Bangalore District Court
Mr. Rattehalli Sathya vs M/S Bma Wealth on 23 May, 2023
KABC010273302022
Form
No.9
(Civil)
Title
Sheet
for PRESENT: SRI PADMA PRASAD
Judgme
B.A.(Law) LL.B.,
XVIII Additional City Civil Judge.
Dated this the 23 rd day of May 2023
PLAINTIFF: Mr. RATTEHALLI SATHYA
NARAYANA BHAGAVAN, Son of
Late R.S.Sathyanarayana, aged
about 68 years, Residing at No.A-
001, Rajprakruti Apts., No. 157, 4 th
Cross, Jayanagar 1st Block,
Bangalore-560 011.
[By Sri D.O.Kotresh, Advocate]
/v e r s u s/
DEFENDANTS: 1. M/s BMA WEALTH
CREATORS LIMITED.
A company incorporated under
Companies Act, 1956, having
its Registered Office at No.29-
5A, Ambedkar Sarani, topsia
Road, Kolkata - 700 046 and
having its Branch office at
Bangalore. Represented by its
Authorised Representative
Mr. Shiv Kumar Damani, aged
about 40 years.
2 O.S.6585_2022_Judgment_.doc
2. ARBITRAL
[ APPELLATE
TRIBUNAL, Constituted by Mr.
R. MOHAN (Presiding
Arbitrator), Mr. A.V.
MURALIDHARAN (Arbitrator)
and Mr. B.P.RAO (Arbitrator)
NATIONAL STOCK EXCHANGE
OF INDIA Ltd., No.101, DBS
House, 26, Cunningham Road,
Bangalore-560 052.] Deleted.
3. Sri V. SEKAR, Sole Arbitrator,
Aged about 48 years,
NATIONAL STOCK EXCHANGE
OF INDIA LTD., No. 101, DBS
House 26, Cunningham Road,
Bangalore-560 052.
D1 - By Sri BVV, Advocate
D2 - Dismissed
D3 - Exparte.
Date of institution of the : 5/4/2016
suit
Nature of the suit : For INJUNCTION
Date of commencement of : 16/1/2023
recording of the evidence
Date on which the : 23/5/2023
Judgment was
pronounced.
: Year/s Month/s Day/s
Total duration
7 1 18
(PADMA PRASAD)
XVIII ACCJ: B'LURU.
3 O.S.6585_2022_Judgment_.doc
This is a suit for permanent injunction.
2. Initially the plaintiff filed the case as
arbitration suit, and as per the order passed on IA
No.4 dated 15/9/2022, this case has been
reclassified as Original Suit.
3. The plaint case in nutshell is that, plaintiff
is a doctor and has served in IIM, Bangalore around
19 years as doctor. The first defendant is a Trading
Member of the National Stock Exchange (NSE) and
Bangalore Stock Exchange (BSE). The first defendant
is also a Depositary Participant registered with COSL
and also with NSDL. The defendant no.1 in the course
of its business activity, used to offer various financial
services like Wealth Management Investment
Advisory, Distribution of IPO and Mutual Funds and it
has its head office at Kolkata and Branch office at
Bangalore.
During January 2010, the employee of first
defendant, Bangalore branch approached the plaintiff
to open an account with them and who offered to give
4 O.S.6585_2022_Judgment_.doc
useful tips on sound investment periodically. The
plaintiff signed all the papers brought in by the said
employee in good faith and opened Trading Account
and Demat Account on 30th January 2010. The
plaintiff upon the advise of the first defendant,
transferred all his holding of 24 shares from the
Demat account held by him with BGSE Financials.
The first defendant had assured him that no
transaction of sale or purchase of shares under the
said newly opened Demat account would be done
without first intimating the plaintiff about the
prevailing price, explaining the benefit of sale or
purchase and would proceed to transact the shares
concerned only after the 1st defendant receiving the
confirmation thereof from the plaintiff.
Since the date of opening the said new Demat
Account with the 1st defendant, one from the first
defendant's branch or Head Office contacted the
plaintiff either over phone or through E-mail towards
making any type of transactions on the said share
holdings of the plaintiff. Accordingly the plaintiff
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submits that the said share holdings of the plaintiff
should have remained intact with the first defendant.
But, to the utter surprise of the plaintiff, in the month
of August 2014, the plaintiff received a phone call
from the 1st defendant's office saying that there was a
small debit balance in his account. The plaintiff was
shocked to hear the same since he did not carry out
any trade nor did he approve any trade transaction by
the first defendant from January 2010 and hence the
plaintiff called for the details from the first defendant
of all the transactions from the date of his opening the
Demat Account. Plaintiff for the first time noticed that
large number of transactions were executed in his
account not authorised by him. The plaintiff till
August 2014 did not get any telephone call or email
from the first defendant or from any of the staff
bringing such transactions to the notice of the
plaintiff. The plaintiff immediately on 20/8/2014 sent
a letter to the first defendant calling upon the first
defendant to furnish him all the copies of the papers
signed kept with the first defendant. In response to
6 O.S.6585_2022_Judgment_.doc
the same, the plaintiff received a reply from the
Kolkata office stating that the applicant had executed
95 transactions on NSE & FO segment, 50 trades on
NSE cash segment and 4 trades on BSE during 2010-
11. The plaintiff had no knowledge of derivatives and
states that he neither received any contract note nor
any SMS from the first defendant. The plaintiff
received statement of accounts for the period of
January 2010 onwards only after he made a
complaint vide his letter dated 27/08/2014.
Thereafter, the plaintiff lodged a complaint
against the first defendant before the Investor Service
Cell, National Stock Exchange, Bangalore who
appointed the 3rd defendant as the sole Arbitrator to
resolve the disputes between the plaintiff and the first
defendant in accordance with the rules and byelaws of
the NSE/SEBI.
The third defendant in accordance with the
provisions of Arbitration and Conciliation Act, 1996
taken up the dispute raised by the plaintiff, issued
notice to the first defendant to appear and file
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objections and the first defendant appeared and
participated in the arbitral proceedings before the
third defendant and the third defendant after
affording sufficient opportunity to the plaintiff and the
first defendant and after taking evidence of both the
parties in accordance with law and after considering
the pleadings, documents and the evidence adduced
by the parties and after hearing both the parties at
length, passed an Award dated 23/7/2015 in Dispute
bearing AM.No.CM/B-0003/2015, allowing the
complaint of the plaintiff and directing the first
defendant to pay a sum of Rs.16,44,255/- to the
plaintiff representing the value of the shares sold
unauthorisedly and in addition to the same, to pay a
sum of Rs.3,49,603/- to the plaintiff towards delayed
payment wrongly debited by the first defendant during
the period January 2010 to May 2012.
Accordingly, prayed for the reliefs claimed in the
suit.
4. Though defendant no.1 appeared did not put
forth any defence. Suit against defendant no.2 is
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dismissed. The defendant no.3 inspite of the service,
not chosen to appear before the court, hence he has
been placed exparte.
5. On the basis of above, the point for
consideration is - Whether the plaintiff is entitled for
the relief claimed in the suit?
6. Plaintiff in order to prove its case, examined
himself as PW.1 and got marked documents as per
Ex.P1 to Ex.P3.
7. Heard the arguments and perused entire
records of the case. The learned advocate for the
plaintiff filed written arguments as well as produced
following citations:
1. 2022 Live Law (SC) 900, Yashpal
Chopra And Co., Vs. Union of India and others.
2. 2020 SCC 109, Civil Appeal No.
9244/2019, M/s N.V. International Vs. The State
of Assam.
3. High Court of Judicature at Bombay
in Commercial Appeal (L) No. 428 of 2019 dated
8/7/2022 in the matter of Jagannath
Parameshwar Mills Vs. Agility Logistics Pvt. Ltd.,
9 O.S.6585_2022_Judgment_.doc
8. My findings on the above point is in the
negative, for the following:
9. The case made out by the plaintiff is that,
representative of first defendant approached the
plaintiff in January 2010 to open an account with
them and offered to give useful tips on sound
investment periodically. Accordingly the plaintiff
signed all the papers brought by the said employee of
first defendant in good faith, and opened the trading
account and demat account on 30th January 2010.
The plaintiff upon the advice of first defendant
transferred all his holding of shares from the Demat
account held by him to the newly opened Demat
account with the first defendant. The plaintiff has
given the particulars of the same. The specific claim of
the plaintiff that first defendant had assured him that
no transaction of sale or purchase of sales under the
said newly opened Demat account would be done
without intimating the plaintiff about the prevailing
price, benefit of sale or purchase. The first defendant
10 O.S.6585_2022_Judgment_.doc
or anybody from first defendant's branch has not
informed anything about the transactions to the
plaintiff but to the surprise of the plaintiff in the
month of August 2014, plaintiff received a phone call
from the first defendant office saying that there was a
small debit balance in his account. Hence, the
plaintiff called for the details from the first defendant
of all transactions and the first defendant furnished
the statement of account to the plaintiff for the first
time thereafter and also claimed that from the date of
opening demat account till August 2014, he did not
call any telephone call or email from the defendant
regarding the transaction. As per the statement
furnished by the first defendant, there was a 95
transactions on NSE and FO segment, 50 trades on
NSE cash segment and 4 trades on BSE during 2010-
11. The plaintiff claims that he has no knowledge
about the said transactions. Accordingly the plaintiff
lodged a complaint against the first defendant before
the investors service cell National Stock Exchange,
Bengaluru who appointed the first defendant herein
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as the sole arbitrator and the sole arbitrator after
holding enquiry directed the first defendant to pay
Rs.16,44,255/- to the plaintiff in addition to pay a
sum of Rs.3,49,603/-. The said award dated
23/7/2015 passed by the respondent become final as
per Section 35 of the Arbitration Act. It is also stated
that an appeal against the award would live only to
the court authorised by law to hear appeals from
original decrees of the court. Accordingly the plaintiff
claimed that the award passed by the third defendant
reached finality. However, the first defendant much
against the law applicable or governing the arbitration
matters, illegally approached the second defendant in
an appeal bearing No. Appeal (A.M) No. CM/B
0003/2015. The second defendant without having any
authority allowed the appeal and set aside the award
passed by the third defendant. Accordingly, the
plaintiff filed this suit for declaration to declare that
the order passed by the second defendant in appeal
No. Appeal (A.M) No. CM/B 0003/2015 dated
4/1/2016 as void, illegal and not binding on the
12 O.S.6585_2022_Judgment_.doc
plaintiff, and injunctive relief to restrain the first
defendant as claimed in the suit.
10. The plaintiff in support of his case,
examined himself as PW.1 and got marked documents
at Ex.P1 to Ex.P3. The plaintiff / PW.1 in his evidence
affidavit stated in consonance with the plaint case.
The plaintiff produced original award dated
23/7/2015 at Ex.P1; Original award dated 4/1/2016
passed by second defendant at Ex.P2; and the letter
issued by NSE dated 5/1/2016 at Ex.P3.
11. On perusal of pleadings and documents by
the parties, the plaintiff claims that the order passed
by third defendant at Ex.P1 is reached finality and the
order passed by the second defendant who has been
deleted in the suit at Ex.P2 is void, and not binding on
the plaintiff. The claim of the plaintiff is based on the
provisions of arbitration Act. The subject matter of
this suit is the transactions relating to the shares and
debentures at Stock Exchange i.e., to say at National
Stock Exchange and Bombay Stock Exchange etc.,
13 O.S.6585_2022_Judgment_.doc
through Demat account of the plaintiff by the first
defendant. The specific case made out by the plaintiff
in the plaint that he has opened the Demat account
on 30/10/2010 by signing the papers submitted by
the person sent by defendant no.1 on good faith.
Thereafter, the plaintiff transferred his shares to the
first defendant. The first defendant without informing
the plaintiff carried out the transactions at the stock
exchange, accordingly the plaintiff lodged a complaint
before the Investors Service Cell, National Stock
Exchange.
12. On the basis of the complaint of the
plaintiff before the National Stock Exchange, the third
defendant appointed as a arbitrator to decide the
dispute. The third defendant after holding the enquiry
passed the award directing the first defendant to pay
a sum of Rs.16,44,255/- in addition to pay a sum of
Rs.3,49,603/-. The said award has been challenged
before the second defendant and the second
defendant set aside the award passed by the third
defendant. Now the claim of the plaintiff is that, there
14 O.S.6585_2022_Judgment_.doc
is no appeal against the arbitration award and there is
no Appellate Tribunal for arbitration award. The said
claim of the plaintiff is based on the provisions of
Arbitration Act. Now it is relevant to note that the
transaction between the plaintiff and defendant no.1
is relating to the shares and debentures at the stock
exchange. There is no general agreement between the
plaintiff and defendant to resolve the dispute. Hence,
whether the provisions of Arbitration Act is exclusively
applicable or not to be considered in this case.
13. It is relevant to note that arbitration
proceedings regarding the dispute involved between
the plaintiff and defendant no.1 has been commenced
on the basis of complaint lodged by the plaintiff
against the first defendant before the Investor Service
Cell, National Stock Exchange, Bengaluru. Therefore,
certainly there is no written agreement between the
plaintiff and defendant no.1 regarding their
transaction and if any dispute arose between the
parties, how the dispute to be resolved is not reduced
into writing. The basis for the plaintiff to approach
15 O.S.6585_2022_Judgment_.doc
this court to challenge the award or order of
defendant no.2 is that, there is no specific provision
under the Arbitration and Conciliation Act to
challenge the arbitral award before the Appellate
Arbitral Tribunal.
14. It is true that Arbitration and Conciliation
Act nowhere provides the Appellate Arbitration
Authority. As such, whatever the award passed under
the Arbitration Act will reach the finality. The recourse
against the arbitral award is as per Section 34 of the
Arbitration Act and the entire Arbitration Act
nowhere provides the appellate tribunal or authority
to challenge the arbitral award.
15. As discussed earlier, there is no Arbitration
Agreement between the plaintiff and defendant no.1 to
resolve their dispute. The arbitration proceedings has
been initiated on the basis of complaint filed by the
plaintiff before the Investor Service Cell, National
Stock Exchange. Accordingly on the basis of
complaint, National Stock Exchange has appointed
16 O.S.6585_2022_Judgment_.doc
the defendant no.2 as a arbitrator to adjudicate the
dispute between plaintiff and defendant. Hence, what
is the provision applied by the National Stock
Exchange to appoint the third defendant as a
arbitrator is to be considered in this case. On perusal
of order passed at Ex.P2, it reveals that there is a
byelaws for the National Stock Exchange of India and
that is governed by its byelaws. The said fact infact
not in dispute. Therefore, the court has to see the
procedure contemplated under byelaws of National
Stock Exchange to resolve the dispute.
16. The Chapter-XI of the National Stock
Exchange of India Limited speaks about the
arbitration. The said chapter XI of National Stock
Exchange of India has given a definitions of arbitrator,
act, admissible claim value, arbitral award, appellate
arbitrator, and appellate arbitral award. These
definitions certainly makes it clear that National Stock
Exchange has provided for the arbitration to resolve
the dispute between the investors and traders. The
said definition also reveals that the arbitral award can
17 O.S.6585_2022_Judgment_.doc
be challenged by filing appeal before the appellate
arbitrator and the appellate arbitrators can pass the
appellate arbitral award. In order to have the clarity, it
is just and necessary to note the definitions under the
Chapter-XI of National Stock Exchange of India
regarding the arbitration.
"Arbitrator' shall mean a sole arbitrator
or a panel of arbitrators.
"Act" shall mean the Arbitration and
Conciliation Act, 1996 and includes any
statutory modification, replacement or re-
enactment thereof, for the time being in
force.
"Admissible claim value" shall mean the
claim value admissible to the Constituent as
ascertained by the Grievance Redressal
Commitee or Panel and recorded in the
direction or order.
"Arbitral Award" shall mean an award
passed by the Arbitrator.
"Appellate Arbitrator" shall mean a
panel of arbitrators who hears the appeal
filed against the Arbitral Award.
18 O.S.6585_2022_Judgment_.doc
"Appellate Arbitral Award" shall mean
an award passed by the appellate Arbitrator.
17. The aforesaid provisions in the byelaws of
National Stock Exchange of India specifically speaks
about the provisions for appellate arbitrator and
appellate arbitral award. Hence, the award passed at
Ex.P2 cannot be declared as void. In the case on
hand, it is clear that general principles of Arbitration
Act is not applicable to the facts of this case,
particularly there is no arbitration agreement
between plaintiff and defendant. The arbitrator has
been appointed by the National Stock Exchange and
the third defendant being the arbitrator appointed by
the National Stock Exchange vide a letter no. NSE/
BRO/ ARBN/ 27032015-AL dated 27/3/2015. Hence,
the byelaws of National Stock Exchange of India is
applicable to the dispute involved in this case.
Accordingly the third defendant being the arbitrator
appointed by the National Stock Exchange has
adjudicated the dispute and passed the award. The
said award has been challenged by the defendant no.1
19 O.S.6585_2022_Judgment_.doc
in accordance with the order of the National Stock
Exchange as per letter bearing no. NSE/ BRO/
ARBN/ 23102015-AG dated 23/10/2015 before the
Appellate Arbitrators. Hence, the act of defendant no.2
is in accordance with the provisions of byelaws of the
National Stock Exchange.
18. It is true that, the third defendant allowed
the claim of plaintiff and passed the arbitral award.
The second defendant who has been deleted in the
suit / appellate arbitrators set aside the order passed
by the third defendant on the ground that the claim of
the appellate is barred by limitation, as the claim is
filed after the lapse of 3 years 2 months. It is also
specifically observed by the appellate arbitrators in
point no.1 of the finding and observation that the last
transaction was dated 22/1/2010 and 27/9/2011
and the objection was filed on 3/11/2014. It is also
observed by the appellate arbitrator at point no.3 in
their finding and observation that the defendant has
complied the regulations governing the trading
members by issuing the contract notes and also
20 O.S.6585_2022_Judgment_.doc
sending the same through mails etc., Further, it is
surprising to note that the plaintiff has not made out
any case to show that there was no occasion for him
to make enquiry regarding the transaction from the
date of opening of demat account till the filing of
complaint.
19. The law of limitation is also applicable as
per Rule 3 of the Byelaws set out in Chapter -XI of
National Stock Exchange Byelaws. The said provision
states that the limitation period for filing an
arbitration application shall be governed by the law of
limitation i.e., the Limitation Act, 1963 as specified
under Section 43 of the Act. Therefore, the plaintiff
ought to have field the complaint within three years
from the date of transaction. In the case on hand, it is
clear that the complaint is filed after the lapse of 3
years. Hence, certainly the claim of the plaintiff is also
barred by limitation. Therefore, viewed from any
angle, the plaintiff failed to make out sufficient
grounds to set aside the appellate arbitral award at
21 O.S.6585_2022_Judgment_.doc
Ex.P2. Accordingly this point is answered in
negative. In the result, following:
The suit of the plaintiff is hereby
dismissed.
No order as to costs.
Draw decree accordingly.
***
[Dictated to the Judgment Writer directly on computer, Script corrected, signed and then pronounced by me, in the Open Court on this the 23 rd day of May 2023.] [PADMA PRASAD] XVIII Additional City Civil Judge.
BENGALURU.
1. List of witnesses examined on behalf of the Plaintiff/s:
PW.1 Rattehalli Sathyanarayana Bhagavan
2. List of witnesses examined on behalf of the Defendant/s:
NIL.
3. List of documents marked on behalf of the Plaintiff/s:
Ex.P1 Original Award dated 23/7/2015.
Ex.P2 Original Award dated 4/1/2016.
Ex.P3 Letter dated 5/1/2016. 22 O.S.6585_2022_Judgment_.doc
4. List of the documents marked for the defendants:
NIL.
[PADMA PRASAD] Digitally XVIII Additional City Civil Judge. signed by BENGALURU. PADMA PADMA PRASAD PRASAD Date:
2023.05.23 16:12:45 +0530 ...Judgment pronounced in the Open Court....
(Vide separate detailed judgment) The suit of the plaintiff is hereby dismissed.
No order as to costs. Draw decree accordingly.
[PADMA PRASAD] XVIII Additional City Civil Judge.
BENGALURU.
2 O.S.6585_2022_Judgment_.doc 4 2 O.S.6585_2022_Judgment_.doc 5