Bombay High Court
Shilpa Stock Broker Pvt. Ltd vs Shravankumkar Banshraj Pandey on 20 June, 2012
Author: Anoop V. Mohta
Bench: Anoop V. Mohta
1 arbp342.09.sxw
ssm
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO. 342 OF 2009
Shilpa Stock Broker Pvt. Ltd.
A Company incorporated under the
Companies Act 1956, having its office
Address at 3rd Floor, Tamrind House,
Tamrind Lane, Fort, Mumbai-400 023 ......Petitioner.
Vs.
Shravankumkar Banshraj Pandey,
Adult, Indian inhabitant of mumbai
residing at 11, Divya Plaza, Gaurav
Garden Complex, B.P. Road,
Kandivali (West), Mumbai-400 067. ......Respondent.
Mr. Ajay Khandhar with Ms. U.K. Sahani i/by M/s. Ajay Khandhar &
Co. for the Petitioner.
Mr. D.P. Guchiya with Mr. P.K. Dubey for the Respondent.
CORAM :- ANOOP V. MOHTA, J.
JUDGMENT RESERVED ON :- 12 JUNE 2012.
JUDGMENT PRONOUNCED ON :- 20 JUNE 2012.
JUDGMENT:-
The Petitioner, the Stock Broker, has challenged the impugned award dated 28 July 2008 passed by the sole Arbitrator under the Rules and Regulations of National Stock Exchange of India Ltd., Mumbai (for short, NSEIL).
::: Downloaded on - 09/06/2013 18:41:12 :::2 arbp342.09.sxw ssm 2 The basic events are as under:-
The Petitioner is a member of NSEIL, and also member of the Bombay Stock Exchange (for short, BSE) having SEBI registration No. INF231057432. The Petitioner is a company registered under the Companies Act, 1956 carrying on business of shares and securities at both the exchanges.
3 The Respondent was a constituent of the Petitioner. On 15 October 2007, the Respondent opened an account with the Petitioner and signed the Member-Client-Agreement. The Petitioner allotted the Client Code No MU190 to the Respondent. The Respondent has carried out number of transactions through the Petitioner.
4 The Petitioner effected various transactions at the instructions of the Respondent at NSEIL and BSE. The Petitioner prepared and issued time to time e-Contract Notes to the Respondent. The Petitioner also issued physical Contract Notes to Respondent when requested by him.
The Petitioner had maintained running Ledger Accounts of the Respondent in their Books of Account in the ordinary and regular course of the business.
::: Downloaded on - 09/06/2013 18:41:12 :::3 arbp342.09.sxw ssm 5 On 22 January 2008, at the foot of ledger account an amount of Rs.11,45,520.44 were due and payable by the Respondent to the Petitioner.
6 In the month of March, 2008, the Respondent issued various cheques towards part payment to the Petitioner. The said cheques deposited in Petitioner's Bank for encashment in March 2008. The same were dishonoured by the Banker's of the Respondent for the reasons 'Funds Insufficient'.
7 On 1 April 2008, the Petitioner received letter from the Respondent's Advocate alleging after three months that false entries were made in his ledger account.
8 On 22 April 2008, the Petitioner had through their Advocate's replied to the Respondent's Advocates letter.
9 On 21 April 2008, the Petitioner filed Arbitration Reference A.M. No. F & O/ M-126/2008 before NSEIL, against the Respondent.
::: Downloaded on - 09/06/2013 18:41:12 :::4 arbp342.09.sxw ssm 10 On 28 July 2008, the Sole Arbitrator passed an award dismissing the claim of the Petitioner.
11 On 24 October 2008, being aggrieved by the said award, the Petitioner has filed the present petition and challenged the said award.
Hence, this petition.
The learned Arbitrator has observed that "There is no doubt that 12 the e-mail statement indicates the 2 emails sent on 14 th and 15th January, 2008". The Respondent having once not disputed the agreement, whereby agreed to accept and/or permit the Petitioner to forward the contract note through email i.e. digital contract notes and accordingly from time to time accepted/received the contract notes, all the trading shares and securities through the Petitioner, in my view, now cannot submit to say that the physical contract notes ought to have been delivered by the Petitioner of the transaction dated 14 th and 15th January 2008. No receipt of physical contract notes in view of the specific agreement clause and in view of proved practice as observed, cannot deny the obligation/transaction which took place on 14 th and 15th January, 2008 as per his instructions. The receipt and/or delivery of physical contract notes in no way even otherwise sufficient to ::: Downloaded on - 09/06/2013 18:41:12 ::: 5 arbp342.09.sxw ssm accept and/or deny the case and/or for the conclusion that the Respondent never placed any order for trade on 14 th and 15th January, 2008. In my view, the absence of POD for the aforesaid two days, as observed, basically when the email statements were forwarded of these two days transactions, is no way sufficient to deny the claim so filed by the Petitioner.
13 The observation, that there are variations between the contract notes produced by the Petitioner and the email statements forwarded, itself is not sufficient unless the variations are specifically defined and is elaborated in physical copy of these documents, which are bound to be different. The issue is also whether the transaction was entered into or not. Admittedly, the Respondent after entering into an agreement had done regular business as per the instructions given from time to time. There was no serious dispute with regard to the receipt of the contract notes by e-mail. The physical receipt of the contract notes, therefore, itself cannot be the reason to deny the claim so raised by the Petitioner. The email entries and/or copies, as per the permissible practice and in view of the technology always unsigned. There was no observations whatsoever and/or contentions raised and/or recorded that the Respondent never provided the email ::: Downloaded on - 09/06/2013 18:41:12 ::: 6 arbp342.09.sxw ssm address on which the digital contract notes were forwarded.
14 The submission that the Respondent was illiterate and never aware of the e-mail practice and/or procedure and/or never used and/or open the site, as submitted first time in the Court are of no assistance. The Respondent, admittedly, after 14 th and 15th January, 2008, issued cheques towards the part payment, in the name of the Petitioner. Those cheques were bounced in March, 2008 itself. The Respondent submitted those cheques as at foot of ledger account on 22 January 2008 and amount of Rs.11,45,520.44 paise was due and payable by the Respondent.
15 The Respondent for the first time by letter dated 1 April 2008 raised the objection that the false entries were made in his ledger account and the same was denied and replied with and therefore, the claim was raised by the Petitioner. The Respondent, as entered into various transactions at earlier occasions and in totality, as the account was due and payable on 22 January 2008 including transactions of 14 and 15 January 2008, also supports the case of the Petitioner. This also falsify the case of the Respondent that no instructions were sent to do any transactions in question. It is also relevant to note that the ::: Downloaded on - 09/06/2013 18:41:12 ::: 7 arbp342.09.sxw ssm Respondent had continued to carry out the transactions even after 22 January 2008 in his family members account regularly. Therefore, the submission so raised that he was out of station or at the native place from 11 January 2008 to 22 January 2008 in no way sufficient to disbelieve the case of the Petitioner and the transactions in question.
16 It is well known that the contract notes goes to the details of the orders given by the Respondent, time of execution of the order, trade member, quantity of the shares and the rate of the shares. Therefore, merely because the physical contract notes were not received, that itself cannot be the reason to deny the digital format of contract notes as forwarded with details on the email address provided by the Respondent. As per the contract also it was sufficient compliance. At least therefore, the rejection of the claim of the Petitioner for want of acknowledgement of delivery of physical contract notes, in no way sufficient to deny the recorded and accounted claim raised by the Petitioner based upon the ledger account. The permissible practice of sending of contract notes is well governed and controlled by SEBI circulars issued from time to time. Such unsigned digital contract notes just cannot be overlooked.
::: Downloaded on - 09/06/2013 18:41:12 :::8 arbp342.09.sxw ssm 17 Therefore, taking overall view of the matter, and in the present facts and circumstances, and as contended, in my view, the case is made out by the Petitioner to interfere with the award of rejection of his claim in toto. The permissible mode of sending contract notes through email on a provided email address based upon the SEBI circulars and practice, in my view, goes to the root of the matter. The physical format may be relevant but not delivered, the same, in the present facts and circumstances, just cannot be the reason to deny the total claim, therefore, in my view, the case is made out by the Petitioner for the remand of the matter for re-hearing. The award so passed denying the total claim, in view of above, therefore, is contrary to the settled practice and the permissible mode and the SEBI circulars issued from time to time permitting the parties to enter into transaction and rely upon the digital format contract notes and such practice.
18 Therefore, the impugned award needs to be quashed and set aside. The learned counsel appearing for the Petitioner, therefore, submitted that let the matter be remanded back for fresh hearing and let the matter be disposed of preferably within reasonable time.
::: Downloaded on - 09/06/2013 18:41:12 :::9 arbp342.09.sxw ssm 19 Resultantly, the award dated 28 July 2008 is quashed and set aside. The matter is remanded back to the Arbitral Tribunal to be appointed under the Rules and Regulations and bye-laws of NSEIL.
The Arbitral Tribunal to reconsider all the aspects by giving opportunity to both the parties.
20 The petition is accordingly disposed of. There shall be no order as to costs.
(ANOOP V. MOHTA, J.) ::: Downloaded on - 09/06/2013 18:41:12 :::