Delhi District Court
Bimla Singh Us 34 vs Religare Securities Limited on 23 August, 2025
DLND010001352012
IN THE COURT OF DISTRICT JUDGE- 01,
NEW DELHI DISTRICT, PATIALA HOUSE COURTS,
NEW DELHI
Presided over by :- SH. DHARMENDER RANA (DHJS)
Arbitration No. 11516/2016
Smt. Bimla Singh
Wife of Sh. Surendra Singh
Resident of : B-20/47, A-1,
Vijaya Nagaram Colony,
Bhelupura, Varanasi,
Uttar Pradesh-221010
...... Petitioner
Versus
1. Religare Securities Limited
19, Nehru Place, New Delhi
2. Religare Securities Limited,
Through Balaji Sales and Service,
B 20/47A, Bhelupura, Varanasi,
Uttar Pradesh
3. National Stock Exchange
th
4 Floor, Jeevan Vihar Building,
Parliament Street, New Delhi-01
......... Respondents
Arbitration No. 111516/16
Bimla Singh vs. Religare Securities Limited Page no. 1 of 24
Petition presented on : 10.09.2012
Arguments Concluded on : 13.08.2025
Judgment Pronounced on : 23.08.2025
JUDGMENT
1. By way the instant order, I propose to dispose of the instant petition under section 34 of the Arbitration and Conciliation Act instituted by Ms. Bimla Singh (hereafter referred as petitioner) against Religare Securities Limited & Ors. (herein after referred as respondent), assailing the order dated 18.05.2012 passed by the Ld. Appellate Arbitral Tribunal, constituted under the National Stock Exchange Rules and Regulations, alongwith the arbitral award dated 10.06.20211, passed by Ld. Sole Arbitrator dismissing the claim of the petitioner/ appellant.
BRIEF FACTS
2. The petitioner herein is a constituent of the Respondent at its Varanasi branch and has instituted a claim before the Ld. Arbitrator for an amount of Rs. 799,359.22 along with interest and costs for the losses suffered by her on account of transactions in her account.
3. It is averred that the petitioner was contacted by the Respondent's branch manager, who persuaded her to open an account with the respondent. Accordingly, a trading account of the petitioner was opened in November 2007 and the value of the Arbitration No. 111516/16 Bimla Singh vs. Religare Securities Limited Page no. 2 of 24 shares transferred by the petitioner as margin money in her account was around Rs. 25 Lacs. It is averred that the petitioner started trading in the F&O segment from 9th January 2008 onwards and had some open positions as on 21 st January 2008, as per details provided by her in the claim before the Ld. Arbitrator.
It is averred that on the morning of 22nd January 2008, seeing the volatility in the market, the petitioner asked the Respondent's branch manager to collect a cheque for Rs 5 Lac from her, as a precautionary measure, although there was no shortage of funds in her account. It is further averred that while the petitioner was in the process of issuing the cheque, she noticed that at 11.51.11 am, the entire open positions were squared off and the shares in the cash segment were liquidated. It is averred that on taking up the matter with the Respondent she was informed that the positions were squared off by the Risk Management cell of the Respondent. It is averred that the liquidation of the open positions/ sale of equity shares were at the lowest price of the day and petitioner claims that even if there was a margin shortfall, only one lot of Reliance Capital would have created adequate margin and there was no requirement to liquidate all the open positions and the petitioner was not informed of the margin shortfall in her account. It is averred that petitioner was informed on 23rd January 2008 that some of her open positions were restored by the Respondent and that the shares sold would be restored back on 24 th January 2008. It is averred that some of the shares were again sold on 25 th January 2008 and were restored back on the same day and some shares Arbitration No. 111516/16 Bimla Singh vs. Religare Securities Limited Page no. 3 of 24 were subsequently sold on 8th February 2008 and again on 10 th July 2008. It is averred that no contract notes were provided for these trades.
Accordingly, the petitioner instituted a claim before the Ld. Arbitrator claiming an amount of Rs.799,359.22 from the respondent alongwith interest and costs.
4. The claim of the petitioner was resisted by the respondent disputing the averments made by the petitioner. It is averred by the respondent that the claim is devoid of any merits and an attempt to disown losses sufferred by the petitioner. It is averred that the petitioner's open positions were squared off on 22nd January 2008 as the petitioner failed in her obligation, as per Member Client Agreement (MCA). It is averred that the petitioner was required to ensure that adequate margin is available in her account and in case of failure to do so; the Respondent was entitled to square off the open positions. The respondent filed a margin statement before the Ld. Arbitrator reflecting margin shortfall on 21st and 22nd January 2008. It is averred that the petitioner was well-aware of the margin shortfall in her account as she was an on-line client and could see her account by logging into the Respondent's website.
5. Eventually, learned Sole Arbitrator, vide order dated 10.06.2011, dismissed the claim of the petitioner. Aggrieved by the dismissal of her claim, the petitioner instituted an appeal before the panel of arbitrators, in accordance with the SEBI rules Arbitration No. 111516/16 Bimla Singh vs. Religare Securities Limited Page no. 4 of 24 and regulations, which also came to be dismissed by the Ld. Panel of Arbitrators vide order dated 18.05.2012.
6. Consequently, the petitioner has now instituted the present petition under Section 34 of The Arbitration and Conciliation Act assailing the award dated 10.06.2011 and the appellate tribunals award dated 18.05.2012.
GROUNDS OF APPEAL
7. Petitioner has now challenged the order of the Ld Appellate Arbitral Tribunal dated 18.05.2012 and the order of the Ld. Arbitrator dated 10.02.2011 on the following grounds:
a) It is averred that the learned Sole Arbitrator has committed material illegality in passing the impugned order without taking into consideration the entire facts and circumstances of the present case.
b) It is further averred that petitioner has claimed the amount of Rs. 7, 99,369.22 in two parts.
It is averred that first part of the claim of Rs. 4, 36,331.55 pertains to the losses suffered due to unauthorized and illegal transaction of equities in her account by the respondent from 22.01.2008 to 10.07.2008 and while the second part of losses suffered was due to unwarranted liquidation of open positions in Futures on 22.01.2008.
Arbitration No. 111516/16Bimla Singh vs. Religare Securities Limited Page no. 5 of 24
c) It is averred that the Ld Arbitrator has wrongly observed and mentioned in para 4 of the award that some of the shares were sold on 25.01.2008, which is not correct. It is averred that in fact, all shares held in the demat account were sold without the Instruction of the petitioner and without intimation to the petitioner.
d) It is averred that in his award the Ld Sole Arbitrator has only partially quoted clause 2d of MCA, the later part of the same clause which the Ld Arbitrator deliberately overlooked pertains to the stipulated time within which the broker is required to collect the additional margin from the client. It is further averred that the respondent broker has sold the shares without giving the required opportunity to the petitioner to deposit the additional margin and squared off the open position of its own without giving requisite time and waiting for the petitioner to deposit additional margin, if any. It is averred that the overlooking of this important aspect by the L.d Arbitrator clearly shows that the Ld Arbitrator was biased in favour of the Broker and against the member / constituent. It is averred that the violation of clause 10, 40(a) and 40(d) of MCA on the part of the respondent has not been addressed in the award at all with the sole intention of passing the award against the petitioner.
e) It is averred that the Ld Arbitrator has deliberately overlooked the fact that the contract notes only up to 25.01.2008 were made available to the petitioner by the respondent. It is averred that the contract note of liquidation of one lot of Kotak Bank @Rs 783.00 on 22.01.2008(NSE order No Arbitration No. 111516/16 Bimla Singh vs. Religare Securities Limited Page no. 6 of 24 2008012200279910) and restoration of same on 23.01.2008 have not been provided till date. It is averred that same was sold off @ Rs 1111.00 same day by the petitioner Also contract notes of transaction done after 25.01.2008 to 10.07.2008 were not provided or uploaded online. It is averred that same were received on 09.11.2008 after delay of more than ten month and that too on instructions of NSE. It is averred that Ld. Arbitrator and the appellate tribunal have overlooked this deliberate and intentional misconduct and violation of SEBI/NSE bye laws and guideline by the respondent and have given a illogical and wrong reasoning / excuse that as the Claimant is doing online trading of her own there was no need on part of the broker to send the contract notes.
f) It is averred that the Ld Arbitrator has miserably failed to notice that on the night of 21.01.2008 the petitioner's account was showing the MTM loss of Rs. 5,56,401.04 against which the value of her equities (as security) was Rs. 22, 59,741.00, this was sufficient to cover up the MTM losses and margin requirement. It is averred that there was no shortage of margin in her account till late night of 21.01.2008. On the morning of 22.01.2008 seeing the international markets, petitioner voluntarily offered a cheque of Rs 5 lakh to the local branch manager of the respondent as a precautionary measure.
g) It is averred that the Ld Arbitrator has not noticed that the claimant / petitioner has not stated in her claim that she was not aware of the status of her account. It is further averred that the petitioner has repeatedly submitted that the cheque was offered Arbitration No. 111516/16 Bimla Singh vs. Religare Securities Limited Page no. 7 of 24 as a precautionary measure. But the award has been passed on the premise and on wrong assumption that "if there was no margin shortfall, there was no need to offer additional margin by her."
It is averred that this is exactly what the petitioner's claim was that since there was no margin shortfall in her account till late night of 21.01.2008 then why she should have offered additional margin on the morning of 22.01.2008 before opening of the market.
h) It is averred that the Ld Arbitrator in an arbitrary manner, without giving any reason or findings rejected/ ignored the application of the petitioner / claimant to call the record of the NSE in evidence regarding NSE MARGIN REQUIREMENT". The petitioner approached NSE Investor Cell, Mumbai vide e- mails, letters and telephonic calls but they have shown their inability to co-operate until and unless instructions are not issued by the Ld Sole Arbitrator in this regard. Accordingly vide her application dated 30.05.2011 the petitioner approached Ld Sole Arbitrator for the same but the Id arbitrator has not considered the bonafide contention and request of the petitioner ignored by the Ld. Arbitrator.
i) It is averred that when NSE and even the Ld Arbitrator has not considered the request of the petitioner, the petitioner compiled the details of margin requirement as on 22.01.2008 at the rates at which her open positions were liquidated from the data available on the web site of NSE and BSE and same was handed over to Ld Sole Arbitrator during hearing. It is averred that all these documents were very crucial for fair judgment Arbitration No. 111516/16 Bimla Singh vs. Religare Securities Limited Page no. 8 of 24
j) It is averred that the Ld arbitrator either was not having any knowledge of the accounting of Stock Exchange with regard to Margin requirement or otherwise or have deliberately interoperated the entries of the account statement of the petitioner filed by the respondent broker. It is averred that the arbitrator miserably failed to understand and appreciate that the petitioner was being allowed to do trading in her account against the value/margin of shares held in her margin account with the broker / respondent, which was worth around Rs 25 lakh at the time of opening of account and still had adequate margin to safely cover the risk of the Broker and as per requirement of NSE FOR Margin. It is further averred that the margin requirements were to be seen in that context only, which the Ld Arbitrator Intentionally and deliberately did not considered.
k) It is averred that the Ld Arbitrator have not appreciated the fact correctly as apparent from the material on record as the award after squaring off the open positions on 22.01.2008 the total debit balance of the petitioner was to the extent of Rs 12, 09,668.54 only and at that particular moment the value of shares (as margin /security) of the petitioner available with the respondent was around Rs 22, 59,741.00. It is further averred that why the petitioners account was considered to be in naked state by the Ld Sole Arbitrator is not explained by the Arbitrator, the AWARD is totally silent in this regard and needs to be set aside on this ground alone.
l) It is averred that Ld. Arbitrator has not appreciated the fact that the Respondents have failed to provide any basis of their Arbitration No. 111516/16 Bimla Singh vs. Religare Securities Limited Page no. 9 of 24 calculation to show the requirement of liquidation of Securities in Margin and why they have sold the entire stock and also squared off all the open position of the petitioner.
m) It is averred that the respondent has submitted that as per their calculation there was requirement of only liquidating two lot of Reliance Capital and one lot of Bajaj Hind. As a result they did not liquidated one lot of Kotak bank, but have not given any calculation or the basis of such calculation, and not explained during the arguments even when the petitioner objected.
It is averred that the apprehension of misappropriation arises from the fact that, if at all there was shortage of margin in the night of 21 then why not the shares were sold immediately on opening of the market on the next day, what forced them to wait till 11.51 A.M. when the rates were lowest. It is relevant to mention that before and after 11.51 A.M. the rates were much higher. It is averred that the entire standing of the petitioner both in the Equity as well as in future was liquidated in one stroke/at one particular point at the lowest rate of the day. It is further averred that moment the positions both in Futures and equity was liquidated by the Respondent, the market, bounced back immediately by more than 30 percent. It is further averred that the hard earned money, the life time investment and savings were wiped away in a fraction of second by the illegal acts of the respondent and the Ld Arbitration tribunal has not even looked into these aspects.
n) It is averred that the Ld Sole Arbitrator has not considered the need to verify the NSE order No 2008012200279910 Arbitration No. 111516/16 Bimla Singh vs. Religare Securities Limited Page no. 10 of 24 pertaining to liquidation of one lot of Kotak bank on 22.01.2008 which has been denied by the respondent and the contract note of same has not been provided till date.
o) It is averred that as per press release dated 18.11.1993 issued by SEBI and as per SEBI Rules and bye Laws the broker shall not consider client's interest inferior to his own. It is further averred that in case of so called margin shortage, had the respondent liquidated only one lot of Reliance Capital, the heavy loss incurred due to irrational decision of respondent could have been avoided. Such important clause stated at para 41(e) of the claim petition has also been overlooked in the award.
p) It is averred that the petitioner was not aware of all the transactions in her account subsequent to 22.01.2011 and all transactions were done on her request and consent on the basis of her e-mails originated on 22.01.2008 and 23.01.2008. It is averred that the petitioner no where in her claim or Rejoinder and e-mails said that she was not aware of the transactions in her account. It is further averred that petitioner in all her e-mails and letters to the respondent and to its higher authorities objected to all these transactions and specifically stated that all these transaction in her account are without her permission and consent. It is averred that the respondent has never denied, challenged or replied to those mails or letters but the LD Arbitrator, of his own with the sole purpose of extending his help to the respondent ignored this fact. It is further averred that the respondent only came to know about the transactions in her account only after they were executed and after coming to know Arbitration No. 111516/16 Bimla Singh vs. Religare Securities Limited Page no. 11 of 24 the transactions she immediately raised her objections and denied the transactions. It is averred that Ld Arbitrator has also not considered para (a) to (c) of Preliminary submission and para 34, 35 & 39 of the rejoinder of the petitioner in this regard.
q) It is averred that the Ld Arbitrator and the Tribunal both have wrongly interpretated the contents of the e-mail dated 22.01.2008 for the benefit of the respondent. It is averred that after the squaring off of the shares, the petitioner wrote this e- mail and requested the respondent to restore the positions as they existed before liquidation, since illegal squaring of open positions in Futures and Equity at the lowest rate of the day had caused the petitioner heavy losses. It is averred that the Ld Arbitrator, on behest of the respondent taken it as the request of the claimant to purchase the shares at market rate at cost and consequences of the claimant and the shares were purchased by the respondent after 2 days of the mail and that too at much higher rates and caused further losses to the claimant.
r) It is further averred that Ld Arbitrator has not considered the fact that:
i) if the claimant wanted to purchase the shares, she would have done it from her own computer, like she was doing it earlier as she was trading on line,
ii) there was no sufficient funds / margins available in the accounts of the claimant, then how could have they purchased the shares,
iii) If these shares were purchased on instructions of the claimant, then why those shares were transferred in her D Mat account.Arbitration No. 111516/16
Bimla Singh vs. Religare Securities Limited Page no. 12 of 24
s) It is averred that the Ld Sole Arbitrator has deliberately not given any comment that why shares of the claimant were sold on 22.01.2008 without giving an opportunity to the claimant to make good the shortfall in margin. It is averred that why subsequently these shares were again purchased on 24.01.2008 at higher price and were never transferred/credited to her demat account as assured and committed by the Respondent vide E-mail dated 23.01.2008, but the difference of cost was illegally debited from the account of the claimant. It is further averred that again these shares were sold off completely on 25.01.2008 by the respondent on their own and once again these shares were purchased same day without her knowledge/consent. It is averred that on 08.02.2008 some of these shares were again sold off and again the losses were debited illegally from the account of the claimant. It is further averred that after this the respondent transferred the balance shares(BF Utility-99 shares and Essar shipping-100 shares) from her account to some unknown account on 21.03.2008 and finally debited further losses illegally from her account on 10.07.2008. As a result a net loss of Rs 436331.55 was debited from her account.
t) It is averred that Ld. Arbitrator has observed that there is no document on record to show that petitioner have made any attempt to provide additional margin and her contention regarding offer of Rs 5 lakh cheque has not been substantiated by any documentary evidence. It is claimed that Since 22.01.2008, petitioner has originated number of e mails and letters to various higher authorities of respondent regarding offer of the cheque Arbitration No. 111516/16 Bimla Singh vs. Religare Securities Limited Page no. 13 of 24 and till date same has not been denied by the respondent in terms of para 10 of MCA. It is averred that in this regard an email dated 26.01.2008, inter-alia, disclosing the entire sequence of events was written by the petitioner to the Respondent. It is further averred that neither the contents nor the receipt of the said email has ever been refuted by the Respondent.
u) It is further averred that since the petitioner was not receiving any satisfactory response from the Respondent, vide its letter dated 06.03.2008, the petitioner approached Securities Exchange Board of India for their intervention in the matter and pursuant thereto Securities and Exchange Board of India vide its letter being No. 6/1 NSE/COMP/NRO/2008/126877 dated 27.05.2008 directed the office of the National Stock Exchange to look into the matter and take necessary action.
It is further averred that in turn, National Stock Exchange approached the petitioner vide its letter No. NSE /IG/SBI/NSE 1549 dated 12.06.2008, inter-alia, asking for additional details and it was assured to the petitioner by means of the said letter that necessary action for obtaining the details from the Respondent was also being initiated by it.
v) It is further averred that when the Respondent came to know about the likely inquiry / action by SEBI/NSE, on 29.07.2008 the Respondent malafidely and with ulterior motives filed a false, frivolous and misconceived suit being No.563 of 2008 titled as Religare Securities Limited Versus Smt. Bimla Singh against the petitioner for recovery of Rs. Rs.54,178.00 in order to falsely claim that the matter is sub-judice. It is further Arbitration No. 111516/16 Bimla Singh vs. Religare Securities Limited Page no. 14 of 24 averred that since then, the petitioner has been writing continuously to National Stock Exchange with copy to Securities and Exchange Board of India to commence their investigations, however, National Stock Exchange has been expressing its inability to initiate any action against the Respondent on the pretext that the matter is sub-judice ignoring the fact that no civil court has jurisdiction to entertain the matter because of the Arbitration clause.
w) It is averred that the learned Sole Arbitrator failed to appreciate that the act of the Respondent since 22.01.2008 is not only unethical and illegal but is also against all laidown norms. It is submitted that on 23.01.2008 only one lot of Kotak bank was restored by the Respondent and remaining positions of Futures were not restored.
x) It is averred that the Ld Arbitrator has not taken any view of the fact that the petitioner has clearly mentioned the instances when the account and the holding of the petitioner was illegally and unauthorisedly used by the respondent at their wishes and all losses were posted in the account of the petitioner.
FINAL ARGUMENTS
8. Final arguments have been advanced by Sh. Jitender Singh on behalf of the petitioner and Ms. Sonal Chauhan on behalf of the respondent.
REASONING
9. Before proceeding to decide on the contentions, the Court Arbitration No. 111516/16 Bimla Singh vs. Religare Securities Limited Page no. 15 of 24 deems it appropriate to remind itself of the scope of powers U/s 34 of the Arbitration Act. It has been very recently held in Delhi Airport Metro Express Pvt. Ltd. Vs. Delhi Metro Rail Corporation Ltd. Civil Appeal no. 5627 of 2021, Arising out of SLP (C) no. 4115 of 2019 decided on 09.09.2021 as under:
"...22. A cumulative reading of the UNCITRAL Model Law and Rules, the legislative intent with which the 1996 Act is made, Section 5 and Section 34 of the 1996 Act would make it clear that judicial interference with the arbitral awards is limited to the grounds in Section 34. While deciding applications filed under Section 34 of the Act, courts are mandated to strictly act in accordance with and within the confines of Section 34, refraining from appreciation or re- appreciation of matters of fact as well as law. (See: Uttarakhand Purv Sainik Kalyan Nigam Limited. v. Northern Coal Field Limited. 1, Bhaven Construction Through Authorised Signatory Premjibhai K. Shah v. Executive Engineer Sardar Sarovar Narmada Nigam Ltd. and Another2 and Rashtriya Ispat Nigam Limited v. Dewan Chand Ram Saran3 ).
23. For a better understanding of the role ascribed to courts in reviewing arbitral awards while considering applications filed under Section 34 of the 1996 Act, it would be relevant to refer to a judgment of this Court in Ssangyong Engineering and Construction Company Limited v. National Highways Authority of India (NHAI)4 wherein R.F. Nariman, J. has in clear terms delineated the limited area for judicial interference, taking into account the amendments brought about by the 2015 Amendment Act. The relevant passages of the judgment in Ssangyong (supra) are noted as under:-
"34. What is clear, therefore, is that the expression "public policy of India", whether contained in Section 34 or in Section 48, would now mean the "fundamental policy of Indian law" as explained in paras 18 and 27 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204] i.e. the fundamental policy of Indian law would be relegated to "Renusagar" understanding of this expression. This would necessarily mean that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 1 (2020) 2 SCC 455 2 2021 SCC OnLine SC 8 3 (2012) 5 SCC 306 4 (2019) 15 SCC 131 Arbitration No. 111516/16 Bimla Singh vs. Religare Securities Limited Page no. 16 of 24 263 : (2014) 5 SCC (Civ) 12] expansion has been done away with. In short, Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] ,as explained in paras 28 and 29 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Court's intervention would be on the merits of the award, which cannot be permitted post amendment. However, insofar as principles of natural justice are concerned, as contained in Sections 18 and 34(2) (a)(iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in para 30 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] .
35. It is important to notice that the ground for interference insofar as it concerns "interest of India" has since been deleted, and therefore, no longer obtains. Equally, the ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the "most basic notions of morality or justice". This again would be in line with paras 36 to 39 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , as it is only such arbitral awards that shock the conscience of the court that can be set aside on this ground.
36. Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law, as understood in paras 18 and 27 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204], or secondly, that such award is against basic notions of justice or morality as understood in paras 36 to 39 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204]. Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii) was added by the Amendment Act only so that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] , as understood in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , and paras 28 and 29 in particular, is now done away with.
37. Insofar as domestic awards made in India are concerned, an additional ground is now available under sub-section (2- A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within Arbitration No. 111516/16 Bimla Singh vs. Religare Securities Limited Page no. 17 of 24 "the fundamental policy of Indian law", namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.
38. Secondly, it is also made clear that reappreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.
39. To elucidate, para 42.1 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Para 42.2 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award.
40. The change made in Section 28(3) by the Amendment Act really follows what is stated in paras 42.3 to 45 in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 :
(2015) 2 SCC (Civ) 204] , namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair-minded or reasonable person would; in short, that the arbitrator's view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2-A).
41. What is important to note is that a decision which is perverse, as understood in paras 31 and 32 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 :
(2015) 2 SCC (Civ) 204] , while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse."...
25. Patent illegality should be illegality which goes to the root of the matter. In other words, every error of law committed by the Arbitral Tribunal would not fall within the expression 'patent Arbitration No. 111516/16 Bimla Singh vs. Religare Securities Limited Page no. 18 of 24 illegality'. Likewise, erroneous application of law cannot be categorised as patent illegality. In addition, contravention of law not linked to public policy or public interest is beyond the scope of the expression 'patent illegality'. What is prohibited is for courts to re-appreciate evidence to conclude that the award suffers from patent illegality appearing on the face of the award, as courts do not sit in appeal against the arbitral award. The permissible grounds for interference with a domestic award under Section 34(2-A) on the ground of patent illegality is when the arbitrator takes a view which is not even a possible one, or interprets a clause in the contract in such a manner which no fair-minded or reasonable person would, or if the arbitrator commits an error of jurisdiction by wandering outside the contract and dealing with matters not allotted to them. An arbitral award stating no reasons for its findings would make itself susceptible to challenge on this account. The conclusions of the arbitrator which are based on no evidence or have been arrived at by ignoring vital evidence are perverse and can be set aside on the ground of patent illegality. Also, consideration of documents which are not supplied to the other party is a facet of perversity falling within the expression 'patent illegality'...
10. At the outset, it would be relevant to mention that re- appreciation of evidence is beyond the scope of petition u/s 34 of the Act. The Ld. Arbitral Tribunal has considered the material and submissions produced before it qua liquidation of the open positions necessitated on account of margin required as shown in the margin statement filed before it and has arrived at a reasoned finding that the petitioner did not make good the margin, before squaring off the position. Therefore, the objection that the Ld. Arbitral Tribunal ignored the evidence qua the margin short fall cannot be sustained. Hence, the grievance of the petitioner that the Ld. Arbitrator and the Ld. Arbitral Tribunal failed to appreciate the deficit margin is of no consequence.
Arbitration No. 111516/16Bimla Singh vs. Religare Securities Limited Page no. 19 of 24
11. The petitioner herein seems to be agitated by the fact that the respondent disposed off her shares at lowest possible rates of the date without intimation/ instructions. It is also alleged that the respondent has raised false and frivolous pleas before the Ld. Arbitrator. It is vociferously contended that on 25.10.2008 shares worth Rs.22,37,732.12 were sold off and yet the respondent failed to settle the debit balance of Rs.18,65,987.62/- and sold off shares in dips and pieces till 10.07.2008. It is further argued that the petitioner was entitled for minimum five days for payment.
Admittedly, the scope of interference in the petition under Section 34 of The Arbitration and Conciliation Act is very limited and the Court cannot set any bar upon the findings of the Ld. Arbitrator. At the cost of repetition, at the outset, it would be relevant to mention that re-appreciation of evidence is beyond the scope of petition under Section 34 of the Act.
12. Perusal of the record reveals that Ld. Arbitrator has elaborately dealt with all the contention of the petitioner herein. It is conclusively established on record the the petitioner was running in margin deficit, the margin statement relied upon by the Ld. Arbitrator contradicts the claim of the petitioner that she was no in short fall of any amount in her margin account.
13. Ld. Counsel for the petitioner has failed to show me any clause whereby the petitioner is entitled for minimum 5 days for making the payment against the default in her account. Evidently, the Ld. Arbitrator has elaborately dealt with the Arbitration No. 111516/16 Bimla Singh vs. Religare Securities Limited Page no. 20 of 24 contention of the plaintiff herein. Neither clause 2(d), 10 or 40(a) & 40(d) of the MCA, contrary to the arguments of the petitioner, shall come in aid of the petitioner.
14. The relevant para of the award is reproduced here for ready reference:
'6..................................................................... ..................................................................... ......In order to understand the roles and responsibilities of the parties, reliance has to be placed inter alia on the following clauses of the MCA which provide as under
"2 d The Client is liable to pay applicable initial margins, withholding margins, special margins or such other margins as are considered necessary by the stock broker or the exchange or as may be directed by SEBI from time to time as applicable to the segment(s) in which the client trades...."
"5.... Without prejudice to the stock broker's other rights (including the right to refer a matter to arbitration), the stock broker shall be entitled to liquidate / close out all or any of the Client's positions for non payment of margins or other amounts, outstanding debts etc. and adjust the proceeds of such liquidation close out if any, against the client's liabilities/ obligations. Any and all losses and financial charges on account of such liquidation/closing out shall be charged to and bome by the client
7. It is not disputed that the Applicant was an on-line client and was allotted a trading terminal, from which she was regularly trading in her account. She was also able to retrieve the contract notes in respect of her trades. As per the Applicant there is no dispute in respect of the transactions in her account up to 18th January 2008.
8. Being an on-line trader, the Applicant became aware of the heavy fall in the market and therefore voluntarily offered on 22nd January 2008 to pay Rs 5 lac by cheque as additional margin. She was also closely following the market on the morning of 22nd January 2008 and was aware of the status of her account. Just before handing over the cheque to the representative of the Respondent, she became aware that her outstanding positions have been squared off. She thereafter declined to give the said cheque Arbitration No. 111516/16 Bimla Singh vs. Religare Securities Limited Page no. 21 of 24 to the respondent These actions of the Applicant, as can been be seen by her own averments in Para 11 of the claim, are contrary to the stand taken by her that she was not aware of the status of her account or that there was no margin shortfall in her account. Had there been no margin shortfall, there was no need for her to offer to give the said cheque.
9. The Respondent has submitted a copy of the statement of account of the Applicant as annexure G to the reply. This shows a continuous debit balance in the account from 16th January 2008 onwards. The debit balance was Rs. 556,401.04 on 21 January 2008. A margin statement has also been filed at annexure B, which shows a margin shortfall of Rs. 3, 96,929 on that day. Even after squaring off the open positions on 22nd January 2008, there was margin shortfall and debit balance in the Applicant's account to the extent of Rs. 12,09,668.54. From the above, it is evident that there was a shortfall in the Applicant's account, comprising of margin shortfall and the debit balance in her ledger account and the Applicant was fully aware of the same.
10. It was urged by the Applicant that the open positions were not squared of immediately and that these were squared off and the shares sold at the lowest prevailing price point of the market, which caused loss to her. This particular plea necessarily has to be considered in light of the fact that there is no particular point at which the positions should be squared up by the Trading member. This is for the reason that unless there are malafides which can be impugned to the Respondent or inordinate delays on its part, such contention cannot be accepted, keeping in view the fluctuating fortunes in the market, particularly in the F&O segment. It is the fluctuating fortunes that happen to the trades. At one point of time, when the positions are squared off or shares sold, the position could be squared or shares sold at a higher rate or later at a lower rate, can never be visualized. Similarly, the Applicant's contention that only selective positions should have been squared off, has no merit due to high volatility and fluctuations in the market. Therefore unless there is some inordinate delay or a malafide on the part of the respondent, the Applicant's plea on this count cannot succeed.
11. It is also contented by the applicant that even after the sale of shares and squaring off of the positions on 22nd January 2008; the Respondent continued to trade in her account, without her permission or information. Copies of the emails exchanged by her Mr. Surendra Singh with the Respondent, however clearly show the contradiction in the Arbitration No. 111516/16 Bimla Singh vs. Religare Securities Limited Page no. 22 of 24 Applicant's claim that she was not aware of the transactions in her account subsequent to 22nd January 2008. In the email dated 22nd January 2008, the Applicant requested for restoration of her holding of shares. A similar request was made in the mail dated 23 rd January 2008. She was informed by the Respondent's email of 24th January 2008 that all her shares have been purchased by the RMC at her request The Applicant by her email dated 4th February 2008, also acknowledged the restoration of the open positions of Kotak Bank and requested for restoration of the remaining. She also requested by email dated 23rd January 2008 to credit the said shares in her Demat account. These exchange of emails, clearly establish that the Applicant was constantly in touch with the Respondent and was aware of the status of her account. Her contention to the contrary in this regard has no merit and must be rejected.
12. In view of the above facts and circumstances, it appears that the dispute raised by the Applicant to the squaring off the open positions, in which she apparently suffered losses, cannot be accepted. All open positions were created by the Applicant herself, and being an online client she was fully aware of the trades in her account. Admittedly. her account was in debit from 16th January 2008 onwards and there is no document on record to show that she made any attempt to provide additional margin. Even her contention that she offered to pay Rs 5 Lac voluntarily, has not been substantiated by any documentary evidence. Clause 5 of the MCA entitles the Respondent to square off the open positions if there is a margin shortfall and sell the shares to recover the outstanding amount. Clause 2 d on the other hand, casts an obligation on the Applicant to pay margin money and the outstanding amount as may be applicable for the trades in her account. She is therefore fully liable for losses if any, suffered by her on account of these trades and can not shift the same on to the Respondent.'
15. Resultantly, I do not find any plausible reason to interfere with the detailed and well reasoned award passed by the Ld. Arbitrator. Accordingly, the petitioner deserves to be dismissed. Ordered accordingly.
Arbitration No. 111516/16Bimla Singh vs. Religare Securities Limited Page no. 23 of 24
16. Arbitral record, if any be sent back alongwith copy of the judgment.
17. File be consigned to record room after necessary compliance. Digitally signed by DHARMENDER DHARMENDER RANA RANA Date:
2025.08.23 15:18:52 +0530 Pronounced in open Court on 23.08.2025. (Dharmender Rana) District Judge-01, New Delhi District, Patiala House Courts, New Delhi Arbitration No. 111516/16 Bimla Singh vs. Religare Securities Limited Page no. 24 of 24