Calcutta High Court (Appellete Side)
M/S. Nirmal Bang Securities Pvt. Ltd vs Mr. Tilak Bachar on 13 May, 2019
Author: Ravi Krishan Kapur
Bench: Soumen Sen, Ravi Krishan Kapur
IN THE HIGH COURT AT CALCUTTA
Civil Appellate Jurisdiction
APPELLATE SIDE
BEFORE:
The Hon'ble Justice Soumen Sen
The Hon'ble Justice Ravi Krishan Kapur
FMA 710 OF 2017
CAN 11859 of 2017
M/S. Nirmal Bang Securities Pvt. Ltd.
Versus
Mr. Tilak Bachar
For the Appellant : Mr. Jishnu Chowdhury,
Mr. Satadeep Bhattacharyya,
Mr. Sagnik Basu,
Mr. Ratul Das,
Ms. Nidhi Bahal,
Md. Dilawar Khan
For the Respondent : Mr. Partha Pratim Roy,
Mr. Pushpal Chakraborty,
Mr. Saikat Sen,
Hearing concluded on : 04.04.2019
Judgment on : 13.05.2019
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Ravi Krishan Kapur, J.
1. This appeal has been filed under Section 37 of the Arbitration and Conciliation Act, 1996 against an order dated 23.02.2017 passed in Misc. Case No.15 of 2017 by the Learned Single Judge, South 24 Parganas, Alipore whereby the Learned Judge had dismissed an application filed by the appellant under Section 34 of the Act.
2. Briefly stated the facts are that, the appellant was a registered trading member of the National Stock Exchange (NSE) and provided trading facilities to its clients both in shares and in securities in the cash as well as the derivative segments. Around August 2013, the respondent approached the appellant to commence trading activities as a client and after filling the requisite documents and obtaining a Unique Client Code, the respondent made an initial payment of Rs.50,000/- to the appellant on 28.08.2013. Thereafter, the respondent commenced trading activities through the appellant on the Stock Exchange. Between August 2013 and 31 October, 2013, the respondent frequently traded through the appellant and admittedly during this period a number of payments were debited as well as credited to the account of the respondent by the appellant. From the nature of transactions which the respondent had carried out for that period of approximately three months, it appears that the respondent was not a long term investor but was a trader and was trading primarily in the futures and options segment.
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3. The disputes between the parties relate to the transactions which occurred on 31.08.2013. On that date, a number of trades were executed by the appellant on behalf of the respondent. In fact, between 10.05:32 hours and 14.20:03 hours on 31.10.2013, 57 orders were placed on the system in the futures segment leading to a turnover of Rs. 11,95,577.19 (Debit - Rs. 6,06,47,308.11; Credit - Rs. 5,88,69,268.08). The corresponding settlement bill for these transactions dated 1 November, 2013 showed a net debit balance of Rs.12,76,974.08 against the respondent.
4. It must be noted that on 31.10.2013, a payment of Rs.5,00,000/- was made by the respondent by a cheque dated 31.10.2013 in favour of the appellant. There is a dispute as to the reason why this payment made by the respondent. The appellant claims that this was a part-payment made by the respondent towards the outstanding debit balance in his account and the resultant debit balance thereafter came down to Rs.7,76,974.08. On the other hand, the respondent contended that this payment was made as a future investment for earning profits thereon by carrying on future trading activities with the appellant.
5. It is also the case of the appellant that in view of the huge losses suffered by the respondent, the appellant as a gesture of goodwill had agreed to waive off the brokerage charges generated on account of the trades carried out on 31.08.2013. Accordingly, appropriate credit for Rs. 81,081.26 on account of brokerage charges has been given by the appellant which was duly reflected in their books of accounts.
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6. The transactions executed on 31.10.2013 by and between the parties were evidenced by (a) morning phone calls which were made by the employee/relationship manager of the appellant to the respondent; (b) confirmation SMS messages sent by the appellant to the respondent after the transactions had been executed by and between the appellant and the respondent; (c) electronic confirmation notes sent by the appellant to the respondent on that date; and (d) a phone call in the evening of 31.10.2013 by the representative of the appellant to the respondent of which there is a transcript confirming that the impugned transactions had taken place between the parties.
7. After the transactions had taken place on 31.10.2013 between the parties, there was an exchange of correspondence by and between the appellant and the respondent. On 14.11.2013, the final settlement of all the trades carried out by the respondent were duly forwarded by the appellant to the respondent.
8. It was only on 21.11.2013, that for the first time that the respondent denied the validity of transactions which had taken place on 31.10.2013 and demanded repayment of Rs.9,79,600. By a letter dated 28.11.2013, the appellant duly replied and refuted the allegations made by the respondent in the letter dated 21.11.2013 and reiterated its demand for Rs.7,31,556.65 from the respondent to the appellant.
9. In view of the fact that the respondent failed, neglected and refused to make payment to the appellant, the appellant was compelled to initiate arbitration proceedings under the bylaws of the NSE as contained in 5 Chapter IX Clause 1 of the said Bylaws. The arbitration clause between the parties contained a multi-tier arbitration process and the appellant in accordance with the arbitration clause referred the matter to the Arbitral Tribunal of the NSE.
10. In terms of the arbitration clause, a Sole Arbitrator was appointed and he passed an award on 18.04.2014 in favour of the appellant. The Sole Arbitrator held that, the transactions carried out on 31.10.2013 were not without prior instructions/advice of the respondent. The reasoning of the Sole Arbitrator was that the respondent had not disputed any of the transactions prior to his letter dated 21.11.2013, when for the first time he challenged the impugned trades which had taken place on 31.10.2013. The Sole Arbitrator also held that, in view of the payment of Rs.5,00,000/- made by the respondent on 31.10.2013 and the fact that the respondent was having a credit balance prior thereto it was amply clear that the respondent had incurred losses on 31.10.2013. The Sole Arbitrator further held that the proof of confirmation of the transactions on 31.10.2013, was documented and demonstrable and was in conformity with the consistent course of business dealings between the parties. Moreover, the Sole Arbitrator held that, the respondent had made a part payment of Rs.5,00,000/- towards the debit balance which he had incurred on 31.10.2013 and this payment could have only been made towards the loss that the respondent had suffered on 31.10.2013. Accordingly, the Sole Arbitrator held that, the respondent was liable to pay the outstanding amount of Rs.7,19,589.07 as on 11.11.2013 along with 12% interest p.a. with effect from 12.11.2013. 6
11. Being aggrieved by the award dated 18.04.2014, passed by the Sole Arbitrator, the respondent filed an appeal before the Appellate Arbitral Tribunal ("the Tribunal") comprising of three members as provided for in the arbitration clause. In the appeal, the main contention of the respondent was that the appellant had not obtained due consent or prior approval from the respondent to proceed with the impugned trade/deals/transactions on 31.10.2013. The Tribunal permitted certain new materials to be brought on record which it found necessary for appropriate adjudication. By a unanimous award dated 17.10.2014, the Tribunal held that the proof of confirmation by Electronic Contract Notes and SMS messages sent to the constituent served the purpose of post-trade confirmation but could not be considered as pre-trade or prior instruction/advice of the respondent to execute the concerned trades. The Tribunal further interpreted Regulation 3.2.1, of the Regulations of NSE (Capital Market Segment) and Regulation 3.4.1, of Regulations of NSE (F & O Segment) which stipulates that trading members shall ensure that appropriate confirmation orders/instructions are obtained from the constituents before placement of an order on the NEAT system and shall keep relevant records or documents of the same and of the completion or otherwise of these orders thereof. The appellant also furnished before the Tribunal, a call list dated 9.11.2013 relating to the mobile phone of an employee of the appellant which showed that calls had been made from the mobile number of the employee of the appellant to the respondent. However, the Tribunal held that in the absence of voice recordings of the said calls, the purpose for which those calls were made could not be ascertained and the mere list of those calls could not be considered to be 7 pre-trade instruction/advice of the constituent. The Tribunal doubted the fact as to why those calls were made from the personal number of an employee of the appellant and not from the registered phone number of the appellant. The Tribunal also interpreted the recording of conversations made on the trading date when the impugned transactions had occurred on 31.10.2013. The Tribunal held that the transcript noting that the respondent said "yes" and acknowledged the post trade closing balance was contrary to the voice recording wherein the respondent appeared to have expressed surprise when he was heard to say "Awh" in the conversation. The Tribunal found that on the basis of voluminous transactions executed on 31.10.2013 such a high volume of the trades evidenced a "frenzy, senseless, irresponsible execution of trades". The Tribunal found that the approach of the respondent was naive, simplistic, negligent and lacked normal prudence. The Tribunal found that the sole intention of unfairly earning brokerage at the cost of the respondent was in utter disregard to the responsibility of the appellant in safeguarding the interests of their clients.
12. In the aforesaid facts and circumstances the Tribunal set aside the award of the Sole Arbitrator and held that the appellant was solely responsible for the losses aggregating to Rs.17,78,041.03 which had arisen in respect of the trades executed on 31.10.2013. The Tribunal further held that the losses were to be borne solely by the appellant and the entries on this account ought to be reversed in the accounts of the appellant. After giving due adjustment, the appellant was directed to make payment of a 8 sum of Rs.9,89,405.91 to the respondent with 15% interest p.a. from the date of the arbitral award passed by the Tribunal.
13. Being aggrieved by the award dated 17.10.2014 passed by the Tribunal, the appellant filed an application under Section 34 of the Act and primarily took the grounds that (a) the impugned award was in conflict with the fundamental policy of Indian Law; (b) the impugned award was in contravention to the public policy of Indian Law; (c) the Tribunal in passing the impugned award acted in excess of jurisdiction; (d) the call logs evidencing the conversation between the respondent and the employee of the appellant viewed along with the fact that the respondent did not raise any immediate objection and this was the consistent practice followed by the parties for more than three months which demonstrated that there could have been no dispute as to the transactions which had taken place on 31.10.2013; (e) the findings of the Tribunal on the interpretation of the transcript wherein it has noted that the respondent said "yes" on being informed of the post trade confirmations and the recording wherein the respondent mentioned "Awh" was an expression of surprise and was contrary and erroneous to the totality of the evidence on record and contrary to law; and (f) the Tribunal ignored the fact that the respondent had in acknowledgment of his liability made a payment of Rs.5 lakhs towards meeting its debit balance caused on the date of impugned transactions. In brief, the Tribunal ignored the previous dealings that evidenced the consistent course of conduct of the parties.
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14. By the impugned order, the Learned Judge dismissed the application filed by the appellant under Section 34 on the ground that the scope of interference by the Courts with regard to arbitral awards is limited. The Learned District Judge held that the Court at this stage does not exercise Appellate jurisdiction nor can it reassess or re-appreciate the evidence and examine the sufficiency or otherwise of the evidence. The Learned Judge held that the onus of proving that the respondent gave instructions squarely rests on the appellant and that the appellant had failed to discharge the onus. The Learned Judge did not give any weight to the fact that a cheque of Rs.5,00,000/- had been paid by the respondent on 31.10.2013 nor did the Learned Judge found this to be a part-payment made by the respondent towards its debit balance.
15. Counsel appearing on behalf of the appellant challenged the impugned award on the ground that the same was not in compliance with either statute or precedent. He submitted that the impugned award fails to take into consideration materials on record and ignores vital evidence. He submitted that the award was such that no reasonable or prudent person could have passed the same. He submitted that the impugned award falls short of the Wednesbury principles of reasonableness. He submitted that the award is contrary to the basic notions of justice. He submitted that the award is contrary to the fundamental policy of Indian Law and to the public policy of India. He assailed the impugned order on the ground that the Learned Judge erred both in law and on facts.
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16. He placed strong reliance on the decisions reported in ONGC Ltd. vs. Saw Pipes Ltd. [2003 (5) SCC 705], MBL Infrastructures Limited vs. Ircon International Limited [2016 SCC Online Cal 7747], Associated Builders vs. Delhi Development Authority [2015 (3) SCC 49], MMTC Limited vs. Vedanta Limited [2019 SCC Online SC 220], Prysmian Cavi E Sistemi vs. Vijay Karia [2019 SCC Online Bom 19], ONGC vs. Western Geco [(2014) 9 SCC 263], Commissioner of Customs, Mumbai vs. Virgo Steels, Bombay and Another [2002 (4) SCC 316] and Munithimmalah vs. State of Karnataka & Others [(2002) 4 SCC 326] which discuss the scope and ambit of section 34 of the Act. He further submitted that the Tribunal misconstrued and misinterpreted the evidence on record and erred in passing the impugned award. He submitted that the Tribunal placed undue reliance on the word "awh" and ignored the prior "yes" whereby the respondent confirmed each of the individual transactions made on 31.10.2013. He further submitted that there was no explanation given by the respondent for the deposit of Rs.5,00,000/- made after the impugned trades had been executed.
17. Counsel on behalf of the respondent contended that the appellant had not furnished records relating to pre-trade instructions when asked to do so by the Tribunal. The Tribunal has taken into account all the evidence presented by the parties and the aspect of the respondent depositing Rs. 5,00,000/- was also considered. The Tribunal has passed a reasoned award. The impugned award was arrived at after appreciating the entire gamut of evidence presented before the Tribunal. He also submitted that, the scope of 11 interference by a Court under section 34 of the Act is limited and an award ought not to be interfered with on the ground re-appreciation of the evidence. He placed reliance in this context on MMTC Ltd v. Vedanta Ltd (Civil Appeal No. 1862 of 2014) (paragraph 11). As such, he submitted that there was no error in the approach of the Learned Single Judge.
18. At the outset, Section 34 (2)(b)(ii) of the Act is extracted hereinbelow:
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).
(b) the Court finds that-
(ii) the arbitral award is in conflict with the public policy of India. [Explanation - For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, if,-
(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.
12Explanation 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.]
19. The aforesaid provision has been the subject matter of numerous judicial pronouncements. In a recent decision of the Hon'ble Supreme Court of India in Associated Builders vs. Delhi Development Authority, (2015) 3 SCC 49 after a complete review of all the authorities, the heads of public policy of India were enumerated as follows:
(a) fundamental policy of Indian Law which encompasses:
(i) compliance with statute and judicial precedent
(ii) need for judicial approach
(iii) natural justice compliance
(iv)Wednesburry unreasonableness
(b) the interest of India
(c) justice or morality
(d) patent illegality.13
20. In Associated Builders a note of caution was also given by the Hon'ble Supreme Court in that:
"A possible view by the arbitrator on facts has 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. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score [ Very often an arbitrator is a lay person not necessarily trained in law. Lord Mansfield, a famous English Judge, once advised a high military officer in Jamaica who needed to act as a Judge as follows:"General, you have a sound head, and a good heart; take courage and you will do very well, in your occupation, in a court of equity. My advice is, to make your decrees as your head and your heart dictate, to hear both sides patiently, to decide with firmness in the best manner you can; but be careful not to assign your reasons, since your determination may be substantially right, although your reasons may be very bad, or essentially wrong".It is very important to bear this in mind when awards of lay arbitrators are challenged.] . Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts."
21. At the outset we are of the view that the approach adopted by the Learned Trial Court in passing the impugned order is so harsh that if it were to be held to be the true and correct approach no award would ever be interfered with. Moreover, there are no reasons recorded in the impugned order dealing with the facts and circumstances of the case. We are of the view that, the Learned Trial Judge erred in his appreciation of the scope, purport an ambit of Section 34 of the said Act.
22. We are also of the view that, in passing the impugned award the Tribunal erred in its appreciation of both the law and the facts. It is an 14 admitted position that both the appellant and the respondent had been frequently trading for more than a period of three months and there was a consistent course of dealings by and between them. As Lord Reid speaking for the House of Lords said in McCutcheon vs. David Mac Brayan Limited reported in [1964] 1 ALL.E.R 430, "the judicial task is not to discover the actual intention of each party, it is to decide what each party was reasonably entitled to conclude from the attitude of the other". This principle has stood the test of time and has been followed consistently by the English Courts in British Via Corporation Limited vs. Switch Grant Private Limited [1974] 1 ALL.E.R 1059 and Hollier vs. Rambler Motors (AMC) Limited [1972]1 All E.R. 399.
23. We are also of the view that pre-trade instruction in writing was made necessary and mandatory only by virtue of a Circular dated 22.09.2017. Prior thereto, the governing clause between the parties was clause 3.4.1 which provides as follows:
"Trading members shall ensure that appropriate confirmed order instructions are obtained from the constituents before placement of an order on the NEAT system and shall keep relevant records or documents of the same and of the completion or otherwise of these orders thereof."
24. In this context it is pertinent to mention that, Clause 13 of the Rights and Obligations of the Stock Brokers and Clients which had been executed, confirmed and consistently acted upon by and between the appellant and respondent provides as follows:
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"The client shall give any order for buy or sell of a security/derivatives contract in writing or in such form or manner, as may be mutually agreed between the client and the stock broker. The stock broker shall ensure to place orders and execute the trades of the client, only in the Unique Client Code assigned to that client."
(emphasis supplied)
25. In view of the aforesaid, the inescapable conclusion is that confirmation in writing was neither necessary nor mandatory under the applicable laws and the contract governing the parties at the appropriate stage when the impugned transactions had occurred. It would also be evident from the transactions and the course of the conduct and dealings between the parties, that the parties consistently followed a particular mechanism in their dealings. The respondent made gains under the same mechanism and duly appropriated the same. It is only when he made severe losses on 31.10.2013 that he challenged the transactions which had occurred on 31.10.2013. We are of the view that there is a whole body of evidence which is to be found from the morning phone calls which the call records show (at page 178), confirmatory SMS messages sent after the transactions (at page 155 to 162), electronic confirmation note on that date (at page 119 to 151) and the phone call on the evening of 31.10.2013 of which there is a transcript (at page 174-177) which have been ignored by the Tribunal in passing the impugned award. The cumulative effect upon a reasonable appreciation of the whole evidence leads to the only conclusion that the respondent had authorized the impugned transactions on 31.10.2013.
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26. We are of the view that, it was an admitted position that both parties were acting at arm's length. There was no compulsion of any kind whatsoever which warranted the respondent to trade in such a highly speculative and dangerous form of the securities market i.e. the derivatives segment. The respondent did it out of his own free volition. Additionally, there is a consistent course of conduct which had taken place by and between the parties ever since the respondent opened his account on 28.08.2013. There were transactions between 30.08.2013 to 31.10.2013 which were all executed in the same mode and manner. The exact same mechanism had been repeatedly followed. There were several instances where the benefit of the transactions had been taken by the respondent which will be evident from the ledger account maintained by and between the parties. It is only when the impugned transactions which were executed on 31.10.2013 and had created a huge debit balance that the respondent chose to dispute and challenge the same and that even after a period of 21 days.
27. We find force in the submission of the appellant that the Tribunal chose to ignore all the transactions which were carried out in the same mode, procedure and mechanism out of which the respondent had also made profits. All such transactions were unanimously and unambiguously accepted and confirmed and adopted by the respondent. This aspect of the matter has also been ignored. On 31.10.2013, the respondent had, after the impugned transactions which had taken place deposited a cheque of Rs.5,00,000/- with the appellant. The respondent sought to contend that 17 this was made as payment for future transactions. The burden of proving this was squarely on the respondent. The respondent failed to adduce any evidence whatsoever to prove that the money was paid for future transactions. In fact, on that date there was a credit balance already reflecting of approximately Rs.5,01,066.95/- in favour of the respondent duly shown in the books of accounts of the appellant. Accordingly, we find force in the findings of the Sole Arbitrator in the first award that "the part payment of Rs.5,00,000/- could only have been made towards adjustment of the outstanding debit balance". Had the trades not been executed as per the instructions of the respondent, he would never have deposited Rs.5,00,000/- and would have in fact made a complaint contemporaneously regarding the unauthorised trades. On the contrary, the respondent waited for a period for more than 21 days, before raising any dispute in respect of the transaction which had occurred on 31.10.2013. This part of the evidence has been totally ignored by the Tribunal in passing the impugned award.
28. Lastly, we are of the view that the Tribunal has entirely misconstrued and misinterpreted the evidence based on the confirmatory telephone exchange made in the evening of 31.10.2013, a transcript whereof had been adduced in evidence before Tribunal. The explanation that the expression "awh" cannot by any stretch of imagination be taken to be a dispute of the transactions on that date. In fact, the emphasis placed on word "awh" by the Tribunal ignores and glosses over the prior repeated "yes" whereby the respondent separately confirmed that on 31.10.2013 the respondent had entered into each of the individual transactions which he subsequently 18 sought to impugn including the two trades that resulted in the majority of the losses. In this connection, it is relevant to set out the entire transcript of the post trade conversation between the parties.
"A: Hello.
R: Yes Tilakbabu. Calling from Nirmal Bang. A. Yes tell.
R: SLT 01854 in Tilak Bachar's code this is the trade confirmation call for 31-10-2013 in equity segment.
A: Yes.
R. Today sir you have bought SBI October contract future 31500 quantity at 1752.48 and have sold at 1752.39 selling average. A: Yes.
R: SBI 1750 call option October contract 24,000 you have bought at 48.13 and have sold 24,000 at 9.79 selling average. A: Yes.
R: SBI 1800 call you have bought October contract 60,000 at 14.31 and have sold 60,000 at 1.33 selling average. A: Yes.
R: Reliance 900 call you have bought 1000 October contract at 90 paisa and have sold 1000 at Rs. 1.65.
A: Yes.
R: Nifty 6300 call October contract 2000 you have bought at 4.10 and sold 2000 at 3.60 selling average.
A: Yes.
R: L&T October contract call 1000 you have bought 1125 at 13 paisa and have sold 1125 at 1.85 paisa.
A: Yes.
R: JSW Steel 880 call option October contract 1000 you have bought at 28 paisa and have sold 1000 at 1.15 paisa. A: Yes.
R: Financial Tech October contract 220 call 2000 you have bought at 44 paisa and have sold 2000 at 40 paisa. A: Yes.
R: Financial Tech October contract 140 put 2000 you have bought at 33 paisa and have sold 2000 at 46 paisa. A: Yes.
R: Financial Tech October contract 200 call 2000 you have bought at 86 paise and have sold 2000 at 1.75 paise. A: Yes.
R. Bharti Airtel 370 call October contract 4000 bought at 1.50 and have sold at 2.27.
A: Yes.
R: Bank of Baroda future October contract 5500 you have bought at 604.65 and have sold 5500 quantity at 609.46. A: Yes.
R: Bank of Baroda October contract 600 call option 2500 bought at 10.50 and have sold at 4.52 and SBI 8000 quantity bought in cash at 1745.04 and have sold 8000 quantity at 1745 selling average in cash today on 31-10- 2013. Is it OK sir?
A: Can't you tell the ledger balance? R: Yes I am telling. Upto date trades are all confirmed right? A: Yes.
R: Thank you so much sire. Your balance is 12,88,635.12 debit today's closing. Is it OK sir?19
A: 12 lacs?
R: 12,88,63.12 debit today's closing. A: Credit?
R: Debit. 12,88,63.12 debit today's closing A: Yes.
R: Is it OK sir?
A: Yes.
R: Thank you sir."
(emphasis added)
29. The Tribunal, in its discussion on the disparity between the audio recording and the transcript, was referring to the last and second-last "yes" answered by the respondent. On the basis of an alleged inconsistency, it held that the claim of the appellant that the respondent had confirmed the closing balance was not correct. The effect of this reasoning was that since the respondent had not confirmed the closing balance, it could not be said that the respondent had given pre-trade instructions for these trades. However, in only dealing with the aspect of the closing balance and the alleged inconsistency the Tribunal failed to take into consideration the other aspects of the transcript which were also materially relevant. The two trades which had incurred the significant losses were the "SBI 1750 call option October contract" and "SBI 1800 call October contract" trades. These two trades wiped out all the gains that the respondent had made in the other trades and were primarily responsible for the debit balance. The respondent has answered "Yes" and confirmed that both these trades had indeed been carried out under his instructions. Additionally, when the employee of the appellant again put to him the question - "Upto date trades are all confirmed right?" - to which the respondent again answered "Yes".
30. These confirmations were clear, unequivocal and unambiguous in nature. The Tribunal did not note any discrepancy in these answers. Even if there was a discrepancy in whether the respondent said "Yes" to being 20 informed that there was a debit balance, it would not detract from the respondent's confirmations to each of the individual trades executed on his behalf, including the loss making trades, and his further confirmation a second time around. At paragraph 31 of the decision in Associate Builders v. DDA (supra), it is stated that it is settled law that where an Arbitral Tribunal "ignores vital evidence in arriving at its decision" such decision would necessarily be perverse. The confirmations to the two loss-making trades as well as the subsequent affirmation of the trades were both vital evidence that the Tribunal ought to have dealt with in arriving at its decision.
31. In view of the aforesaid, we are of the view that the Tribunal in passing the impugned award perversely committed palpable and overriding errors. The Tribunal forgot and ignored and misconstrued evidence which vitally affected the outcome of its conclusions. In interpreting the transcript of the telephonic conversation on 31.10.2013, as well as considering the reason for payment of Rs.5,00,000/- the approach of the Tribunal was ex facie arbitrary and capricious. The view taken by the Tribunal on the available evidence was neither possible nor plausible. We are fully aware that the Tribunal is the ultimate master of the quality and quantity of the evidence to be relied upon when it delivers the arbitral award. We are equally aware that an award based on little evidence or on evidence which does not measure up in quality to a legally trained mind would not be held to be invalid on this score. However, notwithstanding these salutary and well settled principles cautioning Courts before interfering with an award, we are of the view that the impugned award is so perverse and so irrational that no reasonable 21 person could have arrived at the same. The impugned award ignores vital evidence as well as takes into account irrelevant considerations. More importantly the impugned award ignores the consistent course of conduct and dealings between the parties which is so fundamental to commercial transactions of this nature.
32. We are of the view that the explanation of the respondent towards payment of Rs.5,00,000/- to the appellant, is so outrageous that it defies logic and suffers from the vice of irrationality and makes the impugned award, according to us unacceptable and perverse in law. Similar views can be expressed in respect of the explanations offered by the respondent to the telephonic conversation on 31.10.2013 confirming the impugned transactions. We are fully aware that an award cannot be reviewed on merits. However, the reasoning of the Tribunal falls miserably short of the standard of reasonableness if tested on the touchstone of the Wednesbury principles.
33. We are also of the view that in 2013, when the impugned transactions had occurred there was no requirement of pre-contract confirmations being in writing. It was only in 2017 after the coming into force of the Circular dated 26.09.2017 being CIR/MO/MIRSD2/CIR/P/2017/108 that pre- contract confirmations in writing were made mandatory. This ground also amounts to a contravention of the substantive law of India and warrants interference with the impugned award. Such patent violations of the law, on the face of it could not be in public interest. For the aforesaid reasons we are of the view that the Tribunal in upsetting the award passed by the Sole 22 Arbitrator misdirected itself in drawing erroneous inferences in the true and correct facts and circumstances of the case. Such findings of the Tribunal are in our view ex-facie unfair, unreasonable, perverse and go to the root of the matter.
34. In the facts and circumstances aforesaid, we set aside the impugned order and the impugned award dated 17.10.2014 and restore the award dated 18.04.2014 passed by the Sole Arbitrator and direct that the respondent shall pay an amount of Rs.7,19,589.07 to the appellant with interest @ 8 % p.a. from the date of the first award i.e.18.04.2014 till date.
35. In view of the above, the instant appeal stands allowed and the connected CAN No.11859 of 2017 is also disposed off.
I agree,
(Soumen Sen, J.) (Ravi Krishan Kapur, J.)