Delhi District Court
Wealthstreet Advisors Pvt Ltd vs Tarachand Agarwal on 18 July, 2023
IN THE COURT OF MS VINEETA GOYAL,
DISTRICT JUDGE (COMMERCIAL)-03,
PATIALA HOUSE COURTS, NEW DELHI
OMP (COMM)- 90/21
CNR No. DLND010061802021
In the matter of:
Wealthstreet Advisors Pvt Ltd
At A-1101, Mondeal Heights
11th Floor, Besides Wide Angle,
SG Highway, Ahmedabad-380015
..... Petitioner
Versus
1. Tarachand Agarwal
A-83, Prashant Vihar,
Sector 14, Rajapur Kalan,
Rohini, New Delhi-110085 .... Respondent no.1
2. Appellate Arbitral Tribunal
National Stock Exchange of India Ltd.
Comprising of Justice (Retd.) Dr. Satish Chandra
Justice (Retd.) SL Bhayana Ashok Kumar Jalan,
4th Floor, Jeevan Vihar Building,
Parliament Street, New Delhi-110001 .... Respondent no.2
Date of institution of suit : 20.09.2021
Judgment reserved on : 12.07.2023
Date of Judgment : 18.07.2023
Appearance: Sh. Gurcharan Singh, Ld. Counsel for
the petitioner.
Sh. Pawan Kaushik, Ld. Counsel for
respondent no.1.
OMP(Comm) 90/21 WealthStreet Advisors Pvt Ltd v/s Tara Chand Agarwal Page 1 of 16
JUDGMENT
1. The petitioner has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter referred as the 'Act') challenging the impugned award dated 21.01.2021 passed in Arbitration Reference AM No. NSEDRO/18287/19- 20/ISE/IGRP/ARB/APPL by Ld. Appellate Arbitral Tribunal of National Stock Exchange of India Limited.
2. Brief facts are that the respondent had been trading with the petitioner, duly registered stock broker with SEBI since October, 2019. Certain dispute arose regarding the trades on 27.12.2019, which made the respondent no.1 file a complaint before Investor Grievance Redressal Panel (in short IGRP) claiming a sum of Rs. 15,68,220/-. The IGRP vide its Order dated 07.02.2020, observed that no claim was admissible. The respondent preferred his claim before the Arbitral Tribunal of NSE which was contested by the petitioner and the Tribunal passed an award of a sum of Rs. 15,68,220/- in favour of the respondent. The petitioner then preferred an appeal before the Appellate Arbitral Tribunal of NSE which also upheld the award passed by the Arbitral Tribunal. Aggrieved by this, the petitioner has preferred the present petition challenged the impugned award alleging that award is against principle policy of India and Principles of Natural Justice. It is based on erroneous application of laws, Bye-laws, Rules and OMP(Comm) 90/21 WealthStreet Advisors Pvt Ltd v/s Tara Chand Agarwal Page 2 of 16 regulations of NSE. It is also claimed that Ld. Tribunal wrongly observed that petitioner had induced the respondent to buy the share. It had rather informed the respondent, who had expressed his willingness to trade and invest through the petitioner. It is claimed that Appellate Arbitral Tribunal has committed error in not appreciating the terms of risk disclosure documents executed by the respondent.
3. Section 34 (1) of the Act provides that the arbitration award may be set aside by the Court on an application/petition for setting aside the same on any of the grounds specified in Section 34 (2) of the Act within the time prescribed. It 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 con-
templated 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 arbi- tration;
OMP(Comm) 90/21 WealthStreet Advisors Pvt Ltd v/s Tara Chand Agarwal Page 3 of 16Provided 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 arbi- tration may be set aside; or
(v) the composition of the arbitral tribunal or the ar- bitral procedure 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 agree- ment, 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- I For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India only if the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 & Section 81."
ii) It is in contravention with the fundamental policy of Indian law;
iii) It is in conflict with the most basic notions of morality or justice.
Explanation-II- For the avoidance of doubt, the test as to whether there is a contravention with the fun- damental policy of Indian law shall not entail a re- view on the merits of the dispute.
[2 (A) 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 appear- ing on the face of the award: Provided that an award shall not be set aside merely on the ground of an er- roneous application of the law or by reappreciation of evidence.
4. Normally, the general principles are that the decision of the Arbitrator unless there is an error apparent on the face of the award which makes it unsustainable, is not to be set aside even if the OMP(Comm) 90/21 WealthStreet Advisors Pvt Ltd v/s Tara Chand Agarwal Page 4 of 16 court as a court of law would 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 cancelled 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.
5. In the case of Hiedelberg Cement India Ltd Vs. The Indure Pvt Ltd, OMP (Comm) No. 413/2019 decided on 29.01.2020, it was held that law of judicial review and interference in proceedings under Section 34 of the Act is no more res integra. Reference of the case Associate Builders v/s Delhi Development Authority, (2015) 3 SCC 49 was made, where the Hon'ble Supreme Court has held as under:-
"19. When it came to construing the expression the public policy of India contained in Section 34(2)(b)
(ii) of the Arbitration Act, 1996,this Court in ONGC Ltd. v. Saw Pipes Ltd. (2003) 5 SCC 705: held:
(SCC pp. 72728 & 74445, paras 31 & 74)
31. Therefore, in our view, the phrase public policy of India used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest.
What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. How ever, the award which is, on the face of it, patently OMP(Comm) 90/21 WealthStreet Advisors Pvt Ltd v/s Tara Chand Agarwal Page 5 of 16 in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of jus tice. Hence, in our view in addition to narrower meaning given to the term public policy in Renusagar case [Renusagar Power Co. Ltd. v. Gen eral Electric Co., 1994 Supp (1) SCC 644] it is re quired to be held that the award could be set aside if it is patently illegal.
The result would be award could be set aside if it is contrary to: (a) fundamental policy of Indian law; or
(b) the interest of India; or (c) justice or morality, or
(d) in addition, if it is patently illegal.
Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be ad judged void.
74. In the result, it is held that: (A)(1) The court can set aside the arbitral award under Section 34(2) of the Act if 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 con templated 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 arbi tration.
(2) The court may set aside the award:OMP(Comm) 90/21 WealthStreet Advisors Pvt Ltd v/s Tara Chand Agarwal Page 6 of 16
(i)(a) if the composition of the Arbitral Tribunal was not in accordance with the agreement of the parties,
(b) failing such agreement, the composition of the Arbitral Tribunal was not in accordance with Part I of the Act,
(ii) if the arbitral procedure was not in accordance with: (a) the agreement of the parties, or (b) failing such agreement, the arbitral procedure was not in ac cordance with Part I of the Act. However, exception for setting aside the award on the ground of compo sition of Arbitral Tribunal or illegality of arbitral procedure is that the agreement should not be in conflict with the provisions of Part I of the Act from which parties cannot derogate. (c) If the award passed by the Arbitral Tribunal is in contravention of the provisions of the Act or any other substantive law governing the parties or is against the terms of the contract.
(3) The award could be set aside if it is against the public policy of India, that is to say, if it is contrary to: (a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality; or (d) if it is patently illegal. (4) It could be challenged: (a) as provided under Section 13(5); and (b) Section 16(6) of the Act.......
6. In recent judgments, the Hon'ble Supreme Court has once again reiterated the law related to the examination by a Court of an Award under Section 34 of the Act. In Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India Ltd. 2019 SCC OnLine SC 677, the Hon'ble Supreme Court has observed as under:-
35. 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 fundamen tal policy of Indian law as explained in paragraphs 18 and 27 of Associate Builders (supra), i.e., the fundamental policy of Indian law would be relegated OMP(Comm) 90/21 WealthStreet Advisors Pvt Ltd v/s Tara Chand Agarwal Page 7 of 16 to the Renusagar understanding of this expression.
This would necessarily mean that the Western Geco (supra) expansion has been done away with. In short, Western Geco (supra), as explained in para graphs 28 and 29 of Associate Builders (supra), would no longer obtain, as under the guise of inter fering with an award on the ground that the arbitra tor 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 con cerned, as contained in Sections 18 and 34(2)(a)(iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in paragraph 30 of Associate Builders (supra).
36. It is important to notice that the ground for inter ference 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 ba sic notions of morality or justice. This again would be in line with Associate Builders (supra), as it is only such arbitral awards that shock the conscience of the court that can be set aside on this ground.
37. 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 paragraphs 18 and 27 of Associate Builders (supra), or secondly, that such award is against basic notions of justice or morality as under stood in paragraphs 36 to 39 of Associate Builders (supra). 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 (supra), as understood in Associate Builders (supra), and paragraphs 28 and 29 in particular, is now done away with.
38. Insofar as domestic awards made in India are concerned, an additional ground is now available un der subsection (2A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent ille OMP(Comm) 90/21 WealthStreet Advisors Pvt Ltd v/s Tara Chand Agarwal Page 8 of 16 gality 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 sub sumed within the fundamental policy of Indian law, namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.
39. Secondly, it is also made clear that reapprecia tion of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.
40. To elucidate, paragraph 42.1 of Associate Builders (supra), namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Para graph 42.2 of Associate Builders (supra), 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 il legality on the face of the award.
41. The change made in Section 28(3) by the Amendment Act really follows what is stated in para graphs 42.3 to 45 in Associate Builders (supra), namely, that the construction of the terms of a con tract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fairminded or reasonable person would; in short, that the arbitrator's view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2A).
42. What is important to note is that a decision which is perverse, as understood in paragraphs 31 and 32 of Associate Builders (supra), 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 OMP(Comm) 90/21 WealthStreet Advisors Pvt Ltd v/s Tara Chand Agarwal Page 9 of 16 finding based on no evidence at all or an award which ignores vital evidence in arriving at its deci sion would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a find ing based on documents taken behind the back of the parties by the arbitrator would also qualify as a deci sion based on no evidence inasmuch as such deci sion is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse.
7. In the backdrop of the above, let me now examine the objections against the impugned award agitated by the parties, vis- a-vis the contentions of Ld. Counsels for the parties.
8. The petitioner is duly registered stock broker and the respondent has been maintaining a trading account with it. From this account, it is alleged that the respondent has authorized/traded the following transactions in the foreign currency (US dollars):-
a. 20 lot of USD on 16th October, 2019.
b. 100 lot of USD on 5th December, 2019.
c. 500 lot of USD on 9th December, 2019.
d. 500 lot of USD on 27th December, 2019.
e. 500 lot of USD on 27th December, 2019.
f. 30020 lot of USD on 27th December, 2019.
g. 10000 lot of USD on 27th December, 2019.
9. It is alleged that above mentioned transactions resulted into the loss of Rs. 15,68,220/- and consequently, the petitioner raised OMP(Comm) 90/21 WealthStreet Advisors Pvt Ltd v/s Tara Chand Agarwal Page 10 of 16 an invoice value (debit note) to the tune of Rs. 15,68,220/-. Per contra, the respondent has disputed the above transactions particularly transaction 30020 lot and 10000 lot, both dated 27.12.2019 and alleged that these transactions were never authorized, thus disputed loss emerging from these transactions. Perusal of Arbitral record shows that during the proceedings before Ld. Arbitral Tribunal, the rival contentions were raised and the Ld. Arbitrator has elaborately referred to call recordings maintained by the petitioner herein. It has been mentioned that the trades which are at the centre of the dispute are 30020 lot and 10000 lot. The call recording (1577422668) dated 27.12.2019 clearly reveals that respondent (Account Holder) had set 50000 calls and 50 lot and then the operator of the respondent (petitioner herein) responded saying 50000 lot instead of 50 lot (that was initially said by the account holder). It has been mentioned in the award that account holder then confirms 50000 lot and asked the operator to buy 50000 lot but the said operator stopped after buying 30200 lot instead of 50000 lot. The other call recording (1577423252) dated 27.12.2019 records transaction between the parties for trading in 10000 lot. It was also considered that account did not contain the margin to carry such large transactions and the Ld. Arbitrator held that stock broker was not acting in professional manner and due to non transparent methods of transaction, the respondent/petitioner herein was directed to withdraw the invoice value (debit note) to the tune of Rs. 15,68,220/-.
OMP(Comm) 90/21 WealthStreet Advisors Pvt Ltd v/s Tara Chand Agarwal Page 11 of 1610. The petitioner herein, thereby being aggrieved filed appeal against the arbitral award dated 07.11.2020 passed by the Ld. Sole Arbitrator before Appellate Arbitral Tribunal and the Ld. Appellate Arbitral Tribunal dismissed the appeal filed by petitioner herein and observed in para no. 6 to 10 as under:-
"6. We have heard both the parties (by virtual conference) at length and have gone through the material available on record. It may be mentioned that the entire Stock Market, works on a certain degree of trust and honesty. Being an aged person of 74 years, he was depending on the expert advice of the officers of the Trading Member. The claimant often acted as per advice of Shree Rajesh Ojha introduced by Manswani Dangri, who were in regular touch with the claimant.
7. In the instant case, assuming that order was placed for 50,000 LOT even then till date, it has not been completed. Only 30200 LOT were purchased. If the Trading Member was not having the limit of trading 50000 LOT or more, then whey they accepted the order from the claimant. No evidence is available on record where TM stated that order of 50000 LOT will be performed in peace meal. In these peculiar circumstances, It remains a mystery as to how 50000 LOT had been converted into 30020, especially when there was insufficient margin money in the account of claimant. For the purpose, the trading member has blocked all the available shares as margin money without the consent of the claimant.
8. By looking at the history of claimant's trading account, it appears that earlier, he had traded only 20, 100 and 500 LOTs. So, it is unbelievable that he might have placed the order for such a huge OMP(Comm) 90/21 WealthStreet Advisors Pvt Ltd v/s Tara Chand Agarwal Page 12 of 16 quantity, having the high value of 50000 LOT. The TM never made an attempt to get reconfirmation in writing, email or SMS from the claimant.
9. In the peculiar circumstances and by considering the totality of facts of the case, we find no reason to interfere with the impugned Award. The same is hereby sustained along with the reasons mentioned therein."
11. It transpires that the findings given by the ld. Arbitrator and the Appellate Arbitral Tribunal are based on the appreciation of material available in the form of call records, old history trading, splitting of trades of 50000 lots in 30200 lot, non confirmation of transaction by other modes etc. It is settled principle that the Court under Section 34 of the Act does not sit as Court of appeal to re- appreciate the entire evidence.
12. Hon'ble Delhi High Court, recently in Municipal Corporation of Delhi v/s Sweka Powertech Engineers Pvt Ltd, 2023 SCC Online Del 833, decided on 15.02.2023 restated the entire jurispudence of power of Appellate Courts herein.
35. The Appellant has challenged the Claim Nos. 1, 2, 5, 6 in the Common Order dated 24.01.2022 under Section 34 of the Act, 1996 in the Award on the ground of patent illegality. The scope of a challenge under Section 34 and Section 37 of the Act, 1996 is limited to the grounds stipulated in Section 34 as held in MMTC Limited v. Vedanta Ltd, (2019) 4 SCC 163. The comprehensive judicial literature on the scope of interference on the ground of Public Policy under Section 34 was postulated in Associate Builders vs. DDA, (2015) 3 SCC 49. The Apex Court placed reliance on the OMP(Comm) 90/21 WealthStreet Advisors Pvt Ltd v/s Tara Chand Agarwal Page 13 of 16 judgment of ONGC v. Saw Pipes, 2003 (5) SCC 705 to determine the contours of Public Policy wherein an award can be set aside if it is violative of „The fundamental policy of Indian law‟, „The interest of India‟, „Justice or morality‟ or leads to a „Patent Illegality‟. For an award to be in line with the „The fundamental policy of Indian law‟, the Tribunal should adopt a judicial approach which implies that the award must be fair, reasonable and objective. These grounds require an Arbitral Tribunal to deliver a reasoned award which is substantiated by evidence.
36. It was further held in Associate Builders (supra) that, when a decision is made to set aside an award on the basis of "public policy", the term "justice" simply refers to an award that shocks the conscience of the court. A court cannot possibly include what it determines to be unfair, given the circumstances of a case, by replacing the Arbitrator's decision with what it sees as "just".
37. The ground of "patent illegality" is applied when there is a contravention of the substantive law of India, the Arbitration Act or the rules applicable to the substance of the dispute. In Hindustan Zinc Limited vs Friends Coal Carbonisation, (2006) 4 SCC 445, The Apex Court referred to the principles laid down in Saw Pipes (supra) and clarified that it is open to the court to consider whether an award is against the specific terms of contract, and if so, interfere with it on the ground that it is patently illegal and opposed to the public policy of India. The Supreme Court in SAL Udyog (supra) as well, held that an award in blatant disregard of the express terms of the agreement suffers from patent illegality, but a reference was also made to Associate Builders (supra) wherein it was observed that the term "patent illegality" does not apply to every legal mistake made by the arbitral tribunal. A mere a difference of opinion in interpreting the contract or the applicable law could not be classified as patent illegality. Furthermore, the term "patent illegality" does not apply to legal violations that are unrelated to matters of public policy or interest.
13. Further, in paragraph 41 of the judgment, the following was observed:-
41. In the case of National Highway Authority of India vs. M. Hakim (2021) 9 SCC 1 it had been observed by the Three Judge Bench of the Apex Court that interference with the conclusions of OMP(Comm) 90/21 WealthStreet Advisors Pvt Ltd v/s Tara Chand Agarwal Page 14 of 16 fact and law is not permissible in either Section 34 or Section 37 of the Act, 1996. Only when the determination is ex-facie, perverse or in conflict with the provisions of the Contract, can the Court‟s interference be justified. Likewise, the Supreme Court in Anglo- American Metallurgical Coal vs. MMTC Limited (2021) 3 SCC 308 had observed that the Court is not permitted either under Section 34 or 37 of the Act to independently evaluate the merits of the Award, but must confine its authority to the parameters permitted under the Statute. Extreme caution must be observed by the Court and it should be hesitant to disrupt the concurrent conclusions arrived at in the Arbitral Award which is validated by the Court under Section 34 of the Act.
14. The Hon'ble Court in paragraph no.46 observed as under:-
46. In Dyna Technologies Pvt. Ltd. vs. M/s Crompton Greaves Ltd. the Apex court had observed that Section 34 has a different methodology and it cannot be considered as a typical Appellate jurisdiction. Section 34 demands respect to the finality of the arbitral ruling and the party autonomy in having chosen to get their issues resolved through alternate forum of arbitration which would be thwarted if the courts were to accept the challenge to the arbitral rulings on factual issues in a regular manner. The claim being supported by reasons, does not call for any interference.
15. Reverting to the facts of the case in hand, in the instant case, both Arbitral Tribunal and Appellate Arbitral Tribunal have given concurrent findings that petitioner was at fault while carrying out such large trades in the manner as has been done under the facts of the case. Therefore, such factual findings cannot be interfered on the touchstone of being violative of "The Fundamental Policy of Indian law, Justice or Morality or leads to a Patent Illegality. The impugned award has been sufficiently impregnated with underlying reasons thus no ground is made out to set aside or to disturb such award.
OMP(Comm) 90/21 WealthStreet Advisors Pvt Ltd v/s Tara Chand Agarwal Page 15 of 1616. In view of above discussions, the present petition is unmerited and, accordingly, dismissed. Parties are left to bear their own costs.
17. File be consigned to record room.
Digitally signed by VINEETA VINEETA GOYAL
GOYAL Date:
2023.07.18
16:42:18 +0530
Pronounced in the open (VINEETA GOYAL)
Court on 18th July, 2023 District Judge (Commercial)-03
Patiala House Courts
New Delhi
OMP(Comm) 90/21 WealthStreet Advisors Pvt Ltd v/s Tara Chand Agarwal Page 16 of 16