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2022 DIGILAW 437 (KAR)

Reliance Securities Ltd. v. Priyabratta Choudhary

2022-03-31

RITU RAJ AWASTHI, S.R.KRISHNA KUMAR

body2022
JUDGMENT S.R. Krishna Kumar, J. - This appeal is directed against the impugned judgment and order dated 03.01.2022 passed in COM. A.P. No. 02/2021 by the LXXXVII Addl. City Civil & Sessions Judge (Exclusive dedicated Commercial Court), Bengaluru, whereby the said petition/application filed by the appellant under Section 34 of the Arbitration and Conciliation Act, 1996 (for short, 'the said Act of 1996') was dismissed by the Commercial Court. 2. Heard learned counsel for the appellant and perused the material on record. 3. The appellant claims to be a registered stock and share broker registered with SEBI and having its head office at Mumbai and branch offices across India. A Demat and trading account was opened by the respondent with the appellant in the year 2008 and he carried on trading through both offline and online modes from that time. In 2019, the respondent filed a complaint with the National Stock Exchange against the appellant inter alia alleging that 30 unauthorized transactions pertaining to the respondent were carried on illegally by the appellant without the consent, permission or knowledge of the respondent who had incurred loss in a sum of Rs. 99,25,914/- and that the appellant was liable to pay the said amount to the respondent together cost. The appellant disputed the said allegations made by the respondent and contended that all the transactions pertaining to the respondent were not only authorized but the same were done by the appellant with the knowledge and consent of the respondent and as such, the complaint was devoid of merit and liable to be rejected. 4. Since no settlement was arrived at between the parties, the complaint of the respondent was referred to the Internal Grievance Redressal Panel (IGRP) of the NSE. After hearing both sides, the IGRP framed two issues viz., firstly, whether the complaint was lodged by the respondent with NSE within reasonable time and whether the trading member, i.e., appellant herein had obtained pre-consent for the transactions listed out by the respondent/complainant as required under the SEBI directives which mandate that with effect from 01.04.2018, the appellant should obtain pre-consent for all transactions from the respondent and record the same. 5. 5. By order dated 12.07.2019, the IGRP answered both issues in favour of the respondent and against the appellant; the IGRP came to the conclusion that the complaint in relation to the transactions during the period February - March 2019 which was filed by the respondent was within reasonable time. The IGRP also came to the conclusion that the material on record including the voice recordings etc., indicate that out of 30 items, respondent had given pre-consent to the appellant in respect of 7 items while in respect of the remaining 23 items, the respondent had not given pre-consent in favour of the appellant, who had not provided proof of pre-consent for the said 23 items, thereby violating the mandate of SEBI and having indulged in unauthorized trade, the appellant was liable to pay a sum of Rs. 64,58,138/- in favour of the respondent. 6. Aggrieved by the said order passed by the IGRP, the appellant initiated Arbitration proceedings before the panel of arbitrators constituted by NSE; in the said arbitration proceedings, the respondent herein not only opposed the claim of the appellant herein but also put-forth counter claim; the Arbitral Tribunal having heard the parties and perused the material on record also came to the conclusion that the appellant did not obtain pre-trade consent/confirmation from the respondent as held by the IGRP; the Tribunal also considered and appreciated the entire material on record including the Circular dated 01.04.2018 in order to come to the conclusion that there was no pre-trade consent/confirmation given by the respondent in favour of the appellant and consequently, in relation to 23 orders/items in respect of which the appellant had not obtained pre-trade confirmation/consent from the respondent, the appellant was liable to pay Rs. 64,58,138/- together with interest at 9% per annum, in favour of the respondent. Accordingly, by order dated 28.01.2020, the claim of the appellant as well as the counter claim of the respondent were rejected by the Arbitral Tribunal, which confirmed the order of the IGRP. 7. Aggrieved by the aforesaid order of the Arbitral Tribunal, appellant preferred an appeal before the Appellate Arbitral Tribunal. In the appeal also, the respondent herein not only opposed the claim of the appellant herein but also put-forth counter claim. Before the Appellate Tribunal also, the appellant and respondent put-forth their respective contentions which were considered and appreciated by the Appellate Tribunal. In the appeal also, the respondent herein not only opposed the claim of the appellant herein but also put-forth counter claim. Before the Appellate Tribunal also, the appellant and respondent put-forth their respective contentions which were considered and appreciated by the Appellate Tribunal. After hearing the parties, the Appellate Tribunal also considered and appreciated the entire material on record and came to the conclusion that since no pre-trade consent/confirmation was given by the respondent in favour of the appellant resulting in loss to the respondent, the Arbitral Tribunal had correctly allowed the claim of the respondent in respect of 23 orders/items. Accordingly, the Appellate Tribunal also rejected the claim of the appellant as well as the counter claim of the respondent. 8. The orders of the Arbitral Tribunal as well as Appellate Tribunal were challenged by the appellant herein under Section 34 of the Arbitration and Conciliation Act, 1996 before the Commercial Court. The respondent contested the said petition also and by the impugned judgment and order, the Commercial Court dismissed the petition filed by the appellant thereby confirming the orders of the Arbitral Tribunal and the Arbitration Appellate Tribunal. Aggrieved by the impugned order, appellant is before this Court by way of the present appeal. 9. A perusal of the various grounds urged by the appellant in the present appeal as well as the submissions made by the learned counsel for the appellant will indicate that it is the specific contention of the appellant that pre-trade consent/confirmation was given by the respondent in favour of the appellant and as such, it could not be said that the trade made by the appellant was illegal or unauthorized; it was also contended that the respondent was aware of the trade/sale in respect of 23 items/orders and that the same having been confirmed by the respondent, both prior to the sale/trade and even after the sale/trade, it cannot be said that the same was unauthorized or illegal thereby rendering the appellant liable for unauthorized trade; it was further contended that the appellant had placed sufficient material including messages, login details, etc., which established that the sale/trade in respect of the aforesaid 23 items/orders of the respondent were legal and authorized and non-consideration of the said evidence adduced by the appellant amounts to a patent illegality warranting interference under Section 34 of the said Act of 1996. It was therefore contended that the impugned order passed by the Commercial Court deserves to be set aside. 10. We have given our anxious consideration to the rival submissions and perused the material on record. 11. The material on record clearly indicates that the IGRP, the Arbitral Tribunal as well as the Arbitral Appellate Tribunal have considered and appreciated the entire material on record and have recorded a categorical finding of fact based on relevant and admissible evidence that the 23 items/orders were traded/sold by the appellant without obtaining the mandatory pre-trade confirmation/consent from the respondent and the appellant has not recorded the same as required under the SEBI Circular dated 01.04.2018. The Commercial Court also took into account the entire material on record and noticed that all contentions urged by the appellant were pure questions of fact which had been dealt with by the Arbitral Tribunal and the Arbitral Appellate Tribunal and in view of the limited/restricted scope of judicial review under Section 34 of the said Act of 1996, it was impermissible to re-appreciate the material on record or take a different view particularly when the Section 34 Court cannot review an arbitral award on the merits of the dispute. 12. The limited scope of judicial review in an application/petition under Section 34 of the said Act of 1996 is no longer res integra as held in various decisions of the Apex Court as well as this Court including the following recent decisions: (i) Project Director Vs. M. Hakeem (2021) 9 SCC 1 ; (ii) Delhi Airport Metro Express Private Limited Vs. Delhi Metro Rail Corporation Limited (2022) 1 SCC 131 ; (iii) Wellspun Speciality Solutions Limited Vs. Oil and Natural Gas Corporation Limited (2022) 2 SCC 382 ; (iv) UHL Power Company Limited Vs. State of Himachal Pradesh; (v) Smt. Padma Mahadev & others Vs. M/s. Sierra Constructions - COMAP No. 2/2021 Dated 22.03.2021. 13. In the instant case, the material on record discloses that the IGRP, the Arbitral Tribunal and the Arbitral Appellate Tribunal have recorded a categorical finding of fact that the trade/sale done by the appellant in relation to 23 items/orders of the respondent were without obtaining pre-trade consent/confirmation from the respondent as mandatorily required under the NSE Circular dated 01.04.2018 and consequently, the claim of the respondent against the appellant was allowed and confirmed by the Commercial Court. In view of the aforesaid well settled position of law stated supra as regards the limited/restricted scope of interference by the Commercial Court under Section 34 the said Act of 1996, we are of the considered opinion that the Commercial Court was fully justified in passing the impugned judgment and order confirming the Arbitral Award and the Order of the Arbitral Appellate Tribunal, which does not warrant interference in the present appeal. 14. On careful perusal of the material on record and after giving our anxious consideration to the rival submissions, we are of the considered opinion that the impugned award passed by the Arbitral Tribunal and the Arbitral Appellate Tribunal as well as the impugned judgment and order passed by the Commercial Court are correct and proper and based on legal and acceptable evidence and that the same do not contain any illegality or infirmity nor can the same be said to be perverse or capricious warranting interference by this Court in the present appeal under Section 37 of the said Act of 1996. 15. Accordingly, we do not find any merit in the appeal and the same is hereby dismissed.