Bangalore District Court
/ Sri.P.Muthunayakam vs M/S.Sharekhan Limited on 5 February, 2020
IN THE COURT OF THE VI ADDL.CITY CIVIL & SESSIONS JUDGE
BENGALURU CITY
CCCH. 11
Dated this the 5th day of February, 2020
PRESENT: Sri.Rama Naik, B.Com., LL.B.,
VI Addl.City Civil & Sessions Judge,
Bengaluru City.
A.S.No:42/2013
PLAINTIFF / SRI.P.MUTHUNAYAKAM
PETITIONER S/o.Sri.Pitchamuthu,
Aged about 76 years,
MEC Engineers,
No.59, LR Bhande Road,
Kavalbyrasandra, R.T.Nagar Post,
Bengaluru -560 032.
[By Pleader Sri. Veerendra Kumar]
DEFENDANT/ M/S.SHAREKHAN LIMITED
RESPONDENT Lodha 1, Think Techno Campus,
10th Floor, Beta Building,
Off JVLR, Opp.Kanjumarg Station,
Kanjurmarg(E),
MUMBAI - 400 043.
: ALSO AT :
M/S.SHARAKHAN LIMITED,
No.2307, Swan Line Building,
12th Main Road, 3rd Block (E),
Jayanagar, Bengaluru.
By its Sub-broker Mr.Maralr Anand.
[By Pleader Sri.N.Chandrashekar]
---
AS.42/2013
2
JUDGMENT
This suit is filed by Plaintiff under Section 34 of the Arbitration and Conciliation Act, 1996, for setting aside the arbitral award dated 27.02.2013 passed by learned Arbitrators Appellate Committee, in Appeal No.37A/2012 in Reference No.77/12.
2) Plaintiff's case, in brief, is that, on 13.12.2007 Plaintiff signed the Client Registration Form/Agreement with Defendant through his staff Mr.Santhosh on behalf of sub-broker Mr.Malar Anand at Bengaluru. Said Form was filled in casual manner by Mr.Santhosh/Mr.Malar Anand without giving the correct information of the operation of the system. Trades were executed in his account without his knowledge and they failed to highlight that the contract notes would be sent only through e-mail. E-mail ID given in the Client Registration Form is only for contact and not for getting the contract notes. In order to confuse, e-mail ID AS.42/2013 3 recorded in the Client Registration Form in the year 2007; also in the year 2009, same ID is re-recorded in the client master and contract notes were sent to wrong e-mail ID and physical contract notes were sent to wrong address, without mentioning any house number/street name.
3) It is stated that, from the beginning, the Defendant was not dealing in a fair manner and as per the Client Agreement, Defendant was required to take permission in writing of Plaintiff for each trading done in the market and if orders are placed over telephone, Defendant was required to maintain call register/document regarding placing of orders. Defendant was also required to provide contract notes/transactions statements monthly/ quarterly for the transactions done on behalf of Plaintiff. Defendant was not sending contract notes, bills, statements of account, confirmation notes for the transactions done on his behalf.
AS.42/2013 4 However, Plaintiff was getting information through Mr.Santhosh about the transaction done till 6/8.10.2009 and there was no loss till 6/8.10.2009.
4) It is stated that, on 04.03.2009, Plaintiff had initial investment of Rs.1,00,000/- and profit of Rs.30,000/- in his running trading account maintained by Defendant. He further invested a sum of Rs.2,00,000/-. Total investment with Defendant is Rs.3,30,000/-.
5) It is stated that, Plaintiff came to know that without his permission and authority and prior notice, Defendant has done transaction in his account and thereby caused loss to an extent of Rs.3,30,000/-. After 2nd week of 2009, Mr.Malar Anand, the Sub-broker was not available in the office or over phone and finally, he was able to meet him on 05.01.2012 at his office and requested him to pay back his investment. In spite of repeated requests and reminders, AS.42/2013 5 Defendant did not make payment, hence, he filed arbitration complaint before the Arbitrator of Bombay Stock Exchange in Reference No.77/2012.
6) It is stated that, Defendant appeared in the case and filed his statement contending that he has sent contract notes by courier and also by e- mail. But, Defendant has sent contract notes and statements of account to Chennai address, which is not the address of Plaintiff and further, mails were sent to wrong ID of Plaintiff, which shows unfair trade practice of Defendant and same is contrary to the bye-laws of Stock Exchange.
7) It is stated that, after hearing both parties, Arbitrator by his award dated 22.11.2012 allowed the case in Reference No.77/2012 and claims of Plaintiff and directed Defendant to pay Rs.3,30,000/- with interest at 9.5% per annum. As per the bye-law of Bombay Stock Exchange, AS.42/2013 6 matter was sent to Arbitration Appellate Committee at Chennai, in Appeal No.37A/2012 in Reference N.77/12, the Committee by its award dated 27.02.2013 reversed the award dated 22.11.2012 and rejected the claims of Plaintiff.
8) Being aggrieved, Plaintiff has challenged the award on the grounds that:
(1) Award passed by Arbitration Appellate Committee is wholly illegal, contrary to facts of the case, document on record and law.
(2) Arbitrators wholly erred in not considering the fact that as per Clause-4 of bye-laws of stock exchange, Defendant was required to obtain written permission of Plaintiff for each transaction and Defendant has not obtained the same in the present case. (3) Arbitrators erred in not considering the fact that as per Clause-6 of bye-laws of stock exchange, Defendant was required to send copies of contract notes AS.42/2013 7 and periodical statements of account for the transaction done to Plaintiff and Defendant has not complied with the said obligations.
(4) Arbitrators erred in not considering the fact that Defendant has sent
contract notes and statement of account to some Chennai address and wrong I.D of Plaintiff, which clearly proves the unfair trade practice of Defendant in dealing with the hard earned money of Plaintiff.
(5) Arbitrators erred in not considering the fact that, if Defendant was not able to provide the contract notes and statements of account to Plaintiff by electronic media, he has to send the same by physical mode, which is mandatory as per the bye-laws of stock exchange, which Defendant has not complied with.
(6) Arbitrators erred in not considering the fact that, Defendant has not
produced any document in support of his contention that he has obtained AS.42/2013 8 permission of Plaintiff over phone, though maintaining call register and other documents are mandatory as per the bye-laws of stock exchange.
(7) Arbitrators erred in not considering the fact that, as per clause 1.7.8 and 1.7.16 of bye law, it is mandatory for Defendant to keep inform Plaintiff periodically/regularly the transaction done on his behalf and to reconcile the statement at every quarter with reference to all transactions done on behalf of Plaintiff, which is not done in this case.
(8) Award passed by Arbitrators is opposed to public policy, as it has not considered the unfair trade practice adopted by Defendant in dealing with hard earned money of Plaintiff.
(9) Award passed by the Arbitrators is against law laid down by Hon'ble Supreme Court of India and Hon'ble High Courts and suffers from various other legal infirmities.
AS.42/2013 9 For all these reasons, Plaintiff prays for setting aside the impugned award.
9) Defendant marked appearance through his advocate and filed statement of objections, wherein, it is stated that, Plaintiff was his client and as such, he had signed the agreement for online trading. After execution of the agreement, Plaintiff did not pay the margin money correctly and there was no proper maintenance of required margin money. Mr.Malar Anand had already e-mailed entire contract notes and they were delivered to Plaintiff. Plaintiff was served with physical contract notes at Chennai and they were not delivered at wrong address. Agreement does not provide for taking any permission whenever on-line trading was done and whenever orders were placed through telephonic call and discretion is with Defendant to square off the money, if no minimum AS.42/2013 10 margin money is maintained. Hon'ble Arbitration Appellate Committee has passed a correct order.
10) It is stated that, there is a true compliance with sub-clause (6) of Stock Exchange bye-laws and periodical statements, contract notes and statements for every transaction were sent to Plaintiff, which were received by Plaintiff. On account of Plaintiff not maintaining any margin money, Plaintiff is resorting to such claims. Order passed by Arbitration Committee is sound and proper and does not call for any interference and scope of Section 34 of Arbitration and Conciliation Act, is quite narrow and at this stage, no relief can be granted on such false claims. Even there was complete compliance with Clause 1.7.16 and quarterly statements were sent to Plaintiff. No arbitral award can be set aside if there is no mala fides or any other grounds set out in Section 34 of the Act. Award is not against public policy and said AS.42/2013 11 award is passed meticulously after going through the entire records and after giving sufficient hearing and opportunity to Plaintiff. Hence, prays for dismissal of the suit.
11) Heard learned counsel for Plaintiff. Despite granting sufficient opportunities, Defendant has failed to address his side of argument. Perused the record.
12) Points that arise for consideration are :
(1) Whether Plaintiff has made out any of the grounds as enumerated in Section 34 of the Arbitration and Conciliation Act, 1996, to set aside the impugned award dated 27.02.2013 in Appeal No.37A/2012 in Reference No.77/12 passed by Arbitrators Appellate Committee ?
(2) What Order?
13) My answer to the above points are :-
Point No.1 - In the Negative;
Point No.2 - As per final order, for the following :
AS.42/2013 12 REASONS
14) Point No.1 : This suit came to be filed by Plaintiff [Applicant] against Defendant [Respondent] for setting aside award dated 27.02.2013 passed in Appeal No.37A/2012 by Arbitrators Appellate Tribunal, whereby, Arbitrators Appellate Tribunal was pleased to set aside the award dated 22.11.2012 passed in Reference No.77/2012 by sole Arbitrator, in which, sole Arbitrator allowed the claim of Plaintiff by awarding a sum of Rs.3,30,000/-
with interest at the rate of 9.5% with effect from 24.10.2009.
15) Plaintiff's challenge to Appellate award is that, Arbitrators Appellate Tribunal has not considered Clause-(4) of bye-laws of Stock Exchange, whereunder, Defendant was required to obtain written permission of Plaintiff for each transaction. Defendant has not obtained any such permission. Similarly, Clause-(6) of bye-laws has AS.42/2013 13 not been considered by the Arbitrators Appellate Tribunal, whereunder, Defendant was required to send copies of contract notes and periodical statement of account for each transaction. Defendant has not complied with the same. Defendant has sent contract notes and statement of account to wrong I.D of Plaintiff. Arbitrators Appellate Tribunal has failed to consider that Defendant was not able to provide contract notes and statements of account to Plaintiff by electronic media. Defendant has to send the same by electronic mode also.
16) Per contra, Defendant contends that, Sub- broker, Mr.Malar Anand had already e-mailed entire contract notes to Plaintiff. Also, Plaintiff was served with physical contract notes at Chennai. At no point of time, contract notes were delivered to wrong address. Agreement does not provide for taking any permission from Plaintiff whenever on-line AS.42/2013 14 trading was done and whenever orders were placed through telephonic calls. Award of Arbitrators Appellate Tribunal is sound and proper and does not call for any interference under Section 34 of the Arbitration and Conciliation Act.
17) Whole crux of Plaintiff's case revolves around the fact that, Defendant has not sent contract notes and periodical statements of account. Sole Arbitrator while passing the award has specifically held that :
" (b). Though initially the contract notes were sent to a wrong Email ID the Respondent has sent them to the correct Email ID after the correction of the same.
The Applicant failed to open his mail and view them. Hence the blanket denial of non receipt of the same when he opted for Digital Contract Notes can not be accepted as an excuse."
18) Despite having held so, learned sole Arbitrator allowed the claim of Plaintiff. Said award of learned Arbitrator came to be challenged before Arbitrators Appellate Tribunal. Arbitrators Appellate AS.42/2013 15 Tribunal has taken note of the findings of learned sole Arbitrator as to sending of contract notes and statement of accounts by Defendant to Plaintiff. Observations of Arbitrators Appellate Tribunal are as follows :
" The sole arbitrator has also mentioned in the arbitral order ".......... Though initially the contract notes were sent to a wrong email id the respondent has sent them to the correct email id after the correction of the same. The applicant failed to log into his mail and view them. Hence the blanket denial of non-receipt of the same when he opted for digital contract note cannot be accepted as an excuse.
We agree with the view expressed by the sole Arbitrator and cannot accept the respondent's contention of the appellant dealt with his money without his express authority. It took the respondent three years to raise the issue before the BSE. This shows either lack of seriousness required in such transactions or casual approach of the respondent."
19) Further findings of the Arbitrators Appellate Tribunal is that :
" In the hearing the respondent could not produce any evidence to substantiate his charge levelled against the appellant except the copies of letter written by him. Further the respondent questioned the SMS logs submitted by the appellant and submitted that the SMS log was given be the agency AS.42/2013 16 since they were asked to give the same by the appellant and the same way in his email submission state that his service provider Reliance Communication has also not confirmed any such receipt of SMS.
Unfortunately, the respondent could not produce any evidence to prove his point and as these are only the assertion made by the respondent without any evidence to back up we do not intend to take the submission made by the respondent on record and reject them as a mere statement not supported by evidence.
The appellants pointed out that the transactions which the respondent agitates i.e. transactions took place after September 2009, were mostly in NSE and hence is beyond the jurisdiction of BSE arbitration ambit. They also segregated the merge debtors ledger for BSE transactions separately.
The debtors' ledger account for BSE transactions shows mostly purchase of securities and partly squared up by selling some of the securities and partly transferring money from the respondent's NSE account. We could not find any loss on sale of securities in BSE segment. The respondent has no complaint against the appellant till September 2009 and his complaint is regarding transactions that took place after October 2009. These transactions were covered by contract notes sent to the respondent by email and he cannot plead ignorance of the same.
Therefore we are of the opinion that whatever transactions took place in BSE after October 2009 are covered by electronic contract notes and the respondent received copies thereof. Regarding his transactions in NSE segments, we have no jurisdiction. Hence there is no merit in the claim made by the respondent and also the award passed AS.42/2013 17 by the sole Arbitrator did not take cognizance of the above facts i.e. the transactions done at NSE and hence the order has to be set aside."
20) From the findings of the Arbitrators Appellate Tribunal, it is abundantly clear that, Defendant had sent contract notes and periodical statement of accounts to Plaintiff. Arbitrators Appellate Tribunal has specifically held that, Plaintiff has no complaint against Defendant till September, 2009 and his complaint is regarding transaction that took place after October, 2009. Said transaction were covered by contract notes sent by Defendant by e-mail and Plaintiff cannot plead ignorance. Further, it is specifically held that, regarding Plaintiff's transaction in NSE segments, it has no jurisdiction and sole Arbitrator did not take cognizance of the said fact. In that view of the matter, there is no reason to contend that contract notes and periodical statements were not sent to Plaintiff. Re- appreciation of evidence upon which learned AS.42/2013 18 Arbitrator has come to a definite findings is outside the scope of Section 34 of the Arbitration and Conciliation Act.
21) Plaintiff contends that, award passed by Arbitrators Appellate Tribunal is against the law laid down by the Hon'ble Supreme Court and the Hon'ble High Court and same is opposed to Public Policy. It is Plaintiff's mere assertion in the plaint without any substantiation. Plaintiff has not produced any materials to show that how the award would be against the law laid down by the Hon'ble Supreme Court and Hon'ble High Court. Award can be set aside for the grounds enumerated under Section 34 of the Arbitration and Conciliation Act, 1996. In Associate Builders V. Delhi Development Authority [(2015) 3 SCC 49], the Hon'ble Supreme Court was pleased to hold that :
"It must clearly be understood that when a court is applying the "public policy" test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible AS.42/2013 19 view by the Arbitrator on facts has necessarily to pass muster as the Arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. Once it is found that the Arbitrators approach is not arbitrary or capricious, then he is the last word on facts."
22) Unless illegality goes to the root of the matter, Arbitrator's view remains prevail. Merely because award has been passed against Plaintiff, same cannot be set aside. It is, therefore, held that, Plaintiff has not made out any of the grounds as enumerated under Section 34 of the Arbitration and Conciliation Act, much less, the grounds mentioned in the plaint, to set aside the award, hence, plaintiff's suit fails; accordingly, I answer Point No.1 in the negative.
23) Point No.2 : In view of the foregoing discussion and answer to Point No.1, I pass the following :
AS.42/2013 20 ORDER Suit filed by Plaintiff under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside the award dated 27.02.2013 passed by Arbitrators Appellate Tribunal in Appeal No.37A/2012 in Reference No.77/12; is hereby dismissed.
No order as to costs.
[Dictated to the Judgment Writer, transcribed and computerized by her, transcript thereof corrected and then pronounced by me in open court this the 5th day of February, 2020.] [RAMA NAIK] VI Addl.City Civil & Sessions Judge Bengaluru City AS.42/2013 21