Delhi District Court
Mr. Sanjeev Kapoor vs M/S Aditya Birla Money Ltd on 28 April, 2023
IN THE COURT OF ADDITIONAL DISTRICT JUDGE-03
East DISTRICT, KARKARDOOMA COURTS: DELHI.
Presided by :SH. Rajesh Kumar
ARBTN CASE NO. 08/2020
MR. SANJEEV KAPOOR
H. NO. G-171, BLOCK-G,
PREET VIHAR,
DELHI-110092 ................PETITIONER
Versus
M/S ADITYA BIRLA MONEY LTD.
A COMPANY INCORPORATED
UNDER THE COMPANIES ACT
1956 HAVING ITS OFFICE AT:
ALI TOWER,
55 GREAMS ROAD,
CHENNAI-600006 .................RESPONDENT
Date of Institution : 20.03.2017
Date of Order : 28.04.2023
PETITION U/S 34 OF THE ARBITRATION &
CONCILIATION ACT, 1996 FOR SEEKING SETTING ASIDE OF
THE ARBITRAL AWARD DATED 19.12.2016 PASSED BY LD.
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 1/30
ARBITRAL TRIBUNAL-NATIONAL STOCK EXCHANGE OF
INDIA LTD. IN THE ARBITRATION MATTER NO. CM/D-
00015/2016, TITLED AS M/S SHUBHANGI AROMATICS PVT. LTD.
VS. M/S ADITYA BIRLA MONEY LTD.
: :- JUDGMENT-: :
1. By way of present judgment this court shall conscientiously
adjudicate upon the objections filed by the petitioner u/s 34 of the
Arbitration & Conciliation Act, 1996 (hereinafter referred to as "the Act")
seeking setting aside of the order dated 19.12.2016 passed by Ld. Arbitral
Tribunal - National Stock Exchange of India Ltd in the Arbitration Matter
No. CM/D-00015/2016 Titled as Sanjeev Kapoor Vs. M/s Aditya Birla
Money Ltd.
2. Succinctly, the petitioner has averred the following facts in the
objections:
a) It is submitted by the petitioner that present petition filed seeking the
setting aside of the Arbitral Award dated 19.12.2016 passed by the Ld.
Panel of Arbitrators appointed/ constituted under the aegis of National
Stock Exchange of India Ltd. (NSE) whereby the claim instituted by the
petitioner herein was rejected. The present objection petition is being
preferred by the petitioner being a individual MR. Sanjeev Kapoor.
b) The petitioner opened a "Trading Account" and "Demat
Account" with the respondent company. Pursuant to the execution of client
registration kit and others related documents the petitioner was allotted with
Unique Client Code 1040349. As per the mutual understanding, it was
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 2/30
agreed between the parties that the respondent will carry out trading on
behalf of the petitioner in cash market and future & option segment on
NSE platform under the "Arbitrage Trading Strategies" and simultaneously
to hedge the positions in order to avoid any possibility of losses. It was also
agreed that no un-hedged positions will be created in the aforesaid trading
account without the consent of the petitioner. It was also mutually agreed
between petitioner and respondent that for the convenience of the
petitioner, the respondent would send consolidated report in Excel Sheet at
the end of the each trading day containing complete details of trades carried
out on the particular date, beside the contract note pertaining to the trades
affected on the particular day. The respondent company appointed,
designated, earmark one of its employee Mr. Satish Yadav to act as
relationship manager catering to petitioner and his accounts. The said Mr.
Satish Yadav being the employee and representative of respondent company
started dealing with petitioner and he started to communicate with the
petitioner and shared/ confirmed/communicated the particulars of the trades
carried out in account of the petitioner, regularly at the end of each trading
day through his official Email ID: [email protected]. The
petitioner bonafidely trusted the respondent company and believed that
respondent company had carried out only such trades, details thereof stood
enumerated in the express/ written/ printed excel sheet forwarded to the
petitioner from the official Email ID as aforementioned.
c) The petitioner used to receive telephonic call at the end of
each trading day from Chennai office of respondent company thereby
confirming the trades affected in his account and all occasion the
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 3/30
representatives of the respondent company used to insist that petitioner
should respond to the Emails received from the Email ID:
[email protected]., by means of a written Email mentioning
"OK", therein. The consolidated report in excel sheets, used to be attached
to the said emails, in respect of which confirmation was sought. In the said
excel sheet, only such trades were reflected, which were carried out, on the
instruction of the petitioner, and the petitioner accordingly used to go
through the excel sheet and correspondingly convey his 'OK' by means of
response Email. The petitioner carried trades in his account and during the
course of trading he made "Pay-Ins" and "took Payouts", from time to time
and stocks purchased by the petitioner were either transfer to demat account
of petitioner from time to time or kept in the pool of account of respondent.
d) During the month of December, 2015 the petitioner in order to
verify the exact financial status of his account in order to enable himself to
file requisite Advance Tax Payable till December, 2015 requested the
respondent through Mr. Satish Yadav, his relationship manager to activate
"Back office Access" so as to enable extract of relevant trade relative deta
directly from the webside of the respondent company. On receiving the
aforesaid request, Mr. Satish Yadav initially assured the petitioner that he
would get the said Access processed shortly, but thereafter Mr. Satish Yadav
started avoiding the petitioner on one pretext or the other. The petitioner
consequently started to insist for making the said Access available to the
petitioner forthwith, at this Mr. Satish Yadav approached the petitioner on
14.12.2015 and confessed that large scale unauthorized trading had been
affected in the account of the petitioner without knowledge and/or consent
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 4/30
of the petitioner. Ms. Satish Yadav also confessed that such unauthorized
trade had been carried out for the purpose of generating enhanced
"brokerage", to the benefit of respondent company. Mr. Satish Yadav also
confessed that not just he but other Sr. Officer of respondent company were
aware of the said unauthorized trade. The petitioner immediately escalated
the matter on the same day by addressing any Email to Mr. Jagjyoti, a Sr.
Officer of the respondent company. On the said day i.e. 14.12.2015, Mr.
Jagjyoti, Mr. Guneet and Mr. Lalit Gola visited the office of petitioner with
Ms. Satish Yadav and again admitted/ confessed about the unauthorized
trades carried in the account of the petitioner. During this meeting, Mr.
Jagjyoti insisted the petitioner, to first clause all open positions so as to
restrict further losses and also assured that respondent company would work
out a way to compensate the petitioner for losses caused to him. A Compact
Disk containing CCTV footage of aforesaid visit is annexed with the
petition. It came to notice of the petitioner that large number of
unauthorized tradings were carried out in the scrips namely PNB, L & T,
HDFC Bank, REL Infra, Cypla and Tata Steel, both in cash segment as well
as in future and option segment in the trading account of the petitioner.
e) On the persistent insistence of petitioner, the respondent
company shared confidential details with the petitioner whereby petitioner
got in a position to access back office access of the respondent company
through its website. On scrutiny of trades on the basis of "Online Back
Office Records" of the respondent company, by comparing the particulars
of the trade, with the details / particulars/ trade confirmation forwarded to
the petitioner by the respondent company by means of said consolidated
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 5/30
reports on excel sheet, it is evident that since first September, 2015 large
scale unauthorized trades had been carried out by the respondent company.
There were glaring differences and mis-match that were reflected in the
aforesaid consolidated report on excel sheet and the Contract Notes
pertaining to the said date/ period. On account of the said unauthorized
trades being affected in the account of the petitioner a loss of
Rs.32,86,482.32/- has been caused to the petitioner by the respondent
company.
f) Despite various meetings with the official of the respondent
company, petitioner's grievances were not addressed. The officers of the
respondent company assured the petitioner that they would compensate of
the losses suffered by the petitioner, however, the assurances given to the
petitioner were found to be of no consequence being dilatory and motivated.
The petitioner was therefore left no option but to report the matter to the
Investors Grievance Cell, National Stock Exchange of India Ltd. and
petitioner lodged a complaint dated 27.01.2016. Pursuant to the filing of
complaint, a meeting was conducted in NSE on 26.02.2016. Surprisingly
respondent did not file reply to the complaint. Ld. Members directed the
petitioner to provide requisite information on 29.02.2016 and accordingly
petitioner submitted requisite details i.e. statement of comparison of trades
and computation of losses, and trade confirmation emails. Petitioner also
forwarded a compact disk containing the requisite documents. The
petitioner was further astonished when the respondent company denied all
allegations and thereafter, requested the petitioner to provide complete
details so that exact position of loss and profit could be determined. The
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 6/30
petitioner submitted the requisite details. Although all the requisite
information were provided to the respondent company, but still respondent
company made lame and false excuses before Ld. IGRP member NSE,
alleging that the information submitted by the petitioner was not
understandable and on the basis of said information the respondent
company was not in a position to conduct detail analysis. Since the Ld.
IGRP member found that there is no change in the situation as prevailed at
the time of early hearing, the proceedings were closed with advise to the
petitioner to seek redressal of his grievance through arbitration or any other
forum as deem fit. The petitioner accordingly invoked arbitration clause as
envisaged in the agreement executed between petitioner and respondent
company, initiated arbitration proceeding and filed its statement of claim
alongwith documents and annexures before Hon'ble panel of Arbitrators,
National Stock Exchange, New Delhi on 09.06.2016. The respondent filed
its written statement of said statement of claim. The Ld. Panel of Arbitrators
however rejected the said claim of the petitioner and disallowed the claim
of petitioner vide arbitral award dated 19.12.2016. Hence, the present
petition is filed.
3. Petitioner has taken the following grounds in the present
petition:
A. The learned panel of Arbitrators, misconstrued as if the
understanding with respect to sending of Consolidated Report in Excel
Sheet at the end of each trading day, containing complete details of trades,
carried out on the particular date; was between the petitioner and the
employee of the respondent. The said understanding/ agreement which was
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 7/30
arrived at for the convenience of the petitioner was between the petitioner
and respondent company.
B. The Ld. Panel of Arbitrators erred in not appreciating the fact that
Mr. Satish Yadav the employee of the respondent company had been
appointed/ designated/ earmarked by the respondent company to act as the
"Relationship Manager" catering to the petitioner and his accounts.
C) The Ld. Panel of Arbitrators erred in assuming as if the petitioner
had claimed that the understanding/ agreement regarding sending of
consolidated report in Excel Sheet was between him and Mr. Satish Yadav.
In fact it has been the persistent case of the petitioner that the said
arrangement/ agreement was between the petitioner and the respondent
company.
D) The Ld. panel of Arbitrators erred in not appreciating the fact that
Mr. Satish Yadav was the designated relationship manager appointed by the
respondent company to deal with the petitioner as well as in respect of his
accounts. All the acts and conduct of Mr. Satish Yadav were in his official
capacity being a duly authorized representative and employee of the
respondent company.
E) The Ld. panel of Arbitrators while passing the impugned
award, completely lost sight of the fact that all the consolidated reports in
excel sheets containing the particulars of the trades carried out in the
account of the petitioner used to be communicated to the petitioner,
regularly, at the end of each trading day, through the official e-mail ID of
Mr. Satish Yadav that is "[email protected].
F) The Ld. Panel of Arbitrators erred in observing that there was
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 8/30
no occasion for the applicant to enter into any understanding with the
employee and even if, the applicant had entered into such an understanding
with an employee privately, the respondent is not bound by it. While
making the aforesaid observation the Ld. panel of Arbitrators completely
misconstrued as if the said understanding was between the petitioner and an
employee of the respondent. The Ld. panel of Arbitrators further erred in
observing as if the said understanding was a private understanding between
petitioner and the said employee of respondent company. The said
understanding was in fact between the petitioner and the respondent
company. Ld. Panel of Arbitrators erred in holding that the respondent
company was not bound by the said understanding/ arrangement.
G) The Ld. Panel of Arbitrators erred in holding that the
respondent acted in good faith. The actual position was/ is rather to the
contrary. It was the petitioner who bonafidely trusted the respondent
company, and believed that the respondent company had carried out only
such trades, details whereof stood enumerated in the express written and
printed excel sheet sent to the petitioner from the official e-mail ID of Mr.
Satish Yadav.
H) The Ld. Panel of Arbitrators, despite the admitted position that
the consolidated reports in excel sheet were being sent to the petitioners
from the official e-mail ID of Mr. Satish Yadav and that there were glaring
differences and mismatch in the trades that were reflected/ enumerated in
the aforesaid consolidated reports in excel sheet and the contract notes
pertaining to the said trades/ period, erred in rejecting the claim of the
petitioner.
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 9/30
I) The Ld. Panel of Arbitrators completely ignored the fact that
the respondent company on one hand carried out unauthorized trades in the
account of the petitioner without his knowledge, information or consent and
on the other hand, with the objective of keeping its unauthorized acts and
conduct under wrap and to conceal its wrong doings from the petitioner,
deliberately sent manipulated and forged consolidated reports on excel sheet
cleverly omitting to mention the details of the unauthorized trades carried
out by it in the said reports. Only those trades, that were carried out on the
instructions of the petitioner were depicted in the consolidated report on
excel sheet and all the unauthorized trades carried by the respondent
company in the account of the petitioner were omitted from the said excel
sheets.
J) Ld. panel of Arbitrators completely ignored the fact of the
matter that the petitioner used to receive a telephonic call at the end of each
trading day from the Chennai Office of the respondent company thereby
confirming the trades affected in his account. On all occasions the
representative of the respondent company used to insist that the claimant
should respond to the e-mails received from the e-mail ID:
[email protected] by means of a return e-mail, mentioning ok
therein. The consolidated report in excel sheets used to be attached to the
said e-mails in respect of which the aforesaid confirmation were sought,
telephonicaly as aforementioned.
K) The Ld. Panel of Arbitrators, erred in holding that the
respondent company was not a party to the understanding/ arrangement
whereby it was agreed that "consolidated report in excel sheet" would be
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 10/30
sent to the petitioner at the end of each trading day, containing complete
details of trades carried out on the particular date. The said understand/
arrangement had in fact been arrived at between the petitioner and the
respondent company.
L) Some the the earlier e-mails such "Consolidated Reports in
Excel Sheets" were marked even to the higher officials of respondent
company. It could therefore not be assumed that sending of the
Consolidated Reports in Excel Sheets was a private arrangement between
the petitioner and an official of the respondent company.
M) The Ld. Panel of Arbitrators, erred in not appreciating the
position that the provisions contained in Section 91 and 92 of Evidence
Act, were not applicable, in the facts and circumstances of the matter.
Although the understanding/ arrangement was oral but the same was duly
acted upon by sending written and express " Consolidated Reports in Excel
Sheets" to the petitioner.
N) The Ld. Panel of Arbitrations, erred in holding that there was
no occasion for the petitioner to rely upon the e-mails of the employee,
instead of the transactions which have been detailed out in contract notes.
The said e-mails were in fact sent by the designated authorized
representative of respondent company and from his official e-mail ID. The
Ld. Panel of Arbitrators completely ignored the fact that owing to the
voluminous nature of transactions and documents, it was mutually agreed
between the petitioner and the respondent company that for the convenience
of the petitioner, the respondent would send " Consolidated Reports in
Excel Sheets" at the end of each trading day containing complete details of
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 11/30
trades carried out on the particular date.
O) The Ld. Panel of Arbitrators, erred in the not appreciating the
fact that there was no reason for the petitioner to disbelieve the respondent
company or to assume that a fraud was being played upon him by a reputed
company such as the respondent company.
P) The Ld. panel of Arbitrators, erred in holding that the
petitioner had contradicted its claim or that there was no occasion for the
petitioner, to rely upon the e-mail of an individual employee. The true fact
of the matter is that the petitioner did not/ has not contradicted its claim and
that the petitioner did not deal with Mr. Satish Yadav in latter's individual
capacity but dealt with him in his official capacity being the designated
authorized representative appointed by the respondent company.
Q) The Ld. Panel of Arbitrators, completely ignored the aspect as
to why there was a mark difference in the trades reflected in the said "
Consolidated Reports in Excel Sheets" and the actual contract notes. The
patent reason thereof is that unauthorized trades were conducted in the
account of the petitioner held with the respondent company. Without
prejudice to the other assertions made/ grounds raised herein, it is worth
emphasizing that the trading and demat accounts had been opened by the
petitioner with the respondent company and not with any individual. Thus
the respondent company cannot be permitted to shirk off its responsibility
and the liability, by shifting the blame on its employee.
R) The Ld. Panel of Arbitrators, erred in observing that CCTV
footage pertaining to the admissions made by Mr. Satish Yadav, was without
audio recording.
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 12/30
S) The Observation of the ld. panel of Arbitrators to the effect
that Mr. Satish Yadav made a confession on 14.12.2015 did not seem to
corroborate as the e-mail dated 13.12.2015 relied by the applicant himself
indicates that the applicant was aware prior to 14.12.2015, was/ is
erroneous. On 13.12.2015, Mr. Satish Yadav had telephonically
communicated to the petitioner that there were large scaled unauthorized
tradings carried out in his account. Immediately on the same day, the
petitioner addressed a mail to the respondent company that is on 13.12.2015
at about 8.38 p.m. The next day that is on 14.12.2015 Mr. Satish Yadav met
the petitioner and explained the details about the wrong doings in his
accounts. Since confessions were made by Mr. Satish Yadav on 14.12.2015
as such the petitioner stated in his statement of claim about the confessions
having been made by Mr. Satish Yadav on 14.12.2015. On 13.12.2015,Mr.
Satish Yadav had only telephonically communicated to the petitioner that
there were certain unauthorized trades carried out in his account, however,
it was only on 14.12.2015 when Mr. Satish Yadav met the petitioner that he
revealed the details of the vide scaled unauthorized trades carried out in his
account.
T) The Ld. panel of Arbitrators completely ignored the compact
disk (CD) containing the recorded version, statement and confession made
by Mr. Satish Yadav which was placed on record of the Ld. Panel of
Arbitrators.
U) The Ld. Panel of Arbitrators erred in not appreciating the fact
that the petitioner, trusting the respondent company made regular payments
to it. The petitioner believed the respondent company, not knowing that a
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 13/30
fraud was being played against him.
V) Since the petitioner had never accessed the back office log as
such the password etc. had expired due to which the petitioner could not
access the said back office system. It was in this context that during the
month of December, 2015, the petitioner had requested the respondent
through Mr. Satish Yadav to activate the back office access. Ld. panel of
arbitrators misconstrued that since back office access had been given to the
petitioner on 05.03.2015 as such the contention of the petitioner that it was
in December 2015 that he requested the respondent to activate back office
access, was not reliable.
W) The ld. Panel of Arbitrators, completely ignored the fact that
the respondent company, as a matter of practice, was making voice
recordings inter alia with respect to the telephonic instructions being
imparted by its constituent members including the present petitioner.
Despite having recorded the voice conversations, the respondent company
did not place voice recordings as well as the voice log pertaining to the
petitioner to prove their contention that no unauthorized trades were carried
out in the account of the petitioner. Although the respondent placed three
voice recordings of the petitioner before the ld. Panel of Arbitrators but it
did not place even one voice recording of petitioner regarding placement of
either purchase instructions or sale instructions of any script/ share, details
thereof were missing from the consolidated report in excel sheet. The panel
arbitrators ought to have drawn an adverse inference in favour of the
petitioner and against the respondent company.
4. The Ld. counsel for the respondent has filed the reply to the
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 14/30
present petition and took preliminary objections that the Hon'ble Arbitrator
had made and published the Award after considering entire record and
submissions before him and had given detailed reasons for the Award in
respect of the claim of the petitioner, though, the Arbitrator is not supposed
to give detailed reasons and write judgment like that of the Court. It is
further argued that the reasons and findings of ld. panel of Arbitrators in
respect of the claim of the petitioner are as per record available before the
Ld. Panel of Arbitrator and in view of the documents and evidence/record
available before them taken by the panel of Arbitrator is a plausible view if
not the only possible view and the findings of the panel of Arbitrators are
based on record and interpretation of documents is a finding of fact and
cannot be disturbed even if the Court, by a process of reasoning, come to a
different view, because the Court is not sitting in appeal/ revision over the
Award of the arbitrator.
5. Arguments heard from both the sides.
6. PRINCIPLES OF SETTING ASIDE OF AWARD UNDER
SECTION 34 OF THE ARBITRATION AND CONCILIATION ACT On
a panoramic appreciation of the earlier existing judicial thought on the
issue, as manifested by decisions ranging from Renu Sagar Power
Company Ltd. v. General Electric Company 1994 Supp. (1) SCC 644 to
Associated Builders v. DDA (2015) 3 SCC 49, the Hon'ble High Court in its
decision in NHAI v. Hindustan Construction Company Ltd.
MANU/DE/2699/2017 delineated the following propositions: -
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 15/30
(i) The four reasons motivating the legislation of the Act, in 1996, were
(a) to provide for a fair and efficient arbitral procedure,
(b) to provide for the passing of reasoned awards.
(c) to ensure that the arbitrator does not transgress his jurisdiction, and
(d) to minimize supervision, by courts, in the arbitral process.
(ii) The merits of the award are required to be examined only in certain
specified circumstances, for examining whether the award is in conflict with
the public policy of India.
(iii) An award would be regarded as conflicting with the public policy of
India if
(a) it is contrary to the fundamental policy of Indian law, or
(b) it is contrary to the interests of India,
(c) it is contrary to justice or morality,
(d) it is patently illegal, or
(e) it is so perverse, irrational, unfair or unreasonable that it shocks the
conscience of the court
(iv) An award would be liable to be regarded as contrary to the
fundamental policy of Indian law, for example, if
(a) it disregards orders passed by superior courts, or the binding effect
thereof, or
(b) it is patently violative of statutory provisions, or
(c) it is not in public interest, or
(d) the arbitrator has not adopted a "judicial approach", i.e. has not acted
a fair, reasonable and objective approach, or has acted arbitrarily,
capriciously or whimsically, or
(e) the arbitrator has failed to draw an inference which, on the face of the
facts, ought to have been drawn, or
(f) the arbitrator has drawn an inference, from the facts, which, on the face
of it, is unreasonable, or
(g) the principles of natural justice have been violated.
(v) The "patent illegality" had to go to the root of the matter. Trivial
illegalities were inconsequential.
(vi) Additionally, an award could be set aside if
(a) either party was under some incapacity, or
(b) the arbitration agreement is invalid under the law, Or
(c) the applicant was not given proper notice of appointment of the
arbitrator, or of the arbitral proceedings, or was otherwise unable to
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 16/30
present his case, or
(d) the award deals with a dispute not submitted to arbitration, or decides
issues outside the scope of the dispute submitted to arbitration, or
(e) the composition of the Arbitral Tribunal was not in accordance with the
agreement of the parties, or in accordance with Part I of the Act, or
(f) the arbitral procedure was not in accordance with the agreement of the
parties, or in accordance with Part I of the Act, or
(g) the award contravenes the Act, or
(h) the award is contrary to the contract between the parties.
(vii) "Perversity", as a ground for setting aside an arbitral award, has to be
examined on the touchstone of the Wednesbury principle of reasonableness.
(A reasoning or decision is Wednesbury unreasonable (or irrational) if it is
so unreasonable that no reasonable person acting reasonably could have
made it (Associated Provincial Picture Houses Ltd v Wednesbury
Corporation (1948) 1 KB 223). It would include a case in which
(a) the findings, in the award, are based on no evidence, or
(b) the Arbitral Tribunal takes into account something irrelevant to the
decision arrived at, or
(c) the Arbitral Tribunal ignores vital evidence in arriving at its decision
(viii) At the same time,
(a) a decision which is founded on some evidence, which could be relied
upon, howsoever compendious, cannot be treated as "perverse",
(b) if the view adopted by the arbitrator is a plausible view, it has to pass
muster,
(c) neither quantity, nor quality, of evidence is open to re−assessment in
judicial review over the award.
(ix) "Morality" would imply enforceability, of the agreement, given the
prevailing mores of the day. "Immorality", however, can constitute a ground
for interfering with an arbitral award only if it shocks the judicial
conscience.
(x) For examining the above aspects, the pleadings of the parties and
materials brought on record would be relevant.
(xi) The court cannot sit in appeal over an arbitration award. Errors of fact
cannot be corrected under Section 34. The arbitrator is the last word on
facts."
7. As far as the scope of interference with an arbitration award,
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 17/30
as is available to a court under Section 34 of the Arbitration and
Conciliation Act, 1996, is concerned, in the case Delhi Airport Metro
Express Pvt Ltd Vs. Delhi Metro Rail Corporation 2021 SCC OnLine SC
695, it was observed by Hon'ble Supreme Court in para 23 to 27 as under:
23. 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. , Bhaven Construction Through Authorised Signatory
Premjibhai K. Shah v. Executive Engineer Sardar Sarovar Narmada Nigam
Ltd. 3 and Rashtriya Ispat Nigam Limited v. Dewan Chand Ram Saran4).
24. 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)5 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 Interna-
tional Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] expansion has been
done away with. In short, Western Geco [ONGC v. West- ern 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,
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 18/30
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. How- ever, insofar as principles of natural justice are
concerned, as con- tained in Sections 18 and 34(2) (a)(iii) of the 1996 Act,
these con- tinue 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 no- tions of justice or morality as
understood in paras 36 to 39 of Asso- ciate 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 Inter-
national Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12], as un- derstood
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 "the fundamental policy of
Indian law", namely, the contravention of a statute not linked to public
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 19/30
policy or public interest, cannot be brought in by the backdoor when it
comes to setting aside an award on the ground of patent il- legality.
38. Secondly, it is also made clear that reappreciation of evidence, which is
what an appellate court is permitted to do, cannot be per- mitted 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 it- self, 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 con- strues 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 con- tract and deals with matters not allotted to him, he commits an er-
ror 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. This Court has in several other judgments interpreted Section 34 of the
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 20/30
1996 Act to stress on the restraint to be shown by courts while examining
the validity of the arbitral awards. The limited grounds available to courts
for annulment of arbitral awards are well known to legally trained minds.
However, the difficulty arises in applying the well-established principles for
interference to the facts of each case that come up before the courts. There
is a disturbing tendency of courts setting aside arbitral awards, after
dissecting and reassessing factual aspects of the cases to come to a
conclusion that the award needs intervention and thereafter, dubbing the
award to be vitiated by either perversity or patent illegality, apart from the
other grounds available for annulment of the award. This approach would
lead to corrosion of the object of the 1996 Act and the endeavours made to
preserve this object, which is minimal judicial interference with arbitral
awards. That apart, several judicial pronouncements of this Court would
become a dead letter if arbitral awards are set aside by categorising them
as perverse or patently illegal without appreciating the contours of the said
expressions.
26. 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 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'.
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 21/30
27. Section 34 (2) (b) refers to the other grounds on which a court can set
aside an arbitral award. If a dispute which is not capable of settlement by
arbitration is the subject-matter of the award or if the award is in conflict
with public policy of India, the award is liable to be set aside. Explanation
(1), amended by the 2015 Amendment Act, clarified the expression 'public
policy of India' and its connotations for the purposes of reviewing arbitral
awards. It has been made clear that an award would be in conflict with
public policy of India only when it is induced or affected by fraud or
corruption or is in violation of Section 75 or Section 81 of the 1996 Act, if it
is in contravention with the fundamental policy of Indian law or if it is in
conflict with the most basic notions of morality or justice. In Ssangyong
(supra), this Court held that the meaning of the expression 'fundamental
policy of Indian law' would be in accordance with the understanding of this
Court in Renusagar Power Co. Ltd. v. General Electric Co.6 In Renusagar
(supra), this Court observed that violation of the Foreign Exchange
Regulation Act, 1973, a statute enacted for the 'national economic interest',
and disregarding the superior courts in India would be antithetical to the
fundamental policy of Indian law. Contravention of a statute not linked to
public policy or public interest cannot be a ground to set at naught an
arbitral award as being discordant with the fundamental policy of Indian
law and neither can it be brought within the confines of 'patent illegality' as
discussed above. In other words, contravention of a statute only if it is
linked to public policy or public interest is cause for setting aside the award
as being at odds with the fundamental policy of Indian law. If an arbitral
award shocks the conscience of the court, it can be set aside as being in
conflict with the most basic notions of justice. The ground of morality in
this context has been interpreted by this Court to encompass awards
involving elements of sexual morality, such as prostitution, or awards
seeking to validate agreements which are not illegal but would not be
enforced given the prevailing mores of the day.
8. Findings and conclusion of the court.
Perusal of the record shows that the main dispute between both the
parties was with respect to the transactions conducted by the respondent
company after 01.09.2015. The petitioner claims that he was having
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 22/30
understanding with the employee of the respondent company, namely Shri
Satish Yadav and Shri Satish Yadav had executed transactions as per the
applicant's instruction. Said Satish Yadav used to send the details of
transactions executed in petitioner's account from his Email ID i.e.
[email protected]. Admittedly, the petitioner had submitted
its Email ID [email protected] for receipt of contract notes, statement of
accounts, transactions statement, holding statement, profit and loss account.
According to petitioner, the transactions which were mentioned in the said
emails sent by Shri Satish Yadav were as per his instructions. Petitioner has
also admitted to have received contract notes, statement of accounts,
transactions statement, holding statement, profit and loss account from the
respondent company also. However, petitioner further submits that the
information in the emails sent by the respondent company relates to the
transactions executed on the exchange and not as per the information
received by the respondent from the Emails of Satish Yadav. Petitioner
stated that transactions which are mentioned in the email sent by Satish
Yadav from his email ID are as per the instruction but the transactions
executed by the respondent as reflected in the contract notes are different
and not as per his instruction and he suffered loss as the contract notes
containing the transactions executed on the exchange were not as per his
instruction.
9. Ld. Panel of Arbitrators in the impugned award dated
19.12.2016, took into consideration above mentioned contentions of the
petitioner and has observed that applicant has a vast experience of more
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 23/30
than 15 years and there was no occasion for the petitioner to rely upon the
email of the employee of the respondent company instead of the
transactions which have been detailed out in the contract notes which is a
legal and authenticated documents and provide the details of transactions
executed in the account of the petitioner as per rules, by laws of NSE as
well SEBI. Ld. panel of Arbitrators have also observed that apart from the
contract notes the margin statements, profit and loss accounts were also sent
to the applicant through Email by the respondent which contained all the
debit/ credit arising from the transactions executed on the exchange, it
contradicts the claim of the petitioner because there was no occasion for the
petitioner being in possession of the contract notes to rely upon the email of
the individual employee. In view of the same, it is evident that the petitioner
was very much aware about the transactions carried out by the respondent
company on his behalf. The petitioner has no where contended that he did
not receive the emails from the respondent company which contained above
mentioned of details of transactions.
10. Ld. panel of Arbitrators also observed that the petitioner was
regularly receiving the SMSs not only from the respondent company but
also from the exchange regarding the details of the transactions executed in
its account and these set of transactions as mentioned in the SMSs matches
with the contract notes, and not with the intimation received from the
individual employees' emails and as such this corroborate the contention of
the respondent company. The Ld. panel of Arbitrators also observed that the
petitioner was regularly making as well as receiving the payment which are
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 24/30
being generated on the basis of actual transactions on the exchange,
reflected in the contract notes and not on the basis of employees's emails as
such, it contradict the claim of the petitioner that he was not aware about
the transactions which were executed in the account and has been reflected
in the contract notes, margin statement, profit and loss.
11. According to petitioner, the respondent appointed one of its
employee Mr. Satish Yadav to communicate the details of trade executed in
the account of the applicant from his official Email ID:
[email protected] and when petitioner asked for access of
back log from Mr. Satish Yadav, he made a confession on 14.12.2015 about
the unauthorized transactions effected in the applicant's account alongwith
generation of enhanced brokerage by the respondent and involvement of
other senior officers of the respondent company in the same. In reply to the
same, respondent contended that the agreement had been entered into
between petitioner and respondent and the applicant has no occasion to
enter into any understanding with the employee to which, the respondent is
not a party. The respondent has relied upon section 91 & 92 of Evidence Act
whereby, when the terms of contract are explicit and clear, there cannot be
any oral testimony to over write a contract between the parties. Petitioner
submits that ld. Panel of Arbitrators error in appreciating the position that
section 91 & 92 of Evidence Act were not applicable in the present case.
The petitioner has failed to show as to why the provision of section 91 & 92
of Evidence act are not applicable to the present case. The petitioner has
admitted that agreement and KYC with the respondent was signed after
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 25/30
understanding the rights and obligation, risk disclosure documents and
additional rights and obligation of the respondent. When the petitioner
signed the agreement with the respondent, he was bound by the terms and
condition stipulated therein. Moreover, in the present petition also, the
petitioner admitted that understanding/ arrangement with the Mr.Satish
Yadav, the employee of the respondent company was oral. Ld.Panel of
Arbitrators has duly considered this contention of the petitioner and gave
their finding after analyzing the evidence and documents produced before
them. Moreover, Ld. Panel of Arbitrators also observed that when the
petitioner asked for his back office log, thereupon Mr. Satish Yadav made a
confession on 14.12.2015, does not seem to be corroborated as the Email
dated 13.12.2015 relied upon by the petitioner, itself indicates that applicant
was aware prior to 14.12.2015 and the access to the back office log was
given to the petitioner on 24.12.13 as per log furnished by the respondent.
Ld. Panel of arbitrators further observed that this contention of the
petitioner, if seen in the context with SMS/Email communication sent by
the respondent company, cannot be relied upon.
12. Ld. Panel of arbitrator also observed that the petitioner was
receiving intimation from respondent company through multiple channels
regularly on its Email as well as SMS which were as per the contract notes,
hence, contention of the petitioner that it was relying upon the employee's
email and was not accessing the contract notes, is not convincing and is also
without merit. Ld. Panel of Arbitrators also observes that the metadata of
the transactions, Emails, SMSs, exchange of payment, transfer of security
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 26/30
itself falsify the claim of the applicant and such a conduct itself is sufficient
to lead to the conclusion that applicant was well aware about the
transactions in its account as reflected in the contract notes and acted/
responded accordingly in making / receiving the payments and these
transactions are further corroborated and emails sent by NSE/ NDSL which
are independent identities. Ld. Panel of Arbitrators also observe that even if
applicant had entered into such any understanding with the employee
privately, the responded is not bound by it, any admission by the employee
to the petitioner does not come to rescue of the applicant and by the
respondent when the respondent in good faith sending all communication as
per the transactions executed on the exchange in discharge of contractual
obligation. The petitioner had knowledge of actual transactions through
various communication, its own conduct of making payments and in these
circumstances the respondent cannot be made accountable or party to such
understanding with the employee.
13. It is settled law as has been held by Hon'ble Supreme Court of
India in catena of decision that the scheme of provision of Arbitration &
Conciliation Act 1996 aims at keeping the supervision of the court at
minimum level and arbitration award can be set aside only upon one of the
grounds mentioned in sub section (2) of Section 34 of Arbitration &
Conciliation Act. The petition under Section 34 of the Act cannot be dealt
with as if court is sitting with appellate jurisdiction over the award and
court cannot re-look and appreciate the evidence and facts on record as well
as reasoning of the arbitrator except in case when either the award is
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 27/30
beyond the reference or agreement or that is passed under jurisdictional
error. In the present case, no such ground has been raised by the petitioner.
The petitioner opened his account by submitting relevant supporting
document with the respondent by KYC document as well as Depository
participants documents. The petitioner had clearly indicated his preference
to trade in cash and derivatives segments of NSE and BSE and further the
petitioner opted for Internet trading and also opted for receipt of documents
in digital form and shared his mobile number for activation of services of
SMSs alert pertaining to his trading as well as demat account related
transactions. The petitioner also executed electronic contract notes (ECN)
declaration for receiving trade/ transactions details. Accordingly the SMSs
alert were shared with the petitioner on his registered mobile number on
regular basis for each and every order placed executed and transacted in his
trading account. The petitioner never disputed the contents of SMSs
received on his mobile or statement sent on his registered email ID. The
petitioner was in receipt of contract notes, statement of accounts, profit and
loss statement, demat holding statement and margin reports on his
registered email ID on regular basis as per the exchange directives and the
petitioner has not disputed the same. Hence, in the facts of the present case,
none of the grounds mentioned in the section 34 (2) of Arbitration &
Conciliation Act are made by the petitioner. Even in the present petition
there is no averments of pleading by the petitioner as to which part of
section 34 (2) of the Act is made out and in terms of provision of Section 34
(2) of the Act, power of judicial review and scope interference in the award
is very limited and the court hearing the petition against the award cannot
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 28/30
act as the first appellate court as if the award was a decree passed by a trial
court. Further the court cannot substitute its own view for that of the
Arbitrator to do what it considers to be justice. It is also well settled the law
that the merits of award are required to be examined only in certain
specified circumstances, for examining whether the award is in conflict
with the public policy of India. It is settled law that mere saying that award
is against the public policy is not enough, the petitioner has to make out a
strong case within four corners of provision. In the present case, the
petitioner has failed to demonstrate any ground to show that award can be
set aside despite the fact that the petitioner owe a duty to do so and that too
convincingly, for the court come to finding that arbitral award was in
conflict of the provision. This court did not find that the award to be the
against public policy of India. The petitioner has failed to bring any ground
for interference of the award within the parameters circumscribed u/s 34 (2)
of Arbitration & Conciliation Act, 1996 or the principles as enunciated by
Hon'ble Apex Court in various judgments.
14. Relief.
Accordingly, in view of the above discussion, this court
hereby pass the following order:
ORDER
A. The petition u/s 34 of Arbitration & Conciliation Act, 1996 of the petitioner is dismissed.
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 29/30B. The impugned award dated 19.12.2016 is hereby affirmed. C. No order as to cost in the present petition.
The parties shall bear their own costs. File be consigned to record room after due compliance.
Digitally signed by RAJESH RAJESH KUMAR
Location: Court No.7,
Karkardooma Courts,
KUMAR Delhi
Date: 2023.04.28 12:33:47
+0530
Typed to the dictation directly, (Rajesh Kumar)
corrected and pronounced in Additional District Judge-03,
open court on 28.04.2023 East/KKD Courts, Delhi.
Shri Sanjeev Kapoor Vs. M/s Aditya Birla Money Ltd. ARBTN No.08/20 Page 30/30