Delhi District Court
Pranshu Aggarwal vs M/S Elite Wealth Advisors Limited on 18 July, 2023
IN THE COURT OF MS VINEETA GOYAL,
DISTRICT JUDGE (COMMERCIAL-03),
PATIALA HOUSE, NEW DELHI
OMP (Comm) No. 122/21
CNR No. DLND01-008892-2021
In the matter of:
Pranshu Aggarwal
H. No. 1/959 Samrat Lodge,
Gulmohar Enclave, Bulandshahr,
Uttar Pradesh ........ Petitioner
Versus
M/s Elite Wealth Advisors Limited,
S-8, DDA Shopping Complex,
Mayur Vihar Phase-I, New Delhi ...... Respondent
Date of institution of suit : 10.12.2021
Judgment reserved on : 17.07.2023
Date of Judgment : 18.07.2023
Appearance : Sh. Tarun Biswas & Sh. Shubham Verma, Ld.
Counsels for petitioner.
Sh. Anuj Kumar & Sh. Abhijeet Pandey, Ld.
Counsels for respondent.
JUDGMENT
1. The present petition under Section 34 of Arbitration & Conciliation Act, 1996 (hereinafter referred as 'the Act') has been filed by the petitioner against the award dated 19.11.2019 passed by the Sole Arbitrator and also by the Appellate Arbitral Tribunal OMP (Comm) No. 122/21 Pranshu Aggarwal Vs. Elite Wealth Advisors Ltd Page 1 of 21 (majority) vide its award dated 28.02.2020, thereby upheld the award dated 19.11.2019.
2. The abridged facts necessary for adjudication are that the petitioner as a Client had opened a trading account on 19.06.2019 with the respondent which is a duly incorporated company under the Companies Act and is also a registered stock broker/trading member (hereinafter referred as TM) with National Stock Exchange and duly registered with SEBl. It is the case of the petitioner that at the time of opening of the said account, the respondent had shown the policy terms and conditions which was accepted by the petitioner and subsequently the petitioner executed the account opening form/client registration form with respondent policies being part of the contractual terms between the parties. Further, the respondent's policies are standard terms and conditions which it enters with most of its clients. The said policy documents are even stated on the respondent's website. It is further contended by the petitioner that the petitioner at the time of opening of account with the respondent had submitted his bank statement from 16.11.2018- 16.06.2019 along with copy of his 1TR for the financial year 2018-19. The total income of the petitioner for the year 2017- 18 and 2018-19 were Rs.4,99,150/- and Rs 3,48,990/- respectively. The respondent based on the said documents had conducted risk assessment of the petitioner and had categorically specified the petitioner's profile as a "LOW RISK PROFILE". Further, the annual income of the petitioner was OMP (Comm) No. 122/21 Pranshu Aggarwal Vs. Elite Wealth Advisors Ltd Page 2 of 21 noted by the respondent in the range of Rs 5 lac-10 lac per annum.
3. In the petition, the event leading to dispute has been mentioned as on 26.08.2019, the petitioner reached the respondent's office around 09.15 am before the open of Stock Market and at that time the opening balance of Rs 2,07,615 was available as funds in his account. The case of the petitioner is that till 10.05 am he had traded in 10,800 quantity of BANKNIFTY PUT with 336 orders with a total profit of Rs 4,23,581. It is averred that the petitioner until this time can be ascertained to have used a maximum limit of 1.82 times of available funds. The petitioner thereafter requested the employee of the respondent present there to open a Limit/margin/leverage of Rs 5,00,000/- (Five Lakhs) and the said employee using wired telephone called the RMS department to open the limit as requested by the petitioner. The total funds available for leverage at that time were Rs 4,33,592. Thereafter, the petitioner gave instructions to the said employee to buy PUT of BANKNTFTY worth Rs 5 lac with multiple market orders. The employee kept punching orders until rejection came around 10.12 am. During the time the employee was punching orders on behalf of the petitioner, he was observing the charts on his laptop and was checking the price of PUT when he suddenly noticed that PUT buying of worth Rs 50 lacs in his account instead of 5 lacs has been instructed. The petitioner immediately questioned the employee about the gross negligence and manipulation. The aforesaid employee of the respondent had OMP (Comm) No. 122/21 Pranshu Aggarwal Vs. Elite Wealth Advisors Ltd Page 3 of 21 no answer and by that time the MTM showed a loss of Rs 7 lac. Further, at the request of the respondent, the petitioner squared off the positions immediately which resulted to a total loss of Rs 13,04,785/-. Further, the petitioner being aggrieved by the gross negligence and manipulation of his trading account raised a complaint tothe Investor Grievances Resolution panel (IGRP) of the National Stock Exchange but IGRP in its meeting dated 19.09.2019 observed that there was no definite conclusion can be reached and thus no scope of settlement. Thereafter the dispute was dealt under Arbitration by the Sole Arbitrator appointed under the Rules and Bye-laws of NSE which resulted in the award dated 19.11.2019 passed by the Sole Arbitrator. The matter was taken to the Appellate Arbitral Tribunal but vide its (majority) award dated 28.02.2020 it upheld the award dated 19.11.2019.
4. The petitioner has raised number of grounds challenging the impugned award. First ground being that the petitioner was not granted a full opportunity to present his case which is a mandate of section 18 of the Act upon the Arbitral Tribunals. It is submitted that upon filing of written versions by the parties, the first hearing was afforded on 05.11.2019 on which date the matter was heard. The petitioner apprised the Ld. NSE Arbitral Tribunal about additional documents and proofs which are material for just and fair adjudication of the disputes referred to it. The petitioner immediately without any delay filed his additional documents on the next date i.e. 06.11.2019, however, the Ld NSE (Arbitral OMP (Comm) No. 122/21 Pranshu Aggarwal Vs. Elite Wealth Advisors Ltd Page 4 of 21 Tribunal) rejected to take on record such additional documents while passing the impugned Award dated 09.11.2019, on a vague and arbitrary ground that it was produced after the hearing date. It is submitted that under the applicable rules and Bye-laws for NSE Arbitration, Arbitral Tribunal has four months to pass an award from the date of reference and thus there was ample time remaining for the Arbitral Tribunal to admit the additional documents on record for a fair and just adjudication. The NSE (Arbitral Tribunal) instead acted arbitrarily and in a rushed manner. Further, such vital documents which were filed in appeal, were not even referred to by the NSE (Appellate Arbitral Tribunal) in its impugned award dated 28.02.2020 and failed to provide reasoning for non-consideration of such relevant facts and documents in adjudication of the disputes.
Secondly, the impugned award dated 19.112019 has categorically states that the rules and byelaws of NSE which is the statutory framework to adjudicate the disputes under NSE Arbitration to be irrelevant in the facts of the case. It is contended that the rules and bye-laws are very relevant to adjudicate the disputes referred to arbitration and to determine the rights and liabilities of both the parties.
Thirdly, NSE Arbitral Tribunals have not considered that "No Consent" was given by the petitioner to increase limit/margin to ten times the funds available of the petitioner. The margin/limit asked by the petitioner was for only Rs 5 Lakhs but due to the mistake on the part of respondent which has been admitted also in OMP (Comm) No. 122/21 Pranshu Aggarwal Vs. Elite Wealth Advisors Ltd Page 5 of 21 phone conversation, but the Tribunal has brushed aside such crucial evidence. The Trading Member ought to have provided the proof of order instructions/telephone recordings wherein petitioner's request for alleged limit of Rs 50 lacs could be confirmed since no such proof was provided thus the finding of the NSE Arbitral Tribunals was based on no evidence. Because as per NSE (F&O segment) Regulations 4.5.3, the brokers are barred from exercising any discretionary power in a constituent's account thus ten times limit in the petitioner's account was unprecedented which was not even communicated to him.
Fourthly, it is mandated upon the brokers as per the NSE (F&0 segment) regulations that only approved users be permitted to operate the Trading Workstations (NEAT). However, in the present case the respondent portrayed before the NSE Arbitral Tribunals that it was the petitioner who was operating the NEAT Trading Workstation. But the petitioner was not an approved user as per the regulations thus the respondent was allowed to take advantage of his own wrong and violation of law.
4.1 Further, the respondent's Risk Management System was faulty as it had not made mandatory margin calls when 80% of available funds were at loss. It is submitted before the Arbitral Tribunal that the employee who is responsible for effective implementation of RMS system was on leave the day when these questionable trades occurred. It was contended that the Risk Management and Surveillance Policy of the respondent which is OMP (Comm) No. 122/21 Pranshu Aggarwal Vs. Elite Wealth Advisors Ltd Page 6 of 21 part and parcel of the contract with the respondent clearly spells out the express liability of the respondent to square off losses at 80% losses of available funds and to provide margin calls for the same.
4.2 The present petition has been filed raising other grounds such as that the NSE Arbitral Tribunals have considered the CCTV footage (electronic evidence) without the mandatory requirement of certificate of section 65(B) of Indian Evidence Act. It is submitted that the footage has been manipulated as instances can be seen in the footage at a certain given time which is not possible.
5. Per contra, the respondent repelling the contentions of the petitioner submitted that the Arbitration award can be interfered on limited grounds which does not exist in the present case. The petitioner has been provided adequate opportunity of being heard by the Sole Arbitrator and the Appellate Arbitral Tribunal. Further, there is no question of Section 18 of the Act coming into picture because Petitioner was present on the date of hearing and full opportunity was given to present his case and accordingly, he presented his case. It is further submitted that the Ld. Arbitrator had passed his Award after considering all the materials on records and the submissions made by the respective parties. It is matter of record that the petitioner was himself sitting on the terminal and placing the orders. This has been sufficiently OMP (Comm) No. 122/21 Pranshu Aggarwal Vs. Elite Wealth Advisors Ltd Page 7 of 21 proved via CCTV footage and the acceptance of the Petitioner before the Ld. Sole Arbitrator that he himself was doing the trading thus the petitioner himself is responsible for the losses. In paragraph 5 of the award dated 19.11.2019, it has been mentioned that it is an admitted position that the trades in question were entered by the respondent himself in accordance with his normal practice of going over to the Applicant's office and working on their terminals. Further, the contract notes for the trades executed by the Petitioner were duly sent to him on the same day on his designated email id and the SMS for the trades done by the Petitioner on 26.08.2019 were also sent. Referring to Para 1.3 of the statement of defence filed the petitioner thereby stating that " I used to incur heavy profit/losses on daily basis trading options", it is contended that the petitioner was an aggressive investor. In general, the respondent denied all the allegations made by the petitioner.
6. I have considered the facts of the case and rival contentions raised during the proceedings. At the outset, it is mentioned that the scope of interference with the Arbitration award is very limited. In the case of National Highway Authority of India v. M. Hakim, (2021) 9 SCC 1 it had been observed by the Hon'ble Apex Court that interference with the conclusions of fact and law is not permissible in either under 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 OMP (Comm) No. 122/21 Pranshu Aggarwal Vs. Elite Wealth Advisors Ltd Page 8 of 21 Court's interference be justified. Likewise, Hon'ble Supreme Court in Anglo-American Metallurgical Coal v. 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. In Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd., (2019) 20 SCC 1, the Hon'ble 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.
7. In the present case, there is a dissenting view by the member of Appellate Arbitral Tribunal. Hon'ble Apex Court in Dakshin Haryana Bijli Vitran Nigam Ltd. v. Navigant Technologies (P) Ltd., (2021) 7 SCC 657 has elaborately considered the legal aspects of dissenting views and after referring to Ssangyong Engg. & Construction Co. Ltd. v. NHAI (2019) 15 OMP (Comm) No. 122/21 Pranshu Aggarwal Vs. Elite Wealth Advisors Ltd Page 9 of 21 SCC 131 : (2020) 2 SCC (Civ) 213] where Hon'ble Apex Court upheld the view taken in the dissenting opinion to be the correct position in law. In this case, the Court was hearing a Special leave petition from an order [Ssangyong Engg. & Construction Co. Ltd. v. NHAI, 2017 SCC OnLine Del 7864] passed by a Division Bench of the Delhi High Court. The Hon'ble Court noted:-
"12. A Section 34 petition which was filed by the appellant was rejected by the learned Single Judge of the Delhi High Court, by a judgment and order dated 9-8-2016 (Ssangyong Engg. & Construction Co. Ltd. v. NHAI [Ssangyong Engg. & Construction Co. Ltd. v. NHAI, 2016 SCC OnLine Del 4536] ), in which it was held that a possible view was taken by the majority arbitrators which, therefore, could not be interfered with, given the parameters of challenge to arbitral awards. The learned Single Judge [Ssangyong Engg. & Construction Co. Ltd. v. NHAI, 2016 SCC OnLine Del 4536] also went on to hold that the New Series published by the Ministry could be applied in the case of the appellant as the base indices for 2004-2005 under the New Series were available. Having so held, the learned Single Judge stated [Ssangyong Engg. & Construction Co. Ltd. v. NHAI, 2016 SCC OnLine Del 4536] that even though the view expressed in the dissenting award is more appealing, and that he preferred that view, yet he found that since the majority award is a possible view, the scope of interference being limited, the Section 34 petition was dismissed. A Section 37 appeal to the Division Bench of the Delhi High Court yielded the same result, by the impugned judgment dated 3-4-2017 [Ssangyong Engg. & Construction Co. Ltd. v. NHAI, 2017 SCC OnLine Del 7864] ."
8. The dissenting member has appended the following note in the impugned award dated 28.02.2020:-
Arbitration matter No. NSE/Appeal ARBN/ NSEDRO/02554/19- 20/ISC/IGRP/ARB/APPL of 2019 Between OMP (Comm) No. 122/21 Pranshu Aggarwal Vs. Elite Wealth Advisors Ltd Page 10 of 21 MR PRANSHU AGARWAL...Appellant AND ELITE WEALTH ADVISORS Ltd Respondent The present appeal filed by the Appellant alleges that the limit of 50 Lakhs was provided to him Intraday trading though he had not asked for the same, nor had it been provided to him in the past.
The Respondent in the written and in the hearing has stated that even if the limit was provided by mistake, the enhanced limit does not compel the client to go for enhanced volume of trades.
The Ld Arbitrator has held "The Respondent's case is based on the Sole submission that the extra- ordinary limit of about 50 Lakhs was allowed to him that day without him having asked for such a high limit. This, in my mind, does not help the Respondent, because an enhanced limit enables the Investor to go for an enhanced trading volume but does not compel him to do so."
During the hearing the Respondent had submitted that by mistake a zero was added to 5, and this became 50 Lakhs. During the trading done by the client, this mistake could not be observed. The question will arise, what type of Risk Management policy exists with the TM and how is it monitored. If the Risk Management policy is opaque, why only the client should suffer. Logically, TM needs to be held responsible for such loss as his monitoring mechanism did not ensure that such mistake does not occur.
The Ld Arbitrator's observations that "the alleged violations of rules/Bye Laws are not relevant in the context of deciding the case", are not legally valid, as adherence to Rules and Regulations are critical parameters for deciding a case.
In view of the reasons/facts mentioned above, as the mistake has been committed by the TM enhancing the limits to 50 Lakhs consequently any loss arising OMP (Comm) No. 122/21 Pranshu Aggarwal Vs. Elite Wealth Advisors Ltd Page 11 of 21 due to that, logically should be borne by the TM. Therefore, I set aside and modify the award to the extent of recovery of the 3,99,534.32 from the Appellant. I uphold the award of Ld. Arbitrator of dismissing the counterclaim of 13,04,785 of the Appellant (Shri P. Agarwal).
Nirmal Singh Arbitrator 28/2/2020
9. In the present case, the following findings of the Ld. Sole Arbitrator recorded in paragraph 5 in the impugned award dated 19.11.2019 needs consideration: -
5. I have carefully considered the rival submissions and have gone through the written material brought on record. At the outset, let it be said that the academic background of the respondent and the accolades won by him, though certainly praiseworthy, cannot be the decisive factor in the dispute which will have to be necessarily decided in the light of the facts and circumstances surrounding this trade. For the same reason, the alleged violations of rules/bye- laws, are not relevant in the context of deciding this particular issue. ...........
10. The observation above has been effectuated because in the impugned award the objections taken by the petitioner/ Client herein (counter-claimant before the Arbitral Tribunal) that the Trading Member has not followed the guidelines and circulars issued by SEBI.
11. Hon'ble Supreme Court in Franklin Templeton Trustee Services (P) Ltd. v. Amruta Garg, Civil Appeal Nos. 498-501 of OMP (Comm) No. 122/21 Pranshu Aggarwal Vs. Elite Wealth Advisors Ltd Page 12 of 21 2021 vide judgement dated 14th July 2021 observed as under:-
55. The view we have taken is in consonance with the earlier decision of the Gujarat High Court in Alka Synthetics and Trading v. SEBI,15 wherein it was observed that power under Section 11B is in the nature of issuing a command to persons referred to in the provision to do a certain act or to forbear from doing a certain act, if as a result of an enquiry, SEBI is satisfied about the necessity of issuing such direction for the purposes mentioned in clauses (a), (b) and (c). The Gujarat High Court, in our opinion, rightly observed that while Section 11 operates in the field of laying down general regulatory measures as a matter of policy, Section 11B operates in the field of prescribing a specified code of conduct in relation to specified persons or classes of persons.
On the issue of application of principles of natural justice, it was noted that Section 11B empowers SEBI to issue directions only after it is satisfied about the conditions referred to in the provision, as a result of making or causing to be 15 (1999) 95 Comp Cas 663 made an enquiry - which necessarily implies a pre-decisional hearing. Similar view was subsequently expressed in Nikhil T. Parikh v. Union of India16, wherein the same High Court was of the view that Section 11B, being an enabling provision, must be so construed as to subserve the purpose for which it has been enacted. As the term 'measure' is not defined in the SEBI Act, the High Court gave it a meaning prescribed in general parlance, as incorporating anything desired or done with a view to the accomplishment of a purpose, a plan or course of action intended to obtain some object, any course of action proposed or adopted by a Government. The Securities Appellate Tribunal in Sterlite Industries (India) Ltd. v. SEBI,17 has given an expansive interpretation to Section 11 and Section 11B of the SEBI Act, observing that they give enormous authority to SEBI. As long as the power exercised under Section 11B is subject to the provisions of the SEBI Act and well within the legal and constitutional frame work, intended to achieve the purposes of the SEBI Act and subjecting the persons specified in the section, the power will sustain. The Appellate Tribunal called it a wholesome provision designed to achieve the objectives of the SEBI Act.
OMP (Comm) No. 122/21 Pranshu Aggarwal Vs. Elite Wealth Advisors Ltd Page 13 of 2112. Hon'ble Supreme Court in Sahara India Real Estate Corporation Limited and others v/s Securities and Exchange Board of India (2013) 1 Supreme Court Cases has held as under:
"303.1. Sub section (1) of Section 11 of the SEBI Act casts an obligation on SEBI to protect the interest of investors in securities, to promote the development of the securities market, and to regulate the securities market, "by such measures as it thinks fit". It is therefore apparent that the measures to be adopted by SEBI in carrying out its obligations are couched in open ended terms having no prearranged limits. In other words, the extent of the nature and the manner of measures which can be adopted by SEBI for giving effect to the functions assigned to SEBI have been left to the discretion and wisdom of SEBI. It is necessary to record here that the aforesaid power to adopt "such measures as it thinks fit" to promote investors' interest, to promote the development of the securities market and to regulate the securities market, has not been curtailed or whittled down in any manner by any other provisions under the SEBI Act, as no provision has been given overriding effect over sub¬section (1) of Section 11 of the SEBI Act."
13. As held above, the SEBI has an obligation to protect the interest of the investor and for discharge of such obligations, it has issued circular from time to time. All those circular's would be part of the contract between Stock Broker and the client, applicable for the transactions entered after the circular came into force. In another decision of the Hon'ble High Court reported in 2014 GLH (2) 582 (Nikhil T. Parikh v/s Union of India and others), in para 139 the Hon'ble High Court has observed that the circular of SEBI could be termed as a statutory circular having a force of law and binding to all the stock exchanges in the country. Therefore, the respondent who is the sub broker of the stock OMP (Comm) No. 122/21 Pranshu Aggarwal Vs. Elite Wealth Advisors Ltd Page 14 of 21 exchange and the petitioner who is the client would be bound by the circular.
14. In consideration of the above, the approach in the impugned award in not giving due weightage to the circulars of SEBI protecting investors would be against the public policy making the impugned award unsustainable.
15. Another ground raised by the petitioner is regarding unsolicited enhancement of Limit/ margin/ leverage to Rs. 50 lakhs. Ld. Sole Arbitrator has observed that an enhanced limit enables the investor to go for an enhanced volume of trades but it does not compel him to do so. It came out during the hearing that on the relevant day, the respondent went for as many as 55 trade orders, and if there was a sudden and sharp fall, resulting in a loss, none other than the person who entered the orders has to bear the loss. Certainly, had there been a contrary movement in the market, resulting in a profit, the investor would have claimed it.
16. Ld. Appellate Arbitral Tribunal while upholding the above observation of Ld. Sole Arbitrator gave its reasoning as under:
The present Tribunal has carefully examined the averments of both parties.
- The precedent cited by the appellant is not of much help, as while in the cited case, a limit of Rs. 4 crores (value of shares purchased) had been given on a OMP (Comm) No. 122/21 Pranshu Aggarwal Vs. Elite Wealth Advisors Ltd Page 15 of 21 declared client income limit of Rs. 1-5 lacs i.e. a multiple of 80 times. In the current instance, the appellant's declared income is in the next bracket of Rs. 5-10 lacs. The limit is alleged to be Rs. 50 lacs. The implied multiples are thus far below than that in the cited case apart from the fact that in the current case jobbing transactions with several buy / sell orders were occurring during that ill-fated day.
- Similarly, the appellant has made several averments, with varying degrees of complexity and impassioned linguistics to submit that he wanted to trade within his self-imposed risk limit of Rs. 5 lacs and got swept away into a huge loss because the TM gave him an unasked for limit of Rs. 50 lacs without his prior knowledge or consent. These do not however address the learned arbitrator's shrewd observation that a limit can facilitate but not compel the transaction. The appellant by his own admission is highly qualified individual with a bent towards computers and numbers. Several intricately constructed arguments and calculations sheets have been submitted by him. The simple issue at stake is however that there is a wide gap between the intensity of transactions that a Rs. 5 lacs limit can sustain as versus that of by Rs. 50 lac limit. An untrained mind may get confused and lost during the course of a trading day and inadvertently breach his own self-imposed restriction but not a trained number crunching person.
Accordingly, the Tribunal is of the unanimous view that the learned Arbitrator's observation and consequent judgment thus cannot be invalidated. Having said this, the Tribunal also recognises that the appellants allegations appear to indicate that there may have been errors of omissions and commission on the part of the Trading Member. While the appellant cannot take advantage of the same to reduce his liability, the Exchange, NSE, in all propriety should take notice of the same, carry OMP (Comm) No. 122/21 Pranshu Aggarwal Vs. Elite Wealth Advisors Ltd Page 16 of 21 out a detail inspection and if thereafter warranted penalise the Trading Member for breach of trading discipline.
17. The observation above without referring to the guidelines issued by SEBI would result into unsustainable award being against public policy. The guidelines/ circulars restricting margins in consideration of the risk-taking capacity acts as protecting device both for the investor and for the stock market. In case, a person is allowed to assume larger risk then the obligation of which cannot be fulfilled would be damaging to another party. The Future and Options (FAO) segment of the Stock trading is highly volatile and the requirement of margin for the investors dealing in this section is quite high.
18. In the present case, the respondent allowed the petitioner 10 times his risk capacity and in such circumstances, the observations in the impugned award that there may be error of omissions and commission on the part of trading member and the appellant (petitioner herein) cannot take advantage of same to reduce his liabilities can be said to be against public policy that the Stock market has to be a safe place for all the investors. Thus, Ld. Tribunal has given ruling which will not promote the stated public policy of Safe markets.
19. Another reasoning for giving award against the petitioner has been that the petitioner himself has entered the disputed trades using the terminal in the premises/ office of the OMP (Comm) No. 122/21 Pranshu Aggarwal Vs. Elite Wealth Advisors Ltd Page 17 of 21 respondent thus he is responsible for outcome of the trades. During the present appeal it has been argued that as NSE (F&O segment) regulations only approved users can be permitted to operate the Trading Workstations (NEAT), therefore the argument has been erroneously accepted. Further, Arbitral Tribunals have considered the CCTV footage (electronic evidence) without the mandatory requirement of certificate of section 65(B) of Indian Evidence Act. It is submitted that the footage has been manipulated as instances can be seen in the footage at a certain given time which is not possible.
20. The above argument has to be considered in the light of a circular of the SEBI dated 22.3.2018, as per which stockbroker is required to keep evidence of pre trade authorization and is required to produce evidence when dispute arises. The Relevant part of SEBI circular dated 22.03.2018, is as under:
"III. To further strengthen regulatory provisions against unauthorized trades and also to harmonise the requirements across markets, it has now been decided that all brokers shall execute trades of clients only after keeping evidence of the client placing such order, which could be, inter alia, in the form of:
a. Physical record written and signed by client. b. Telephone recording.
c. Email form authorized email ID d. Log for inter net transactions.
e. Record of messages through mobile phones. f. Any other legally verifiable record.
When a dispute arises, the broker shall produce the above- mentioned records for the disputed trades. However for exceptional cases such as technical failure etc where broker fails to produce order placing evidence, the broker shall OMP (Comm) No. 122/21 Pranshu Aggarwal Vs. Elite Wealth Advisors Ltd Page 18 of 21 justify with reasons for the same and depending upon merit of the same, other appropriate evidences like post trade confirmation by client, receipt/payment of funds/ securities by client in respect of disputed trade etc shall also be considered."
21. The Regulations framed in this regard are known as National Stock Exchange (Futures & Options) Trading Regulations, 2000 which clearly provides in para 1.3.3 concept of approved workstation and in para 2.2.15 Notification of different levels of the approved users for each workstation to define the access to the NEAT system by the approved users. The Arbitral Tribunal passed the impugned award without giving reasons and justification whether the petitioner was permitted to work himself on the terminals. The admissibility of CCTV recording without necessary certificate u/s 65B of the Evidence Act will erode its veracity, thus, the impugned award is non- speaking.
22. The petitioner has also raised an issue of not taking on record additional proofs submitted before Ld. Sole Arbitrator on 06.11.2019. The impugned award does not contain any observation on the point and it has been passed without taking into consideration.
23. Section 34 (2) (a) (iii) provides that an arbitral award may be set aside by the Court only if the party making the application furnishes proof that the party making the application was not given proper notice of the appointment of an arbitrator or OMP (Comm) No. 122/21 Pranshu Aggarwal Vs. Elite Wealth Advisors Ltd Page 19 of 21 of the arbitral proceedings or was otherwise unable to present his case. In the present case, it transpires that the petitioner was not able to present his case because in the impugned award, no reasoning has been given with regard to the point raised by the petitioner seeking permission to lead evidence.
24. It is also matter of consideration that the petitioner at the time of opening account with the respondent was assured of Risk Management policy being in place to avoid any unauthorised trade. But on the day when the disputed transactions were being carried there was failure of Risk Management. The Member of the Appellate Tribunal in his dissent note has mentioned that the question will arise, what type of Risk Management policy exists with the TM and how is it monitored. If the Risk Management policy is opaque, why only the client should suffer. Logically, TM needs to be held responsible for such loss as his monitoring mechanism did not ensure that such mistake does not occur.
25. The Ld. Appellate Arbitral Tribunal (majority) failed to appreciate that Risk Management policy was Public policy of the contract and non-consideration of the same in the impugned award would render it unsustainable.
26. In view of above discussions, in considered opinion of this court, the impugned award is against the violation of principles of natural justice, fundamental policy of India and OMP (Comm) No. 122/21 Pranshu Aggarwal Vs. Elite Wealth Advisors Ltd Page 20 of 21 shocks the judicial conscience. Furthermore, the same appears to be patently illegal. Accordingly, in view of the discussions, as adumbrated above, the petition under Section 34 of the Act is hereby allowed. The impugned award dated 28.02.2020 (majority) is hereby set aside. Parties are left to bear their own costs.
27. File be consigned to Record Room.
Pronounced in the open Court (VINEETA GOYAL)
on this 18.07.2023 District Judge (Commercial-03)
Patiala House, New Delhi
OMP (Comm) No. 122/21 Pranshu Aggarwal Vs. Elite Wealth Advisors Ltd Page 21 of 21