TaxTMI 
TaxTMI 
2026 (4) TMI 1580
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.... the Respondent. 2. Appellant has placed on record relevant documents filed in the proceedings before the Arbitrator. With consent of the parties heard finally. FACTS IN BRIEF: 3. Brief facts leading to the filing of the present Arbitration Appeal are that, the Appellant is trading and clearing member of recognized stock exchanges such as the National Stock Exchange (NSE), Bombay Stock Exchange (BSE), Multi Commodity Exchange of India (MCX) and National Commodity and Derivatives Exchange Limited (NCDEX) bearing SEBI registration No. INZ000164132. The Respondent / Client approached the Appellant to carry out trading activities on the aforementioned exchanges through the Appellant's platform and to avail the broking services provided by the Appellant. The Appellant's sub-broker / Alliance Partner Manvendra Pratap Singh through whom the Respondent had approached the Appellant. The Respondent accordingly opened a trading and demat account with the Appellant on 15.07.2024 and was subsequently allotted a unique client code (UCC): 40354157 by the Appellant. The Respondent was also provided with an SMS alert facility on his registered mobile number, so also, e-mail facility, where....
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....on. The Respondent incurred total brokerage charge of Rs. 9,48,302/- during the trading period. He contended that the brokerage was unreasonably high, considering his actual trading activity. The excess charges indicate brokerage churning, a practice where brokers execute unnecessary trades to generate higher brokerage commission. On 19.09.2024, the Respondent recorded a total loss of Rs. 13,26,956/- including direct trading losses from unauthorized transactions and brokerage and other charges. The Respondent had contended that these losses were entirely preventable and resulted from the Respondent's conduct and, thus, the Respondent asserted that the Appellant's agents intentionally disregarded SEBI regulations, specifically Chapter IV, Section 18, which prohibits: (i) misleading advertisements or assurances regarding stock market returns, (ii) promises of guaranteed profits in trading, (ii) unethical brokerage practices. 6. Thus, the Respondent claimed full refund of trading losses and brokerage fees of Rs. 14,40,000/-, which included Rs. 9,89,701/- as brokerage fees taken from the Respondent. 7. The Appellant defended the claim of the Respondent ....
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....g issues: (i) Did the Respondent's representatives misrepresent past trading successes to induce the Applicant into trading on the Respondent's platform ? (ii) Did the Respondent engage in excessive trading for generating brokerage commission ? (iii) Does the non-joinder of the Alliance Partner / Sub-broker, Manvendra Pratap Singh and his employees Vishal and Vishnu, render the claim defective ? (iv) Were the trades executed in the Applicant's account without explicit authorization ? (v) Did the Respondent's representatives use pressure tactics to force the Applicant into trading? (vi) Was there any conflict of interest where the Respondent prioritized brokerage earnings over the client's financial well-being? (vii) Do the WhatsApp chats and audio recordings where the Respondent's representatives allegedly admitted misconduct hold legal weight? (viii) Whether the Trading Member is responsible for the acts done by the Authorised Person and his employees ? 10. The Arbitral Tribunal found that, (1) on 18.09.2024 within 66 seconds there was a credit balance of Rs. 9,50,128.05/- which reduced to Rs. 36,1....
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.... also enticed to invest additional capital by promises of large return, (9) it was found that high pressure sales tactics were adopted coupled with unrealistic assurances of success. 11. As regards issue of the non-joinder of the Alliance Partner / Sub-broker, Manvendra Pratap Singh, and his employees Vishal and Vishnu, the Tribunal found that the responsibility for the actions of a Sub-broker and his employees ultimately rests with the Trading Member under whom they operate. Regulatory frameworks governing stockbroking operations impose an obligation on the Trading Member to oversee and control the conduct of its Alliance Partners and Sub-brokers. The Alliance Partner / Sub-broker, Manvendra Pratap Singh and his employees Vishal and Vishnu acted as representatives of the Appellant in opening Respondent's trading account and in the execution of trades. Their actions were within the scope of their duties under the Trading Member's umbrella and ultimately the Trading Member was the beneficiary of their marketing efforts and trading operations. The Respondent had an agreement directly with the Appellant stock broker and has no contractual relationship with the various pers....
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....ding that the Arbitral Award runs into 24 pages and, therefore, no reasonable ground for interference existed, reflects a clear non-application of mind. The mere length of an Arbitral Award cannot be a substitute for judicial scrutiny under Section 34 of the Arbitration Act. 17. The Appellant submits that the power of this court under Section 37 of the Arbitration Act is co-extensive with power under Section 34 of the Arbitration Act and, as such, this court should examine the Award and set it aside on the grounds mentioned in Section 34 of the Arbitration Act. 18. The Appellant further submitted that this court in the case of Ulhas Dandekar Vs. Sushil Financial Services Pvt. Ltd. &, Jagadeesa G. Chary Vs. Nirmal Bang Securities Pvt. Ltd., CARB Petition No-1175 of 2019, decided on 27 March 2025, has clearly lay down that once there is conscious and knowing participation in trading, a party cannot subsequently avoid losses, and that absence of pre-trade authorization is not conclusive proof of unauthorized trading. 19. The Appellant further submitted that the District Court returns a finding on the aspect of the Arbitral Award not being contrary to public policy, it fails t....
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....-outs during and after the disputed period, is wholly inconsistent with the allegation that the trades were unauthorized. 25. The Appellant further submitted that this court in the case of Erach Khavar Vs. Nirmal Bang Securities Pvt. Ltd., Arbitration Appeal No.12 of 2025, decided on 25 August 2025, had held that disputes to transactions must be raised within a reasonable time. It as further held that absence of pre-trade authorizations does not amout to unauthorized trades and such an absence at the highest entails disciplinary measures for the stock broker. 26. The learned counsel for the Appellant submitted that this court may accordingly set aside the Arbitral Award, so also, the Order passed by the Principal District Court. SUBMISSIONS OF THE RESPONDENT: 27. Per contra, Mr. Vikas Gupta along with Ms. Akshara Sharad Madake, learned Counsel appearing for the Respondent submitted that the Appellant is a direct beneficiary of the actions of his Alliance Partner and their employees. He further submitted that the Appellant has failed to restrain his agents in inducing the Appellant in unfair manner compromising their returns and is acted in the manner prejudicial to the ....
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....ruction for every transaction effected by a client through a stock broker would be fatal to a claim by the stock broker to settle accounts. For the reasons set out in this judgement, I am unable to agree with the Appellant that in the facts of this case, he has no liability to pay his dues owing to admitted absence of such instructions. 31. The case before the learned Single Judge in case of Ulhas Dandekar (supra) was that the Petitioner therein had attempted to wriggle out of losses suffered from trade transactions accusing the stockbroker of carrying out unauthorised trades. The contentions raised on behalf of the Petitioner therein was that the stockbroker had failed to maintain written or recorded instructions for the trades under challenge and reliance was placed on NSE Regulations and SEBI Circular mandating maintenance of record. 32. This Court in the case of Ulhas Dandekar (supra) has summarised the conclusion at Paragraph No.40 as under: "40. It would be useful to summarise the conclusions drawn in this judgment as follows:- a) Maintenance of prior written or recorded authorisation of trades given to a stock broker by the client is an important safe....
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....ction 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." 34. The Division Bench of this Court in the case of Erach Khavar (surpa) has observed that violation of NSE Regulations requiring pretrade authorisations can at the highest be a ground for penalising of a stock-broker and the same 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. However, the cou....
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....s finding of fact cannot be re-examined before this court in Appeal under Section 37 of the Arbitration Act. Neither the Appellant has placed before this court any details as to how this particular finding is perverse or could have never been given on the basis of evidence before the Arbitrator. There is no patent illegality as regards the finding rendered and the same is based on record of WhatsApp recordings and transactions produced before the Arbitrator. The Arbitrator has also taken into consideration various SMSs and audio records between Alliance Partner and the Respondent client and has rendered a finding that the client was persuaded by promising very high returns and continuous pressure was maintained. Accordingly, transactions were carried out in the manner prejudicial to the interest of the Respondent client. The same finding is being based on the evidence cannot be interfered by this court. 38. In Monita Khade (supra), this court has observed that the principle of not holding broker responsible if the client does not object to the transactions within a reasonable time and permit another person to continue effecting trades, the client cannot later on seek to distance....
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....uct the LIC had induced the policyholders, including the insured, to believe that agents were authorised to receive premium on behalf of the LIC. The only circumstance relied upon by the learned Counsel for the appellants is the receipt of the amount of Rs. 2,730 by the LIC on August 10, 1987. In this regard, the submission of Shri Salve is that issuance of the receipt for the said amount of 2, 730 by the LIC in the name of the insured does not indicate that the amount was received through respondent No. 3 and that on the basis of the said receipt it cannot be said that the LIC had induced the insured to believe that respondent No. 3 was authorised to receive the amount of premium on behalf of the LIC. We find considerable merit in this submission. From the mere fact that respondent No. 3 had obtained bearer cheque for Rs. 2, 730 from the insured on June 4, 1987 and after encashing the same from the Bank on June 5 1987, had deposited the said amount with the LIC on August 10, 1987, it cannot be said that the LIC induced the insured to believe that respondent No. 3 had been authorised by the LIC to receive premium on behalf of the LIC. We are, therefore, unable to hold that the doct....
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.... cargo and load some fresh cargo. The shipowners engaged a stevedore company to discharge and load. A servant of the stevedore company stole a brass plate, which was a cover that could be removed to give access to a storm valve. Its removal rendered the ship unseaworthy as sea water could enter when the ship rolled. The resulting hole in the ship was concealed by part of the fresh cargo loaded. On her voyage after leaving the port the ship encountered heavy weather. Water entered through the hole and damaged part of the original cargo. In an action for damages by the owners of the damaged cargo, the shipowners contended that they were excepted from liability by Article IV. Rule 2(q) of the Hague Rules, because the cause of the damage arose without their actual fault or privity and "without the fault or neglect of the agents or servants" of the shipowners. 25. Dealing with this argument, Danckwerts, L.J. observed (at page 597) : It seems to me that the vital point in the case is whether the theft of the brass plate was made by the stevedore, at Port Sudan, in the course of his employment by the shipowners. He was to be regarded as the agent of the shipowners for th....
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....AGPUR 79, has also dealt with the aspect of liability of the Principal towards third person for the misfeasances of his agents within the scope of the authority in the course of his agency as under: "Sherjan Khan v. Alimuddi ((1916) 43 Cal. 511 = 20 C.W.N. 268 + 34 I.C. 598 = 23 C.L.J. 225) in which it is held that the principal is liable to third persons in a civil suit for the frauds and other malfeasances of his agent in the course of his employment although the principal did not authorise or justify or participate in, or, indeed, know of such misconduct or even if he forbade the acts or disapproved of them. The principal is not liable for the torts or negligences of his agent in any matters beyond the scope of the agency unless he has expressly authorised them to be done, or he has subsequently adopted them for his own use and benefit/ and the case in 36 Calcutta is mentioned as one of those recognising the doctrine that acts of fraud by the agent, committed in the course and scope of his employment, form no exception to the rule whereby the principal is held liable for the torts of his agent, even though 'he did not in fact authorise the commission of the fraudulent a....