Delhi District Court
Fairwealth Securities Limited vs Navab Yadav on 10 July, 2018
IN THE COURT OF MS. TWINKLE WADHWA: LD. ADDITIONAL
DISTRICT JUDGE03:PATIALA HOUSE COURT:NEW DELHI
DISTRICT
Arbtn No. 4504/17
Fairwealth Securities Limited
A312323, 3rd Floor, 5,
Somdatt ChamberI,
Bhikaji Cama Place,
New Delhi110066.
.....Plaintiff
VERSUS
1. Navab Yadav
H. No. 79, Pandwala Khurd,
Najafgarh,
New Delhi110043.
2. Panel of Appellate Arbitrator
National Stock Exchange of India Ltd.
Jeevan Vihar Building, Connaught Place,
New Delhi.
....Defendants
Date of Institution : 09.06.2017
Date of Final Arguments : 04.07.2018
Date of Decision : 10.07.2018
JUDGMENT
Brief facts of the Case
Arbtn. No. 4504/17 Page 1
of 12
1. The present is a petition under Section 34 of Arbitration and
Conciliation Act, 1996 filed by stock broker/trading member
Fairwealth Services Limited against its customer/client Navab
Yadav against the order of Appellant Tribunal which was
conducted according to the laws and bylaws of NSE. The brief
facts leading to the present case are as follows
2. The client Navab Yadav has filed copy of the police complaint
before NSE on the basis of which reference was made to sole
Arbitrator Justice V S Aggarwal (retd.). It was the case of client
Navab Yadav that he had agreed to trade in securities through
appellant Stock Broker Company on the repeated insistence of
Mr. Ajay Tiwari and Madhu Manjhi. On their repeated assurances,
he had given Rs.96,300/ (initially given Rs.1,46,300/ Rs.50,000/
withdrawn) to appellant/trade member to be deposited in his
trading account. Further he had also given three blank cheques to
them which were credited in the bank account of one Madhu
Manjhi instead of trading account of client. The client was told that
cheques would be used for different segments for trading. Later
on, it was discovered that Rs.2,50,000/ were credited in the
account of Madhu Manjhi and as soon as he discovered the said
fact, he immediately contacted the respondent and thereafter filed
police complaint including the present complaint before NSE for Arbtn. No. 4504/17 Page 2 of 12 recovery of Rs.3,46,300/.
3. The case of respondent was that all the allegations are false and frivolous and he denied the assertions made. Respondent denied that he conducted any unauthorised trade in the claimant's account. It was the case of respondent that he has sent electronic contract notes through email on the email ID of the claimant/client on regular basis in accordance with SEBI guidelines. He has also filed before Arbitrator the copy of the said contract notes. It was also pleaded by respondent that he had sent trade confirmations of the transaction through SMS also to the claimant which shows that claimant was aware of the transactions. Respondent further pleaded that he used to randomly record trade confirmations telephonically to cross check the transactions. He had also filed two such recorded conversations before Arbitrator. It was further argued that there was profit in the account also and he had withdrawn Rs.50,000/ also once from his trading account. Further it was also contended before Arbitrator by respondent that claimant/client has not filed statement of claim in a proper format in accordance with Section 23 of Arbitration and Conciliation Act and hence consequences under Section 25 Arbitration and Conciliation Act have to follow. It was further contended that client had himself agreed to receive the contract notes through SMS and email as Arbtn. No. 4504/17 Page 3 of 12 mentioned in Clause 6, 11 and 13 of the letter of authority given by client to the stock broker/appellant duly signed . It was averred that according to the said letter of authority, client had agreed to place telephonic instructions as a written instruction, had agreed not to receive trade confirmation slips and other slips in paper form and agreed to receive through SMS. Hence, stock broker had complied with all the necessary formalities.
4. After hearing and going through the record, the sole Arbitrator came to the conclusion that client was not entitled for recovery of the said amount which had gone into the bank account of Madhu Manjhi as she had no concern with the stock broker. However, with respect to the amount of Rs.96,300/ which was credited in the bank account of stock broker, it was held that client was entitled to the recovery of the said amount along with interest @ 12% after one month from the date of the order of sole Arbitrator. Grounds of Objection
5. Against the order of the sole Arbitrator, the present appellant/stock broker approached Appellate Tribunal of NSE which affirmed the order of the sole Arbitrator. Now the present appeal is filed on the following broad grounds
1. It is argued that Appellate Tribunal failed to consider the fact that statement of claim was not filed in accordance with Section 23 of Arbtn. No. 4504/17 Page 4 of 12 the Arbitration and Conciliation Act and hence the order of appellant tribunal is bad in law.
2. It is further argued that his complaint was not accompanied with the affidavit and hence should not have been considered nor respondent no.1 has led any evidence to support his case nor requested Arbitrator for giving an opportunity for leading evidence.
3. It is further argued that no formal relief was claimed against the objector/stock broker and hence no order could be passed against them by sole Arbitrator and appellate tribunal as it was not specifically prayed for.
4. It is further argued that award is erroneous and no cogent ground has been given for the findings arrived at by the Arbitrator and that order was not passed in view of the specific provisions of the letter of authority.
5. Ld. Arbitrator failed to consider the fact that the information regarding trade was conveyed to the client through SMS as well as email and he was was aware of the transactions and did not dispute transactions even after receiving phone calls.
Reasons for decision
6. I have heard both the sides and gone through the record.
7. As far as argument that a proper statement of claim was not Arbtn. No. 4504/17 Page 5 of 12 filed in appropriate format nor it was accompanied with affidavit is concerned, it is submitted by counsel for objector that in view of Section 25 of Arbitration & Conciliation Act, Arbitral Tribunal should have rejected the claim. However, this plea was raised before Appellate Tribunal also. Appellate Tribunal aptly dismissed this objection raised by the petitioner after observing that
5. We have heard both parties. In so far as the objection of the Appellant, that the claim should have been rejected outright as there was not statement of case as required by Section 23 of the Act, is concerned we find no merit therein. Section 23(1) reads as follows "23. Statements of claim and defence.0(1) Within the period of time agreed upon the parties or determined by the arbitral tribunal, the claimant shall state the facts supporting his claim, the points at issue and the relief or remedy sought, and the respondent shall state his defence in respect of these particulars, unless the parties have otherwise agreed as to the required elements of those statements."
In Kedar lal Vs. Hari Ram, AIR 1952 SC 47, the Supreme Court has held that "it would be slow to throw out a claim on a mere technicality of pleading, when the substance of the thing is there and no prejudice is caused to the other side, however clumsily or inartistically the plaint might be worded.' It will also be seen from the reading of Section 23 reproduced above that there is no specific nomenclature prescribed for the pleadings to be filed before the arbtiral tribunal. In the present case the respondent had filed a copy of the complaint which he had given to the police. The complaint listed all the allegations against the Appellant Trading Arbtn. No. 4504/17 Page 6 of 12 Member including those of unauthorized trades and the losses incurred by the complainant on this account. Thus all the necessary facts supporting his claim, the point of unauthorized trading and the loss incurred were included in the police complaint which also formed his statement of case. That it had not been so titled as 'Statement of Case' is immaterial as it carried the substance of his case and it caused no prejudice to the Appellant.
8. Also it is mentioned in objections that it is not accompanied with duly signed affidavit. However, non obtaining of affidavit was merely a technicality and does not affect the case on merits. Moreover, this objection was not raised before this first Appellate Court that it was not accompanied with duly signed affidavit. Moreover, it is not the case of petitioner/trading member that he was prejudiced in any way by non filing the statement of claim in proper format. It is not the case of petitioner that he was not aware of the exact transaction or the nature of transaction between the parties. Hence, petitioner is not prejudiced in any way by not filing the statement of claim in proper format. Moreover, this is a case which is decided on the basis of documents being filed by trading members/petitioner. Original client agreement was with petitioner, all the information pertaining to the trading account of the client was with the petitioner/trading member and the telephonic conversations were in the possession of the petitioner. Hence, Arbtn. No. 4504/17 Page 7 of 12 petitioner was in no way prejudiced by these technicalities being not complied with.
9. It is also argued that client/claimant has not lead any evidence. However, it is prerogative of the party to decide whether they want to lead any evidence or not. It is not mandatory for any party in any proceedings to mandatorily lead evidence. It is always choice of a party to proceed with a case on the basis of document only or to lead oral evidence also.
10. It is further argued that since no formal relief was claimed against the objector/trading member, hence any relief being granted against the stock broker is bad in law. However, a bare perusal of the written statement being filed by the petitioner/trading member shows he was aware of the relief which was saught against him. Though it is correct that there is no formal statement of claim yet both the parties were well aware of the relief sought for. Moreover, in the complaint filed by claimant before NSE it is specifically mentioned that there were unauthorised trading from his account and he has been cheated. All these averments are specifically made in this complaint also. Moreover, stock broker is a person who is dealing day in and day out with such matters. Hence, he is not a layman as far as arbitration proceedings pertaining to trading account of a member are concerned.
Arbtn. No. 4504/17 Page 8 of 12
11. It is also argued that Ld. Arbitrator ignored the specific provisions in the Letter of Authority at clause 6, 11 and 13 wherein it was agreed by client that he will receive contract notes through email and has not denied that all the information was given to him through SMS. It is also argued that on 02.04.2016, entered claimant into a member client agreement with stock broker /trading member and was regularly being sent emails and messages and he objected after 28.06.2016. Hence during this period, no objections were raised. However, Ld. Sole Arbitrator as well as Appellate Tribunal had rightly observed that only because SMSs were sent and emails were being sent is not sufficient to presume that trading in the account was being done by the client/claimant. Rather it was for the trading member/stock broker to produce telephonic conversation to show that all these three months, orders were placed telephonically by the claimant. But trading member did not file any telephonic conversation wherein claimant would be placing orders with the non trading member/ stock broker, rather TM has placed two telephonic conversations wherein employees of trading member were confirming the trading order with the claimant. However, it was rightly observed by the Appellate Tribunal that by way of these telephonic conversation it cannot be presumed that orders were placed by claimant only. Also while Arbtn. No. 4504/17 Page 9 of 12 making the above said observations, it was observed by Appellate Tribunal as follows "6. We also find no substance in the contention of the Appellant that that the impugned award is based on erroneous findings of fact and that no reasons have been given for the conclusions of the learned Arbitrator. The issue in contention was whether the disputed trades were authorised by the respondent. The learned arbitrator had concluded that mere sending of contract notes and sms alerts cannot, by themselves, constitute ratification of the trades by the respondent since the respondent started protesting within a short span. As for the two recordings produced by the Appellant on its failure to produce recordings for all the disputed trades. It is not a part of appellate jurisdiction to try the dispute de novo, reassess the evidence and to rejudge the merits of the pleadings put forth by either party and no interference is called for if the view taken by the Arbitrator is a plausible view. The Supreme Court has held in Indu Engg & Textile Ltd. Vs. Delhi Development Authority, AIR 2001SC2668, that unless the view of the Arbitrator is vitiated by a manifest error on the face of the award or is wholly improbable or perverse, it is not open to court to interfere. As this Appellate Tribunal is not possessed of jurisdiction beyond that of a court under Section 34, we cannot substitute our view over that of the learned Arbitrator once we find, as we do in this case, that his view is a plausible view."
12. Also it was required as per law for the trading member to file proof regarding the telephonic orders being placed by the claimant/client but he failed to do so. Hence, it was rightly observed Arbtn. No. 4504/17 Page 10 of 12 by Appellate Tribunal as follows "7. It was also contended before us on behalf of the Appellant that the Arbitrator cannot go beyond the contract between the parties. It was argued that the contract includes a stipulation by the respondent that "I/We request to consider my/our telephonic instructions for order placing/order modification/order cancellation as a written instruction. I/We am/are getting required details from contracts issued by you." Since the receipt of the contract notes had been admitted by the respondent, it was argued, the factum of instructions was also established but this was ignored by the learned Arbitrator. Here again we are unable to agree with the Appellant. The very preamble of the MemberClient Agreement (MCA) provides that the "stock broker, sub broker and the client shall be bound by all the Rules, Byelaws and Regulations of the Exchange..........". Regulation 3.2.1 of the NSE (CM) segment and Regulation 3.4.1 (F&O) segment provide that it is obligatory for the Trading Member to ensure that trading instructions are obtained from the constituents before placement of the orders on the system and also to keep relevant records or documents of the same. The learned Arbitrator found that Appellant had neither kept recordings of the alleged telephonic instructions nor produced documentary proof of personal visits of the respondent to place such orders. In examining this aspect the learned Arbitrator, as in our opinion, working well within the compass of the contract between the parties which provided for compliance with the rules and regulations of the NSE."
13. In view of above discussion, I agree with the view taken by the Appellate Tribunal as well as Ld. Sole Arbitrator that mere Arbtn. No. 4504/17 Page 11 of 12 sending of messages and emails is not a sufficient proof to conclude that orders for trading were placed by claimant only, rather it was the stock broker who has withheld the evidence of telephonic conversations.
In view of above discussion, the present objection petition is hereby dismissed.
Parties are left to bear their own cost.
File be consigned to record room.
Digitally signed by TWINKLE TWINKLE WADHWA
Announced in an open Court WADHWA Date:
2018.07.16
On 10th day of July, 2018. 11:03:52 +0530
(Twinkle Wadhwa)
ADJ03/PHC/NEW
DELHI
10.07.2018
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