Delhi District Court
India Infoline Ltd vs Atulya C. Sareen on 24 November, 2012
1
IN THE COURT OF SHRI MAN MOHAN SHARMA
ADDITIONAL DISTRICT JUDGE (CENTRAL) 01
TIS HAZARI COURTS, DELHI.
C.S. No. 52/11
Unique I. D. Number 0241C1088002008
India Infoline Ltd.
Having its Head Office at
Building No. 75, Nirlon Complex,
Off Western Express Highway,
Goregaon (E), Mumbai400 063.
.....Plaintiff.
Versus
1. Atulya C. Sareen
2/42D, Ram Nagar Colony,
Civil Lines Agra282002 (U.P.)
2. National Stock Exchange of India Ltd.
4th Floor, Jeevan Vihar Building,
Parliament Street, New Delhi110001.
3. Sh. Ravi Kant (Sole Arbitrator)
C/o Arbitration Department,
National Stock Exchange of India Ltd.
4th Floor, Jeevan Vihar, Building,
C.S. No. 52/11(India Infoline Ltd. Vs. Atulya C. Sareen) 1/12
2
Parliament Street, New Delhi110001.
....Defendants
Date of institution : 14.08.2008
Date of reserve for judgment : 31.10.2012
Date of pronouncement of judgment : 24.11.2012
JUDGMENT
These are the objections U/s 34 of the Arbitration and Conciliation Act, 1996 (hereinafter 'the Act') filed by the petitioner, M/s India Infoline Ltd. The petitioner has challenged the arbitration award dated 17.05.2008, passed by the Ld. Sole Arbitrator, who has been impleaded as the respondent no. 3 in these proceedings. The respondent no. 2 is the National Stock Exchange.
2. The lis between the parties had its genesis in the Member Client Agreement (KYC) executed between the petitioner and respondent no. 1 for the purpose of trading in shares and securities. Some differences crept in between the parties on account of certain unauthorized tradings done in the said account on 03.06.2006 and 06.06.2006 about which the respondent no. 1 raised a dispute for the C.S. No. 52/11(India Infoline Ltd. Vs. Atulya C. Sareen) 2/12 3 first time on 19.03.2007. As the matter could not be resolved between the parties, the arbitration was invoked by the respondent no. 1. However, the award went against the petitioner, who is aggrieved from the same, and has challenged the same in the present proceedings.
3. I have heard Sh. Mukesh Goel, Ld. Counsel for the petitioner and Sh. K. K. Sharma, Ld. Counsel for the respondent no. 1.
Petitioner's Arguments
4. The Ld. Counsel for the petitioner has opened his arguments by submitting that a bare reading of the award shows that the Ld. Arbitrator has been swayed by the emotional chords, and reasoning has been a casualty in the case. All the findings are based on conjectures and surmises. The sole consideration which weighed with the arbitrator is the illness of the mother of the respondent no. 1 and her being admitted in ICU and this argument has led the Ld. Arbitrator to give a finding that the respondent no. 1 could not have done the transactions in shares under these circumstances. The plain reading of the award goes to show that this fact weighed heavily with C.S. No. 52/11(India Infoline Ltd. Vs. Atulya C. Sareen) 3/12 4 the Ld. Arbitrator and influenced his decision. In this process the legal reasoning has been given a gobye.
5. Contrary to the settled law, the Ld. Arbitrator put the defence on the test rather than the claim. Ld. Arbitrator has passed the award while fixing the negative onus upon the petitioner, which thing is totally foreign to the law of evidence. The reverse onus or negative onus is unheard in the Indian legal jurisprudence, except when there is a presumption in favour of the claimant. No such presumption exits under the law and thus the award as passed is contrary to the law and the public policy of the Nation.
6. The share market is a place which is always under a state of flux. Price may go up or down in a fraction of seconds; fortunes are made or marred in the market. Thus there are checks and balances to curb dishonesty on the part of the stakeholders. It is incumbent upon the constituent to object to a transaction within 24 hours of its execution, else the right to object stands extinguished. If there is debit balance in the account of the member an opportunity is afforded to make good the debit balance, else the securities are sold. C.S. No. 52/11(India Infoline Ltd. Vs. Atulya C. Sareen) 4/12 5 In the present case the respondent no. 1 has woken from its slumber after a long delay and thus the claim was wholly untenable.
7. The respondent no. 1 had been admittedly working as a Branch Manager of a nationalized bank and is conversant and deemed to be conversant with the nature of business, transactions in shares and securities. He has admittedly done trading, thus his case in not that he is a novice or amateur. The nature of claim pressed into service by him is not maintainable on the face of it and liable to be rejected at the threshold.
8. The plea of the respondent no. 1 that the agreement is not signed by the petitioner and thus there is no enforceable contract between the parties has no legs to stand. If there was no agreement, then how the respondent no. 1 has invoked the Arbitration. When he has exercised the arbitration clause, he is estopped from raising such a plea.
9. The statement of claim does not mention about the volume of loss. How, the Ld. Arbitrator has arrived at the figure of Rs. 5.9 lac, is not manifest on record and it goes to show that the award has been C.S. No. 52/11(India Infoline Ltd. Vs. Atulya C. Sareen) 5/12 6 passed on assumptions and presumptions, which is writ large on the face of the award. Arbitrator has taken the claim of respondent as gospel truth.
10. It is finally submitted that the objection as to the jurisdiction is nonest and the objections are very much maintainable before this Court.
Respondent no. 1's arguments
11. Ld. Counsel for the respondent no. 1 has refuted the arguments of the petitioner tooth and nail. While addressing the arguments Ld. Counsel for the respondent no. 1 ventured into the appreciation of facts and evidence, which I am not repeating here as the same is beyond the scope of the matter.
12. It is submitted by the Ld. Counsel for the petitioner that the agreement was not signed by petitioner, hence, the same is not valid. However the arbitration has been conducted under section 9 of the Securities Contract (Regulations) Act, (SCRA) which provides for compulsory arbitration. The parties are also governed by the SEBI Act and The Depositories Act and the Rules and Regulations of the C.S. No. 52/11(India Infoline Ltd. Vs. Atulya C. Sareen) 6/12 7 National Stock Exchange.
13. The objections as filed are not maintainable for want of jurisdiction. It is not the place of arbitration that may have jurisdiction. The jurisdiction is governed by the Civil Law.
14. In Apparel Export Promotion Council Vs. Prabhati Patni, Proprietor Comfort Furnishers and Anr. 2005(3) Arb. LR 518 (Delhi) it has been held that to determine the jurisdiction of a Court for the purpose of section 34 of the Act one has to look at the subject matter of arbitration and not at situs of arbitration. Situs of arbitration or fact that award was made a particular place would not be relevant for conferring jurisdiction.
15. The case of Indian Oxygen Ltd. Vs. National Oxygen Ltd. and another Company Cases (Volume 72) page 378 has been relied upon to cite that the Arbitrator chosen within the jurisdiction of the Court does not give jurisdiction to that Court.
16. Reliance has been placed upon GE Countrywide Consumer Financial Services Ltd. vs. Surjt Singh Bhatia & Jaspal Kaur 2006(2) Arb. LR 170 (Delhi) to cite that if a suit could be filed at a C.S. No. 52/11(India Infoline Ltd. Vs. Atulya C. Sareen) 7/12 8 place where the parties had agreed to hold arbitration proceedings then, obviously the Courts at such place would have jurisdiction. But if the suit cannot be filed at a place where the parties had agreed to hold the arbitration proceedings then the courts at such a place would not have jurisdiction.
17. The case of Garhwal Mandal Vikas Nigam Ltd. Vs. Krishna Travel Agency (2008) 6 SCC 741 has been relied upon to defines the meaning of court as referred to in section 34 of the Act and the aspect of jurisdiction.
18. The law pronounced in the case of Mikuni Corporation Vs. Ucal Fuel Systems Ltd. and Ors. 2008(1) Arb. LR 503(Delhi) establishes that the place where the arbitration may take place not relevant for deciding jurisdiction of Court.
19. The law laid down in Larsen & Toubro Ltd. Vs. K. S. Baidwan & Ors. 2006 (Suppl.) Arb. LR 25 (Delhi) and Inox Air Products Ltd. vs. Rathi Ispat Ltd. 2006(4) Arb.LR 40 (Delhi) have also been cited on the aspect of jurisdiction and it is submitted that the facts of the present case are similar to those cases. In the C.S. No. 52/11(India Infoline Ltd. Vs. Atulya C. Sareen) 8/12 9 similar vein the judgment of Escorts Ltd. Vs. G. K. Automobile 2006 (1) Arb.LR 347 has been relied upon.
Findings and Reasons
20. I have considered the rival submissions and the material on record.
21. In the first instance, I will consider the aspect of jurisdiction and if the findings goes in favour of this Court having jurisdiction, I will examine the other aspects on law and merits.
22. In Kamalpushp Enterprises vs. Gas Authority of India 1995 RLR 56 it has been held that for deciding the question of territorial jurisdiction in the arbitral proceedings, the Court has to ask two questions:
(i). What are the questions which form the subject matter of reference to arbitration?
(ii). If these questions arise in a suit, which is the Court which would have jurisdiction to entertain the suit?
23. The dispute before the Arbitrator had its genesis in the jural relationship between the parties which had arisen out of the member C.S. No. 52/11(India Infoline Ltd. Vs. Atulya C. Sareen) 9/12 10 client agreement. Albeit the respondent no.1 has taken objection to the agreement not having been signed by petitioner but the fact of the matter is that the respondent no. 1 has not denied the jural relationship between the parties. Therefore, in view of the same the dispute between the parties as arisen out of the jural relationship in which the petitioner is a member of Stock Exchange as well as a Depository Participants on the one hand and the respondent no.1 is the client of petitioner for transactions in shares and securities as well as for demat services. The dispute is pertaining to transactions in the account of respondent no. 1 which the respondent no. 1 states to be unauthorized and contrary stand has been taken by the petitioner. Consequently, the dispute is whether there is any liability subsisting against the respondent no.1. Thus, there is a civil dispute of financial liability between the parties. This answers the first question which the court has to pose to it, as per the law pronounced in the aforesaid judgment.
24. There is no denial that the Member Constituent Agreement was executed at Buduan, Rajasthan. The respondent no.1 at the C.S. No. 52/11(India Infoline Ltd. Vs. Atulya C. Sareen) 10/12 11 relevant time was stationed at that place. Presently, he is stationed at Agra. There is no cause of action which as accrued to the petitioner within the jurisdiction of Delhi. The respondent no.2 i.e. NSE is only a performa party as the petitioner is its member. Thus, its situs at Delhi does not create any cause of action in favour of petitioner at Delhi. Mere fact that the situs of Arbitration had been at Delhi also gives no jurisdiction to the Courts at Delhi to have jurisdiction within the meaning of Section 34 of the Act for entertaining the petitioner's objections.
25. Under these facts and circumstances, the lis could not have been instituted within the jurisdiction of Delhi by the petitioner. The law as cited by the ld. counsel for respondent no.1 cements the plea that the this Court has no jurisdiction to entertain the objections under Section 34 of the Act as filed by the petitioner.
26. As this Court has no jurisdiction in the matter, it cannot entertain the objections as filed by the petitioner and therefore, there is no need to venture into the submissions made on the merits of the matter.
C.S. No. 52/11(India Infoline Ltd. Vs. Atulya C. Sareen) 11/12 12
27. Accordingly, the objections are not maintainable before this Court for want of jurisdiction. They are hence rejected/ordered to be returned for want of jurisdiction and the petitioner may file the same before the court of competent jurisdiction in accordance with law.
28. The petition stands disposed of accordingly.
29. File be consigned to Record Room.
Announced in the Open Court today i.e. 24.11.2012 (MAN MOHAN SHARMA) ADJ (CENTRAL)1 DELHI.
C.S. No. 52/11(India Infoline Ltd. Vs. Atulya C. Sareen) 12/12