TaxTMI 
TaxTMI 
2014 (12) TMI 1291
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.... with the Securities and Exchange Board of India and also with the Bombay Stock Exchange, National Stock Exchange of India and Multi Commodity Exchange. 4] It is the case of the respondent that the claimant approached the respondent in the month of March 2011 for the purpose of opening a trading and demat account in order to purchase and sell commodities from the Commodity market both in the Multi Commodity Exchange of India Ltd. On 10 th March 2011, the parties executed an agreement for opening a trading and demat account for trading in stock market, commodity market segment and future and option market. The respondent agreed to act as an intermediary of the claimant for the purpose of purchasing and selling of commodities from the commodity market. 5] It is the case of the claimant that one Mr.Priotosh Ghosh, an employee of respondent was introduced to the claimant by her brother in law as an experienced stock market advisor and responsible and senior employee of the respondent, who represented the rosy picture of high returns and huge profits within a short time by investing money in commodities in Multi Commodity Exchange of India Limited (for short MCX) through the respo....
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....ed transactions in her account, with the Corporate office of the respondent and obtained a statement of balance amount from the respondent. The claimant came to know for the first time that there had been hundreds of transactions, all unauthorized, in her account since opening of the account in March 2011. The representative of the respondent had never shown the claimant a complete statement of account. The claimant was only shown such portions which were reflecting nett profit. The claimant also came to know that the respondent had carried out about 60 to 70 intra-day buy and sell transactions on each day and around 100 intra day transactions on certain dates. The claimant had not given any instructions for a single intra day transactions and those transactions were unauthorizedly carried out in her account. 11] It is the case of the claimant that on 14 th September 2011, the claimant made several attempts to collect information from the officers of the respondent. But, they evaded her on one pretext or the other. The claimant, therefore, lodged a complaint on 14 th September 2011 against the respondent at the Police Head Quarters. 12] On 8th September 2011, the said Priotos....
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....aimant that even according to the said statement of account, filed by the respondent, it was clear that the ledger balance in the account of the claimant was always positive and that there was sufficient margin at all times in her account. It is the case of the claimant that in the fourth and final sitting of the reference before the arbitral tribunal which was held on 11 th May 2012, in the minutes of the said meeting, the arbitral tribunal wrongfully recorded that the claimant did not have any grievance regarding the transactions in her account till 11th May 2012, though, it was her case all through out that the tradings in her account were illegal, specially the intra day transactions between March 2011 and May 2011, which were without the consent and knowledge of the claimant. The claimant by her letter dated 19 th May 2011 addressed to the arbitral tribunal requested to correct the said error in the minutes of the hearing held on 11th May 2012. 18] On 18/27th June 2012, the arbitral tribunal rendered an award and directed the respondent to pay an amount of Rs. 806031.69 being the closing balance in the account of claimant as on 14 th July 2011 with interest at 18% p.a. from....
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....t to have rendered an opportunity to the respondent to lead oral evidence or ought to have directed the respondent to examine Mr.Priotosh Ghosh as one of the witness, as the same was necessary. Reliance is also placed on by-law 15.27 of MCX, which is extracted as under:- "15.27 Permission Necessary for Witness or Evidence: No party shall be entitled without the permission of the arbitral tribunal, to insist on a request to the arbitral tribunal to hear or examine witness or receive oral or documentary evidence, other than what is deemed necessary by the arbitral tribunal." 24] The learned Counsel for the respondent submits that the claimant had received all the contract notes and the statement of account from time to time and have never disputed that the same were not received by the respondent at any point of time. It is submitted that the claimant herself had disclosed the e-mail address of her husband for the purpose of delivery of contract notes and other information by e-mail which were sent by respondent from time to time. The claimant thus, could not have made any grievance for the first time before the arbitral tribunal that no such contract notes or infor....
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....f, which reads thus;- "15. Having examined the whole matter in the light of afore-noted principles, I am of the opinion that the petition deserves to be allowed. From the material placed on record by the parties, it appears to me that: (i) there are disputes between the parties on the issues/claim raised by the petitioner and countered by the respondents, including whether the claim still subsists or has been extinguished as alleged by the respondents, which cannot be resolved without evidence; (ii) there is an Arbitration Agreement in Clause 41 of agreement dated 19 th January 2004, to which the petitioner is a party along with the respondents. The Arbitration Agreement is in clear terms and brings within its ambit the disputes sought to be raised by the petitioner: whether there was a breach of the terms of agreement dated 19 th January 2004, in as much as the petitioner failed to pump in the requisite funds in Varsha either by way of equity or otherwise, as alleged, in Varsha's letter dated 22nd August 2005, would be a matter in the realm of arbitration and this Court cannot go into that question; (iii) the issues/claim raised by the petitioner, on....
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....Counsel invited my attention to the complaint made by the claimant before the investor grievance cell and the reply of the respondent to the said complaint. It is submitted by the learned counsel that the said complaint made to the investor grievance cell by the claimant was treated as statement of facts before the arbitral tribunal. The respondents have dealt with the said complaint by treating the said complaint as statement of fact before the arbitral tribunal. The respondent, therefore, cannot be allowed to now urge that there was no statement of fact/claim before the arbitral tribunal. No such issue was even raised before the arbitral tribunal by the respondent. 30] It is submitted that in the written statement/ reply filed by the respondent before the arbitral tribunal, it was pleaded by the respondent that the claimant used to give instructions on phone to the remissier or used to carry out trading by visiting the office of the respondent personally. The arbitral tribunal has rendered a finding that the respondent has not produced any record or register, though directed by the arbitral tribunal and if the same would have been produced, it would have indicated that the cla....
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.... Counsel that no a single call was made by the respondent for payment of any margin money. Pursuant to the directions of the arbitral tribunal, the respondent had filed statement showing the account of the claimant before the arbitral tribunal. Learned counsel invited my attention to the said statement which was on record before the arbitral tribunal for the period 7th March 2009 to 26th November 2011. It is submitted that there was credit balance in the account of the claimant, except on 3 dates i.e. 13th July 2011, 19th July 2011 and 1st August 2011, when the claimant was admittedly out of India. The respondent was not in a position to produce any record before the arbitral tribunal as to when the respondent had made any calls for deposit of margin money, as mandatory under clause 8.6.5 and 8.6.6 of the by laws of MCX. The learned Counsel invited my attention to clause 8 of the member - constituent agreement entered into between the claimant and the respondent which also provides for payment of margin money and the right of trading member to call for margin money which provides in the event of the constituent not making any deposit of the margin money, the trading member is not a....
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....ions of purchase and 40 transactions of sales in the account of claimant. The learned Counsel submits that the claimant did not give any instructions to carry out any such tradings in the account of the claimant. The respondent did not produce any proof of any oral instructions to show that the claimant was personally present in the office of the respondent and had carried out such transactions. The claimant had produced immigration details from the passport of the claimant before the arbitral tribunal to show that the claimant was out of India during the period from 4 th July 2011 to 25th August 2011. All such transactions were, therefore, unauthorizedly carried out by the respondent and could not have been entered in the account of the claimant. 35] Insofar as the issuance of contract notes and delivery thereof raised by the respondent is concerned, the learned Counsel invited my attention to the business rules and it is submitted that the contract notes have to be not only issued by the trading member but has to be delivered within 24 hours. The trading member has to maintain the proof of delivery. The respondent, however, did not disclose any proof of delivery of any of the ....
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....consistent with the findings of the arbitral tribunal rendered in para 16 of the impugned award. On one hand the arbitral tribunal has held that the respondent had not led evidence of Mr.Priotosh Ghosh for negating the plea of the claimant and has rendered a finding by negating the submission of the respondent that the claimant did not give any written instructions for holding transactions and that the respondent had failed to prove any such instructions by her does not have legal force and appears to be without merit and on the other hand has accepted the submissions of the respondent insofar as the period from 11 th May 2011 to 4th July 2011 is concerned. The learned Counsel submits that the arbitral tribunal thus, ought to have allowed the entire claim of the claimant made before the arbitral tribunal and not any part thereof. 39] The learned Counsel places reliance upon the Judgement of the Full Bench of this Court in the case of R.S.Jiwani Vs. Ircon International Ltd., reported in 2010(1) Bom.C.R. 529 and in particular 35 thereof and would submit that if this court cannot allow the claim which is rejected by the arbitral tribunal under section 34 of the Arbitration Act, thi....
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.... since the petition under Section 34 is being restored to the file of that court. We, accordingly, dispose of these two appeals by the following order: (i) The judgment of the High Court dated 3.6.2005 and the judgment dated 23.2.2005 passed by the IInd Additional District Judge, Ernakulam are set aside. (ii) The petition (OP Arb. No. 71 of 2004) filed by the State of Kerala against the award dated 20.12.2003 is restored to the file of the IInd Additional District Judge, Ernakulam for fresh hearing and consideration of the objections in respect of Claims 1, 4-B, 5 and 6. (iii) However, the IInd Additional District Judge, Ernakulam shall first remit the award to the arbitral tribunal for stating their reasons in support of Claims 1 and 4-B and after receipt of the reasons from the arbitral tribunal proceed with the hearing and disposal of objections. 41] The learned Counsel for the claimant distinguished the judgement of this court delivered on 21 st March 2006 in the case of Gammon India Vs. Municipal Corporation of Gr. Bombay in Arbitration Petition No.1 of 2006 on the ground that this court has not considered the issue whether the order under section....
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....amine the witness or receive oral or documentary evidence, other than what is deemed necessary by the tribunal. It is the matter of record that neither any party requested the tribunal to permit any of them to lead oral or documentary evidence, nor requested the tribunal to call any of the parties to lead oral evidence. The arbitral tribunal did not deem it necessary to call any of the parties to lead oral evidence. Section 19(2) and (3) of the Arbitration Act clearly provide that subject to Part I of the Act, the parties are free to agree on the procedure to be followed by the tribunal in conducting its proceedings, failing which the arbitral tribunal may subject to the said Part, conduct the proceedings in the manner it considers appropriate. 47] In my view, since the parties were governed by the bye-laws of MCX and had agreed that none of the parties shall be entitled without the permission of the tribunal to insist or request the tribunal to hear and examine witness or receive oral or documentary evidence, it cannot be urged that the arbitral tribunal did not give any opportunity to the respondent to cross examine the claimant or her witnesses. 48] Insofar as the submissi....
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....ndent broker has no complied with the directives issued by the Forward Markets Commission and also the business rules issued by the MCX and its bye-laws, the arbitral tribunal ought to have considered these mandatory provisions required to be followed by the broker and could not have accepted such transactions as valid in the account of the claimant. Since the respondent had failed to produce the proof of delivery of the contract notes and also the copy of the ECN form, no cognizance of the copies of such contract notes could have been taken by the arbitral tribunal. 51] Insofar as the submission of the learned Counsel of the respondent that there was no money claim made by the claimant or that there was no statement of facts / claim filed by the claimant and thus, there was no opportunity to deal with such claim by the respondent, is concerned, a perusal of the record indicates that the claimant had filed a complaint before the investor grievance cell against the respondent. The respondent had replied to the said complaint made by the claimant. The claimant, thereafter, filed the claim with the arbitration division of the MCX in Form No.I i.e. arbitration application. In the sa....
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....mant that the claimant was out of India during the period between 4th July 2011 and 25th August 2011. The claimant was not issued any demand for deposit and/or payment of any margin money during the said period. A perusal of the said statement of account and also the contract notes, which were brought on record by the respondent before the arbitral tribunal, clearly indicates that even if there was debit balance on 3 dates during the period between 4th July 2011 and 25th August 2011, the respondent has carried out large number of not only sale transactions but also purchase transactions allegedly on behalf of the claimant. The respondent failed before the tribunal to produce any proof of delivery of contract notes or any proof of demand of any margin money. The respondent also did not produce any proof of voice record during the period between March 2011 and November 2011 in support of the plea that the claimant had given any oral instructions to carry out any transactions from abroad. The claimant had produced copies of the passport along with the immigration record for the said period. The respondent however, could not produce any record of the personal visits of the claimant to ....
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.... transactions on behalf of the claimant. 58] In my view the respondent has failed to produce any proof of any instructions from the claimant to carry out any such transactions or that the transactions were carried out by the claimant herself online or that she was personally present to carry out such transactions in the office of the respondent and also having failed to prove that the respondent had demanded any margin money, which the claimant had failed to deposit and, therefore, the respondent was justified in squaring off of the transactions, standing in the account of claimant. In my view, since the respondent has carried out the transactions without demanding any margin money from the claimant and without any instructions from the claimant though there was debit balance, all such transactions carried out by the respondent, without any instructions and without any demand for margin money, were unauthorised and no such debit could have been made in the account of claimant in respect of such unauthorised transactions. A trading member who has carried out any such transactions in breach of bye-laws of MCX cannot make any claim against the constituent and/or debit any amount to....
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....rity of transactions on 25th November 2011 which was after the period when the claimant had formally registered her complaint about unauthorised trading in her account on 7th September 2011. 62] In my view, the learned Counsel for the respondent could not demonstrate from various findings on record contained in paras 12 to 25 of the award as to how the same are perverse. In my view, since the findings of fact recorded by the arbitral tribunal are not perverse, this court cannot interfere with such findings of fact under section 34 of the Arbitration Act. 63] Insofar as the judgement of the Supreme Court in the case of Venture Global (supra) relied upon by the learned Counsel for the respondent on the issue that the tribunal could not have gone into the allegations of fraud in the arbitration proceedings, is concerned, in my view, the respondent cannot be allowed to urge this plea for the first time in these proceedings. The issue of arbitrability on this ground was not raised by the respondent before the tribunal nor any such ground is raised in the petition. In my view, even if an allegation of fraud would have been made by the respondent before the arbitral tribunal, there ....
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....imant and shall allow the entire claim. 68] In the alternative, the learned Counsel for the claimant submits that since the tribunal has not considered the relevant bye-laws, business rules and directives in the impugned award while rejecting the substantial part of the claim and since the findings rendered by the tribunal in para 26 are inconsistent with the findings rendered in the earlier paras 12 to 25 of the award, this court has ample power under section 34(4) of the Arbitration Act to pass an order to direct the arbitral tribunal to resume the arbitral proceedings and to give an opportunity with a view to eliminate the grounds of challenge under section 34 of the Arbitration Act. He submitted that no separate application is required to be made by the claimant for remitting the matter back for this limited purpose under section 34 (4) of the Arbitration Act. In support of these submissions, he placed reliance on the judgment of the Full Bench of this Court in case of R.S.Jiwani (supra) and in particular para 35 thereof which reads thus;- "35. The Supreme Court was primarily stating the principles which have been kept in mind by the courts while interfering with th....
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.... arbitral tribunal is concerned, it is held by the Supreme Court that under section 34 of the Arbitration Act, the court cannot correct the errors of the arbitral tribunal. It can set aside the award wholly or partly. In my view, the court cannot correct an error and cannot make an award under section 34 of the Arbitration Act. This court has no power to allow the claims made by the claimant which were rejected by the arbitral tribunal. I am thus not inclined to accept the submissions of the learned Counsel for the claimant that this court can grant the claims which were rejected by the arbitral tribunal. 70] Insofar as the submission of the learned Counsel for the claimant that, the tribunal having ignored the bye-laws, business rules and the provisions of law while rejecting part of claim is concerned and that the tribunal has rendered an inconsistent finding, in my view, the claimant is entitled to invoke the provisions of section 34(4) of the Act for remission of the part of the award, insofar as the claim is rejected by the tribunal ignoring bye-laws, business rules and provisions of the Act and having rendered inconsistent findings and the arbitral tribunal after hearing p....