TaxTMI 
TaxTMI 
2025 (9) TMI 185
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....ing on business of trading in shares and securities. Appellant opened a Depository Account with the Respondent. This is how Demat Account and Trading Account of the Appellant was opened with the Respondent. Appellant had transferred 1500 shares of Hero Moto Corporation Limited, 5,000 shares of Petronet LNG Limited and 7000 shares of ITC Limited with the Respondent towards security. During 30 June 2015 to 27 September 2015, transactions of purchase and sale of shares in the Account of the Appellant took place on the basis of instructions allegedly given by the Appellant through mobile phone and other means. Appellant suffered losses in the said transactions. Respondent sent Ledger Account to the Appellant which was not objected to by the Appellant. Respondent paid back the balance credit amount of Rs. 37,829.69/- standing in the Ledger Account paid back to the Appellant on 27 January 2016. 3) On 29 June 2016, Appellant objected to the transactions carried out by the Respondent and filed complaint with the Investors Grievance Redressal Panel (IGRP) of NSE and claimed the value of shares from the Respondent. On 9 January 2017, the IGRP passed order and granted claim of Rs. 46,60,00....
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....e a fresh enquiry or record fresh reasons for upholding the order of the Arbitral Tribunal. In support, he would rely upon judgment of the Apex Court in Girijanandini Devi & Ors. Versus. Bijendra Narain Choudhary (1966 SCC Online SC 236). That the order of the learned Single Judge suffers from the vice of non-application of mind. That SEBI Circular of 26 September 2017 was issued after passing of Award of the Arbitral Tribunal dated 10 April 2017 and Award of Appellate Tribunal of 14 August 2017 and therefore there is no question of the Tribunal or the Appellate Tribunal loosing the sight of the said Circular. 6) That even otherwise the SEBI Circular has no relevance in view of specific NSC instructions for securing pre- trade confirmations. That judgment of Calcutta High Court in Nirmal Bang Securities Pvt. Ltd. Versus. Tilak Bachar (2019 SCC Online Cal 628) has no application to the present case as the same is delivered in 2019 after the Arbitral Award and Respondent never relied on Clause- 13 of the Contract to contend that NSE Regulation-3.4.1 was not binding. That in any case, contract cannot supersede the regulations and the bye-laws. He would rely upon order of this Court....
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....ransactions in the Account, that he confirmed the said transactions and even signed the Ledger Account while accepting the balance amount without raising any demur. That pre-trade confirmations were not possible in the present case as Respondent had entered into an illicit/unlawful arrangement with Mr. Farukh Meshman who used to issue instructions for purchase and sale of shares and the Appellant was to share the profits. That the Majority Award had ignored the vital evidence and was therefore perverse. That it had overlooked the fact that all trades in the Appellant's Account was authorised. That the Majority Award was otherwise contrary to the position of law laid down in various judgments holding that pre-trade authorisations in F&O segment was not mandatory at the relevant time when the transactions took place. That the Division Bench judgment of Calcutta High Court in Nirmal Bang Securities Pvt. Ltd. (supra) confirms this position, SLP against which judgment has been dismissed. That in Keynote Capitals Ltd. Versus. Eco Recycling Ltd. (2018 SCC OnLInE Bom. 1269) it is held that when the constituent was aware of the transactions and did not object about the same, the transaction....
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....ount to Rs. 35,77,412/-. However, the Arbitral Tribunal did not accept the contention of the Respondent that the trade transactions were authorised by the Appellant. It relied upon statement of Mr. Manoj Gupta, unregistered sub-broker, who was sharing commission with the Respondent. The Arbitral Tribunal held that the F&O transactions were entered into a large scale without the consent of the Appellant which was in violation of NSE Regulations requiring non-entering of any transactions without prior consent or authorisation from the investor. 13) In Appeal preferred by the Respondent, the Presiding Member agreed with the Respondent that the trade transactions were effected with authorisations from the Appellant. The majority members however held that Appellant never authorised the broker to do the F&O transactions in his Account. However, the Majority Award is cryptic one which does not take into consideration any evidence on record and records a bald finding of non-authorisation by the Appellant to the Respondent without recording any reasons in support of the same. Mr. Rajasekhar has attempted to salvage this situation by relying upon judgment of the apex court in Girijanandin....
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.... did not protest against even a single transaction for three long months. Such conduct would clearly go against the Appellant and has rightly been taken into consideration by the learned Single Judge. 16) To make the case of the Appellant worse, he has confirmed the final Ledger Account by signing the same on 5 October 2015 and accepted the balance of Rs. 37,829.69/- on 27 January 2017 without raising any demur. He raised objections to the transactions for the first time after 10 long months which again is a unnatural conduct which cannot be ignored and has rightly been taken into consideration by the learned Single Judge as a factor against the Appellant. 17) Faced with the difficulty where the Appellant admittedly confirmed all transactions after they were effected, he cited the pretext of absence of pre-transactions authorisation for the purpose of wriggling out of the losses caused due to the transactions. Appellant has relied upon National Stock Exchange (Futures and Options Segment) Trading Regulations, particularly Regulation No.3.4.1 providing that the trading member shall ensure that appropriate confirmed order instructions are obtained from the constituents before p....
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....tions requiring pre-trade authorisations. 19) In our view, violation of NSE Regulations requiring pre- trade authorisations can at the highest be a ground for penalising of a stock-broker. The same however cannot be a reason for wriggling out of consequences of a trade, particularly when the trade transaction is confirmed by the constituent. Absence of pre-trade authorisation cannot be permitted to be used as a handle by a person speculating in shares for the purpose of wriggling out of losses resulting out of trade transactions which are confirmed by him. There is a difference between concept of absence of pre-trade authorisation and blatantly unauthorised trade. The present case does not involve the vice of blatantly unauthorised trades. Reliance by the Appellant on order of this Court in Amit Bharadwaj and judgment in Bonanza Commodities Brokers Pvt. Ltd. is therefore inapposite. 20) Though the learned Single Judge may not be entirely right in criticising the Majority Award by holding that it lost sight of SEBI Circular dated 26 September 2017 (on account of award being delivered before issuance of SEBI Circular), the fact remains that SEBI made pre-transactions authorisat....