procedure of its own, then so long as such agreed private procedure is not against the laws and the statutes of the land, then such agreed procedure must prevail over the notions and principles of natural justice."

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29. The principles of natural justice, it is trite, cannot be put in a straight jacket formula. In a given case the party should not only be required to show that he did not have a proper notice resulting in violation of principles of natural justice but also to show that he was seriously prejudiced thereby. In The Chairman, Board of Mining Examination and Chief Inspector of Mines and Another vs. Ramjee [(1977) 2 SCC 256], this Court held :

"...Natural justice is no unruly horse, no lurking land mine, nor a judicial cure-all. If fairness is shown by the decision-maker to the man proceeded against, the form, features and the fundamentals of such essential processual propriety being conditioned by the facts and circumstances of each situation, no breach of natural justice can be complained of. Unnatural expansion of natural justice, without reference to the administrative realities and other factors of a given case, can be exasperating. We can neither be finical nor fanatical but should be flexible yet firm in this jurisdiction. No man shall be hit below the belt - that is the conscience of the matter."

[See also Union of India and Others vs. Anand Kumar Pandey and Others - (1994) 5 SCC 663], and R.S. Dass etc. vs. Union of India and Others [1986 (Supp.) SCC 617].

30. In Anand Kumar Pandey's case (supra), this Court again reiterated that the rules of natural justice cannot be put in a straight jacket and applicability thereof would depend upon the facts and circumstances relating to each particular given situation.

31. In M.C. Mehta vs. Union of India and Others [(1999) 6 SCC 237], this Court held that in a case of natural justice upon admitted or indisputable factual position, only one conclusion is possible, a writ of certiorari may be issued.

32. In State of U.P.vs. Harendra Arora and Another [(2001) 6 SCC 392], this Court followed, inter alia, Managing Director, ECIL vs. B. Karunakar [(1993) 4 SCC 727] and State Bank of Patiala vs. S.K. Sharma [(1996) 3 SCC 364] and held that an order passed in a disciplinary proceeding cannot ipso facto be quashed merely because Page 26 of 30 C/FA/834/2018 JUDGMENT a copy of the enquiry report has not been furnished to the delinquent officer, but he is obliged to show that by non-furnishing of such a report he has been prejudiced, would apply even to cases where there is requirement of furnishing a copy of enquiry report under the statutory rules.

33. In Aligarh Muslim University and Others vs. Mansoor Ali Khan [(2000) 7 SCC 529], it was held :

"The principle that in addition to breach of natural justice, prejudice must also be proved has been developed in several cases. In K.L. Tripathi v. State Bank of India Sabyasachi Mukharji, J. (as he then was) also laid down the principle that not mere violation of natural justice but de facto prejudice (other than non-issue of notice) had to be proved. It was observed, quoting Wade's Administrative Law (5th Edn., pp.472-75), as follows :

"It is not possible to lay down rigid rules as to when the principles of natural justice are to apply, nor as to their scope and extent...There must also have been some real prejudice to the complainant; there is no such thing as a merely technical infringement of natural justice. The requirements of natural justice must depend on the facts and circumstances of the case, the nature of the inquiry, the rules under which the tribunal is acting, the subject- matter to be dealt with, and so forth."

Since then, this Court has consistently applied the principle of prejudice in several cases. The above ruling and various other rulings taking the same view have been exhaustively referred to in State Bank of Patiala vs. S.K. Sharma. In that case, the principle of "prejudice" has been further elaborated. The same principle has been reiterated again in Rajendra Singh vs. State of M.P."

34. In U.P. Awas Evam Vikas Parishad vs. Gyan Devi (Dead) by LRs. and Others (1995) 2 SCC 326], the Constitution Bench observed :

"...In other words the right conferred under Section 50(2) of the L.A. Act carries with it the right to be given adequate notice by the Collector as well as the reference Page 27 of 30 C/FA/834/2018 JUDGMENT court before whom the acquisition proceedings are pending of the date on which the matter of determination of the amount of compensation will be taken up. Service of such a notice, being necessary for effectuating the right conferred on the local authority under Section 50(2) of the L.A. Act, can, therefore, be regarded as an integral part of the said right and the failure to give such a notice would result in denial of the said right unless it can be shown that the local authority had knowledge about the pendency of the acquisition proceedings before the Collector or the reference court and has not suffered any prejudice on account of failure to give such notice."

35. In Graphite India Ltd. and Another vs. Durgapur Project Ltd. and Others [1999) 7 SCC 645], it has been held that the principles of natural justice can be waived.

36. In 'Administrative Law', 8th Edn., by William Wade and Christopher Forsyth at page 491, it has been stated :

"...At the other end of the spectrum of power, public authorities themselves are now given the benefit of natural justice, as illustrated at the end of this section. Basically the principle is confined by no frontiers. On the other hand it must be a flexible principle. The judges, anxious as always to preserve some freedom of manoeuvre, emphasise that 'it is not possible to lay down rigid rules as to when the principles of natural justice are to apply: nor as to their scope and extent. Everything depends on the subject-matter'. Their application, resting as it does upon statutory implication, must always be in conformity with the scheme of the Act and with the subject-matter of the case. 'In the application of the concept of fair play there must be real flexibility'. There must also have been some real prejudice to the complainant: there is no such thing as a merely technical infringement of natural justice."

37. In Khaitan (India) Ltd. & Ors. vs. Union of India & Ors. [Cal LT 1999 (2) HC 478], one of us said :

"The concept of principles of natural justice has undergone a radical change. It is not in every case, that the High Courts would entertain a writ application only on the ground that violation of principles of natural justice has been alleged. The apex court, in State Bank of Patiala & Others vs. S. K. Sharma reported in 1996 (3) Page 28 of 30 C/FA/834/2018 JUDGMENT SCC 364 has clearly held that a person complaining about the violation of the principles of natural justice must show causation of a prejudice against him by reason of such violation. The apex court has held that the principles of natural justice, may be said to have been violated which require an intervention when no hearing, no opportunity or no notice has been given. Reference in this connection may also be made to Managing Director, E.C.I.L. v. B. Karmarkar, reported in AIR 1994 SC 1076. The question as to the effect of non-grant of enough opportunity to the learned counsel for the appellant by the Commission to meet the allegations made in the supplementary affidavit requires investigation. As to what extent the appellant has suffered would be a question which would fall for a decision of a High Court. Where such a disputed question arises, in the considered opinion of this Court, a writ application will not be entertained only because violation of natural justice has been alleged and more so, in a case of this nature where such a contention can also be raised before the Highest Court of India. A distinction has to be borne in mind between a forum of appeal which is presided by an Administrative Body and the apex court as an appellate court."

23. I am also not impressed by the submission as regards freezing of the depository account. In my view, the Arbitrator has rightly come to the conclusion that the dispute of the respondent with the CDSL should not come in the way of the respondent herein in getting his shares. None of the grounds contained in sub-clause (2)(a) of section 34 of the Act deal with the merits of the decision rendered by an Arbitrator award. An arbitrator award can be set aside by the court only on any one of the conditions stipulated in section 34(2) of the Act.

24. From the various decisions, referred to above, it could safely be stated that;

(a) The award can be set aside only if the case is covered Page 29 of 30 C/FA/834/2018 JUDGMENT under section 34(2)(a) of the Act;

(b) The Civil Court has no jurisdiction to sit in appeal over the award and review the reasons assigned by the arbitrator, and the award cannot be set aside merely because by process of inference and arguments it could be demonstrated that the arbitrator has committed some mistake in arriving at his conclusion.

(c ) The award cannot be interfered with even in the case where on an interpretation of any contract or documents, two views are plausible and the arbitrator accepts one view while the other view is more appealing to the Court.

(d) If any illegality or irregularity in the arbitral proceedings is complained, then such irregularity or illegality should fall within the ambit of objections under section 34 of the Act. If they do not fall within the ambit of objections under section 34 of the Act, then those, certainly, cannot be entertained under section 37 of the Act.

25. In the result this first appeal fails and is hereby dismissed. Notice stands discharged.

(J.B.PARDIWALA, J) Vahid Page 30 of 30

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