Delhi District Court
Gautam Mukherjee vs Escorts Securities Ltd on 25 May, 2015
IN THE COURT OF SURESH KUMAR GUPTA,
ADDITIONAL DISTRICT JUDGE02 & WAKF TRIBUNAL,
NEW DELHI DISTRICT, PATIALA HOUSE COURTS, NEW DELHI
Arbtn No. 257/13
Unique ID No. 02403C0100092013
Gautam Mukherjee
House No. 803, Sector37
Faridabad121003 .... Petitioner
Versus
Escorts Securities Ltd.
Having its registered office at
11, Scindia House
Connaught Place
New Delhi110001
Appellate Arbitral Tribunal
National Stock Exchange of India Ltd.
Sh. Dipankar Basu, Presiding Arbitrator
Sh. Sarweshwar Jha, Arbitrator
Sh. Vijai, Jeevan Vihar Building
Parliament Street
New Delhi110001 ... Respondents
Arbtn No: 257/13 Page No. 1 of 14
Decided on 25.05.2015
Date of institution 01.08.2013
Date of conclusion of arguments 18.05.2015
Date of Judgment 25.05.2015
Order Dismissed
J U D G M E N T
1 The petitioner has filed the petition U/S 34 of Arbitration & conciliation Act, 1996 (hereinafter referred to as Act) for setting aside the award dated 26.04.2013 passed by Ld. Appellate Arbitral Tribunal constituted under byelaws of National Stock Exchange of India Ltd. on the grounds that award has been passed in a mechanical manner without touching the material issues and without requiring the respondent to file reply to the appeal. The uncontroverted and admitted averments regarding pledged security/share certificates in favour of the respondent were not considered. The settlement was reached by the petitioner on the basis of the statement of defence/counter claim and proposal was sent by the petitioner to the respondent vide letters dated 04.12.2008 and 05.12.2008 alongwith three post dated cheques of Rs.15,000/ each. The Ld. Appellate Tribunal has failed to appreciate the fact that all the three post dated cheques were encashed by the respondents which signifies the acceptance of proposal by conduct. The respondent is not free to turn its back on the terms of the contact which in any way amount to breach of contract. The email dated 05.12.2008 is of no Arbtn No: 257/13 Page No. 2 of 14 Decided on 25.05.2015 significance once the consideration amount was accepted. The sale of securities pledged in favour of respondent is bad for the want of statutory notice. The communication dated 05.12.2008 is not a notice in the first place and secondly it does not amount to any notice for the sale of pledged shares/certificates. The Ld. Appellate Arbtiral Tribunal has failed to appreciate the law laid down in case law titled as "GTL Limited Vs. IFCI Limited & Ors., Manu /DE/3341/2011". There was no service of statutory notice U/S 176 of Contract Act, 1872 as such sale of securities is void and respondent is under obligation to restore back the securities to the petitioner. The Ld. Appellate Tribunal has gone beyond the scope of appeal in holding that no pledge was ever created in favour of respondent. Clause 12 of Supplementary Agreement is in the favour of the petitioner. The award has been passed in derogation of established legal preposition and is also violative of public policy. 2 Notice of the petition is given to the respondent. Ld. Counsel for the respondent submitted at bar on 22.10.2013 that he does not want to file a reply.
3 Ld. Counsel for the petitioner submitted that award has been passed in a mechanical manner without taking into consideration the uncontroverted and admitted facts. He further submitted that the shares were pledged with the respondent which could not have been sold without giving a Arbtn No: 257/13 Page No. 3 of 14 Decided on 25.05.2015 notice U/S 176 of Contract Act, 1872. The sale of securities without notice is bad in the eyes of law. He further submitted that the petitioner has given a proposal for settlement vide letters dated 04.12.2008 and 05.12.2008 along with three post dated cheques of Rs. 15,000/ each. He further submitted that the respondent has accepted the settlement proposal by encashing the three post dated cheques so the very sale of securities to recover the alleged dues is in breach of the contract. He further submitted that Ld. Appellate Arbtiral Tribunal has not considered all these facts so the award is bad in the eyes of law and against the public policy.
4 Ld. Counsel for the respondent submitted that the petitioner has executed a member client agreement along with supplementary agreement. He further submitted that there is noting on record to show that share certificates were ever pledged with the respondent and even Clause 12 of the supplementary agreement dated 03.11.2007 does not show that shares were pledged with the respondent. He further submitted that there were outstanding dues against the petitioner and notice was given to the petitioner through e mail dated 05.12.2008 to clear the outstanding dues but in vain as a result share certificates were sold in order to recover the dues. He further submitted that the proposal of the petitioner does not in any way affect the rights of the respondent to recover the outstanding amount as prices in the share market fluctuates in a sharp manner.
Arbtn No: 257/13 Page No. 4 of 14
Decided on 25.05.2015 5 The respondent herein is claimant in arbitration proceedings before sole Arbitrator. The claim of the respondent/claimant is that respondent/claimant is a company incorporated and registered under Companies Act which deals in the trading business of stocks, shares and securities and member of National Stock Exchange India Limited and Bombay Stock Exchange of India Limited. Sh. Bhuvnesh Singh is authorized representative of the claimant who is authorized to sign, verify, file and prosecute legal proceedings on behalf of respondent/claimant vide separate resolution dated 24.06.2004 passed by Board of Directors. The petitioner herein is respondent in arbitration proceedings before sole Arbitrator. The petitioner/respondent has approached the respondent/claimant for trading in stocks and shares and opened two accounts i.e. Cash Market Segment (CGAM01) and Future and Option Segments (FGAM01). The member client agreement and account opening form for both the accounts were executed between them on 03.11.2007. The statement of account regarding the entire transaction was dispatched to the petitioner/respondent from time to time. The statement of account dated 12.11.2008 shows a balance of Rs.1017288.47p against the petitioner/respondent which was acknowledged by him in the trading account dated 28.11.2008. The petitioner/respondent was called upon to make the outstanding payment vide letter dated 20.11.2008 which was acknowledged vide letters dated 04.12.2008 and 05.12.2008 through emails. The petitioner/respondent has shown his inability to clear the debit balance Arbtn No: 257/13 Page No. 5 of 14 Decided on 25.05.2015 due to huge financial loss and requested to waive off 30% of the total outstanding amount and offered to pay a sum of Rs.15,000/ pm without any interest on the said amount. It was further assured that the petitioner/respondent shall pay extra amount as and when extra money is received by way of bonus/salary increment/incentives and request was made not to liquidate his shares/securities worth Rs.5 Lacs. The same be kept pledged and transferred in his account as and when debit balance becomes nil. The request to waive of 30% amount from the total outstanding amount and to withhold the share/securities was specifically denied vide letter dated 05.12.2008 and it was told to the petitioner/respondent to clear the outstanding amount in the aforesaid trading session. However, the petitioner/respondent was allowed to clear the said debit in the monthly installments of Rs.15,000/ each. The securities/shares were sold on the same date i.e. 05.12.2008 vide settlement number NN8230 and copy of the contract note was sent to petitioner/respondent within the time prescribed by National Stock Exchange India Limited and petitioner/respondent was directed to clear the balance amount by way of monthly installments of Rs.15,000/ each. The request of the petitioner/respondent to waive of all interest and of future interest was allowed subject to clearance of dues without any default. The petitioner/respondent has payed installments of Rs.15,000/ till 07.07.2011 by leaving a debit balance of Rs.195079.27p. A legal notice dated 05.11.2011 was sent to the petitioner/respondent which was duly received and replied by him. Arbtn No: 257/13 Page No. 6 of 14
Decided on 25.05.2015 The respondent/claimant has invoked the arbitration proceedings under the provisions of National Stock Exchange India Limited and filed the statement of claim before the arbitrator appointed by National Stock Exchange India Limited. The five claims namely balance amount of Rs. 195079.27p, interest @18% per annum from 08.02.2011 till 26.03.2011 of Rs.162653.60p, interest @18% per annum on outstanding amount of Rs.1017201.62p from 21.11.2008 till 07.02.2011 of Rs.39699.80p, pendentilite and future interest @18% per annum and litigation expenses of Rs.25,000/ were claimed against the petitioner/respondent.
6 The petitioner/respondent filed the statement of defence that the statement of account issued by the complainant from time to time is inaccurate. It is inaccurate that there was an outstanding balance of Rs. 1017288.47p on 12.11.2008 which was acknowledged by him through letters dated 04.12.2008 and 05.12.2008 sent to the respondent/claimant through e mails. The payment plan of Rs.15,000/ PM was promised towards liquidation of alleged liability subject to certain conditions. The respondent/claimant would not have encashed three post dated cheques in case proposal was qualified. The respondent/claimant has sold the shares/securities on 05.12.2008 within the prescribed time is totally false. The petitioner/respondent has not given any instructions to sell the securities. The acceptance of post dated cheques signifies conclusion of the agreement on the terms of the offer and Arbtn No: 257/13 Page No. 7 of 14 Decided on 25.05.2015 respondent/claimant is precluded from raising any new condition after acceptance of said offer. There is no outstanding balance of Rs. 195079.29p. The respondent/claimant is not entitled for any dues.
7 The petitioner/respondent has also filed a counter claim before arbitrator with the averments that he has pledged stocks/shares of various companies with the respondent. The claimants liability stood at Rs. 1017201.62p at the end of trading cycle. A letter dated 04.12.2008 was written to liquidate the liability in a time bound manner with a condition that securities will not be sold. A sum of Rs.4 Lacs has been paid to the satisfaction of liability. The securities were sold for a sum of Rs.434549/ on 05.12.2008 without any notice to him. The respondent is duty bound to restore the securities in his favour.
8 Heard and perused the record. The arbitral award can be set aside if any of the conditions is incorporated in Section 34(2) of the Act exist. The petitioner has to show that any of the conditions incorporated U/S 34(2) of the Act exist in his case to set aside the award. It is clear from the record of the case that Sh. Laxmi Swaminathan was appointed as a sole arbitrator. The respondent/claimant has filed his statement of claim before Ld. Arbitrator and thereafter statement of defence and counter claim was filed by the petitioner/respondent. Respondent/claimant is trading in share, stocks and Arbtn No: 257/13 Page No. 8 of 14 Decided on 25.05.2015 securities and duly registered with National Stock Exchange of India and Bombay Stock Exchange of India. It is clear from the record that the petitioner has started trading in securities/shares through respondent and two accounts were opened by him. A member client agreement, supplementary agreement dated 03.11.2007 and account opening form were executed between the parties. It is clear that there were transactions between the parties. Respondent/claimant used to dispatch statement of account to the petitioner/respondent. The statement of account showing a balance of Rs. 1017288.47p was dispatched to the petitioner by the respondent which was duly received by the petitioner as his signatures bear on the statement of account filed by the respondent before Ld. Arbitrator. The petitioner has fairly conceded before Ld. Arbitrator that he does not dispute the statement of account filed by the respondent meaning thereby that he has admitted the statement of account filed by the respondent. The petitioner has also admitted in his counter claim that liability of the claimant i.e. petitioner herein stood at Rs.1017201.62p. The statement of account was not in dispute before Ld. Arbitrator. Ld. Appellate Arbitral Tribunal has also taken into consideration statement of account filed in the appeal against the order of Ld. Arbitrator. The petitioner has not disputed any of the transactions shown in the statement of account. The statement of account also bears the signature of the petitioner on the last page no.37 of statement of account with the remarks subject to the verification by 10.12.2008. The petitioner did not seek any Arbtn No: 257/13 Page No. 9 of 14 Decided on 25.05.2015 clarification from the respondent in case he was having any doubt about the any entry in the statement of account. The balance amount shown in the statement of account is no where is disputed in the letters dated 04.12.2008 and 05.12.2008 sent through email to the respondent wherein some proposal to liquidate the balance amount was given by the petitioner. The proceeding show that there was no dispute with respect to the amount payable by the petitioner to the respondent in terms of the statement of account. 9 The letters dated 04.12.2008 and 05.12.2008 written by the petitioner through email to the respondent were duly considered by Ld. Arbitrator as well as by Ld. Appellate Arbitral Tribunal. The proposal of the petitioner i.e. to waive of 30% of the entire due amount, noncharging of interest on balance amount, to take balance amount in monthly installment of Rs.15,000/ each and not to sell the securities was duly considered by the respondent. It was replied that waiver of the amount cannot be accepted and further the payment period will become too long. The payment should be within a period of 11.5 years. The request for not selling the securities cannot be accepted. The complete proposal given by the petitioner was not accepted by the respondent. Ld. Appellate Arbitral Tribunal has duly considered the proposal given by the petitioner and subsequent reply of the respondent to the proposal given by the petitioner. Ld. Appellate Arbitral Tribunal concluded that there was a clear denial to the complete proposal of the petitioner. There Arbtn No: 257/13 Page No. 10 of 14 Decided on 25.05.2015 was denial not to sell the shares and no fault can be find in the subsequent sale of securities by the respondent. Ld. Appellate Arbitral Tribunal has considered all the pleas and documents filed by the petitioner to this effect. The court cannot sit as in appeal over the award of Ld. Appellate Arbitral Tribunal by reappreciating the evidence. It is not possible to reexamine the facts to find out whether a different case can be arrived in the absence of any of the grounds shown in Section 34 (2) of the Act.
10 The main ground raised by the petitioner is that shares were pledged with the respondent and respondent shall have given a notice U/S 176 of Contract Act, 1972 before selling the shares in order to square the liability, if any, and absence of the notice itself is sufficient to show that sale of securities is void abinito and he is entitled back for the securities. This point was duly raised by the petitioner before Ld. Appellate Arbitral Tribunal and even placed reliace on GTL Limited Vs. IFCI Limited & Ors, in IA No. 11586/2011 in CS (OS) No. 1771/2011 of our own High Court. The plea raised by petitioner was duly considered by Ld. Appellate Arbitral Tribunal and opined that the said case law is not applicable as the facts of the said case law are quite different from the case in hand. In Tarapur and Company Vs. Cochin Shipyard Limited, Cochin, (1984) 2 SCC 680 and UP Hotel Vs. UP State Electricity Board (1989) 1 SCC 359, it was held by their Lordship that arbitrator's decision on a question of law is also binding even if erroneous. Arbtn No: 257/13 Page No. 11 of 14
Decided on 25.05.2015 The plea was duly raised and considered by Ld. Appellate Arbitral Tribunal and court cannot come to the different conclusion by sitting as an Appellate Court. 11 Ld. Appellate Arbitral Tribunal has given a finding that there is no document on record to show that shares were pledged by the petitioner with the respondent and even petitioner has failed to show how these shares were purchased or transferred or delivered to the respondent to create the alleged pledge. The shares were given as a margin. The Clause 12 of Supplementary Agreement dated 03.11.2007 was relied upon by Ld. Appellate Arbitral Tribunal which says that "in the event of default in payment of required margin or any outstanding towards ESL, the ESL shall be entitled to sell or otherwise dispose of in any manner, all or any of the said securities in such manner and upon such terms and subject to such conditions as ESL may think fit, without obtaining the consent of the Client, after giving oral notice to the client of the said sale and the proceeds of such sale or disposal shall be applied first in payment of all costs, charges or expenses of and incidental to such sale or disposal and for enforcement of pledge/lien hereunder, secondly in paying the client's dues and in respect of all other outstanding dues to ESL." Clause 12 says that the respondent was within its right to sell shares in order to recover outstanding amount. The amount due is duly acknowledged by the petitioner. The settlement offer was not completely accepted by the respondent. The shares were not pledged with respondent so no fault can be find on the part of Arbtn No: 257/13 Page No. 12 of 14 Decided on 25.05.2015 the respondent. The petitioner did not object to the sale of shares after 05.12.2008 till the date of filing of the claim petition by the respondent before the Ld. Arbitrator. No complaint was filed by the petitioner against the respondent. The action on the part of petitioner is an after thought. Ld. Appellate Arbitral Tribunal has considered all the pleas raised by the petitioner by giving reasons.
12 The court cannot substitute its own evaluation and come to the conclusion that arbitrator has acted contrary to the agreement between the parties. The view taken by Ld. Appellate Arbitral Tribunal is a plausible view. The Arbitral Tribunal is the final arbiter of the dispute between the parties. Arbitration is a method to resolve the dispute in pursuant to the agreement between the parties. The endeavour of the court should be to honour and support the award as far as possible. Reliance is placed upon Mark Fred Vanaspati & Alied Industries Vs. Union of India (2007) 7 SCC 679. 13 The award is not open to challenge on the grounds that Arbitral Tribunal has reached a wrong conclusion or interpretation given by the Arbitral Tribunal to the terms of the contract. There is nothing on record to show that any of the conditions to set aside the award U/S 34 (2) of the Act are in existence. The Arbitrator is a final Judge on both the question of fact and law referred to it. The view taken by Ld. Appellate Arbitral Tribunal is a plausible Arbtn No: 257/13 Page No. 13 of 14 Decided on 25.05.2015 view.
14 To my mind, the ground incorporated U/S 34(2) of the Act do not exist in the present petition in order to set aside the award. Hence, the petition filed by the petitioner is dismissed. There is no order as to the cost. File be consigned to record room.
Announced in the open court on 25 day of May, 2015 th (SURESH KUMAR GUPTA) ADJ02 & WAKF TRIBUNAL NEW DELHI Arbtn No: 257/13 Page No. 14 of 14 Decided on 25.05.2015