Madras High Court
Kudaravalli Satyanarayana vs M/S.Steel City Securities Limited on 20 July, 2018
Author: Abdul Quddhose
Bench: Abdul Quddhose
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 20.07.2018 CORAM: THE HONOURABLE MR. JUSTICE ABDUL QUDDHOSE O.P.No.447 of 2013 Kudaravalli Satyanarayana ... Petitioner Vs 1.M/s.Steel City Securities Limited, Represented by Managing Director, D.No.49-52-5/4, Shanthipuram, Vishakapatnam - 530 016. 2.Sri.C.Rangamani (Sole Arbitrator), C/o.The National Stock Exchange of India Limited, 2nd floor, Esphani Centre, Door No.123-124, Nungambakkam High Road, Nungambakkam, Chennai - 600 034. .. Respondents Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996, praying to set aside the award dated 24.03.2009 passed by the 2nd respondent. For Petitioners : Mr.V.M.Venkatramana for Respondents : Mr.S.Nagarajan for R1 Arbitrator for R2 O R D E R
The instant petition has been filed by the petitioner under Section 34 of the Arbitration and Conciliation Act, 1996, challenging the Arbitral Award dated 24.03.2009, passed against the petitioner.
2. The brief facts leading to the filing of the instant Petition are as follows:
(i) The petitioner became a constituent of the first respondent trading member under an agreement dated 03.01.2007. Under the agreement with the first respondent, the petitioner was trading in both cash and F & O segments of the National Stock Exchange through the first respondent's Vijayavada-2 Branch Office.
(ii) According to the petitioner, due to the non execution of the orders for sale of shares by the first respondent on 21.01.2008 itself, the petitioner has suffered loss of Rs.8,57,633/-. The petitioner has therefore made a claim against the first respondent for the recovery of an amount of Rs.8,57,633/-.
(iii) In view of the dispute between the parties, the said dispute was referred to arbitration. In accordance with the Arbitration clause contained in the agreement, National Stock Exchange appointed the second respondent as the sole Arbitrator to decide the disputes between the parties.
(iv) The sole Arbitrator acted upon the reference and after issuing notice to the parties to dispute and after considering the materials available on record and after hearing the submissions of the respective parties, passed an award dated 24.03.2009, rejecting the claim of the petitioner seeking recovery of a sum of Rs.8,57,633/- from the first respondent.
(v) Aggrieved by the Arbitral Award dated 24.03.2009, the instant petition has been filed by the petitioner.
3. Heard Mr.V.M.Venkatramana, learned counsel appearing for the petitioner and Mr.S.Nagarajan, learned counsel appearing for the first respondent.
4. According to the learned counsel for the petitioner, the first respondent did not execute the orders placed by the petitioner for the sale of shares mentioned in paragraph No.1 of the Arbitral Award on 21.01.2008 itself. According to the petitioner, if all the shares for which orders are placed were sold by the first respondent on 21.01.2008 itself, when the markets were at peak, the profits would have been much higher, but instead of executing the orders on 21.01.2008 itself, the first respondent sold the shares only on 22.01.2008, when the share market was not doing well. In that process, according to the learned counsel for the petitioner, due to the negligence of the first respondent, the petitioner has suffered a huge loss, since the shares were sold at a much lesser price. Therefore, according to the learned counsel for the petitioner, the first respondent is liable to compensate the loss suffered by the petitioner for not executing the orders for the sale of shares on 21.01.2008 itself.
5. The learned counsel for the petitioner further submits that the first respondent could have waited for the end of the month to square off the outstanding amount payable by the petitioner to the first respondent. According to the learned counsel for the petitioner, the account was being operated by the petitioner only from the beginning of January 2008. The loss suffered by the petitioner is on account of the non execution of the orders placed by the petitioner on 21.01.2008. Therefore, according to the learned counsel for the petitioner, the first respondent could have very well waited for the end of the month to square off the dues payable by the petitioner to the first respondent.
6. The learned counsel for the petitioner also admits that a sum of Rs.15,25,736/- was due to the first respondent by the petitioner, on account of the trading as on 21.01.2008, when the petitioner had placed orders with the first respondent for sale of the subject shares.
7. The learned counsel for the petitioner then drew the attention of this Court to the findings of the Arbitrator on the alleged claim. He drew the attention of this Court to paragraph No.6 of the Arbitral award which reads as follows:
"From the averments of the Applicant in his application and subsequent submission, it is evident that his intention was to speculate on 21.01.2008 and 22.01.2008 when the market was very volatile. The respondent admit that by mistake they had executed one purchase order for the Applicant on 21.01.2008 by oversight and in view of the heavy pay-in due of the Applicant, they had not allowed him to acquire positions once again. The stand taken by the Applicant that he was not informed of any demand for pay-in dues or call for margin by the respondent is unbelievable. The Applicant might say that the shares were sold by him and orders for purchase were placed on his own. But he cannot expect the Respondent to ignore the constraints faced by them during those days in which the market was very volatile. It can, therefore, be concluded that the Respondent were in order in not executing the Applicant's purchase orders and that the claim of the Applicant, based on merely his wishes that could not be executed, is devoid of merits."
8. The learned counsel for the petitioner submits that the first respondent have themselves admitted that by mistake they had executed one purchase order for the petitioner on 21.01.2008. Therefore, according to him, having executed one purchase order to the 1st respondent, they ought to have executed the remaining purchase order also on 21.01.2008 itself, but instead they have executed the purchase orders only on 22.01.2008.
9. Per contra, the learned counsel for the first respondent would submit that as on 22.01.2008, an outstanding amount of Rs.15,25,736/- was due and payable by the petitioner to the first respondent under the share trading account.
10. According to the learned counsel for the first respondent, during the month of January 2008, the markets were volatile and since the petitioner opened the account only on 28.12.2007, apprehending that there may be further losses, they did not execute the orders placed by the petitioner immediately on the same day itself. Therefore, according to the learned counsel for the first respondent, the Arbitrator has rightly rejected the claim of the petitioner.
11. As seen from the records, it is clear that the petitioner opened the account with the first respondent only on 28.12.2007. It is also not in dispute that as on 21.01.2008, a sum of Rs.15,25,736/- was due and payable by the petitioner to the first respondent under the share trading account. The non execution of orders placed by the petitioner on the first respondent is for the date on 21.01.2008.
12. As seen from the Arbitral Award, no document has been filed by the petitioner making a demand on the first respondent for the alleged losses suffered by the petitioner on account of the non execution of orders placed by the petitioner on 21.01.2008. The claim statement is also not filed as a document along with the instant petition. Instead of making claim with the first respondent, the petitioner had directly approached the grievance cell of the National Stock Exchange without giving an opportunity to the first respondent to give proper response to the alleged claim made by the petitioner. The Arbitrator has also given valid reasons for rejecting the claim of the petitioner. The Arbitrator has held that the first respondent cannot be expected to ignore the constraints faced by them during those days when the market was very volatile. The Arbitrator has given a categorical finding that there was no negligence on the part of the first respondent in not executing the petitioner's purchase orders and held the claim of the petitioner to be devoid of merits.
13. This Court, having considered the materials available on record as well as the Arbitral Award, comes to the conclusion that the findings of the Arbitrator are not perverse and there is no illegality in the Arbitral Award and there is no merit in the instant petition filed by the petitioner.
14. The scope of Section 34 of Arbitration and Conciliation Act, is very limited. Unless and until the findings of the Arbitral Tribunal are perverse, arbitrary, illogical or irrational, this court cannot interfere under Section 34 of the Act. This Court finds no perversity or patent illegality in the impugned Arbitral Award.
15. The Hon'ble Supreme Court in a Catena of decisions starting from Renusagar Power Company Ltd vs. General Electric Company 1994 Supp (1) SCC 644 to the recent Associated Builders Vs DDA (2015) 3 SCC 49 has held only under the following grounds the Arbitrator Award can be challenged under Section 34 of the Arbitration and Conciliation Act:
(a) Procedure contemplated under Arbitration and Conciliation Act was not followed by the Arbitrator.
(b)The Arbitral Award is a non speaking Award.
(c)The Arbitrator has transgressed his jurisdiction.
(d)The Arbitral Award is in conflict with the public policy of India.
(iii)An award would be regarded as conflicting with the public policy of India if:-
(a) it is contrary to the fundamental policy of Indian law, or
(b) it is contrary to the interests of India,
(c) it is contrary to justice or morality,
(d) it is patently illegal, or
(e) it is so perverse, irrational, unfair or unreasonable that it shocks the conscience of the court.
(iv)An award would be liable to be regarded as contrary to the fundamental policy of Indian law, for example, if
(a) it disregards orders passed by superior courts, or the binding effect thereof, or
(b) it is patently violative of statutory provisions, or
(c) it is not in public interest, or
(d) the arbitrator has not adopted a judicial approach, i.e. has not acted in a fair, reasonable and objective approach, or has acted arbitrarily, capriciously or whimsically, or
(e) the arbitrator has failed to draw an inference which, on the face of the facts, ought to have been drawn, or
(f) the arbitrator has drawn an inference, from the facts, which, on the face of it, is unreasonable, or
(g) the principles of natural justice have been violated.
(v)Insofar the patent illegality has to go to the root of the matter. Trivial illegalities are inconsequential.
(vi) Additionally, an award could be set aside if
(a) either party was under some incapacity, or
(b) the arbitration agreement is invalid under the law, Or
(c) the applicant was not given proper notice of appointment of the arbitrator, or of the arbitral proceedings, or was otherwise unable to present his case, or
(d) the award deals with a dispute not submitted to arbitration, or decides issues outside the scope of the dispute submitted to arbitration, or
(e) the composition of the Arbitral Tribunal was not in accordance with the agreement of the parties, or in accordance with Part I of the Act, or
(f) the arbitral procedure was not in accordance with the agreement of the parties, or in accordance with Part I of the Act, or
(g) the award contravenes the Act, or
(h) the award is contrary to the contract between the parties.
(vii) Perversity, as a ground for setting aside an arbitral award,has to be examined on the touchstone of the Wednesburyprinciple of reasonableness. It would include a case in which
(a) the findings, in the award, are based on no evidence, or
(b) the Arbitral Tribunal takes into account something irrelevant to the decision arrived at, or
(c) the Arbitral Tribunal ignores vital evidence in arriving at its decision.
(viii) At the same time,
(a) a decision which is founded on some evidence, which could be relied upon, howsoever compendious, cannot be treated as perverse,
(b) if the view adopted by the arbitrator is a plausible view, it has to pass muster,
(c) neither quantity, nor quality, of evidence is open to re-assessment in judicial review over the award.
(ix)Morality would imply enforceability, of the agreement, given the prevailing mores of the day. Immorality, however, can constitute a ground for interfering with an arbitral award only if it shocks the judicial conscience.
16. The petitioner has not satisfied any of the grounds mentioned above to interefere with the Arbitral Award dated 24.03.2009. Therefore, this Court is of the considered view that there is no merit in the petition filed by the petitioner. Hence, this petition shall stand dismissed. No costs.
20.07.2018 ub ABDUL QUDDHOSE, J.
ub O.P.No.447 of 2013 20.07.2018