Delhi District Court
M/S Kaynet Commodities Pvt. Ltd vs Bimlesh Kumar Pandey on 30 September, 2022
IN THE COURT OF SH. SUDHANSHU KAUSHIK :
ADDL. DISTRICT JUDGE-02 & WAQF TRIBUNAL :
PATIALA HOUSE COURTS : NEW DELHI
IN THE MATTERS OF :-
I. ARBTN NO.11401/2016
CNR NO.DLND01-000653-2015
M/S KAYNET COMMODITIES PVT. LTD.
ABHINANDAN BUILDING, 6th FLOOR,
633, PULACHI WADI, DECCAN GYMKHANA,
PUNE-411004
BRANCH OFFICE AT :
55, PANCHKUIAN ROAD,
NEAR RAM KRISHNA METRO STATION,
DELHI
(THROUGH ITS AR SH. MANOJ TIKOO)
.....PETITIONER
VERSUS
1. BIMLESH KUMAR PANDEY
PLOT NO.31B, BLOCK-E,
PHASE-1, GOYALA DAIRY,
QUTUB VIHAR, NEW POST OFFICE,
NEW DELHI-110071
2. SMT. LAXMI SWAMINATHAN
LEARNED SOLE ARBITRATOR
THROUGH MULTI COMMODITY
EXCHANGE OF INDIA LTD.
KANCHUNJUNGA BUILDING,
CONNAUGHT PLACE, NEW DELHI-01
.....RESPONDENTS
II. ARBTN NO.11402/2016
CNR NO.DLND01-000654-2015
M/S KAYNET COMMODITIES PVT. LTD.
ABHINANDAN BUILDING, 6th FLOOR,
633, PULACHI WADI, DECCAN GYMKHANA,
PUNE-411004
.....PETITIONER
Arbtn.No.11401/2016, 11402/2016 & 11404/2016
Kaynet Commodities Pvt. Ltd. Vs Bimlesh Kumar Pandey & Ors. Page 1 of 26
VERSUS
1. DHANANJAY JITESH PANDEY
R/O PLOT NO.31B, BLOCK-E,
PHASE-1, GOYALA DAIRY,
QUTUB VIHAR, NEW POST OFFICE,
NEW DELHI-110071
2. SMT. LAXMI SWAMINATHAN
LEARNED SOLE ARBITRATOR
.....RESPONDENTS
III. ARBTN NO.11404/2016
CNR NO.DLND01-000658-2015
M/S KAYNET COMMODITIES PVT. LTD.
ABHINANDAN BUILDING, 6th FLOOR,
633, PULACHI WADI, DECCAN GYMKHANA,
PUNE-411004
.....PETITIONER
VERSUS
1. PRAVEEN RANJAN PANDEY
R/O PLOT NO.31B, BLOCK-E,
PHASE-1, GOYALA DAIRY,
QUTUB VIHAR, NEW POST OFFICE,
NEW DELHI-110071
2. SMT. LAXMI SWAMINATHAN
LEARNED SOLE ARBITRATOR
.....RESPONDENTS
DATE OF INSTITUTION : 17.04.2015
DATE OF CONCLUSION OF FINAL ARGUMENT : 18.08.2022
DATE OF PRONOUNCEMENT OF ORDER : 30.09.2022
Arbtn.No.11401/2016, 11402/2016 & 11404/2016
Kaynet Commodities Pvt. Ltd. Vs Bimlesh Kumar Pandey & Ors. Page 2 of 26
ORDER
1. These are three separate petitions under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') whereby Kaynet Commodities Private Limited (hereinafter referred to as 'the petitioner') has challenged the common arbitration award dated 18.01.2015 passed by the sole Arbitrator Ms. Laxmi Swaminathan (hereinafter referred to as 'the Arbitrator').
2. By the common award, the Arbitrator granted compensation to the respondents Praveen Ranjan Pandey, Dhananjay Jitesh Pandey and Bimlesh Kumar Pandey and directed the petitioner to make the payment within one month with further directions that in case of failure, it shall pay an interest @ 12% per annum from the date of filing of the arbitration application till the date of actual payment.
3. The brief facts as revealed from the record are;
A) Petitioner is a company registered as an intermediary of commodity markets having membership of Multi Commodity Exchange of India Limited (MCX) and National Commodity & Derivative Exchange Limited (NCDEX).
B) Respondent Praveen Ranjan Pandey, his father Bimalesh Kumar Pandey and brother Dhananjay Jitesh Pandey opened separate Arbtn.No.11401/2016, 11402/2016 & 11404/2016 Kaynet Commodities Pvt. Ltd. Vs Bimlesh Kumar Pandey & Ors. Page 3 of 26 trading accounts with the petitioner after executing membership client agreements and KYCs. On opening of the accounts, welcome letters were sent to the respondents on their registered email IDs and it was conveyed that they would be receiving trade confirmation call and SMS for every day transactions carried out by them in their respective trading accounts. It was further conveyed that respondents would be getting ledger balance and electronic contact notes on their respective email IDs. C) Dispute erupted between the petitioner and respondents in respect of trade transactions made from the trading accounts. Respondents wrote an email at the helpdesk of the petitioner stating that they never received trade confirmation calls in respect of purported transactions carried out from their accounts. Over this issue, parties exchanged emails but the matter was not resolved. Respondents lodged a complaint with MCX alleging that the transactions from their accounts were done by the Relationship Manager of the petitioner without their approval. MCX sought reply from the petitioner and conciliation meeting was held but the parties failed to arrive at any settlement. Respondents invoked the arbitration clause by moving separate applications with MCX for Arbtn.No.11401/2016, 11402/2016 & 11404/2016 Kaynet Commodities Pvt. Ltd. Vs Bimlesh Kumar Pandey & Ors. Page 4 of 26 the appointment of Arbitrator. On the applications of the respondents, Ms. Laxmi Swaminathan was appointed as the Arbitrator and intimation was given to the parties. D) Notices of statements of claim filed by the respondents were issued to the petitioner with directions to submit reply and relevant documents. In response, petitioner submitted the statement of defence. Opportunity was given to the parties to produce evidence. Respondents produced transcripts of a DVD containing the recorded conversation between Santosh Jha and Bimlesh Kumar Pandey.
E) The Arbitrator concluded the proceedings and passed a common award dated 18.01.2015 in respect of separate claims of respondents holding that similar issues were raised in all the three matters. The Arbitrator partly allowed the claim of respondents and granted the following reliefs;
(i) (a) In the case of Applicant No.1, Bimalesh Kumar Pandey (MCX/ARB/1980A/14), the Respondent Trading Member is directed to pay to the Applicant an amount of Rs.5,75,000/- (Rupees Five Lakhs Seventy Five Thousand only);
(b) In the case of Applicant No.2, Dhananjay Jitesh Pandey (MCX/ARB/1981A/14), the Respondent Trading Member is directed to pay to the applicant an amount of Rs.2,75,000/- (Rupees Two Lakhs Seventy-Five Thousand only);
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(c) In the case of Applicant No.3, Praveen Ranjan Pandey (MCX/ARB/1982A/14), the Respondent Trading Member is directed to pay to the applicant an amount of Rs.2,24,000/- (Rupees Two Lakhs Twenty-Four Thousand only).
(ii) The aforesaid amount shall be paid to the applicants by the respondents within one month of the receipt of a copy of this award failing which they shall also pay interest on these amounts at the rate of 12% per annum from the date of filing of the application till the date of actual payment.
(iii) All other claims are dismissed.
(iv) Parties to bear their own cost.
4. The award has been challenged on the following grounds;
(a) That Arbitrator traveled beyond the terms of the agreement, which was entered between the parties at the time of opening of the trading account.
(b) That Arbitrator wrongly ignored the terms of the written contract and relied on the oral evidence in the form of transcripts of recorded telephonic conversations between Bimlesh Kumar Pandey and Santosh Jha.
(c) That Arbitrator failed to take note of the fact that the welcome letter contained clear warning that trading transactions involved risk and the client shall be responsible for incurring any losses.
(d) That Arbitrator failed to take into account the fact that trade confirmation calls were received and accepted by the respondents.
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(e) That Arbitrator wrongly fasten the liability on the petitioner in respect of the alleged misconduct of his employee Santosh Jha.
(f) That Arbitrator failed to take into account that no assured returns were promised by the petitioner.
5. I have heard the rival submissions.
6. The petitioner has challenged the award on the ground that Arbitrator has placed too much reliance on the alleged telephonic conversation between the respondent and Santosh Jha. Counsel for petitioner has argued that no liability can be fasten on the petitioner for the alleged misconduct of Santosh Jha. He has mentioned that the Arbitrator wrongly based her finding on the transcripts of a DVD containing alleged conversation between Bimlesh Kumar Pandey and Santosh Jha. He submitted that the transcripts of the conversation were not admissible as the necessary certificate under Section 65B of the Indian Evidence Act was not furnished. He has contended that these transcripts were produced by the respondents at a later stage of the arbitration after the petitioner had already filed the statement of defence. He has contended that it was expressly mentioned in the welcome note that the investment made by the respondents were subject to market risk. He has contended that in respect of each transaction, an SMS was triggered at the registered Arbtn.No.11401/2016, 11402/2016 & 11404/2016 Kaynet Commodities Pvt. Ltd. Vs Bimlesh Kumar Pandey & Ors. Page 7 of 26 mobile number of the respondents. He has mentioned that besides the SMS, trade confirmation calls were also made to the respondents. He has stated that electronic contract notes and ledger balance were also transmitted on the registered emails of respondents. He has contended that the trade confirmation calls were duly confirmed by the respondents. He has argued that respondents never lodged any complaint in respect of the trade transactions before 13.01.2014. He has contended that the complaint was lodged by the respondents only after discovering that they have suffered losses. He has contended that Arbitrator ignored all these facts and passed award in favour of respondents. It has been argued by the petitioner that the finding of the Arbitrator is in conflict with the fundamental policy of Indian Law as well as basic notions of justice. Apart from these submissions, it has also been argued on behalf of petitioner that the award was based on mis-appreciation of facts. Counsel for the petitioner has argued that the patent illegality in the award goes to the root of the matter and therefore, the award deserves to the set aside.
7. On the other hand, Counsel for respondents argued that the challenge to the award is not maintainable. He has argued that the award can be challenged only on the basis of the grounds set-out under Section 34 of the Act. Counsel has submitted that the scope of examining the validity Arbtn.No.11401/2016, 11402/2016 & 11404/2016 Kaynet Commodities Pvt. Ltd. Vs Bimlesh Kumar Pandey & Ors. Page 8 of 26 of the award is very limited. He has submitted that the court is not competent to re-appreciate facts and question the validity of the award merely on account of reason that a different view was possible on the same facts. He has contended that the court cannot substitute its own opinion for the findings given by the Arbitrator. He has argued that so long as the finding of the Arbitrator is based on evidence and facts brought on record during the arbitration proceedings, the court cannot over turn the finding. He has argued that it is not sufficient to merely allege that the award is patently illegal. He has contended that the patent illegality should be such which goes to the root of the matter and unless it is so, the award cannot be set aside. He has mentioned that the award is not in conflict with the public policy of India. He has contended that the finding given by the Arbitrator cannot be re-appreciated by the court while deciding a petition under Section 34 of the Act. He has submitted that the court dealing with the petition under Section 34 of the Act is not sitting as a court of appeal against the award passed by the Arbitrator. He has mentioned that there is nothing which may show that the award is unfair and unreasonable. He has argued that the petitions should be dismissed.
8. I have perused the record in the light of respective arguments. Arbtn.No.11401/2016, 11402/2016 & 11404/2016 Kaynet Commodities Pvt. Ltd. Vs Bimlesh Kumar Pandey & Ors. Page 9 of 26
9. The grounds for setting aside of an award have been enumerated under Section 34 of the Act, which reads as under;
"34. 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 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 1: For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if; Arbtn.No.11401/2016, 11402/2016 & 11404/2016 Kaynet Commodities Pvt. Ltd. Vs Bimlesh Kumar Pandey & Ors. Page 10 of 26 i. the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or ii. it is in contravention with the fundamental policy of Indian law; or iii. it is in conflict with the most basic notions of morality or justice.
Explanation 2: For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
(2-A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by re- appreciation of evidence".
10. While interpreting and defining the scope and extent of judicial intervention for setting aside an award, the Apex Court has observed in the matter of "Delhi Airport Metro Express Private Limited Vs Delhi Metro Rail Corporation Limited" (2022) 1 SCC 131 that while deciding applications filed under Section 34 of the Act, courts should strictly act in accordance with and within the confines of Section 34 of the Act. It was held that the Courts would refrain from appreciating or re-appreciating the matters of fact as well as law. The Apex Court made an observation that the court dealing with the application under Section 34 of the Act is not authorized to dissect and re-access the factual aspects of the case. The observation contained in para-28 of the judgment aptly summarizes the scope of judicial intervention. Arbtn.No.11401/2016, 11402/2016 & 11404/2016 Kaynet Commodities Pvt. Ltd. Vs Bimlesh Kumar Pandey & Ors. Page 11 of 26 "28....There is a disturbing tendency of courts setting aside arbitral awards, after dissecting and reassessing factual aspects of the cases to come to a conclusion that the award needs intervention and thereafter, dubbing the award to be vitiated by either perversity or patent illegality, apart from the other grounds available for annulment of the award. This approach would lead to corrosion of the object of the 1996 Act and the endeavors made to preserve this object, which is minimal judicial interference with arbitral awards. That apart, several judicial pronouncements of this Court would become a dead letter if arbitral awards are set aside by categorizing them as perverse or patently illegal without appreciating the contours of the said expressions...."
11. While dealing with the scope of challenging the award on the ground that it is against the 'public policy', it has been observed by the Hon'ble Supreme Court in case of "Associate Builders Vs DDA" 2015 (5) SCC 49 that it must be clearly understood that when a court is applying the 'public policy' test to an arbitration award, it does not act as a court of appeal and consequently errors of facts cannot be corrected. The court held that a possible view by the Arbitrator on facts as necessarily to pass muster as the Arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award.
12. The Court observed in Delhi Airport Metro's case (supra) that 'Patent illegality' should be an illegality which goes to the root of the matter. It was held that every error of law committed by the Arbitral Tribunal Arbtn.No.11401/2016, 11402/2016 & 11404/2016 Kaynet Commodities Pvt. Ltd. Vs Bimlesh Kumar Pandey & Ors. Page 12 of 26 would not fall within the expression patent illegality. The court observed that mere erroneous application of law cannot be categorized as patent illegality. It was further observed that contravention of law not linked to public policy or public interest is beyond the scope of the expression patent illegality. The court held that the Courts dealing with the applications under Section 34 are prohibited to re-appreciate evidence to conclude that the award suffers from patent illegality appearing on the face of the award, as courts do not sit in appeal against the arbitral award. The observations made in this regard in para No.29 of the Judgment are as under;
"29...the permissible grounds for interference with a domestic award under Section 34(2-A) on the ground of patent illegality is when the arbitrator takes a view which is not even a possible one, or interprets a clause in the contract in such a manner which no fair- minded or reasonable person would, or if the arbitrator commits an error of jurisdiction by wandering outside the contract and dealing with matters not allotted to them. An arbitral award stating no reasons for its findings would make itself susceptible to challenge on this account. The conclusions of the arbitrator which are based on no evidence or have been arrived at by ignoring vital evidence are perverse and can be set aside on the ground of patent illegality. Also, consideration of documents which are not supplied to the other party is a facet of perversity falling within the expression patent illegality."
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13. In Delhi Airport Metro Express case (supra), the Apex Court interpreted the expression 'Public Policy of India' and cited with approval the decision in "Ssangyong Engineering and Construction Company Limited vs National Highways Authority of India (NHAI)"
(2019) 15 SCC 131 wherein it was observed as under;
"34. What is clear, therefore, is that the expression public policy of India, whether contained in Section 34 or in Section 48, would now mean the fundamental policy of Indian law as explained in paras 18 and 27 of Associate Builders [Associate Builders v. DDA i.e. the fundamental policy of Indian law would be relegated to Renusagar (supra) understanding of this expression. This would necessarily mean that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 expansion has been done away with. In short, Western Geco [ONGC v. Western Geco International Ltd, as explained in paras 28 and 29 of Associate Builders, would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Court's intervention would be on the merits of the award, which cannot be permitted post amendment. However, insofar as principles of natural justice are concerned, as contained in Sections 18 and 34(2) (a)(iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in para 30 of Associate Builders.
35. It is important to notice that the ground for interference insofar as it concerns interest of India has since been deleted, and therefore, no longer obtains. Equally, the ground for interference on the basis that the award is in conflict with justice or morality is now to be Arbtn.No.11401/2016, 11402/2016 & 11404/2016 Kaynet Commodities Pvt. Ltd. Vs Bimlesh Kumar Pandey & Ors. Page 14 of 26 understood as a conflict with the most basic notions of morality or justice. This again would be in line with paras 36 to 39 of Associate Builders, as it is only such arbitral awards that shock the conscience of the court that can be set aside on this ground.
36. Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law, as understood in paras 18 and 27 of Associate Builders or secondly, that such award is against basic notions of justice or morality as understood in paras 36 to 39 of Associate Builders, Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to Section 48(2)
(b)(ii) was added by the Amendment Act only so that Western Geco [ONGC, as understood in Associate Builders, and paras 28 and 29 in particular, is now done away with."
14. Coming to the facts of the present matter. It is an admitted position that transactions were done from the trading accounts of the respondents. Perhaps, the sole purpose of opening a trading account is to do trading in commodities. The gist of the allegations made by the respondents is that they never placed orders with the petitioner for the trading done from their accounts. It is the respondents case that the Relationship Manager Santosh Jha never took permission to do trading from their accounts and the trade transactions were done without their consent. Respondents further alleged that trade confirmation calls were never received by them.
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15. Record shows that at the time of opening the trading account, respondents entered into separate Membership Client Agreements with the petitioner. Although, respondents disputed their signatures on the agreements but the Arbitrator concluded that since respondents issued cheques of margin money without raising any objection, therefore, the objection appears to be an afterthought. Be as it may, the fact that respondents never lodged any complaint about their signatures being forged on the Membership Client Agreements does suggest that the objection raised by them was indeed an afterthought and frivolous.
16. At the time of opening of the trading accounts, respondents signed the Membership Client Agreements (MCAs)/KYCs and welcome letters were issued to them. The Member Client Agreements contained a Risk Disclosure Agreement. The parties became bound by the contractual obligations under the Membership Client Agreements, terms of welcome letters and KYCs. It was mentioned in the Risk Disclosure Document that respondent should undertake the trade transactions only after understanding the nature of contractual relations. It was mentioned in this document that investment in commodity market carries a high element of risk. Further, it was stated that there would be no guaranteed profits for the trading done from the trading accounts. Arbtn.No.11401/2016, 11402/2016 & 11404/2016 Kaynet Commodities Pvt. Ltd. Vs Bimlesh Kumar Pandey & Ors. Page 16 of 26 The various clauses of this document conveyed in unequivocal terms that the trading in commodity market involves risk and might result in financial losses.
17. On opening of the trading accounts, petitioner sent a welcome letters to the respondents intimating them that Santosh Kumar Jha has been appointed as their dedicated Relationship Manager and his phone number was also provided. The welcome letters and MCA contained detailed terms & conditions. It was categorically specified in clause-14 of the welcome note that an electronic generated contract note shall be sent to the respondents within 24 hours of execution of trade on their registered email address. In this clause, respondents were urged to check the contract note minutely and report for any discrepancy within 24 hours of the receipt of contract note. Clause-15 of the welcome note specified that the orders placed by the respondents are not recorded and in case, any contract note is not as per the order, the respondents should deny the same within 24 hours and in case, they failed to deny the contract note, same shall be deemed to be ratified. It was mentioned in clause-17 of the welcome note that all investment in the market/exchange are subject to market risk and therefore, respondents should take due care before executing trade. It was mentioned in Arbtn.No.11401/2016, 11402/2016 & 11404/2016 Kaynet Commodities Pvt. Ltd. Vs Bimlesh Kumar Pandey & Ors. Page 17 of 26 clause-18 of the welcome note that neither petitioner nor its employees were in the business of portfolio management/advisory and therefore, no investment in the securities market could be guaranteed. It was advised that respondents should wisely take decisions before executing trade and thoroughly check contract notes, ledge accounts on regular basis. It was specified in clause-19 of the welcome note that petitioner does not deal in any other products like guaranteed return and in case, any action is done beyond the terms of KYC, the company shall not be held responsible. The petitioner filed Membership Client Agreements, Risk Disclosure Documents and KYCs along with the statements of defence. These documents were placed on record in the arbitration proceedings. Petitioner also placed on record the welcome letters and mentioned that the same were forwarded on the registered emails of respondents and the same were also sent through courier.
18. Petitioner mentioned in the statement of defence before the Arbitrator that Electronic Contract Notes of the trade transactions were forwarded at the registered email IDs of the respondents. The log report of the Electronic Contract Notes and the bills were filed to substantiate these submissions. Petitioner further stated that trade confirmation and ledger balance SMSs were regularly sent at the registered mobile numbers of Arbtn.No.11401/2016, 11402/2016 & 11404/2016 Kaynet Commodities Pvt. Ltd. Vs Bimlesh Kumar Pandey & Ors. Page 18 of 26 the respondents on daily basis but they never disputed any transactions. The SMS delivery reports of the trade confirmation SMSs were placed on record. Petitioner mentioned that since respondents were doing trading in forward market, therefore, intimations were sent to them that increase in the volume of trading has been noticed in their trading account. Copy of the emails through which the intimations were delivered were filed along with the statement of claim. Petitioner stated that the ledger statements were dispatched regularly at the registered email ID of the respondents. The log reports of the ledger statements along with the financial ledger statements were filed along with statements of defence.
19. It is an admitted position that the SMSs were triggered on the registered mobile phones of the respondents after each day's transactions of trading. Respondents have not denied having received those SMSs. They have stated that the SMSs were in such form that they could not understand or decipher them. It is also an admitted position that Trade Confirmation Calls were made at the registered mobile phone of the respondents. It is the respondents stand that as per the advice given by Santosh Kumar Jha, they used to confirm these calls either by saying 'yes' or pressing '1' without applying their mind. It has been mentioned Arbtn.No.11401/2016, 11402/2016 & 11404/2016 Kaynet Commodities Pvt. Ltd. Vs Bimlesh Kumar Pandey & Ors. Page 19 of 26 by the respondents that Santosh Jha had instructed them that he would be executing trade on their behalf and thereafter, they would receive a trade confirmation call from the MCX within 24 hours along with a confirmation call from petitioner's helpdesk for confirming the day's trade. Respondents have stated that Santosh Jha instructed them that on receiving these calls, they have to press '1' and say 'yes' for everything asked in those calls regarding the executed trade as otherwise the MCX would freeze their accounts. Respondents have stated that petitioner was well aware of the fact that the trading is actually being done by its employees and not by the clients. The Arbitrator believed this contention of the respondents by relying on the transcripts of an alleged telephonic conversation between respondent Bimlesh Kumar Pandey and Sanjay Jha. The Arbitrator observed that the transcripts of the call revealed that Santosh Jha had instructed the respondents to either say 'Ok' or 'Yes' or press '1' in respect of the trade confirmation calls. He observed that the perusal of transcripts of trade confirmation calls given for the period from 06.09.2013 to 08.01.2014 reveals that respondents have either pressed key '1' or said 'Ok' or 'Yes' to the information given by the employee of the petitioner. The Arbitrator held that it appears that respondents acted as per the instructions of Santosh Jha as Arbtn.No.11401/2016, 11402/2016 & 11404/2016 Kaynet Commodities Pvt. Ltd. Vs Bimlesh Kumar Pandey & Ors. Page 20 of 26 their averments fit the pattern of trade confirmation calls. The Arbitrator concluded that although, the petitioner might have sent the necessary documents as per the terms & conditions of the MCA and the regulations of exchange, in the particular case, the Relationship Manager of the petitioner apparently advised and instructed the respondents and they acted accordingly. This is perhaps the main reasoning on which the award has been passed.
20. Indeed, this court cannot sit in appeal and reverse the finding given by the Arbitrator so long as the finding is based on some evidence. In the present matter, petitioner has submitted that Arbitrator relied on the transcripts of a DVD without insisting on a certificate under Section 65B of the Indian Evidence Act. Counsel for the petitioner has vehemently argued that Arbitrator committed a serious error by accepting in evidence, the transcripts of the DVD without insisting on a certificate under Section 65B of the Indian Evidence Act. He has contended that in view of this error, the award deserves to be set-aside. I am not impressed with the said line of argument. It has been held in the matter of "Millellium School Vs Pawan Dawar" O.M.P(COMM.) 590/2020 decided by the High Court of Delhi on 10.05.2022 that Section 65B of Indian Evidence Act is not applicable to arbitral Arbtn.No.11401/2016, 11402/2016 & 11404/2016 Kaynet Commodities Pvt. Ltd. Vs Bimlesh Kumar Pandey & Ors. Page 21 of 26 proceedings. The court observed in the matter that by virtue of Section 1 of the Indian Evidence Act, it does not apply to arbitration. It was held by the High Court that although, the principle of Evidence Act are usually applied in arbitral proceedings, sensu stricto, the said Act is not applicable in arbitral proceedings. In view of the observation made by the High Court of Delhi, the argument that the Arbitrator could not have relied on the transcripts of DVD needs to be rejected. However, even if these transcripts are taken into account, still, the petitioner cannot be made liable in view of the various disclosures made in the KYC, Risk Disclosure Document and welcome note.
21. On appreciating the record, it is apparent that the finding given by the Arbitrator is totally contrary to the evidence produced on record. The Arbitrator categorically observed in para-12 of the award that the legal relation between the parties is governed by the KYC, welcome letter and MCA provisions but even after holding this, she totally ignored the terms & conditions contained in these documents. It is not the case of the respondents that they were illiterate and they do not know the implication of doing trading in commodities. It was categorically mentioned in MCA and the welcome note that the trading in commodity market is subject to market risk. The petitioner never gave Arbtn.No.11401/2016, 11402/2016 & 11404/2016 Kaynet Commodities Pvt. Ltd. Vs Bimlesh Kumar Pandey & Ors. Page 22 of 26 any assurance to the respondents of assured return on their investments. The welcome note clearly specified that petitioner was not in the business of portfolio management/advisory on the investment & security market. The petitioner specified in the welcome note that the company was only doing the business of brokerage or trading in the commodity market. The respondents did receive the trade confirmation calls and SMSs after each day's trading session. The Arbitrator observed in para-15 of the award that respondents were novices in the trading market and they acted on the instructions of the employees of the petitioner. The Arbitrator observed that petitioner shall be responsible for the acts of its employee as he was dealing with the respondents in official capacity. This line of reasoning is against the concept of principal and agent relationship as defined under the provisions of Indian Contract Act.
22. The petitioner entered into an agreement with the respondents at the time of opening of the trading accounts. The precautions that need to be taken for trading in the commodity market were highlighted in the MCA, KYC, Risk Disclosure Document and welcome note. For each day's transactions, trade confirmation calls were made to the respondents, which were confirmed by them. SMSs were also sent on Arbtn.No.11401/2016, 11402/2016 & 11404/2016 Kaynet Commodities Pvt. Ltd. Vs Bimlesh Kumar Pandey & Ors. Page 23 of 26 the registered mobile phones confirming the transactions done by them. Petitioner has submitted that ledger balance and electronic contract notes were sent on the registered emails of the respondents and respondents have not disputed this aspect. The petitioner has taken all the due precautions. The agreement and the welcome note contains a detailed account of the standard operating procedure which provided various cross-checks to ensure that a client is not misled. The trade confirmation calls provided an opportunity to the clients to accept or deny the trading orders placed by them within 24 hours. Nothing more could have been done on the part of the petitioner. In such circumstances, if the respondents suffered losses by acting on the instructions of the employee of petitioner, the petitioner cannot be held liable as their employee certainly acted outside the authority. It is a settled principle of law that an agent can bind the principal only for the acts done by him in furtherance of its express or implied authority but the principal cannot be held liable for the acts committed beyond the implied or express authority.
23. Section 227 of the Indian Contract Act expressly provides that when an agent does more than he is authorized to do and when that part of what he does, which is within his authority, can be separated from the part Arbtn.No.11401/2016, 11402/2016 & 11404/2016 Kaynet Commodities Pvt. Ltd. Vs Bimlesh Kumar Pandey & Ors. Page 24 of 26 which is beyond his authority, so much only of what he does as his within his authority, is binding as between him and principal. In the present matter, there is no material on record to indicate that Santosh Jha was authorized by the petitioner at any point of time to give instructions to the respondents in respect of the trade calls placed by them. Thus, since the acts of Sanjosh Jha were beyond the authority conferred on him by the petitioner, therefore, petitioner cannot be held liable for his acts. There is nothing on record to indicate that Santosh Jha was carrying any express or implied authority to give instructions to the respondents. There is evidence to show that Santosh Jha, acting as an agent of petitioner, exceeded his authority. In such like cases, petitioner, being the principal, cannot be held liable. The Arbitrator totally ignored this settled preposition of law, which appears to be very much applicable in the present case. Further, the parties were bound by the terms of the contract agreed upon by them at the time of opening of the trading account. The Arbitrator also did not take into account the provisions of KYC, Risk Disclosure Document and Membership Client Agreement and passed the award solely relying on the transcripts of the DVD. There is a patent illegality in the award and the illegality goes to the root of the matter. The award deserves to be set-aside. Arbtn.No.11401/2016, 11402/2016 & 11404/2016 Kaynet Commodities Pvt. Ltd. Vs Bimlesh Kumar Pandey & Ors. Page 25 of 26
24. In view of the discussions made in the afore-mentioned paras, the impugned award dated 18.01.2015 is set-aside.
25. Arbitral Record be sent back to the concerned Arbitrator.
26. File be consigned to Record Room after due compliance. Announced in open Court on 30.09.2022 (Sudhanshu Kaushik) Addl. District Judge-02 & Waqf Tribunal, New Delhi District, Patiala House Courts, New Delhi/30.09.2022 Arbtn.No.11401/2016, 11402/2016 & 11404/2016 Kaynet Commodities Pvt. Ltd. Vs Bimlesh Kumar Pandey & Ors. Page 26 of 26