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2014 DIGILAW 514 (DEL)

Indiabulls Securities v. Ramesh Chand Gupta

2014-02-13

VALMIKI J.MEHTA

body2014
Judgment : Valmiki J. Mehta, J. (Oral) 1. This First Appeal is filed by the appellant against the impugned judgment of the court below dated 16.10.2012 whereby objections under Section 34 of the Arbitration & Conciliation Act, 1996 filed by the appellant/M/s. Indiabulls Securities Limited, were dismissed. By the Award, the respondent no.1 herein, and who was the claimant in the arbitration proceedings, was awarded damages by the Arbitrator/respondent no.2/Justice Mr. V.S.Aggarwal (Retd.), Sole Arbitrator on the ground that the appellant herein (respondent in the arbitration proceedings) wrongly liquidated the holdings of the claimant/respondent no.1 although there was no balance due in the commencement of the trading on 21.01.2008 because in the morning of 21.01.2008, a cheque of the respondent no.1/claimant stood deposited in the bank account of the broker/appellant/objector, which was in the same bank of respondent no.1/claimant and if there was any delay for crediting of the account of the appellant by the Bank, then the claimant/respondent no.1 cannot be held liable. 2. This aspect has been dealt by the court below in paras 5 to 7 of the impugned judgment and which read as under:- “5.Both the objections have been carefully dealt with by the learned Arbitrator. With respect to the delay, he has opined that the remedy to seek arbitration is not barred. An arbitration could be initiated for settlement of a dispute within six months, while before a Civil Court it could be within three years as the statutory rights of a claimant cannot be curtailed by any agreement. On merits, the learned Arbitrator took notice of the fact that the respondent claimant had protested on 22.01.2008 itself when he learnt about the petitioner’s illegal action. The learned Arbitrator also took note of clause 2.2 of the Member Client Agreement, but not withstanding the petitioner’s right to square off the position, has noted that the respondent cheque No.804984 was presented and debited from his account on 21.01.2008 itself in favour of the petitioner. For the sake of operational convenience, the respondent maintained his account with the same bank as that of the petitioner and, therefore, it was only a fund transfer from o0ne account to another which should have been done immediately. The delay if any could only be attributed to the bank. For the sake of operational convenience, the respondent maintained his account with the same bank as that of the petitioner and, therefore, it was only a fund transfer from o0ne account to another which should have been done immediately. The delay if any could only be attributed to the bank. There was nothing on record to show that respondent had taken up the matter with the bank as to why the fund transfer was not credited to their account immediately. Learned Arbitrator has also taken note of the fact that as per Clause 3.10 of the NSE in respect of F&O regulations, non-payment of the daily settlement by the constituent within the next trading day would entitle the trading member to close out the transactions by buying or selling the derivative contract. But as the respondent had taken steps to reduce his liability within the next trading day, the petitioner’s inexplicable urgency in selling off the respondent’s securities was unwarranted resulting in a loss to the claimant. The learned Arbitrator therefore concluded that the respondent was entitled to damages. He has also opined that in the absence of any fixed or mathematical formula for arriving at a figure in view of the fluctuating prices, the damages awarded were confined to 50% of the amount claimed, i.e. Rs.1,33,190.50. 6. There is no merit in the petitioner’s arguments that the M to M losses should have been made good before the start of the next trading day. It has to be settled within the next trading day, which the respondent did. 7. Learned Arbitrator has gone into the details of the transaction and has passed the award after due application of mind. The respondent had taken all steps for a fund transfer and his account had been duly debited. The respondent had maintained an account with the same bank as that of the petitioner to facilitate the fund transfer. If the bank failed to credit the said amount to their account, they were at liberty to take it up with their bank.”(underlining added) 3. Before me, counsel for the appellant more surprisingly argued a totally new case that the appellant herein, was claiming the balance due at the end of trading of 21.01.2008 and not in the morning of 21.01.2008. For this purpose, attention of this Court was invited to para 5 of the written statement of the appellant before the Arbitrator. Before me, counsel for the appellant more surprisingly argued a totally new case that the appellant herein, was claiming the balance due at the end of trading of 21.01.2008 and not in the morning of 21.01.2008. For this purpose, attention of this Court was invited to para 5 of the written statement of the appellant before the Arbitrator. 4. The contention of the appellant is not only wholly frivolous but totally against the pleadings, the entire basis on which the arbitration proceedings took place and the matter which was argued in the objections filed under Section 34. Para 5 of the written statement of the appellant talks only of the balance not at the end of the trading of 21.01.2008 but at the commencement of trading in the morning of 21.01.2008. As already stated above, the appellant/respondent no.1 had cleared his balance because his cheque was deposited in the account of the appellant in the morning of 21.01.2008 and there was no delay on the part of claimant/respondent no.1 to make payment with respect to the margin shortfall. 5. Considering the facts of the case, where the respondent no.1 has been unnecessarily put to litigations, costs and waste of time, and that the respondent no.1 had cleared his dues on the morning of 21.1.2008 itself, this appeal is dismissed with costs of Rs.30,000/-. Costs shall be paid within a period of four weeks. The amount decreed under the Award which is deposited with the National Stock Exchange in terms of the Award be released to the respondent no.1 forthwith on the copy of the present judgment being given to the NSE.