Delhi District Court
Jm Financial Services Ltd vs Naveen Kumar Dahiya on 21 July, 2025
IN THE COURT OF DISTRICT JUDGE-05, NEW DELHI
DISTRICT, PATIALA HOUSE COURTS, NEW DELHI
Arbitration No: 1963/17
IN THE MATTER OF : -
JM Financial Services Ltd.,
Through its AR: Mr. Kashyap Chokhavatia,
Office at: 7th Floor, Cnergy,
Appasaheb Marathe Marg,
Prabhadevi, Mumbai-400025
...... Petitioner
VERSUS
Mr. Naveen Kumar Dahiya
R/o B-70, B, LGF,
Kalkaji, New delhi-110019
...... Respondent
PETITION UNDER SECTION 34 OF THE ARBITRATION &
CONCILIATION ACT, 1996
Date of institution : 06.02.2017
Date when judgment reserved : 07.07.2025
Date of Judgment : 21.07.2025
JUDGMENT:-
Arbn. No. 1963/17, JM Financial Service ltd.Vs. Naveen Kumar Dahiya, Page No. 1 of 22
1. Present order shall dispose of the objections filed u/s 34 of Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act) whereby JM Financial Services (objector/petitioner) seeks to set aside the order dated 29.11.2016, passed by Ld. Appellate Arbitral Tribunal passed in favour of Naveen Kumar Dahiya (Respondent).
Facts of case
2. As per the statement of claim filed by the claimant Naveen Kumar Dahiya before Ld. Arbitrator was that claimant had a trading account with JM Financial Services Ltd. at Noida Branch following which, he brought 14 lots of 500 shares (7000 shares) of Just Dial Ltd. in future derivative segment at average price of Rs. 560/-. That on 12.02.2016, he carried forward position of 14 lots (7000 shares) of Just Dial Ltd. with cash balance of Rs.6.02 lacs and Rs.0.07 lacs as collateral margin against stocks.
It is further alleged that JM Financial Services Ltd. has a system to communicate the margin requirement of the day via email to the clients by the end of the day and in pursuance of the same, claimant also received mail of margin status in the evening of 11 th Feb, 2016 regarding due amount of Rs.1.6 lacs approx. It is further alleged that in response to the said mail, he deposited Rs. 2.50 lacs, in his trading account at 11.21.27 AM through online transfer, however, JM Financial Services Ltd. without informing him and without taking into consideration the above transfer of Rs.2.50 lacs squared off his full holding of 7000 shares at Rs.383 at 11.52 AM. It Arbn. No. 1963/17, JM Financial Service ltd.Vs. Naveen Kumar Dahiya, Page No. 2 of 22 is further alleged by the claimant, due to the above trade, he suffered loss of Rs. 12,39,000/- (560-383=177; 177*7000).
3. In response thereof, it was alleged by the respondent/objector that the claimant was an active investor and that he himself had been conducting online transactions. It was further stated that in the present case there was a vertical fall in share prices within a period of 2 minutes, as result of which claimant has suffered losses and he was informed about the same within a period of about 30 minutes. It is further stated that the claimant did not make any complaint till 17.02.2016 i.e., after 5 days of the alleged episode. Objector further denies any role in the losses so suffered by the claimant due to above said transactions.
4. That in terms of circular passed by National Stock Exchange, since the dispute was less than Rs.25 Lacs, same was referred for arbitration before Ld. Single Arbitrator whereby order dated 01.08.2016 Ld. Arbitrator dismissed the claim of claimant/respondent Naveen Kumar Dahiya.
5. That thereafter an appeal was preferred against the said arbitration award dated 01.08.2016 by Naveen Kumar Dahiya before the Appellate Arbitral Tribunal comprising of 3 arbitrators and the Ld. Appellate Arbitrate Tribunal, after hearing the parties allowed the claim of the claimant Naveen Kumar Dahiya vide award dated 28.11.2016 and set aside the award passed by Ld. Single Arbitrator.
Arbn. No. 1963/17, JM Financial Service ltd.Vs. Naveen Kumar Dahiya, Page No. 3 of 22
6. Against the said award passed by Ld. Appellate Arbitrate Tribunal dated 28.11.2016, present objections are preferred by JM Financial Services u/s 34 of Arbitration and Conciliation Act, 1996.
Objections u/s 34 of Act file by JM FINANCIAL SERVICES
7. In the objections so filed by the objector JM Financial Services Ltd. before this court, it is stated that the claimant/respondent has opted for internet-based trading and executed the transaction by using internet trading facility and the objector used to send Electronic Contract Notes (ECN) as well as Daily Activity Statement (DAS) to the complainant showing initial margin amount, exposure margin amount and Mark-to-Market (MTM) profit or loss.
It is further stated that the open position of 7000 shares of Just Dial Ltd. was carried forward from 8th February 2016 to 11th February 2016 and further it had sent DAS dated 11 th February 2016 by an email to the respondent intimating him that total margin requirement against his open position is Rs.7,69,335/- and after adjusting the ledger balance amount of Rs 6,02,608.34/- and value of collateral of Rs.7,180.00/-, there was a margin shortfall of Rs 1,59,546.66/-. The said amount was due and payable by the respondent to the petitioner before the trading started on 12th February 2016.
It is further stated that on 12th February 2016, the respondent had carry forwarded open position of 7000 shares of Just Dial Ltd with the carry forward price of Rs.471.10/- per share. It is further Arbn. No. 1963/17, JM Financial Service ltd.Vs. Naveen Kumar Dahiya, Page No. 4 of 22 stated that there was an obligation upon respondent to pay a sum of Rs.1,59,564.66/- to the petitioner to maintain his open position against the said requirement and respondent made a payment of Rs 2,50,000/- thereby confirming that he carry forwarded his open position of 7000 shares of Just Dial Ltd from 11 th February 2016 to 12th February 2016 with a carry forward rate @ 471.10 per share.
It is further stated by the petitioner that on 12th February 2016, the market opened with high volatility and there was steep fall in the price of the shares of Just Dial Ltd from Rs.471.10 per share to Rs.372 per share (a fall of 20% in the market price of shares of Just Dial Ltd.). Further due to fall in the market price of shares from the carry forward rate @ Rs 471.10 per share to Rs.372 per share, there was a MTM requirement of Rs.6,93,000/-, initial margin requirement of Rs.6,04,450/- and exposure margin was Rs.1,64,885/- and total requirement of Rs.14,62,235.00/- to maintain the open position of 7000 shares of Just Dial Ltd. against which the Respondent had a credit balance of Rs.8,59,788.35/- and hence there was margin short fall.
It is further stated that since the market price was going down as per the risk control measures, the petitioner decided to close the open position of the respondent in respect of 7000 shares of Just Dial Ltd to protect any unforeseen condition for the respondent and further losses to the respondent. It is further stated that the respondent was aware about the market fall in the share of Just Dial Ltd. throughout the day and despite being aware of close-out of his open position of 7000 shares of Just Dial Ltd., the respondent Arbn. No. 1963/17, JM Financial Service ltd.Vs. Naveen Kumar Dahiya, Page No. 5 of 22 preferred to not object to the said close-out and re-create fresh position after meeting his obligations.
It is further stated that in addition to the Petitioner's knowledge about a market price variation in the shares of Just Dial Ltd and the Petitioner's close-out of the open position, the respondent was intimated by the petitioner by sending a Contract Note dated 12th February 2016 by email resulting in a net loss of Rs.6,14,905.24/- i.e., the amount to be recovered from the Respondent.
It is further averred that the said Contract Note contains specific clause:
"incase you observe any discrepancy in the Contract Note including the rate and quantity of the shares/securities/contracts bought or sold by you and rate of the brokerage including other levied thereon, the same should be intimated to us in writing or through email on ig.broking.jmfl.com within the reasonable period of time from the receipt of the contract notes. In case, we do not receive any intimation in reasonable time period, we may presume that there is no discrepancy and hence, the Contract Note sent to you is in order."
It is further stated that after posting entries for MTM loss of Rs.6,14,905.24/- and the credit entry for the payment of Rs.2,50,000/-, the ledger account of the Respondent was showing a credit balance of Rs.2,37,692.10/-. Against the said credit balance, the Petitioner had made payout of Rs.2,37,692.10/- in full and final settlement of ledger account on 18th February 2016 and the said payment was received by the Respondent without any objection.
Reply filed by Respondent Arbn. No. 1963/17, JM Financial Service ltd.Vs. Naveen Kumar Dahiya, Page No. 6 of 22
8. In reply thereof, beside denying the averments so made by the objector in his objections, it is stated that, respondent has deposited excess of margin money than that required. It is further stated that as per the rules of National Stock Exchange, the squaring of position of the respondent by the objector was illegal. It is further stated that there was no default on the part of the respondent, since the objector does not raise any demand for deposit of any margin money. It is further stated that the respondent has time till next working day to deposit any margin money in term of regulation 3.10 (a) of NSC Regulations. It is further stated that at that time when the position of the respondent was squared of by the objector, respondent has balance of Rs. 2.43 lacs. Respondent further prayed that the objections so raised by the objector be dismissed.
9. After completion of pleadings, matter was listed for final arguments.
10. I have heard the arguments so led by Ld. Counsels for the parties and perused the case file carefully.
11. Before proceedings further with the present objection in hand, this court deems it appropriate to discuss in here the law with regards to scope of Section 34 of the Act. For the same, I may gainfully refer to the observation made by Hon'ble Apex Court in Delhi Airport Metro Express Pvt. Ltd. vs. Delhi Metro Rail Arbn. No. 1963/17, JM Financial Service ltd.Vs. Naveen Kumar Dahiya, Page No. 7 of 22 Corporation Ltd. (09.09.2021 - SC) : MANU/SC/0623/2021, wherein it was observed as follows:
24. This Court has in several other judgments interpreted Section 34 of the 1996 Act to stress on the restraint to be shown by courts while examining the validity of the arbitral awards. The limited grounds available to courts for annulment of arbitral awards are well known to legally trained minds. However, the difficulty arises in applying the well-established principles for interference to the facts of each case that come up before the courts. There is a disturbing tendency of courts setting aside arbitral awards, after dissecting and reassessing factual aspects of the cases to come to a conclusion that the award needs intervention and thereafter, dubbing the award to be vitiated by either perversity or patent illegality, apart from the other grounds available for annulment of the award. This approach would lead to corrosion of the object of the 1996 Act and the endeavours made to preserve this object, which is minimal judicial interference with arbitral awards. That apart, several judicial pronouncements of this Court would become a dead letter if arbitral awards are set aside by categorising them as perverse or patently illegal without appreciating the contours of the said expressions.
25. Patent illegality should be illegality which goes to the root of the matter. In other words, every error of law committed by the Arbitral Tribunal would not fall within the expression 'patent illegality'. Likewise, erroneous application of law cannot be categorised as patent illegality. In addition, contravention of law not linked to public policy or public interest is beyond the scope of the expression 'patent illegality'. What is prohibited is for courts to re-appreciate evidence to conclude that the award suffers from patent illegality appearing on the face of the award, as courts do not sit in appeal against the arbitral award. The permissible grounds for interference with a domestic award Under Section 34(2-A) on the ground of patent illegality is when the arbitrator takes a view which is not even a possible one, or interprets a Clause in the contract in such a manner which no fair-minded or reasonable person would, or if the arbitrator commits an error of jurisdiction by wandering outside the contract and dealing with matters not allotted to them. An arbitral award stating no reasons for its findings would make itself susceptible to challenge on this account. The Arbn. No. 1963/17, JM Financial Service ltd.Vs. Naveen Kumar Dahiya, Page No. 8 of 22 conclusions of the arbitrator which are based on no evidence or have been arrived at by ignoring vital evidence are perverse and can be set aside on the ground of patent illegality. Also, consideration of documents which are not supplied to the other party is a facet of perversity falling within the expression 'patent illegality'.
26. Section 34(2) (b) refers to the other grounds on which a court can set aside an arbitral award. If a dispute which is not capable of settlement by arbitration is the subject-matter of the award or if the award is in conflict with public policy of India, the award is liable to be set aside. Explanation (1), amended by the 2015 Amendment Act, clarified the expression 'public policy of India' and its connotations for the purposes of reviewing arbitral awards. It has been made clear that an award would be in conflict with public policy of India only when it is induced or affected by fraud or corruption or is in violation of Section 75 or Section 81 of the 1996 Act, if it is in contravention with the fundamental policy of Indian law or if it is in conflict with the most basic notions of morality or justice.
In Ssangyong (supra), this Court held that the meaning of the expression 'fundamental policy of Indian law' would be in accordance with the understanding of this Court in Renusagar Power Co. Ltd. v. General Electric Co. MANU/SC/0195/1994 : 1994 Supp (1) SCC 644. In Renusagar (supra), this Court observed that violation of the Foreign Exchange Regulation Act, 1973, a statute enacted for the 'national economic interest', and disregarding the superior courts in India would be antithetical to the fundamental policy of Indian law. Contravention of a statute not linked to public policy or public interest cannot be a ground to set at naught an arbitral award as being discordant with the fundamental policy of Indian law and neither can it be brought within the confines of 'patent illegality' as discussed above. In other words, contravention of a statute only if it is linked to public policy or public interest is cause for setting aside the award as being at odds with the fundamental policy of Indian law. If an arbitral award shocks the conscience of the court, it can be set aside as being in conflict with the most basic notions of justice. The ground of morality in this context has been interpreted by this Court to encompass awards involving elements of sexual morality, such as prostitution, or awards seeking to validate agreements which are not illegal but would not be enforced given the prevailing mores of the day.
Arbn. No. 1963/17, JM Financial Service ltd.Vs. Naveen Kumar Dahiya, Page No. 9 of 22
27. In light of the principles elucidated herein for interference with an arbitral award by a court in exercise of its jurisdiction Under Section 34 of the 1996 Act, we proceed to consider the questions that arise in these Appeals as to whether the Division Bench of the High Court was right in setting aside the award of the Arbitral Tribunal dated 11.05.2017.
Scope/Jurisdiction of Ld. Appelate Arbitral Tribunal
12. In light of the discussed above, with regards to the jurisdiction of the court u/s 34 of the Act, coming upon the present case in hand on merits.
It was argued by Ld. Counsel for the objector that Ld. Appellate Arbitral Tribunal had exceeded its jurisdiction in allowing the appeal so filed by the claimant, since the Appellate Tribunal failed to consider that the scope of appeal is similar to that as stated in section 34 of the Arbitration Act. It was argued that since the order passed by the Ld. Single Arbitrator dated 01.08.2016 does not fall within the purview of section 34 of the Act, the Appellate Court could not have interfere in the order dated 28.11.2016 passed by Ld. Single Arbitrator.
13. With regards to the arguments so raised, it is pertinent to note here that the right to file an appeal against an arbitration award was recognized by Hon'ble Apex Court in Centrotrade Mineral and Metal Inc. vs. Hindustan Copper Ltd. (2017) 2 SCC, wherein it was observed by Hon'ble Apex Court as follows:
25. We are unable to appreciate how these provisions come to the aid of learned counsel for HCL. Sub-section (1) of Section 34 of the A&C Act entitles a party to an arbitration to approach a court Arbn. No. 1963/17, JM Financial Service ltd.Vs. Naveen Kumar Dahiya, Page No. 10 of 22 "only by an application" for setting aside an award. This is sought to be read by learned counsel in a different way to suggest that an award can be set aside only by a court, thereby excluding a two-
tier arbitration procedure. If the contention of learned counsel were to be accepted, we would perforce have to read the sub- section quite differently by repositioning the word "only" and the sub-section to read: "Recourse only to a Court against an arbitral award may be made by an application for setting aside such award in accordance with sub-section (2) and sub-section (3)." Or "Recourse against an arbitral award may be made only to a Court by an application for setting aside such award in accordance with sub-section (2) and sub-section (3)." We are afraid we cannot read or redraft the statute in the manner suggested by learned counsel.
26......
27. In our opinion, on a combined reading of sub-section (1) of Section 34 of the A&C Act and Section 35 thereof, an arbitral award would be final and binding on the parties unless it is set aside by a competent court on an application made by a party to the arbitral award. This does not exclude the autonomy of the parties to an arbitral award to mutually agree to a procedure whereby the arbitral award might be reconsidered by another arbitrator or panel of arbitrators by way of an appeal and the result of that appeal is accepted by the parties to be final and binding subject to a challenge provided for by the A&C Act. This is precisely what the parties have in fact agreed upon and we see no difficulty in honouring their mutual decision and accepting the validity of their agreement.
28. The fact that recourse to a court is available to a party for challenging an award does not ipso facto prohibit the parties from mutually agreeing to a second look at an award with the intention of an early settlement of disputes and differences. The intention of Section 34 of the A&C Act and of the international arbitration community is to avoid subjecting a party to an arbitration agreement to challenges to an award in multiple forums, say by way of proceedings in a civil court as well under the arbitration statute. The intention is not to throttle the autonomy of the parties or preclude them from adopting any other acceptable method of redressal such as an appellate arbitration. In this context, the view expressed in the Analytical Commentary On Draft Text of A Model Law on International Commercial Arbitration - Report of the Secretary-General 16 is quite relevant. This commentary deals, inter alia, with Article 34(1) of the Model Law on International Commercial Arbitration17 and it is stated as follows:
Arbn. No. 1963/17, JM Financial Service ltd.Vs. Naveen Kumar Dahiya, Page No. 11 of 22 "1. Existing national laws provide a variety of actions or remedies available to a party for attacking the award. Often equating arbitral awards with local court decisions, they set varied and sometimes extremely long periods of time and set forth varied and sometimes long lists of grounds on which the award may be attacked. Article 34 is designed to ameliorate this situation by providing only one means of recourse available during a fairly short period of time and for a rather limited number of reasons.
2. The application for setting aside constitutes the exclusive recourse to a court against the award in the sense that it is the only means for actively attacking the award, i.e. initiating proceedings for judicial review........ Finally, article 34(l) would not exclude recourse to a second arbitral tribunal, where such appeal within the arbitration system is envisaged (as, e.g., in certain commodity trades)." 18 [Emphasis supplied by us].
14. Further, circular bearing no SEBI/HO/MIRSD/ MIRSD_RTAMB/P/CIR/2022/76 dated 30.05.2022, issued by Security and Exchange Board of India (SEBI) provides for provision of Arbitration qua disputes pertaining to or emanating from investor services. The said circular also provides for appellate arbitration. The relevant provisions of the circular are being reproduced as under, for the sake of clarity:
3.3.Arbitration 3.3.1.The limitation period for filing an arbitration application shall be as prescribed under the law of limitation, i.e., The Limitation Act, 1963.
3.3.2.In case of arbitration matters involving a claim of up to Rs. 25 lakhs, a sole arbitrator shall be appointed and, if the value of the claim is more than Rs. 25 lakhs, a panel of three arbitrators shall be appointed.
3.3.3.The process of appointment of arbitrator(s) shall be completed by the stock exchange within 30 days from the date of receipt of complete application from the applicant.
Arbn. No. 1963/17, JM Financial Service ltd.Vs. Naveen Kumar Dahiya, Page No. 12 of 22 3.3.4.Disputes pertaining to or emanating from investor service requests such as transfer/transmission of shares, demat/remat, issue of duplicate shares, transposition of holders, investor entitlements like corporate benefits, dividend, bonus shares, rights entitlements, credit of securities in public issue, interest /coupon payments on securities and delay in processing/wrongful rejection of aforesaid investor service requests may be considered for arbitration.
3.4.Appellate Arbitration 3.4.1.Any party aggrieved by an arbitral award may file an appeal before the appellate panel of arbitrators of the stock exchange against such award within one month from the date of receipt of arbitral award by the aggrieved party.
3.4.2.The appellate panel shall consist of three arbitrators who shall be different from the one(s) who passed the arbitral award appealed against.
3.4.3.The process of appointment of appellate panel of arbitrator(s) shall be completed by the stock exchange within 30 days from the date of receipt of complete application for appellate arbitration.
15. Once it is clarified, that parties can agree among themselves to file a non-statutory appeal, the question which remains to be determined is the scope and jurisdiction of Ld. Appellate Arbitral Tribunal to decide the appeal against the arbitral award passed by Ld. Single Arbitrator.
16. The Arbitration and Conciliation Act, 1996 is a complete code in itself, which envisages and provides for the procedures and powers available with the "parties to the contract" and the "arbitrators" so appointed. Said Act clearly states that parties and arbitrator can lay down its own procedure in conducting its Arbn. No. 1963/17, JM Financial Service ltd.Vs. Naveen Kumar Dahiya, Page No. 13 of 22 proceedings. At this stage, this Court deems it appropriate to reproduce in here, relevant section of Arbitration Act:
16. Competence of arbitral tribunal to rule on its jurisdiction.
(1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreesment, and for that purpose,--s
(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and
(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.
(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator.
(3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings.
(4) The arbitral tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3), admit a later plea if it considers the delay justified.
(5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award.
(6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with section 34. 1
19. Determination of rules of procedure.--
(1) The arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 (5 of 1908) or the Indian Evidence Act, 1872 (1 of 1872).
Arbn. No. 1963/17, JM Financial Service ltd.Vs. Naveen Kumar Dahiya, Page No. 14 of 22 (2) Subject to this Part, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings.
(3) Failing any agreement referred to in sub-section (2), the arbitral tribunal may, subject to this Part, conduct the proceedings in the manner it considers appropriate.
(4) The power of the arbitral tribunal under sub-section (3) includes the power to determine the admissibility, relevance, materiality and weight of any evidence.
17. Since the complete proceedings of Arbitration are governed by provisions mentioned in the Act, it would be unfitting to state that scope of Appellate Arbitral Tribunal shall not be governed by provisions enabling Arbitrator and parties to device their own mechanism for arbitration proceedings. As such, like "Arbitrator" even "Appellate Arbitral Tribunal" has power and scope to determine the procedure and conduct of proceedings. Needless to say, such procedure, scope or conduct shall be subject to terms of contract entered into between the parties.
18. On the other hand, Sec. 34 of the Act specifically states for "Recourse to a court against an arbitral award". Section 34 of the Act does not grant liberty to court to deal with the arbitral award by setting its own procedure or conduct, rather, same limits the power, authority and jurisdiction of the courts to interfere in the arbitral award. Limiting the power or jurisdiction of "Arbitral Appellate Tribunal" within the scope of Sec 34 of the Act, will not be contrary to law but also make the purpose of setting up Arbitral Appellate Tribunal ineffective.
Arbn. No. 1963/17, JM Financial Service ltd.Vs. Naveen Kumar Dahiya, Page No. 15 of 22
19. As such, for the reasons so stated above, this court finds no merits in the arguments so led by Ld. Counsel for the petitioner/objector that scope of Arbitral Appellate Tribunal is limited within the purview of Sec 34 of the Act.
20. Saying so at this stage, it would be also relevant to state in here that powers/ authority vested upon Arbitral Appellate Tribunal shall be subject to the terms of contract/agreement permitting its creation.
In this regards circular bearing no SEBI/HO/MIRSD/MIRSD_RTAMB/P/CIR/2022/76 dated
30.05.2022, issued by Security and Exchange Board of India (SEBI) may be referred as below:
3.8.2. Appeal against Arbitral Award 3.8.3.1. The appeal against an arbitral award shall be disposed of by way of issue of an appellate arbitral award within three months from the date of appointment of appellate panel.
3.8.3.2. The stock exchanges may extend the time for issue of appellate arbitral award by not more than two months on a case to case basis after recording the reasons for the same.
3.8.3.3. A party aggrieved by the appellate arbitral award may file an application to the court of competent jurisdiction in accordance with Section 34 of the Arbitration and Conciliation Act, 1996. In case the parties wish to settle/withdraw the dispute, the arbitrator(s)/ appellate panel may pass an award on consent terms.
3.8.4.Where the award is against the Listed Company/RTA, the Listed Company/RTA shall update the status of compliance with the arbitration award promptly to the exchange.
Arbn. No. 1963/17, JM Financial Service ltd.Vs. Naveen Kumar Dahiya, Page No. 16 of 22 3.8.5.The stock exchanges shall put in place a framework for imposition of penalty on Listed Companies in cases where Listed Companies/RTAs do not honor the arbitral award.
21. Since, the rules set out by SEBI does not confine or restrict the power of Appellate Arbitral Tribunal within the confines of Section 34 of the Act, it cannot be said that scope of Appellate Arbitral Tribunal, while sitting in appeal to that of the order passed by Ld. Single Arbitrator has to be considered within the four corners of Section 34 of the Act.
22. Be that as it may, this court is not sitting in second appeal of the award passed by Ld. Single Arbitrator, rather this court merely has to see as to whether the order passed by Ld. Appellate Arbitral Tribunal dated 29.11.2016 is required to be set aside in terms of Section 34 of the Act.
Point of Determination
23. As such, another argument which was raised by the Ld. Counsel for petitioner/objector was that the respondent herein did not raise any objections against the said squaring of position within reasonable time. It was argued that objections were raised by the objector after the period of 5 days, only after the prices of the shares of Just Dial increased.
24. To my mind, the question which requires determination is not whether any objections were raised by the respondent against Arbn. No. 1963/17, JM Financial Service ltd.Vs. Naveen Kumar Dahiya, Page No. 17 of 22 squaring of the position within reasonable time, rather, it is "whether the objector /petitioner was well within his power to square of the position of the respondent even if there is credit balance in the ledger account of the respondent?."
25. In order to narrow down the controversy, it would be relevant to state in here that facts which were admitted between the parties:
a. That the respondent had purchased on 29.01.2016 14 lots of 500 shares (7000 shares) of Just Dial Ltd. in future derivative segment at average price of Rs. 560/-.
b. That ledger balance at the opening on 12.02.2016 was Rs.
6,02,608/- and an amount of Rs. 2,50,000/- was transferred online at 11.21 am by the respondent making the net credit balance of Rs. 8,52,608.34/- and the value of non cash collateral was Rs. 7,180/-.
c. That initial margin required was Rs. 6,04,450/- and exposure margin was Rs. 1,64,885/-.
d. That on 12.02.2016 at 11.49 am, the prices of shares had fallen from Rs. 471/- to Rs. 372/- resulting in MTM loss of Rs. 6,93,000/-.
e. That objector squared off the position of the respondent at 11.52 am on 12.02.2016 alleging shortfall of Rs. 6,02,546.65.
26. Further, it is admitted by the Objector/Petitioner that at the time of squaring of the position of the respondent by the objector, he has credit balance of Rs. 2,37,692.10/- in the ledger account. The Arbn. No. 1963/17, JM Financial Service ltd.Vs. Naveen Kumar Dahiya, Page No. 18 of 22 said fact is admitted in the objections so filed before this court. For the sake of convenience, same is being reproduced as under:
"The Petitioner states that after posting entries for MTM loss of Rs. 6,14,905.24 and the credit entry for the payment of Rs. 2,50,000/-, the ledger account of the Respondent was showing a credit balance of Rs. 2,37,692.10. Against the said credit balance, the Petitioner had made payout of Rs. 2,37,692.10 in full and final settlement of ledger account on 18th February 2016 and the said payment was received by the Respondent without any objection".
27. At this stage, this court further deems it appropriate to reproduce herein the relevant portion of the award passed by Ld. Appellate Abritral Tribunal :
"MTM loss has to be calculated at the end of the day and constituent is to pay the loss within the next trading day under the said Regulation 3.10 (b). Part of condition 'D', extracted above, of the 'Policies and Procedures' of the respondent is also in line with the above Regulation. Facts disclosed in para No.2 above of the order would show that the total requirement towards margin was Rs. 7,69,335/-, net credit balance was Rs.8,52,608.34/- and value of non-cash collateral was Rs.7,180/- and MTM loss was Rs. 6,93,000/-. Credit balance and value of non- cash collateral, thus, far exceeded the requirement of margin money. That being so, there was absolutely no occasion for the respondent to have squared off of the p osition of the appellant for the said MTM loss. That apart, the time to pay MTM loss was available up till next trading day on 13.2.2016. Therefore, position could not have been squared off at 11.52 Am on 12.2.2016. That action was totally unwarranted and illegal. Last condition of condition at E above to which our attention was drawn by the AR of the respondent to justify the action, is of no Arbn. No. 1963/17, JM Financial Service ltd.Vs. Naveen Kumar Dahiya, Page No. 19 of 22 help to the respondent in view of particularly the former part of the finding recorded above...."
28. From the bare perusal of the award dated 28.11.2016 passed by Ld. Appellate Arbitral Tribunal, it is clear that Ld. Tribunal considered the fact that the petitioner/objector herein, squared of the position of the respondent without considering the fact that margin balance of Rs. 2,37,692.10/- was lying in the account of respondent, even after losses were suffered due to fall in prices of shares. Furthermore, time available to pay MTM loss was available till next day. As such, it cannot be said that there was any infirmity in the order passed by Ld. Appellate Arbitral Tribunal.
29. Be that as it may, in judgment Delhi Airport Metro Express Pvt. Ltd. (supra), Hon'ble Apex Court has categorically observed that every error of law committed by the Arbitral Tribunal would not fall within the expression 'patent illegality'. Nor, erroneous application of law or contravention of law not linked to public policy or public interest is within the scope of the expression 'patent illegality'. Furthermore, courts are further restrained from re- appreciating the evidence to conclude that the award suffers from patent illegality. However, courts u/s 34 of the Act can interfere into the award on the ground of patent illegality when:
a) The arbitrator takes a view which is not even a possible or interprets a Clause in the contract in such a manner which no fair-
minded or reasonable person would; or Arbn. No. 1963/17, JM Financial Service ltd.Vs. Naveen Kumar Dahiya, Page No. 20 of 22
b) If the arbitrator commits an error of jurisdiction by wandering outside the contract and dealing with matters not allotted to them;
c) Where an arbitral award failed to state reasons for its findings;
d) The conclusions of the arbitrator which are based on no evidence or have been arrived at by ignoring vital evidence are perverse;
e) On the ground of conflict with public policy of India i.e. when it is induced or affected by fraud or corruption or is in violation of Section 75 or Section 81 of the 1996 Act;
f) If it is in contravention with the fundamental policy of Indian law i.e. contravention of a statute only if it is linked to public policy or public interest;
g) If an arbitral award shocks the conscience of the court;
h) If it is in conflict with the most basic notions of morality or justice i.e. awards involving elements of sexual morality, such as prostitution, or awards seeking to validate agreements which are not illegal but would not be enforced given the prevailing mores of the day.
30. Present impugned award passed by Ld. Appellate Arbitration Tribunal, by no stretch of imagination, falls within the preview of Arbn. No. 1963/17, JM Financial Service ltd.Vs. Naveen Kumar Dahiya, Page No. 21 of 22 any of the clauses, as stated above. Furthermore, there is no challenge to the present award on the ground of incapacity of Party or validity of agreement or appointment/composition of the arbitrators.
31. In view of the foregoing discussion, this court find no merits in the objections so raised by the petitioner u/s 34 of the Act, and as such same are dismissed. Award dated 29.11.2016, passed by Ld. Appellate Arbitral Tribunal stands confirmed.
32. File be consigned to Record Room after due compliance.
Announced in the open Court on 21st July, 2025 (Anubhav Jain) District Judge-05 (New Delhi District) Patiala House Courts, New Delhi Present order consist of 22 pages and each page bears my signatures. Digitally signed by ANUBHAV ANUBHAV JAIN JAIN Date: 2025.07.22 14:58:04 +0530 (Anubhav Jain) District Judge-05 (New Delhi District) Patiala House Courts, New Delhi Arbn. No. 1963/17, JM Financial Service ltd.Vs. Naveen Kumar Dahiya, Page No. 22 of 22