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Delhi District Court

Sh. Shyam Sunder (Constituent) vs M/S Kotak Securities Ltd on 18 July, 2017

             IN THE COURT OF SH. ANIL KUMAR SISODIA:
               ADDITIONAL DISTRICT JUDGE-05:WEST:
                    TIS HAZARI COURTS: DELHI.

                                   ARBT/60797/2016


Sh. SHYAM SUNDER (Constituent)
R/o 130-B, DDA LIG Flats,
Rajouri Garden Extension,
New Delhi                                         ..................Applicant

Versus


M/s KOTAK SECURITIES LTD.
(Trading Member)
6th Floor, Building No. 21,
Infinity Park, Off Western Express Highway,
Goregaon Mulund Link Road,
Malad (East), Mumabi-400097                 ...........Respondent

                                               Date of Institution : 08.08.2013
                                               Order reserved on : 12.07.2017
                                                Date of Decision : 18.07.2017
ORDER

1. Vide this order I shall dispose off the Objections filed by the Objector u/S. 34 of the Arbitration & Conciliation Act, 1996 against the Arbitration Award dated 07.04.2010 passed by Sh. Divakar Dev, Ld. Sole Arbitrator in AM No. F&O/D-196/2009.

2. The facts giving rise to the present objection petition are that the Sh. Shyam Sunder Vs M/S Kotak Securities Ltd Page No. 1/9 applicant maintained an account no. SMX F 9 with Customer ID No. 10920046, DP ID IN 300214 Branch 000092 with respondent. The applicant has been a member since 2004 and had signed Member Client Agreement (MCA) and had also deposited some securities in lieu of margin money with the respondent. It was further stated that the applicant only intended to deal with the cash segment and the respondent without apprising or without taking any authorization from the applicant started transacting in Derivative segment of the trading popularly known as F&O segment from 26.08.2008 to 23.10.2008 and the applicant suffered huge losses and he lost everything due to misdeed of the respondent. The respondent sent bill dated 01/11/2008 which showed that the respondent had sold the securities of the applicant and the same was adjusted in some bills for the transactions which applicant never carried out nor had instructed the respondent. No statement was sent to the applicant for the period when F&O transactions carried out by the officials of the respondent company. Under these circumstances, the applicant filed a complaint before SEBI and matter was referred for arbitration. The Ld. Arbitrator dismissed the application of the applicant vide award dated 07.04.2010.

3. Aggrieved by the aforesaid award, the petitioner has challenged the award on the grounds that Ld. Arbitrator failed to appreciate that there is an element of fraud in the actions of the respondent and the respondent had immediately removed/dismissed its employees who were dealing with the account of the applicant and who dealt with F&O/Derivatives section in the account of the applicant. Ld. Arbitrator Sh. Shyam Sunder Vs M/S Kotak Securities Ltd Page No. 2/9 failed to appreciate that applicant never authorized the respondent to transact in the Derivative segment and had never transacted in the derivative segment since the year 2004. Ld. Arbitrator failed to appreciate that applicant had never given any email ID to the respondent and does not have any email ID. This goes in sharp contrast and contradicts the stand of the respondent that he informed the applicant electronically about all the transactions carried out in his account. Ld. Arbitrator failed to appreciate that the respondent acted with malafide and usurped all the life savings of the applicant in one go.

Ld. Arbitrator failed to appreciate that except for the period 26.08.2008 to 23.10.2008, the applicant never transacted in the F&O segment. No express authority was given by the applicant to the respondent to transact in the F&O segment for this period too. A prayer was made for setting aside the award passed by the Ld. Arbitrator.

4. Notice of the objection petition was issued to the respondent. Respondent has filed reply to the objections denying its contents and raising preliminary objections that the application is barred by limitation and the same has been filed beyond the prescribed limitation period of 120 days and is liable to be dismissed. Section 5 of the Limitation Act is not application to the proceedings under Section 34 (3) of the Arbitration Act. It was also submitted that the scope of the application under Section 34 is very limited and arbitral award may be set aside only on the grounds contained in Section 34 of the Act and the present application does not make any ground for interference with the award. The applicant wants to re-argue and reopen the award which is not Sh. Shyam Sunder Vs M/S Kotak Securities Ltd Page No. 3/9 permissible.

On merits the contents of the application were denied and it was stated that in 2004, the applicant had entered into Member Client Agreement and the relevant clause of the agreement shows that the applicant was interested in transacting in F&O segment. It was denied that respondent transacted in F&O segment without authority or without intimation to the applicant. It was submitted that respondent placed orders on the Stock Exchange upon the instructions/directions from the applicant and all transactions were carried out in accordance with the terms and conditions of the MCA. It was also submitted that the transactions were duly informed to the applicant. The respondent regularly sent the receipt of contract notes, bills, statement of accounts, etc to the applicant on the address provided by him besides on email ID and the applicant never raised any objections or protested in any form whatsoever. The applicant was repeatedly requested to clear his outstanding amount but the applicant failed to do so and the respondent was constrained to liquidate the securities in the cash segment on 14.10.2008 and 23.10.2008 as per clause 8 (g) of the MCA. Other contents of the application were denied. A prayer was made for dismissal of the application.

5. Applicant has filed counter reply to the reply filed by the respondent and has reiterated the facts stated in the objections.

6. I have heard Ld. Counsel for the applicant as well as Ld. Counsel for the respondent and have perused the record carefully.

7. At the outset, it may be mentioned that the scope of Section 34 Arbitration & Conciliation Act is very limited. The Award can be set aside u/S. 34(2): (1) for the reasons mentioned in Section 34(2)a(i) to

(v); (2) for the reasons stated in Section 28(a); (3) for the reasons stated in Section 34(2)(b)(ii) on ground of conflict with the public policy of India, that is to say, if it is contrary to (a)fundamental policy of Indian Law; or (b) the interest of India; or (c)justice or morality; or (d) if it is patently illegal; (4) for the reasons stated in Sections 13(5) and 16(6).

8. It is also an equally settled proposition of law that the Courts while dealing with the applications under Section 34 Arbitration & Conciliation Act do not sit as a Court of appeal and it cannot re- appreciate the evidence.

9. The counsel for the respondent has argued that the objections filed by the applicant are hopelessly barred by limitation as the award was passed on 07/04/2010 and the objections have been filed on 08/08/2013.

10. The applicant has filed an application under Section 5 of Limitation Act for condonation of delay in filing the objections stating that the applicant is an old person facing multiple problem and his wife is also suffering from old age problems and there was no one to look after her. There was no source of income and applicant was writing to the respondent to make good the losses suffered by him and when he did not receive any satisfactory reply, the present application was filed.

11. Counsel for the applicant has argued that after passing of the award, applicant had filed application under Section 33 of the Arbitration and Conciliation Act and same remained pending and it was only decided on 09.09.2015 after directions were issued by the Hon'ble High Court to the Ld. Arbitrator to dispose off the application of the applicant under Section 33 Arbitration and Conciliation Act in the appeal filed by the applicant against the order of dismissal of objection petition dated 13.08.2014. Hence, the objections are within time. Counsel for the respondent has submitted that the application filed by the applicant/objector under Section 33 was not maintainable as the applicant has sought the review of the award on merits of the case and the same was not permissible. Ld. Arbitrator vide its order dated 09.09.2015 has also observed that the scope of Section 33 is limited one and it only allowed the Arbitrator, on the application of the party or otherwise (1) to correct any computation errors, any clerical or typographical errors or any other errors of a similar nature occurring in the Award (2) to give an interpretation of a specific point or part of the Award and (3) to make an additional arbitral Award as to claim presented in arbitral proceedings but omitted from the arbitral Award. It was argued that the application was rejected on this ground only that it did not fall within the Section of 33 of the Arbitration Act.

Counsel for the respondent has also placed reliance of judgment of State of Arunachal Pradesh Vs Damani Construction Co., (2007) 10 Supreme Court Cases 742 and argued that application seeking review on merits was not maintainable and the application filed by the applicant Sh. Shyam Sunder Vs M/S Kotak Securities Ltd Page No. 6/9 is misconceived and the same would not give any fresh cause of action to the applicant so as to file objections under Section 34 (3) of Arbitration and Conciliation Act.

12. It is well settled that Section 5 of the Limitation Act does not have any applicability to Section 34 (3) of the Arbitration Act. The time for filing the objections against the award begins from the date when the claims are finally settled. In the present case, the award was passed on 07.04.2010 and the applicant had time upto 120 days for filing the objections after receipt of the award. A bare reading of clause (3) of Section 34 shows that a period of three months has been prescribed for making an application for setting aside the award from the date when the arbitral award has been received or if a request has been made under Section 33, from the date from which such request has been disposed. A proviso added to the Section shows that period of three months can be extended by a further period of 30 days, if the applicant has been prevented by sufficient cause. In Union of India Vs M/s Popular Construction Co., AIR 2011 SC 4010, it was held that time limit prescribed under Section 34 of the Arbitration and Conciliation Act was absolute and unextendable and Section 5 of the Limitation Act was not applicable to it.

13. In the present case the applicant received the copy of the award on 04.05.2010 and therefore, the time for filing objections expired on 01.09.2010 whereas the award has been filed in the year 2013. Perusal of the application filed by the applicant under Section 33 would show Sh. Shyam Sunder Vs M/S Kotak Securities Ltd Page No. 7/9 that the contents of the said application were much beyond the scope of review provided under Section 33 of the Arbitration and Conciliation Act. Hence, the said application cannot be construed to be one under Section 33 of the Arbitration and Conciliation Act as it sought review of the award on merits. Hence, the disposal of the said application will not give a fresh cause of action to the applicant for filing the objection petition. Therefore, the objections filed by the applicant are clearly barred by limitation.

14. Apart from the technical objections of the limitation, on merit also the objections deserves to be dismissed as the applicant in his objections raised the pleas which tentamounts to reappraisal of award on merits which is not permissible under Section 34 of the Arbitration and Conciliation Act. The respondent has placed on record documents showing that it had informed the applicant regarding the transaction in the F&O segment on the address given by the applicant. Respondent placed on record delivery run sheet showing the dispatch of the statements during the period of August, September and October, 2008 which shows that respondent had informed the applicant regarding the transactions not only through the Email ID but also by courier. Therefore, the averments of the applicant that he was not informed about the transaction in the F&O segment appears to be incorrect. The applicant has not been able to show any patent illegality which goes to the root of the matter and vitiates the Award warranting its setting aside. The award passed by the Ld. Arbitrator is well reasoned and I do not find any ground to interfere with the same. Hence, the objections filed by the Sh. Shyam Sunder Vs M/S Kotak Securities Ltd Page No. 8/9 objector are dismissed being devoid of any merits.

File be consigned to Record Room after completion of necessary formalities.

Announced in the open Court                    (ANIL KUMAR SISODIA)
Dated :- 18th July 2017                        ADJ-05, WEST DISTRICT
                                               TIS HAZARI COURT, DELHI




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