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[Cites 25, Cited by 0]

Delhi District Court

Smifs Limited vs Mr. Sudhir Garg on 18 May, 2024

                  IN THE COURT OF SH. ANURAG SAIN,
              DISTRICT JUDGE, (COMMERCIAL COURT)-01,
                 PATIALA HOUSE COURT, NEW DELHI


OMP (COMM) No.42/2023

SMIFS Limited
Vaibhav 5th Floor 4, Lee Road,
Post Office - Elgin Road,
Kolkata-700020,
West Bengal                                                   ....Petitioner

vs.

Sh. Sudhir Garg
C-2/1102, 11th Floor,
Tower C-2, Cleocounty,
Sector-121, Noida,
Gautam Buddh Nagar,
Uttar Pradesh-201301.                                         ....Respondent

Date of Institution :            20.03.2023
Arguments heard on :             23.03.2024
Decided on          :            18.05.2024


Appearances              : Sh. Rishab Sancheti, Sh. Ankit Acharya, Ms. Pratiksha
                           Sharma and Ms. Ritu Chaudhary, Ld. Counsels for
                           petitioner.
                           Sh.Rajat Sang, Ld. Counsel for the respondent
                           with respondent.

                                    JUDGMENT

1. Appellant petitioner i.e. SMIFS Limited filed this petition against respondent i.e. Sudhir Garg under Section 34 of Arbitration and Conciliation Act (in short referred to as 'Arbitration Act') for setting aside the Appellate SMIFS Limited Vs. Sudhir Garg Page No.1 of 25 OMP (comm) No.42/2023 Arbitral Award dated 27.01.2023 passed by appellate arbitrator Panel Sh.Suresh Kumar Srivastava, Sh. L.R. Sharma and Sh. Tejinder Singh Laschar in appeal AM NO.-NSEDRO/0023293/21-22/ISC/IGRP/ARB/APPL.

2. The case of the objector/petitioner as averred in the present objection petition is that petitioner is a Stock Broking Firm, carrying out its business from its registered office and during October 2020, respondent Sudhir Garg approached the officers of the petitioner for opening a Trading-cum-Demat account upon producing several papers including bank details in support of his well settled and sound financial capability. It is averred that respondent submitted that he was educated in the field of Securities Market and willing to invest in Millions and he had indicated his net worth to be around ₹1 Crore in KYC form. It is averred that upon representation of respondent, the petitioner company registered him as a client on 14.10.2020 and also allotted him a Unique Client Code being UCC No.66374 and allowed him to carry out the trades from the platform of petitioner since 15.10.2020 and he carried out voluminous Securities Transaction during the period 15.10.2020 till 19.04.2021 in the Cash Market, futures and options of NSE and commodity segment of MCX. The details of funds made available and funds credited by the respondent are mentioned in pay-in and pay out table is given by the petitioner in para (v) of the petition.

3. It is averred that respondent carried out voluminous securities transaction as per the rules, prescribed for placement of Order instructions and that the respondent was a regular visitor to the dealing office of the petitioner and signed the voluntary declaration for placement of orders. It is averred that the orders placed by the respondent was fed onto the Order Management SMIFS Limited Vs. Sudhir Garg Page No.2 of 25 OMP (comm) No.42/2023 System and also informed to respondent's email ID and confirmation was obtained through IVR and that respondent was provided electronic contract notes as per the mandate provided in the KYC application.

4. It is averred that respondent had never voiced any grievance on any count regarding his investment operations with the petitioner. The petitioner company received an intimation from Investor Service Centre of NSE regarding a complaint registered by the respondent on 08.12.2021 with NSE of India under complaint reference no.NSEDRO/0023293/21-22/ISC dated 08.12.2021, regarding unauthorized trades by the petitioner without any specific dates in which the unauthorized trades have been executed. Allegations of cheating etc. have been made by the respondent. It is averred that the complaint is based on unsubstantiated allegations of trades being carried out without intimation to him. Upon receipt of the complaints, petitioner company provided all the requisite documents/information to the NSE. Thereafter, the GRC members passed an order dated 25.01.2022 deciding the said complaint, concluding admissibility of the complaint in favour of the investor for an amount of ₹18,56,140.00, thereafter petitioner company informed the Investor Services Centre of NSE on 29.01.2022 regarding its decision to approach before Hon'ble Arbitration Forum to challenge the aforesaid order dated 25.01.2022 and had also approached the Grievance Redressal Cell of Multi Commodity Exchange of India Limited and upon hearing both the parties, Grievance Redressal Panel Member was passed an order dated 14.03.2022 rejecting the claim of respondent.

5. Thereafter respondent filed an arbitration claim, wherein the petitioner has filed its statement of defence and on 26.09.2022, ld. Arbitral tribunal passed an award allowing the claim of the applicant-respondent.

SMIFS Limited Vs. Sudhir Garg Page No.3 of 25 OMP (comm) No.42/2023

Thereafter petitioner company filed an arbitration appeal before the appellate authority and respondent had filed a cross-appeal. Thereafter on 27.01.2023, the appellate authority dismissed the appeal of the petitioner and partly allowed the cross-appeal of the constituent. Petition filed by the petitioner on the various grounds mentioned in the petition and prayed that impugned appellate arbitral award dated 27.01.2022 be set aside.

6. The respondent filed reply to the petition of the petitioner and stated that the petition of the petitioner is on the basis of whims and fancies and having no merits. It is averred that the petitioner has done the transactions from the accounts of the respondent without following the procedure as laid down by the SEBI. It is averred that in order to prevent the unauthorized trades specific provisions were included into the circular dated 22.03.2018 as per which "Physical record written and signed by the client", however, in the present matter only signatures of the respondent were taken upon printed format, which is in clear violation of the circular. It is averred that the defence of the petitioner with regard to the alleged signed certificates of office visit of the respondent for giving instructions, however, petitioner failed to produce any daily entry register to substantiate their claim.

7. Further it is the case of the respondent that IGRP, Arbitration Tribunal and appellant tribunal failed to observe the fact that visit certificate were relating to mere 10 visits till 12.01.2021, but the disputed transactions were done till 19.04.2021. It is averred that the alleged visit certificates also pertains to the period during which Lockdown was imposed and that the petitioner failed to follow the norms laid down by the circular of SEBI, which categorically directed to take pre-order instructions whereas the representative SMIFS Limited Vs. Sudhir Garg Page No.4 of 25 OMP (comm) No.42/2023 of the petitioner only gave the post trading information in only positive background. It is averred that the telephonic recordings produced by the petitioner has clearly proved the malice of the petitioner as they never informed the respondent about any loss caused to its accounts except the minor once. It is averred that petitioner has caused huge financial loss by doing unauthorized trades for the respondent and imposed arbitrary charges on different heads. The petitioner has also deducted ₹2,31,748/- from the account of the respondent without any basis.

8. Further it is the case of the respondent that all the forums have given findings the petitioner indeed did wrong with respondent by ignoring the basic principles laid down for the trading of shares or by not taking proper instructions and had also misrepresented on various facts regarding the post trade recordings and office visit certificates. Petitioner company has also done criminal act by illegally transferring the balance from the account of the respondent and on multiple occasions the petitioner debited the account of the respondent without taking any prior permission from the respondent, which is clear violation of the banking rules and rules laid down by the SEBI as well. It is averred that the petitioner took arbitrary ground of instructions through IVR by pressing 1 which was not for the purpose of providing any information regarding any transaction or trade. It is averred that petitioner failed to bring on record any plausible defence for its non compliance of provision for doing trades for its clients and further conduct of the petitioner proved its malafide intentions behind unauthorised trades of giving undue benefits to entitles wherein money was invested by misleading the respondent.

SMIFS Limited Vs. Sudhir Garg Page No.5 of 25 OMP (comm) No.42/2023

9. I have heard arguments advanced by both the sides and given due consideration to the facts and pleadings of the case and the documents relied upon by the parties, submissions put forth by the respective counsels and the relevant legal position.

10. During the course of arguments ld. counsel for the petitioner submits that the impugned award is liable to be set aside as the Ld. Appellate Arbitration Panel has allowed the Appeal of the Respondent without appreciating the fact that the entire claim of the Respondent is based on an erroneous premise that all trades executed by the Petitioner Company were unauthorized and the respondent has completely failed to show any specific date(s) of unauthorized trade(s). It is submitted that nothing has been placed on record to show that disputed transactions were carried out till 19.04.2021. It is averred that Ld. Appellate Arbitration Panel has passed a non-speaking award without any justifiable reasoning and the award does not contain any reason for granting the arbitrary claim of the respondent without adjudicating the case of the Petitioner Company and the same has been passed without appreciating the material and documents placed on record by the Petitioner. It is averred that the impugned award has been passed in a mechanical manner, without appreciating the fact that not being able to show any record of trade confirmations by the Respondent could at best be a regulatory failure (if proved) on the part of the Petitioner company and not "unauthorized trade" for which the Petitioner Company has been saddled with a liability of ₹25,00,000/- (Twenty Five Lakhs only). It is the case of the petitioner that Ld. Appellant Arbitration Panel failed to appreciate that all the transactions related to the account of the respondent have been carried out strictly in accordance with the SMIFS Limited Vs. Sudhir Garg Page No.6 of 25 OMP (comm) No.42/2023 rules and regulations prescribed by SEBI, subject to exemptions granted and the details of same were provided to the Respondent on his registered email id "[email protected]"on a real time basis, who had also endorsed and confirmed the trades by giving his consent to the (IVR)confirmation Calls to his Registered Mobile Number: 9810098032, by responding to the IVR and accepting the trades by pressing the command "1". Further it is argued that the petitioner has duly provided all the evidence including transaction records, voluntary declarations signed by the Respondent, telephonic conversations, electronic contact notes,copy of routine email communications.

11. In support of its submissions, petitioner has relied upon following judgments;

(a) Continental Telpower Industries Ltd. Vs. Union of India and Ors., (2009) SCC OnLine Del 1859;

(b) Delhi Urban Shelter Improvement Board Vs. Lakhvinder Singh 2017 SCC OnLine Del 9810;

(c) Resurgent Power Projects Ltd. Vs. ABB India Limited (2020) 3 MLJ 856.

(d) Batliboi Environmental Engineers Ltd. Vs. Hindustan Petroleum CorporationLtd. 2023 SCC Online SC 1208;

(e) National Highways Authority of India Vs. Ms. Hindustan Construction Company,2016 DHC 1544-DB

(f) National Highways Authority of India Vs IRB Pathankot Amritsar Toll Road Ltd. 2023 DHC 4352 DB

(g) Satluj Jal Vidyut Nigam Ltd. Vs. Ms. Jaiprakash Hyundai Consortium & Ors. 2023 DHC 4692;

(h) Ms SMS Ltd. Vs. Konkan Railway Corporation Ltd., 2020 DHC 1891;

(i) National Highways Authority of India Vs Hindustan Construction Co. Ltd. 2016 DHC 7668;

SMIFS Limited Vs. Sudhir Garg Page No.7 of 25 OMP (comm) No.42/2023

(j) A. Shanmugam vs. Ariya Kshatriya Rajakula Vamsathu Madalaya Nandhavana Paripalanai Sangam Represented by its president & Ors., (2012) 6 SCC 430.

12. On the other hand ld. counsel for the respondent has argued that the petitioner herein in garb of objection petition under section 34 of Arbitration and Conciliation Act 1996, has filed the appeal where petitioner challenged award passed by the IGRP which was firstly upheld by the Arbitration Panel and then by the Appellate Arbitrator Panel by the concurrent finds and petitioner raised the objection over the appreciation of evidence done by the all the forums but that cannot be covered under the purview of section 34 petition. It is argued that IGRP had calculated the loss suffered by the respondent but held that both parties to the dispute at fault and equally divided their liability for the loss caused to the respondent herein. It is submitted by ld. counsel for the respondent that ld. Arbitrator had also observed the averments of the respondent which clarified that how petitioner misrepresented the respondent by reflecting huge balance into the account and when was requested to transfer the same into the account at that time declared that nothing left in the account of respondent and all three forums have consistently held petitioner responsible for not following the SEBI guidelines while trading for the respondent and appellate arbitrator even admitted the fact that some of the trades clearly seems to be unauthorised. It is argued that IGRP and Arbitration have dealt at length with each and every contention as raised by the petitioner and after considering everything in detail held that loss which was calculated by IGRP has to equally bear by both petitioner and respondent equally and the arbitral and appellate tribunal have applied their mind to the pleadings and evidence adduced before SMIFS Limited Vs. Sudhir Garg Page No.8 of 25 OMP (comm) No.42/2023 it and the terms of SEBI guidelines and the court would not reappraise as it were an appeal. That appellate Arbitration Panel had upheld the findings of IGRP and Arbitration panel and appellate tribunal only enhance the claim in favour of respondent by applying the concept of proportionality, which was based upon the law laid down by the English court, Which were used with the intention to prevent the abuse of the discretion, conferred upon a particular person which gives makes a company or person extremely powerful and at that time judicial review comes to the rescue of lesser or Person with without power. It is argued that proportionality given in the favour of the respondent just to see the doctrine of unreasonableness is giving way to the doctrine of proportionality and in this case the respondent being an individual and not very well versed about the market technique could not be held equal responsible for the losses caused and hence the appellate arbitration panel enhance the award in the favour of respondent by mere ₹7.5 lakhs. In support of his submissions, ld. counsel for the respondent has relied upon the judgment of Hon'ble Delhi High Court in case State Trading Corporation of India Ltd. Vs. M/s Toepher International Asia PTE, FAO (OS) No.242/2024. It is averred that the present petition is nothing but abuse to the process of law. It is averred that arbitration panel upheld the findings of IGRP and arbitration panel and appellate tribunal only enhance the claim in favour of the respondent by applying the concept of proportionality, which was based upon the law laid down by the English court. Thus, it is prayed that the present objection petition be dismissed.

13. The scope of enquiry under section 34 is restricted to consideration whether any one of the grounds mentioned in section 34 exists for setting-aside the award.

SMIFS Limited Vs. Sudhir Garg Page No.9 of 25 OMP (comm) No.42/2023

14. Section 34 of the Arbitration and Conciliation Act reads as under:

"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 SMIFS Limited Vs. Sudhir Garg Page No.10 of 25 OMP (comm) No.42/2023 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 1 - For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-- (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice.

Explanation 2.-- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.

(2A) 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 SMIFS Limited Vs. Sudhir Garg Page No.11 of 25 OMP (comm) No.42/2023 an erroneous application of the law or by re-appreciation of evidence.
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter."

15. Normally, the general principles are that Arbitrator is a Judge of the choice of the parties and his decision, unless there is an error apparent on the face of the award which makes it unsustainable, is not to be set aside even by the Court as a Court of law could come to a different conclusion on the same facts. The Court cannot reappraise the evidence 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 set aside are those mentioned in the Arbitration Act. Where the Arbitrator assigns cogent grounds and sufficient reasons and no error of law or misconduct is cited, the award will not call for interference by the Court in exercise of the power vested in it. Where the Arbitrator is a qualified technical person and expert, who is competent to make assessment by taking into consideration the technical aspects of the matter, the Court would generally not interfere with the award passed by the Arbitrator.

SMIFS Limited Vs. Sudhir Garg Page No.12 of 25 OMP (comm) No.42/2023

16. Hon'ble Supreme Court in the case of Associate Builders vs. Delhi Development Authority, (2015) 3 SCC 49 has held that the interference with an arbitral award is permissible only when the findings of the arbitrator are arbitrary, capricious or perverse or when conscience of the Court is shocked or when illegality is not trivial but goes to the root of the matter. It is held that once it is found that the arbitrator's approach is neither arbitrary nor capricious, no interference is called for on facts. 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.

17. Hon'ble Supreme Court in case of Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India, 2019 SCC OnLine SC 677 has held that under Section 34 (2A) of The Act, a decision which is perverse 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. A finding based on the 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 characterized as perverse. It is held that 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.

18. In a recent decision by the Supreme Court in the matter of PSA SICAL Terminals Pvt. Ltd. Vs. Board of Trustees of V.O Chidambranar Port SMIFS Limited Vs. Sudhir Garg Page No.13 of 25 OMP (comm) No.42/2023 Trust Tuticorin reported as 2021 SCC OnLine SC 508, the Supreme Court has reiterated its view in MMTC Limited Vs. Vedanta Limited reported as (2019) 4 SCC 163, and held as follows "11. As far as Section 34 is concerned, the position is well-settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii) i.e., if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the "fundamental policy of Indian Law"

would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury [Associated Provincial Picture Houses v. Wednesbury Corpn., [1948] 1 K.B. 223 (CA)] reasonableness. Furthermore, "patent illegality"

itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract.

12. It is only if one of these conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2) (b)(ii), but such interference does not entail a review of the merits of the dispute, and is limited to situations where the findings of Delhi Development Authority vs M/S Tomar Construction Company on 29 April, 2023 the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts.

SMIFS Limited Vs. Sudhir Garg Page No.14 of 25 OMP (comm) No.42/2023

19. Applying the aforesaid test, let us discuss the facts of the present case. In the present case, it is an admitted fact that there are multiple layers of litigations between the parties.

20. Initially the respondent filed a complaint before IGRP and the IGRP after discussing the transactions in detail, vide its order has held as under:

"in view of the above observations and facts, it is difficult to accept the contentions of the complainant that ll trades in the disputed period should be classified as unauthorised. The trading member is also at fault in not strictly following the SEBI Guidelines in circular dated 22.03.2018 of maintaining evidence of order placement. Hence it would be fair to share the loss between the parties.
The loss for the disputed period on the NSE trading has been computes as Rs.37,12,280.40. We are of the view that the complainant should be compensated with 50% of the total loss i.e. Rs.18,56,140/- (37,12,280/2) by the trading member.

21. The said order of IRGP was challenged by the petitioner and the respondent before arbitral tribunal after discussion passed its award dated 26.09.2022, wherein it was held as under:

"In the light of the discussion above we affirm the order of IGRP dated 25.01.2022 that the parties should share the loss suffered by the applicant. The applicant has not adduced any cogent ground to dispute the finding of the IGRP that his losses amounted to Rs.37,12,280.40. We thereafter allow the claim of the applicant only for Rs.18,56,140/- i.e. the same amount as decided by IGRP. We direct that such part of this amount which has not been already released to the applicant through the NSE should be paid by the respondent to the applicant within one month of SMIFS Limited Vs. Sudhir Garg Page No.15 of 25 OMP (comm) No.42/2023 this order failing which the applicant will also be entitled to interest of 9% on the outstanding amount till its full payment.
22. The said award was challenged by the petitioner company as well as the respondent by filing cross-appeals. Both the cross-appeals were decided by the Appellate Arbitral Panel.
23. As per the order of the appellate tribunal the same has upheld the finding of IGRP and the original award about the calculated loss being Rs.37,12,280.40 is quite correct, considering the fact that both sides are responsible in the trading. However, the apportionment for the liability of loss should be more in favour of the constituent i.e. the respondent here and less in the favour of trading member i.e. the petitioner. On this anology the ld. appellate tribunal dismissed the appeal of the petitioner and partly allowed the cross-appeal of the respondent herein. The award was raised to Rs.25.00 lakh and original award is thus modified and point of determination is accordingly decided. Thereafter, the appellate award has been read as under:
"the appeal of trading member is dismissed and cross-appeal of the constituent is partly allowed. The original arbitral award is modified and the trading member is directed pay Rs.25.00 lakhs to the constituent. No interest is payable on this amount. Parties shall bear their own costs.".

24. The petitioner has challenged the order of the appellate arbitral tribunal inter-alia mainly on the following grounds:

SMIFS Limited Vs. Sudhir Garg Page No.16 of 25 OMP (comm) No.42/2023
(a) that ld. appellant arbitrator panel has miserably failed to appreciate that the Securities Trading Account of the respondent was in the sole operational control of the Respondent through himself and all the orders were executed upon his sole instructions;
(b) that ld. appellant arbitrator Panel failed to appreciate that the respondent had confirmed the Securities Transactions on the interactive Trade Confirmation Call as the said transactions were executed by the appellant upon the instructions of the respondent;
(c) that ld. appellant arbitrator Panel failed to appreciate that the respondent carried out voluminous Securities Transaction during the period 15.10.2020 till 19.04.2021 in the cash market, futures and options of NSE and Commodity Segment of MCX, in its own volition and transferred diverse sums to the client bank account of the appellant company as up-front margin and/or additional amounts from time to time to discharge pay-in obligations;
(d) that ld. appellant arbitrator Panel failed to appreciate that the respondent continued its Securities Transactions with the Petitioner Company inspite of his own grave allegations of un-authorized Trading/fraud etc which in turn go on to show that the said allegations lack bonafide and are made with the sole intention to saddle the petitioner with losses caused to the respondent.
(e) that ld. appellant arbitrator Panel failed to appreciate that the respondent was a regular visitor to the dealing office and voluntary declarations signed by the respondent and was therefore fully proactive and aware of all the transactions that were being undertaken as also the modus operandi of the petitioner. Any such grievance SMIFS Limited Vs. Sudhir Garg Page No.17 of 25 OMP (comm) No.42/2023 could have raised at those times itself.
(f) that ld. appellant arbitrator Panel failed to appreciate that the orders placed by the respondent was fed into the order management system were also intimated to the respondent's registered email ID :
"[email protected]" on a real time basis, which was duly acknowledged by the respondent without any objections in any manner whatsoever;
(g) that ld. appellant arbitrator Panel failed to appreciate that the respondent has also endorsed and confirmed the trades by giving his consent to the IVR confirmation calls to his mobile, by respondent to it and accepting the trades by pressing "1".

(h) that ld. appellant arbitrator Panel failed to appreciate that the petitioner produced the relevant documents enclosing the statement of defence, clearly showing that the respondent was always in touch with the petitioner company regarding his routine course of business through emails.

(i) that ld. appellant arbitrator Panel failed to appreciate that the petitioner company in the arbitration proceedings and in its appeal filed its statement of defense along with all annexures in relation to each and every deal executed by the respondent and with all proof that the respondent is the only person who placed all orders and executed the trades through the platform of petitioner company;

(j) that the award passed by ld. appellant arbitrator Panel is without any independent application of mind and without considering the ground for challenge raised by the petitioner-appellant.

(k) that ld. appellant arbitrator Panel erred by holding the apportionment SMIFS Limited Vs. Sudhir Garg Page No.18 of 25 OMP (comm) No.42/2023 for the liability of loss should be more in favour of constituent member and less in favour of the trading member without considering the evidence and documents placed on record by the petitioner. None of the documents were considered by the ld. arbitrators and ld. appellate arbitrators.

(l) that ld. appellant arbitrator Panel while placing on reliance of award dated 26.09.2022 passed by the ld. arbitral tribunal ignored the crucial findings of ld. arbitrators.

(m)That the ld. arbitrators passed an award without considering the circular no. SEBI/HO/MIRSD/DOP1/CIR/P/2018/54 dated 22.03.2018.

(n) that ld. appellant arbitrator Panel inferred certain factual findings which are contrary to the undisputed records;

(o) that ld. appellant arbitrator Panel failed to consider the documents shows that the respondent approached the tribunal with unclean hands and malafide intentions only to harass the petitioners.

(p) that ld. appellant arbitrator Panel failed to consider that the respondent never denied receipt of the contract note of trdes;

(q) that from perusal of complaint registered by the respondent with NSE manifest the allegation regarding unauthorized trades by the petitioner are without any specific dates and the allegations of cheating etc. have been made without any specific date;

(r) that ld. appellant arbitrator Panel failed to appreciate that the respondent was not entitled to his claim and that the petitioner have complied with each and every rules and regulations of NSE Byelaws and all the circulars from time to time by the SEBI.

SMIFS Limited Vs. Sudhir Garg Page No.19 of 25 OMP (comm) No.42/2023

(s) that ld. appellant arbitrator Panel failed to appreciate that the petitioner raised its objection with relevant documents to the complaint filed by the respondent are false and an afterthought, but the objection was never dealt.

25. Let us examine the award passed by the appellate authority. There are three limbs of the award passed by appellate authority one is upholding the decision of IGRP and original arbitral panel about calculation of loss; second is dismissal of appeal filed by the petitioner herein; third is raising the amount awarded by the original arbitral tribunal to Rs.25.00 lakhs in favour of the respondent herein.

26. Now coming to the first limb of the order. Petitioner in its petition prayed for setting aside the impugned appellate arbitral award dated 27.01.2023, passed by the Appellate Arbitrator Panel. The appellate tribunal has while deciding the cross-appeals held that IGRP and the original arbitral panel about the calculated loss Rs.37,12,280.40 is quite correct considering the fact that both sides are responsible for the loss in trading. While deciding this, in its finding, ld. appellate tribunal stated that "the documentary evidence filed by the trading member suggests that some if not all the trades were authorised. Considering the heavy loss suffered by the constituent, the findings of IGRP and the original arbitral panel, it is safe to conclude that only some portion of trading was unauthorised and not at all of it. Therefore, the finding of the IGRP and the original arbitral panel about the calculated loss being Rs.37,12,280.40 is quite correct". Thus, from the above, it cannot be said that appellate tribunal has taken into consideration and analysis the orders passed SMIFS Limited Vs. Sudhir Garg Page No.20 of 25 OMP (comm) No.42/2023 by IGRP and the original arbitral panel. Thus it cannot be said that the findings given by the appellate arbitral tribunal are without applying the mind.

27. Now, coming to the second limb of the award. The appellate arbitral tribunal has dismissed the appeal filed by the petitioner and partly allowed the appeal filed by the respondent. Let us examine the issue, whether the appeal filed the petitioner herein is rightly dismissed by the appellate arbitral tribunal or not. For examining this issue, let us first examine the award passed by the original arbitral tribunal. The arbitral tribunal in its order stated that "we have carefully considered the averments and arguments of the parties" and thereafter given detail findings for reaching the conclusion and affirm the order of IGRP dated 25.01.2022. Nothing has been pointed out by the petitioner's counsel from the record which would falsify these observations of the Ld. Arbitrator. Ld. counsel for the petitioner vehemently argued that Ld. Arbitrator have not taken into consideration the circular no. NSEIL/ARBN/2010/003 dated 31.08.2010. While passing the award, ld. arbitrators has categorically mentioned that "respondent, on its part, has also failed to produce any evidence to show that he was in compliance of the SEBI circular 22 March 2018, which enjoined the Trading Member to have a pre-trade proof of orders placed by the investor". Thus, it cannot be said that the tribunal has not applied their mind to the facts as well as evidence before them. Having examined the various contentions of the petitioner on the touchstone of the parameters of interference as explicitly laid down by the Hon'ble Supreme Court of India in several judgments referred to above, I am of the view that the impugned Award does not call for any interference. The arbitrator has given sound reasons to decide the claim. The same are detailed and does not suffer any illegality. Ld. SMIFS Limited Vs. Sudhir Garg Page No.21 of 25 OMP (comm) No.42/2023 Arbitral tribunal has given ample reasons in respect of their decision. 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 arbitral tribunal on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quality and quantity of evidence to be relied upon when he/she delivers his/her arbitral award. Thus, an award based on little evidence or no evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. Once, it is found that the arbitrator's approach is not arbitrary or capricious, then it is the last word on facts. In my opinion, the view taken by Ld. Arbitrator can not be said arbitrary to the terms of the contract; provisions of law; or the fundamental policy of law. In my view, the findings of the Ld. Arbitratral tribunal can not be termed violative of the public policy. Court can not interfere in the findings of the Ld. Arbitratral Tribunal if he has taken a particular view if the same is not contrary to the public policy of India or contrary to the provisions of law.

28. From the above cited judgments of Hon'ble Supreme court, it is clear that this court cannot sit as an court of appeal over the proceedings of ld. Arbitrator. The role of the court is in the supervisory nature. This court can intervene only if any ground u/s 34 (2) of the Act is made out. Court cannot interfere in the findings of ld. Arbitration by re-appreciating the evidence or the findings or reconsidering the conclusions. In arbitration, parties themselves decide to resolve their disputes through arbitrator. Ld. Arbitrator is not bound to strictly follow the procedure of a Civil Suit according to Code of Civil Procedure or The Law of Evidence. Ld. Arbitrator is free to evolve his SMIFS Limited Vs. Sudhir Garg Page No.22 of 25 OMP (comm) No.42/2023 procedure for arbitration proceedings. The main requirement is that procedure adopted by ld. Arbitrator should be in accordance with the principles of natural justice and fair to the parties concerned. Nothing is pointed out in the findings of ld. Arbitrator that procedure adopted by him was contrary to principles of natural justice or provisions of law. This court feels unable to find any legal or factual error in the finding arrived at by the Learned Arbitrator as noted hereinabove. Having regard to the detailed reasoning given by the Learned Arbitrator, it is difficult to say that the impugned award is either in conflict with the basic notions of justice or is in contravention with the fundamental policy of Indian Law.

29. Thus, in view of the aforesaid discussion, I am of the opinion that the tribunal has rightly dismissed the appeal filed by the petitioner herein.

30. Let us come to third limb of the order vide which the appellate authority in its order dated 27.01.2023 partly allowed the cross-appeal of the respondent herein by raising the award amount up to Rs.25.00 lakhs. The aforesaid amount was raised by the tribunal without giving any finding, how the appellate tribunal has come to the conclusion. The findings are completely silent as to the method and the manner in which the appellate arbitral tribunal has computed the figures. It is the basic and foremost principal in every determination either by the court or any authority that effects the rights of the citizen or leads to civil consequences, the court or the authorities must adopt the judicial approach. This would also be looked at that the arbitral tribunal or the Court should keep in mind the principals of natural justice, which would mean and includes that they have to applied its mind to the facts of the case, SMIFS Limited Vs. Sudhir Garg Page No.23 of 25 OMP (comm) No.42/2023 while taking the decision either way. However, if there is no application of mind, the said is fatal to any adjudication. Section 31 (3) (a) of the Arbitration and Conciliation Act, states that the arbitral award shall state the reasons on which it is based unless agreed by the parties that no reasons be given. An arbitral award would be irrational and perverse and tantamount to a patent illegality, when no reasons are mentioned in the award and the same is in contravention of Section 31 (3) of the Arbitration and Conciliation Act. In the absence of any justification and reason to raise the claim, it suffers from the patent illegality. Hon'ble Supreme Court in case of Ssangyong Engineering & Construction Co. Ltd. (supra) has held that 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.

31. Now, the interesting question before the Court is whether the Court can partially allow or disallow the award. Hon'ble Delhi High Court in O.M.P. (COMM) 311/2021, MBL Infrastructures Limited Vs. Delhi Metro Rail Corporation, after taken into consideration the law laid down in various judgments, has held as under:

10.1 In view of the law laid down in the aforesaid judgments, this Court is of the view that the under section 34 of the Act, the Court is vested with the jurisdiction to set aside certain problematic portion of the Award which are patently illegal and shocks the conscience of this Court.
102. However, the setting aside of the Award is subjected to the condition that the portion of the Award which has been upheld shall have due effect and cause no such cascading impact.
SMIFS Limited Vs. Sudhir Garg Page No.24 of 25 OMP (comm) No.42/2023
103. In the instant petition, therefore, this Court in case sets aside claim no. 3 and claim no. 4 then, the other claims shall nor be impacted by it neither have any perverse consequences.

32. Thus, in view of the aforesaid discussions and findings, it is ordered that the petition filed by the petitioner is partially allowed and the award passed by the appellate arbitral tribunal is partially upheld as under:

a) Raising of award amount up to Rs.Twenty five lakhs is set aside.
b) Dismissal of appeal filed by the present petitioner before the appellate arbitral tribunal is upheld and there is no ground to interfere in the findings of original arbitral award and the same is upheld.

33. No order as to cost.

34. File be consigned to Record Room after due compliance.

ANNOUNCED IN THE OPEN COURT on 18th May 2024.

ANURAG SAIN District Judge (Commercial Court)-01 Patiala House Court, New Delhi.

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