Delhi District Court
Smifs Ltd vs Hare Ram Jha on 21 March, 2022
In the Court of Shri Sanjiv Jain, District Judge,
(Commercial Court-03), Patiala House Courts New Delhi
OMP (Comm) No. 78/19
SMIFS Ltd
4, Lee Road, Vaibhav, 5th Floor
Kolkata- 700020,
West Bengal ... Petitioner
versus
Hare Ram Jha
A-2/572, Gali no. 27,
South Gamri,
Delhi-110053 .... Respondent
Date of institution : 26.04.2019 Date of reserving judgment : 21.03.2022 Date of decision : 21.03.2022 JUDGME NT
1. This petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter called the 'Act') challenges the award dated 23.01.2019 passed by the Appellate Arbitral Panel comprising of Justice Sh. V.S Aggarwal (Retd.), Sh. R.P Agarwal and Ms. Malini Bansal whereby the appeal filed by the OMP (Comm) No. 78/2019 Page No.1 of 26 petitioner against the award dated 26.09.2018 allowing the claim of the respondent/applicant for Rs. 5,36,105/-, was dismissed.
Brief facts:
2. The facts relevant for disposal of this petition are that the respondent in November, 2017, had approached the petitioner, a stock broking firm, for opening a Trading cum Demat Account.
He submitted the papers including the bank details in support of his sound financial capability. He opted to trade in capital market and derivatives market segment. He declared his income ranging from Rs. 5.0 lakhs to Rs. 10.0 lakhs in KYC form. He also provided demat holding and bank statements as proofs of his financial credentials and his eligibility to trade in this segment. He also had prior knowledge and experience in the securities market. On the submission and limitation made by the respondent, the petitioner registered the respondent as a client on 27.11.2017. He was explained the inherent risk involved in the securities/derivative market. The petitioner allotted him a Unique Client Code being UCC no. 60328 and allowed him to carry the trades from its platform w.e.f. 29.11.2017. It is stated that the respondent carried extensive trade from its UCC through it in regular manner on 08.02.2018, 12.02.2018, 01.03.2018, 22.03.2018, 28.03.2018, 12.04.2018, 19.04.2018, 26.04.2018, 03.05.2018, 10.05.2018 and 24.05.2018 at his own will. It is also stated that the petitioner in OMP (Comm) No. 78/2019 Page No.2 of 26 compliance of the Rules and Regulations of the NSE, took all the initiative for confirming trades executed by the respondent against which, he never raised any dispute. The respondent issued the cheques favouring the petitioner to fulfil his financial obligations and also received the funds towards settlements of pay-outs from time to time. It is stated that in regular course of business, the respondent was in routine correspondence with the petitioner regarding his trade activities, thus, was regularly attached with the petitioner.
3. It is stated that in the routine course of business, the respondent undertook position in Bank Nifty Options on 24.05.2018 and incurred losses. On 25.05.2018, he acknowledged his financial obligations which arose due to his trading activities and requested the petitioner to clear his outstanding debits. He never raised any objections on any of the trades executed on his instructions including those on 24.05.2018 nor disputed his financial obligations with respect to the losses incurred by him on 24.05.2018.
4. It is alleged that on or about 14.06.2018, it received an information from the Investor Service Cell of NSE that the respondent has lodged a written complaint on 29.05.2018 disputing his trade dated 24.05.2018. It is stated that the respondent also filed an arbitration claim/application. The petitioner contested the complaint by giving replies and OMP (Comm) No. 78/2019 Page No.3 of 26 attending several meetings held by IGRP. On 25.08.2018, it filed its statement of defence in the arbitration case with all the annexures in relation to the deals executed by the respondent with proofs and thereafter, the arbitrator passed the award dated 26.09.2018 allowing the claim of the respondent.
5. On 24.10.2009, the petitioner filed an appeal before the appellate authority being Appeal A.M No. F & O/D-0026/2018 against the award alleging that the award was passed without considering the Circular No. SEBI/ HO/ MIRSD/ DOP1/CIR/P/2018/54 dated 22.03.2018 where it was stated that in case a broker fails to produce order placing evidences, other appropriate evidences like post trade confirmation by the client/receipt/payment of funds/securities by the client in respect of dispute trade etc. shall be considered.
6. The appellate authority vide award dated 22.01.2019 dismissed the appeal.
7. The petitioner challenged the order/award on appeal alleging that the order has been passed without application of mind solely placing reliance on the case, OMP No. 613 of 2014, titled, Angel Broking Pvt Ltd v/s Sharda Kapur & Ors without considering the fact that the said judgment was challenged before the Division Bench in FAO Nos. 435 of 2016 and 492 of 2016 and the Division Bench had modified the order vide OMP (Comm) No. 78/2019 Page No.4 of 26 order dated 09.05.2017. It is stated that the order dated 09.05.2017 has also been challenged by way of SLP (c) No. 24531-24532 of 2017 titled, Sharda Kapur v/s Angle Broking Limited which is pending adjudicaiton.
8. It is stated that pursuant to the dismissal of appeal, the stock exchange in violation of Clause 9 of the Circular No. CIR/MRD/DSA/24/2010 dated 11.08.2010 released the amount of claim confirmed by the award i.e. Rs. 5,36,105/- in favour of the respondent.
9. The petitioner challenged the award on various grounds interalia as under:
A. That the Appellate Arbitral Panel, decided the appeal by placing reliance on the decision in the case of OMP No. 613 of 2014, Angel Broking Private Limited v/s Sharda Kapur & Ors, decided on 27.05.2014 without considering the fact that said order was further challenged in FAOS No. 435 and 492 of 2016 and was decided vide order dated 09.05.2017 where it was held as under:
"12. In view of the above discussion, FAO No. 435/2016 is allowed and the relief's granted by the impugned judgment of interest and compensation as per paras 22 and 23 are set aside and quashed. FAO No. 492/2016 of Ms. Sharda Kapur will stand dismissed as neither the court below nor this court can grant the relief of return of the shares as is being prayed by Ms. Sharda Kapur and which relief though prayed for in the arbitration proceedings was denied and Ms. Sharda Kapur was only granted a money decree award."
It is stated that the said order is already under challenge in the SLP before the Supreme Court and therefore, dismissing of OMP (Comm) No. 78/2019 Page No.5 of 26 appeal on the basis of the same is wholly unsustainable and bad in law.
B. That the Appellant Arbitral Panel failed to appreciate that the petitioner had produced all the relevant documents showing that the respondent was always in touch with the petitioner regarding his course of business through mails written in English, thus, is well conversant with English language.
C. That the Appellate Arbitral Panel failed to appreciate that the respondent filed the claim as an after thought with an intention to cheat the petitioner to gain illegally avoiding his genuine financial obligations. It is stated that before IGRP, the respondent had failed to prove his claim which fact was not considered by the panel. It was specifically pleaded before the Panel with the statement of defence that it was the respondent who had placed all the orders and executed the trades through the platform of the petitioner.
D. That the Appellate Arbitral Panel did not apply its independent mind and dismissed the appeal placing reliance on the findings of the sole arbitrator without considering the evidence and the documents placed by it. It completely ignored the crucial findings of the arbitrator in para 8 of the award dated 26.09.2018. It is stated that the award was passed/appeal was dismissed without considering the Circular no. SEBI/ HO/ MIRSD/ DOP1/ CIR/P/2018/54 dated 22.03.2018 wherein it was stated that in case a broker fails to produce order placing evidences, then other appropriate evidences like post trade confirmation by client, receipt/payment of funds/securities by client in respect of dispute trade etc. shall also be considered. It is stated that in the given case none of the evidences given by the petitioner were considered while passing the impugned award.
E. That the Appellate Arbitral Panel failed to appreciate that since inception of his trading account, the respondent had carried out extensive trades on several dates and enjoyed the benefit without raising any disputes and chose to raise disputes only to the trade dated 24.05.2018, thus approached the tribunal with unclean hands and thus, the question of execution of trade dated 24.05.2018 by the petitioner without the knowledge of the respondent could not/did not arise at all. It is stated that the respondent never denied the receipt of the OMP (Comm) No. 78/2019 Page No.6 of 26 contract note of the trades moreover, through his email dated 25.05.2018, he had confirmed the receipt of the same and did not raise any dispute towards the trade dated 24.05.2018. He has specifically admitted his debit towards the said trade and proposed to pay the same after some time and thus, it could be said that the complaint was lodged after thought in an attempt to squeeze valuable consideration for his illegal financial gain. It is stated that respondent was active in the derivative trading segment since inception of his account with the petitioner.
F. That the Appellate Arbitral Panel failed to consider the statement of the petitioner that it had complied with each and every rules and regulations of NSE by laws and all the circulars issued from time to time by the SEBI in relation to stock unauthorized trade practices and passed the erroneous award without dealing with the objections raised by the petitioner during the arbitral proceedings. It grossly erred in placing selective reliance on the circulars published on several dates by SEBI as whole in part without any specific reason.
10. Notice of the petition was given to the respondent but despite service, he never appeared nor any reply was filed on his behalf. During pendency of this petition, the petitioner filed an application stating that it has undergone internal restructuring and its name has been changed from 'Stewart and Mackertich Wealth Management Ltd' to 'SMIFS Ltd' vide certificate of incorporation dated 21.11.2019 issued by the Ministry of Corporate Affairs. This court, vide order dated 21.09.2021, allowed the application.
11. The arbitral record was summoned.
OMP (Comm) No. 78/2019 Page No.7 of 2612. I have heard Ms. Pratiksha Sharma, ld. Counsel for the petitioner who also filed the written submissions.
13. Ld. Counsel for the petitioner reiterated as stated in the petition. Ld. Counsel contended that it is an admitted fact that the respondent never disputed the trades carried out by the trading member and it was only after the respondent/investor who suffered the loss filed this complaint which is an after thought with an ulterior motive to recover the losses from the trading member. He had sent a mail dated 25.08.2018 just after the day of disputed trade admitting that the trade was initiated by him, seeking time to pay the amount required to recover the losses. No dispute was raised in the said mail that the trade was carried out in an unauthorized manner/unilaterally but the arbitrator ignored this material piece of evidence and committed this fundamental error by allowing the claim of the respondent which was also upheld by the Appellate Arbitral Panel. Ld. Counsel referred the sequence of dates and events and submitted that from the facts on record, it is abundantly clear that the order for the disputed trade was placed by the respondent/investor himself in the regular course of trade. When the arbitrator held that no fault can be attributed to the petitioner/trading member, on what premises he attributed the loss to the petitioner. Ld. Counsel referred the case of Ssanyog Engineering and Construction Co. Ltd v/s National Highways Authority of India (NHAI), (2019) 15 SCC 131 to contend that OMP (Comm) No. 78/2019 Page No.8 of 26 the adjudicating authority must apply its mind which is the part of fundamental policy of Indian law and the decisions that fall short of the standards of reasonableness are open to challenge in a court of law. If on facts proved before the arbitrator, he fails to drawn inference which ought to have been drawn or if he has drawn an inference which on the face of it is untenable resulting in miscarriage of justice. The adjudication even when made by him that enjoys considerable latitude and play at the joints at making averred will be open to challenge and may be modified. Ld. Counsel argued that before initiating the arbitral proceedings, matter was investigated by the Investor Grievance Redressal Panel (IGRP) where the respondent failed to prove his claim. Ld. Counsel contended that the panel did not consider the documents placed by the petitioner which showed that the trade was carried out with the complete knowledge and consent of the respondent. Ld. Counsel referred Section 34 of Act and the case of Ssanyog Engineering and Construction Co. Ltd (supra), relied upon by Delhi High Court in Shiel Trade Venture Private Limited v. Samsung India Electronics Private Limited, 2019 SCC Online Del 1942 to contend that though failure to deal with every issue shall not render the award liable to be set aside; however, whether prejudice has been caused to either party since a material fact which goes to the root of the matter has been ignored and the award is foisted on one of the parties unilaterally; is a facet which merit indulgence under Section 34 of the Act. Ld. Counsel stated that had the fact of OMP (Comm) No. 78/2019 Page No.9 of 26 admission of initiation of trade by the respondent himself would have been considered by the panel, the said consideration would have altered the entire balance of the award and resultantly, its effect. Ld. Counsel also placed reliance on the cases, a) Ssanyong Engineering and Construction Co. Ltd (supra), b) Motilal Oswal Securities Ltd v/s Rakshak Kapoor, 2019 SCC Online Del 11438, c) Shiel Trade Venture Private Limited (supra), d) Jamila Millia Islamia v/s Airwaves Engineers Pvt Ltd, 2019 SCC Online Del 8369, e) Bharat Sanchar Nigam Ltd v/s Maharashtra Knowledge Corporation Ltd, 2019 SCC Online Del 8297, (f) HCL Infosystems Limited v/s Virgo Softech Limited, 2019 SCC Online Del 6565, (g) Angel Broking Pvt Ltd v/s Sharda Kapur, OMP- 613 of 2014, dated 27.05.2014, Angel Broking Pvt Ltd v/s Sharda Kapur, FAO Nos. 435 and 492 of 2016, dated 09.05.2014, Sharda Kapur v/s Angel Broking Ltd, SLP (Civil) 24531 of 2017, dated 03.10.2017, Sharda Kapur v.s Angel Broking Ltd. Pending before the Supreme Court of India, SLP (Civil) 24531 of 2017,
h) Hare Ram Jha v/s Escorts Securities Ltd, A.M.No. NSEDRO/22711/19-20/ISC/IGRP/ARB.
14. I have given my thoughtful consideration to the above contentions and perused the award/order, documents and the case laws (supra).
OMP (Comm) No. 78/2019 Page No.10 of 2615. Section 34 of the Arbitration and Conciliation Act reads as:
"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- I For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India only if the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81."
ii) It is in contravention with the fundamental policy of Indian law;
iii) It is in conflict with the most basic notions of morality or justice.
OMP (Comm) No. 78/2019 Page No.11 of 26Explanation-II- 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 reappreciation of evidence.
16. Normally, the general principles are that the decision of the Ar-
bitrator unless there is an error apparent on the face of the award which makes it unsustainable, is not to be set aside even if the court as a court of law would come to a different conclu- sion on the same facts. The court cannot reappraise the evi- dence and it is not open to the court to sit in appeal over the conclusion of the arbitrator. It is not open to the court to set aside a finding of fact arrived at by the arbitrator and only grounds on which the award can be cancelled are those men- tioned in the Arbitration Act. Where the arbitrator assigns co- gent grounds and sufficient reasons and no error of law or mis- conduct is cited, the award will not call for interference by the court in the exercise of the power vested in it.
17. In the case of Associate Builders v/s Delhi Development Au-
thority, (2015) 3 SCC 49, it was held that interference with an arbitral award is permissible only when the findings of the arbi- trator are arbitrary, capricious or perverse or when conscience OMP (Comm) No. 78/2019 Page No.12 of 26 of the Court is shocked or when illegality is not trivial but goes to the root of the matter. The arbitrator is ultimately a master of the quantity and quality of evidence while drawing the arbitral award. Patent illegality must go to the root of the matter and cannot be of trivial nature.
18. In Ssangyong Engineering & Construction Co. Ltd. vs. Na- tional Highways Authority of India Ltd. 2019 SCC OnLine SC 677, the Supreme Court has held that under Section 34 of the Act, a decision which is perverse while no longer being a ground for challenge under public policy of India but would certainly amount to a patent illegality appearing on the face of the award. A finding based on the documents taken behind the back of the parties by the arbitrator would also qualify as a de- cision based on no evidence inasmuch as such decision is not based on evidence led by the parties and therefore would also have to be characterized as perverse.
19. A perusal of the arbitral record and the award passed by the Sole Arbitrator dated 26.09.2018 reveals that the respondent had taken also these objections raised in the petition before the arbitrator interalia that the trading account was opened based on the application of Hare Ram Jha and full KYC was com- pleted; he had opted to trade in derivative market apart from the OMP (Comm) No. 78/2019 Page No.13 of 26 capital market by signing on the segment; his account was opened on 27.11.2017 and trading started on 04.01.2018; regu- lar intimations by way of SMSs, e-contract notes, account state- ment etc were sent; there was no challenge/dispute till the ill fated trade on 24.05.2018; regular pay-in/payouts were occur- ring in the entire period imploying the concents of trade; and he had acknowledged his financial obligations on 25.05.2018 (voice recording/email).
20. During the arbitral proceedings, voice recording submitted by the petitioner was also played and it was categorically observed by the Arbitrator that recording related only to the call on 25.05.2018 and in the mail dated 25.05.2018, it was basically requested that his shares may not be sold and instead the ac- count overdues be recovered as adjustment from future profits. It was held by the arbitrator that the interactions between the petitioner and respondent indicated that the agent of the peti- tioner was friendly with the respondent. He also discussed the trading pattern which commenced in January, 2018. He also discussed trade in cash market segment, IPO application and F & O occurred throughout the subsequent period. He held that initial F & O trades were of low value but increased steadily in quantum with passage of time. The trades using different strike rates in the same day started happening in later weeks, at times, OMP (Comm) No. 78/2019 Page No.14 of 26 with upto 3 strike rates. Trade complexity and risk levels thus went up relatively quickly in F & O overtime.
21. The arbitrator had also asked the petitioner for evidences of prior order placement records, SMS logs, call recordings etc as mandated by SEBI. He also referred NSE consolidated circular of 13th July, 2016, Future and Option Trading Regulations which clearly provided that the trading members shall ensure that appropriate confirmed order instructions are obtained from constituents before placement of an order in the NEAT system and shall keep relevant record or documents of the same. He also referred SEBI circular no. CIR/HO/MIRSD/CIR/P/2017/ 108 dated 26th September 2017 which provided that all brokers shall execute trades of clients only after keeping evidence of the client placing order in the form of a) physical records written and signed by the client, b) telephone recording, c) email from authorized email id, d) log of internet transactions, e) record of SMS messages, f) any other legally verifiable records. The cir- cular clearly provided that in case of dispute, burden of proof will be on the broker to produce the above records for the dis- puted trades and whenever the order instructions are received from clients through telephone, the stock broker shall mandato- rily use the telephone recording system to record instructions and maintain the telephone recordings as part of its record. There is another circular which has been referred by the arbitra-
OMP (Comm) No. 78/2019 Page No.15 of 26tor i.e. CIR/HO/MIRSD2/CIR/P/2017/124 dated 30th Novem- ber, 2017 interalia that normal minimum period for retaining such records shall be 3 years. In case of dispute, burden of proof will be on the broker to produce the above records for the disputed trades, however, for exceptional cases, such as techni- cal failure etc. where broker fails to produce order placing evi- dence, the broker shall justify with reasons for the same and thereafter, the post trade confirmations by client, receipt/pay- ment etc shall be considered.
22. The arbitrator after referring the circulars, again referred the tape recordings and held that these were the post trade commu- nication calls, no order placement call recording was produced by the petitioner nor was any alternate order placement proof was provided by the petitioner. Further, the post trade call recordings of various dates did not create an impression that the respondent was in specific knowledge of the deal since he was often heard to seek meaning of the deals/implications of the deals etc. The arbitrator has given the observations that call recording of 24.05.2018 (the trade dispute date) was found to be truncated. None of the calls evidenced any serious objection existing on the part of the respondent. He observed that though petitioner made a series of attempts to justify the adequacy of the documentation but also admitted that it had no records of prior order placements despite SEBI regulations. Although the OMP (Comm) No. 78/2019 Page No.16 of 26 petitioner tried to justify that the Branch Manager was a close friend of the respondent by taking protection provided by the relaxations granted in the circular dated 30.09.2017 but the ar- bitrator concluded that admittedly, the respondent was not a novice innocent of trade markets but he did not have a high risk appetite as evident from his trades in the cash market segment which were in low risk well trading stocks and IPO applica- tions. He was unaware of open ended implications of F & O trades. He referred the SEBI Rules and held that the petitioner had defaulted on this aspect as it permitted its Branch Man- agers/traders to violate the mandatory SEBI prescriptions. He also considered the contentions of the respondent on the aspect of relaxations made in the circular dated 30.11.2017 and held that the basic impression which can be gathered from the evi- dence that a form of informal portfolio management may well have been in place which resulted in sudden but huge losses due to unfavourable market movements but SEBI guidelines do not permit such type of stock broking activity. The trading can be considered to have been validly done if it backed by specific recorded prior orders and the absence thereof makes the dis- puted trades unauthorized.
23. The petitioner had raised the similar objections before the Ap- pellate Arbitrator Panel comprising of three arbitrators. The panel had referred the arbitral award dated 26.09.2018, circular OMP (Comm) No. 78/2019 Page No.17 of 26 of NSE dated 13.07.2016, Bye-laws and regulations of SEBI/NSE 31.1.17, 3.4, 4.4.1, 4.4.3, 4.4.4, 4.5.3, 6.1.4 and held that the regulations of NSE (F & O Segment) clearly indicate the transactions have to be executed only on the instructions of the client and no discretion whatsoever shall vest with the member to execute any transaction in the account of the client. The regulations even require the member to obtain appropriate order prior to execution of trade and to maintain the complete record of orders placed by the clients. The regulation even pro- hibits the member not to make recommendation to the client for sale/purchase of derivative contract unless the member has rea- sonable ground to believe that such recommendation is suitable for the client. It was held that relationship of client and trading member is fiduciary relationship and the clients act as a princi- pal and the trading member being the agent. The execution of the orders by the member on the instruction of the clients has its origin to maintain the transparency in the functioning in the market so as to protect the interest of the client and manipula- tion by the member and secondly, the funds belong to the clients and the client is being given complete domination to trade in the way, the client desires. Even where the client de- sires to have benefit of the professional knowledge and skills of the members, a recourse is available to the member where a member can act as a portfolio Manager.
OMP (Comm) No. 78/2019 Page No.18 of 2624. The Panel rejected the contention of the petitioner/appellant that any such orders could be placed by the respondent. It was held that petitioner/appellant did not produce any such record of placing of the order in writing by the respondent or by tele- phonic conversation recorded or any telephone calls having been made at the relevant time. There are no SMS messages even though, the regulations require otherwise. So, it cannot be said that such orders had been placed by the respondent. Qua the contention of the petitioner/appellant that there was a recorded conversation between the parties which showed that respondent was aware of the transactions and that the contract notes were sent with email messages separately, the panel has referred the observations made by the Sole Arbitrator who had heard the same in the presence of the parties and found the same truncated. It was held by the panel that in the face of such a truncated conversation, it can be stated that what is being stated, can hardly be relied upon. The panel also referred the case of Angel Broking Pvt Ltd v/s Sharda Kapur & Ors, OMP- 613 of 2014, decided on 27.05.2014 where Delhi High Court considered somewhat a similar controversy and held as under:
" The petitioner has not been able to assail the aforesaid findngs of the Appellate Tribunal. The submission of learned counsel for the petitioner is that the recorded con- versations produced before the Arbitral Tribunal and the Appellate Tribunal showed that the respondent/claimant OMP (Comm) No. 78/2019 Page No.19 of 26 was aware of the debits made to her accounts, and that the respondent/claimant has given confirmations in re- spect of F & O transactions. In this regard, he has placed reliance on the conversation of 27.04.2012. The aforesaid confirmations, in any event, do not amount to placing of orders by the respondent/claimant on the petitioner in the F and O segment. The basic issue is that the petitioner could not have undertaken F and O transactions on its own from the account of the respondent/claimant, and then seek confirmation of the same. The Appellate Tri- bunal has also taken note of the fact that the petitioner sought to produce only selective recordings and withhold the other recordings of conversations undertaken with the respondent/appellant. I, therefore, find no merit in the aforesaid submission of learned counsel for petitioner."
25. The panel applied the ratio decindi of the judgment and dis- missed the appeal.
26. The petitioner in the objection has alleged that the said order was challenged in FAOS No. 435 and 492 of 2016 vide order dated 09.05.2017 but on perusal, I find that there was no chal- lenge to the order of OMP-613 of 2014 dated 27.05.2014. In the case, it was held that the court while passing the impugned judgment could not have granted interest and compensation which was granted in as much as this would result on the court modifying the award by granting reliefs which were not granted OMP (Comm) No. 78/2019 Page No.20 of 26 by the award. The SLP is against the order in FAOS No. 435 and 492 of 2016 and not against the order in the case of OMP- 613 of 2014 dated 27.05.2014.
27. In the instant case, the sole arbitrator and the panel had appre- ciated in detail all the relevant documents produced by the par- ties and referred the SEBI Circulars and the Guidelines issued from time to time and nothing can be inferred from the award/order that the respondent filed the claim as an after- thought to cheat the petitioner to gain illegally avoiding his fi- nancial obligations. It may be true that before IGRP the respon- dent had failed to prove his claim but from this, it cannot be said that the findings of the Arbitrator or the Panel are based on no evidence/material or they have not applied their mind or have acted in a manner which no person of ordinary prudence would have acted. In this case, all the relevant circulars were considered and thereafter, the award was passed/upheld. The objections which have been raised in the present petition have been discussed in detail by sole arbitrator/panel and thereafter the award was passed. The court, in the guise of the petition un- der Section 34 of the Act cannot appraise/reappraise the evi- dence.
OMP (Comm) No. 78/2019 Page No.21 of 2628. It was held in the case of State Trading Corporation of India Ltd. v. Teopfer International Asia PTE Ltd FAO (OS) 242/2014:
6. Section 34 proceeding, which in essence is the remedy of annulment, cannot be used by one party to convert the same into a remedy of appeal. In our view, mere erroneous/wrong finding of fact by the Arbitral Tribunal or even an erroneous interpretation of documents/evidence, is non-interferable under Section 34 and if such interference is done by the Court, the same will set at naught the whole purpose of amendment of the Arbitration Act.
7. Arbitration is intended to be a faster and less expensive alternative to the courts. If this is one's motivation and expectation, then the finality of the arbitral award is very important. The remedy provided in Section 34 against an arbitral award is in no sense an appeal. The legislative intent in Section 34 was to make the result of the annulment procedure prescribed therein potentially different from that in an appeal. In appeal, the decision under review not only may be confirmed, but may also be modified. In annulment, on the other hand, the decision under review may either be invalidated in whole or in part or be left to stand if the plea for annulment is rejected. Annulment operates to negate a decision, in whole or in part, thereby depriving the portion negated of legal force and returning the parties, as to that portion, to their original litigating positions. Annulment can void, while appeal can modify. Section 34 is found to provide for annulment only on the grounds affecting legitimacy of the process of decision as distinct from substantive correctness of the contents of the decision. A remedy of appeal focuses upon both legitimacy of the process of decision and the substantive correctness of the decision. Annulment, in the case of arbitration focuses not on the correctness of decision but rather more narrowly considers whether, regardless of errors in application of law or determination of facts, the decision resulted from a legitimate process.
It is not to be forgotten that the courts deal with and rule on disputes where monies and properties of real persons are at stake. The courts do not decide in abstract. Thus, when in one OMP (Comm) No. 78/2019 Page No.22 of 26 case the courts interfere with the arbitral award for the reason of the same not rendering to the litigant what the courts would have granted to him, the courts find it difficult in the very next case, though under the new Act, to apply different parameters.
12. The courts have thereafter been inundated with challenges to the award. The objections to the award are drafted like appeals to the courts; grounds are urged to show each and every finding of the arbitrator to be either contrary to the record or to the law and thus pleaded to be against the Public Policy of India. As aforesaid, the courts are vested with a difficult task of simultaneously dealing with such objections under two diverse provisions and which has led to the courts in some instances dealing with awards under the new Act on the parameters under the old Act.
Reference was made of the case Corporation Vs. Central Warehousing Corporation (2009) 5 SCC 142 and P.R. Shah, Shares & Stock Broker (P) Ltd. V. B.H.H. Securities (P) Ltd. (2012) 1 SCC 594, where it was held that a Court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or reappreciating evidence and an award can be challenged only under the grounds mentioned in Section 34(2) and in the absence of any such ground it is not possible to reexamine the facts to find out whether a different decision can be arrived at. A Division Bench of this Court also recently in National Highways Authority of India Vs. M/s. Lanco Infratech Ltd. MANU/DE/0609/2014 held that an interpretation placed on the contract is a matter within the jurisdiction of the Arbitral Tribunal and even if an error exists, this is an error of fact within jurisdiction, which cannot be reappreciated by the Court under Section 34 of the Act. The Supreme Court in Steel Authority of India Ltd. Vs. Gupta Brother Steel Tubes Ltd. (2009) 10 SCC 63 even while dealing with a challenge to an arbitral award under the 1940 Act reiterated that an error by the Arbitrator relatable to interpretation of contract is an error within his jurisdiction and is not an error on the face of the award and is not amenable to correction by the Courts. It was further held that the legal position is no more res integra that the Arbitrator having been made the final Arbiter of resolution of dispute between the parties, the award is not open to OMP (Comm) No. 78/2019 Page No.23 of 26 challenge on the ground that Arbitrator has reached at a wrong conclusion.
18. If we were to start analyzing the contract between the parties and interpreting the terms and conditions thereof and which will necessarily have to be in the light of the contemporaneous conduct of the parties, it will be nothing else than sitting in appeal over the arbitral award and which is not permissible."
Conclusion:-
29. Now to sum up, in the instant case, most of the grounds raised by the petitioner to challenge the award/order are factual in nature which have been already considered and adjudicated in the impugned award. It is outside the scope of Section 34 of the Act to reappreciate the entire evidence and come to conclu-
sion because such an approach would defeat the purpose of ar- bitration proceedings. It has been consistently held 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. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ulti- mate master of the quality and quantity of evidence to be relied upon when he delivers his arbitral award. Once, it is found that the arbitrator's approach is not arbitrary or capricious, then he is the last word on facts. (P.R Shah, Shares & Stock Brokers (P) Ltd v. B.H.H Securities (P) Ltd. [(2012) 1 SCC 594).
OMP (Comm) No. 78/2019 Page No.24 of 2630. A perusal of the arbitral award/order shows that the arbi-
trator/panel has examined all the relevant aspects of the agree- ment, the correspondences made by the parties, the terms of the contract and the conduct of the parties. It has remained inside the parameters of the contract and has construed the provisions of the contract. The petitioner has failed to establish that the panel has travelled beyond the terms of the contract.
31. Having examined the various contentions of the petitioner on the touchstone of the parameters of interference as explicitly laid down by the Supreme Court in several judgments referred to above, I am of the view that the impugned Award/Order does not suffer from any infirmity or error apparent on the face of record. It is not for this Court to sit in appraisal of the evidence led before the Arbitrator/Panel and this Court will not open itself to the task of being a judge on the evidence placed before the Arbitrator/Panel which was subject matter of dispute. In the present case, the Arbitrator/Panel has deliberated on the issues under reference which were within his/their competence and as per the agreement entered into between the parties. There are no allegations against the Arbitrator/Panel of misconduct nor of having misconducted the proceedings which have either been specifically alleged by the petitioner or established. The Arbitrator/Panel has duly explained the reasons for arriving at his/its decisions. There is OMP (Comm) No. 78/2019 Page No.25 of 26 nothing to indicate that award/order is in conflict with the basic notions of justice and the fair play and fundamental policy of Indian law or in contravention of the terms of the agreement or it lacks reasoning as pleaded in the petition.
32. For the aforesaid reasons, the impugned award/order dated 23.01.2019 is maintained and the petition is dismissed. No order as to costs. File be consigned to record room.
Announced in open court today i.e. 21st March, 2022 (Sanjiv Jain) District Judge (Commercial) - 03 Patiala House Courts, New Delhi OMP (Comm) No. 78/2019 Page No.26 of 26