Delhi District Court
Religare Securities Ltd vs Ms. Thirnavukkarasu Jothi ... on 15 February, 2013
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IN THE COURT OF SH. DIG VINAY SINGH
ADDL. DISTRICT JUDGE : CENTRAL : DELHI
Arbtn. No.198/11
Religare Securities Ltd.
Having its registered office at
19, Nehru Place,
New Delhi-110019 Applicant/Petitioner
Vs.
1. Ms. Thirnavukkarasu Jothi Mangayarkarsi
5, Ittery Road,
Kitchipalayam
Salem-636015.
2. Mr. V. Natarajan
Sole Arbitrator,
National Stock Exchange of India Ltd.,
7th Floor, Arihant Nitco Park,
No.90, Dr. Radhakrishnan Salai,
Mylapore,
Chennai-600004 Respondents
ORDER
1. This petition under Section 34 of the Arbitration and Conciliation Act 1996 is directed against an award dated 15.12.2007.
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2. The petitioner is a registered stock broker with National Stock Exchange of India. The respondent No.1 was its client. Admittedly the respondent No.1 placed a purchase order with the petitioner for purchase of 5000 shares of Nissan Copper Limited, on 02.01.2007. The admitted value of these shares on that day was Rs.5,50,000/-, which comes to Rs. 110 per share. Under the terms and conditions of stock market, the petitioner was bound to transfer shares, in normal course, on 04.01.2007 or latest by 06.01.2007. It was so under T+2 Settlement Stipulation as existing and prevalent in the Stock Market. Admittedly the shares in questions were credited in the account of the respondent No.1 on 05.02.2007 only, i.e. after one month.
3. Upon this a dispute arose between the respondent No.1 and the petitioner Stock Broker, which was referred to the Ld. Arbitrator. Both the sides participated before ld. Arbitrator and presented their respective stands. Thereafter the impugned award came to be passed.
4. Vide the impugned award ld. Arbitrator observed that the petitioner was negligent in not crediting the shares in the account of respondent No.1 due to which the respondent No.1 suffered because of fluctuation in the price of scrip i.e. Nissan Copper Ltd. Ld. Arbitrator allowed a claim of Rs.1,31,250/- in favour of the respondent No.1 and against the petitioner. It is necessary to note here as to how this amount was arrived at by the arbitrator.
5. As mentioned above under the T+2 Rule the shares ought to have been credited latest by 04.01.2007 or 6.01.2007. But at the relevant time there Arbtn no.198/11 Religare Securities Vs. M/s Thirnavukkarashu Jothi Mangayarkarsi dt. 15.02.2013 Pg..2 of 10 h.l.
3 was a prohibition against trading in the shares of the scrip in question. The said prohibition was pursuant to a circular dated 02.01.2007 under No. NSCCL SEC 2007 2003, which was issued to all the trading members. Securities and Exchange Board of India (SEBI), which is a regulatory authority, had directed NSE to withhold the payments of securities and funds in respect of the scrip on 29.12.2006 and on 02.01.2007 for a period of 15 days. Subsequently SEBI issued a second order on 17.01.2007 for release of withheld payout for normal buy and sell transactions qua the scrip. Thus the ban was lifted on 17.01.2007. And the ld. Arbitrator concluded that the petitioner should have credited 5000 shares in the account of the respondent No.1 on 18.01.2007, which was admittedly not done. The shares were in fact credited only on 05.02.2007.
6. Ld. Arbitrator was dis-satisfied with the reasons given by the petitioner for delay and ld. Arbitrator concluded as follows:
"1) ........... Respondent has simply quoted a maxim without giving any facts whatsoever from the client's ledger account in support of the same. On the other hand respondent's account statements and submission themselves reveal that he has received full settlement for Nissan Copper Shares purchased reflected in the running account vide two cheques of Rs.38,500/- and Rs.7,20,000/-. There is a net credit balance of Rs.12,957.20 in the ledger in favour of the applicant as on 10.01.2007. Therefore the reasoning given by the respondent in this regard cannot be accepted.
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2) The second reason given viz. Client had not asked for the transfer and as per standing instructions respondent has retained them in a frivolous excuse. I cannot attach any meaning or significance to it in the case of this transaction. He has also not stated that he credited the shares on 05.02.2007 only after receiving instructions from applicant.
Therefore I conclude that the respondent has been negligent and is at fault in not crediting the shares in applicants favour our 18.01.2007 and has to pay the penalty for the delay in crediting the same only on 05.02.2007. I have obtained the historical scrip wise price volume date from N.S.E. Of the transaction done in Nissan Copper Ltd., shares on 18th January, 2007 and 5th February, 2007. The closing price of the scrip on 18.01.2007 was Rs.78/- and on 05.02.2007 it was Rs.51.75. The respondent has to bear the difference in price of the scrip on the above two dates which is Rs. 26.25. Accordingly for the 5000 shares purchased by the applicant the loss computed is Rs.26.25X5000 i.e. Rs.1,31,250/- which has to be borne by the respondent.
7. Accordingly award of Rs.1,31,250/- was passed in favour of respondent No.1 along with simple interest @ 18% from 18.01.2007.
8. The new Act of 1996 has limited the grounds under which an arbitral award can be challenged. Those limited grounds are summarized as follows:-
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(i) If the party challenging the Award furnishes proof that he was under some incapacity;
(ii) That the agreement was not valid under the law;
(iii) That petitioner was not given a proper notice of the appointment
of Arbitrator or of the arbitral proceedings or was otherwise unable to present his case;
(iv) That the Award deals with a dispute not referred to or not falling within the terms of the agreement;
(vi) If the composition of the Arbitral Tribunal or the arbitral procedure was not in accordance with the agreement of the parties;
(vii) If the subject matter of the dispute is found, in the opinion of the Court, not capable of settlement by arbitration under the law;
(viii) If the arbitral Award is in conflict with the public policy of India.
9. The ground taken in the present petition that because of ban of SEBI the shares could not be credited and therefore the petitioner has no liability, is fallacious, since admittedly the period during which there was a ban in trading of scrip was indeed excluded by the ld. Arbitrator. It is not in dispute that the ban was lifted on 17.01.2007. Therefore the petitioner should have credited the shares in the demat account of the respondent No.1 by 18.01.2007 or latest by 19.01.2007. Admittedly shares were credited only on 05.02.2007. The claim of petitioner that the bar in trading of shares was not considered by the arbitrator is false as the said period was indeed deducted by the arbitrator in calculating the delay. It is for this very reason that the Arbtn no.198/11 Religare Securities Vs. M/s Thirnavukkarashu Jothi Mangayarkarsi dt. 15.02.2013 Pg..5 of 10 h.l.
6 petitioner was directed to pay the award amount from 18.01.207 with interest.
10. For this delay the petitioner has sought to explain that there was a debit balance of Rs.7,07,042.80p in the account of respondent No.1 on 09.01.2007 and thereafter an amount of Rs.7,20,000/- was credited in the account, on 10.01.2007, as paid by respondent No.1. Another amount of Rs. 38,500/- was also paid on same day i.e. 10.01.2007. It is claimed that still the account of respondent No.1 reflected a debit balance of Rs.22,460.30p after counting the entry of trades undertaken by the respondent No.1.
11. Petitioner claims that till the time a debit balance was reflected in the account of respondent No.1 there was no question of crediting the shares in her account.
12. Perusal of the award also reveals that the arbitrator called for the price of the scrip from the NSE itself. On 18.01.2007, (when the scrip ought to have been credited), the price of the scrip was Rs.78/- whereas on 05.02.2007, (when the scrip was credited) the price was Rs.51.75p.Thus there was difference in the price of Rs.26.25p and ld. Arbitrator multiplied this difference with the number of shares i.e. 5000, which comes to Rs. 1,31,250/-. It may be mentioned here that on the day when the respondent No.1 placed purchase order the rate of scrip was Rs.110/- per share.
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13. This part of the defence of petitioner was duly considered by the arbitrator who has specifically observed that there was a net credit balance of Rs. 12,957.20p in the ledger pertaining to respondent No.1 as on 10.01.2007.
14. The claim of petitioner in the present petition that the account of Respondent No.1 was reflecting a debit balance and it was only on 05.02.2007 that a credit was reflected, does not find support from the statement of account placed before the ld. Arbitrator. Perusal of arbitral file reveals that there is a statement of account filed by the petitioner which reflects that there was a credit of Rs.3,26,895.38p on 19.01.2007. There was a credit amount of Rs. 4,07,435.82p on 22.01.2007. On 23.01.2007 and 24.01.2007, there was a credit amount of Rs.3,24,191.89p and Rs.3,13,533.78p, respectively.
15. Thus, after the ban was lifted the petitioner had enough credit amount for purchase and credit of the scrip in the account of respondent No.1, at least between 19.01.2007 to 24.01.2007. It may be mentioned here that on 18.01.2007, the price of scrip was Rs.78/- as noted in the award, which is not disputed. Therefore, at least between 19.01.2007 to 24.01.2007, there was enough amount available in the account of respondent No.1 for purchase of shares. Therefore, the finding of ld. Arbitrator on that score cannot be faulted with.
16. Despite availability of amount the scrip was not purchased and credited by the petitioner.
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17. Next ground taken by the petitioner is that the respondent No.1 had claimed only Rs.5,50,000/- from the petitioner towards the cost of shares, but the arbitrator allowed Rs.1,31,250/- was without jurisdiction as no such prayer was made. This contention is fallacious as the award simply allowed the difference of price of scrip, on the day when the petitioner should have purchased the shares but was not purchased, and when the petitioner actually purchased and credited the shares. From 18.01.2007 till 05.02.2007, the price of scrip nosedived from Rs.78/- per share to Rs.51.75p and therefore, it is the petitioner who ought to bear that difference, since it was the fault of petitioner in not purchasing shares till 05.02.2007. It is the petitioner who has to bear the difference of price. It may be mentioned that as per price of Rs.78/- per share, the total amount required would have been Rs.3,90,000/- which was indeed available in the account of respondent No.1 on 22.01.2007, when the balance was more than Rs.4.00 lacs.
18. Regarding interest there is no agreement between the petitioner and the respondent No.1 as to non-grant of interest. Therefore, I don't find any reason to interfere in the award qua this aspect of the matter. No such agreement has been pointed out between the petitioner and the respondent No.1 which debarred claiming of interest. The Legislature while enacting the Arbitration and Conciliation Act, 1996, incorporated a specific provision in regard to award of interest by Arbitrators. Sub-section (7) of Section 31 of the Act deals with the Arbitrator's power to award interest. Clause (a) relates to the period between the date on which the cause of action arose and the Arbtn no.198/11 Religare Securities Vs. M/s Thirnavukkarashu Jothi Mangayarkarsi dt. 15.02.2013 Pg..8 of 10 h.l.
9 date on which the award is made. Clause (b) relates to the period from the date of award to date of payment. Thus arbitrator had power to grant interest.
19. Similarly I don't find any illegality in grant of cost against the petitioner by the arbitrator qua the arbitral proceedings.
20. None of the grounds claimed by the petitioner in the present petition falls within the limited grounds available under Section 34 of the Arbitration and Conciliation Act, entitling the petitioner to seek setting aside of impugned award. It is well settled now, that even if this court comes to a conclusion that a view other than the view taken by the ld. Arbitrator is possible, still award cannot be set aside on that ground. It is not open to this court to re- appreciate the material available on record of Arbitrator to find faults with the decision of Arbitrator. Arbitrator is the best judge of quality and quantity of evidence. Thus the present petition does not meet the requirements under Section 34 of the Arbitration Act to interfere in the impugned award.
21. Reliance placed by the petitioner upon the case of B.K. Roy Chaudhery Vs. DDA CS (OS) 1781 of 1992, decided by Hon'ble Delhi High Court on 14.01.2010 is misplaced as the facts of the said judgment is distinct where it was held that arbitrator could not have performed the function of executive engineer and his analysis of rates were found to be beyond his jurisdiction.
22. In the present case the arbitrator did not decide the rate of scrip, which is decided by the market forces on a stock exchange for a particular day. The Arbtn no.198/11 Religare Securities Vs. M/s Thirnavukkarashu Jothi Mangayarkarsi dt. 15.02.2013 Pg..9 of 10 h.l.
10 arbitrator has rightly taken into account the closing scrip price of a particular day to find the difference of rate between the two dates.
As a result the petition is dismissed. The arbitration proceedings be sent back to the concerned Arbitrator with a copy of this order and the petition file be consigned to record room.
Announced in the open court on 15th day of February, 2013. DIG VINAY SINGH ADJ-04 (CENTRAL) DELHI Arbtn no.198/11 Religare Securities Vs. M/s Thirnavukkarashu Jothi Mangayarkarsi dt. 15.02.2013 Pg..10 of 10 h.l.