SSM 1 arbp.518.10.doc IN THE HIGH COURT OF JUDICATURE OF BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO. 518 OF 2010 Ashit C. Mehta Investment Intermediates Ltd. Through Nucleus House, 5 th Floor, Saki Vihar Road, Andheri (E), Mumbai – 400 072. .... Petitioner Versus Central Depository Services (I) Ltd., Through Chairman, P. J. TOWER, 16 th Floor, Dalal Street, Fort, Mumbai – 400 001 .... Respondent Mr. M. S. Sharma for the Petitioner. Ms. Kirtida Chandarana i/b Mehernosh Humranwala for the Respondent. CORAM: S. C. DHARMADHIKARI, J. DATED: 8 th FEBRUARY, 2011. Oral Judgment: This Petition under Section 34 of the Arbitration and Conciliation Act, 1996 challenges the Award dated 17 th March, 2009. SSM 2 arbp.518.10.doc The Petitioner carries on business in securities and is a member of National Stock Exchange and Bombay Stock Exchange. 2. The Petitioner does not dispute that it is a Depository Participant with Respondent, which is licensed by the Securities Exchange Board of India ('SEBI' for short) to provide DEMAT accounts services to Indian citizens. 3. The Petitioner, also, does not dispute that Respondent is the Principal DEMAT operator and Petitioner is its Sub-broker and Depository Participant since 10 th January, 1999 by written agreement. The Award in question has been rendered pursuant to the Reference under the bye-laws of the Respondent by which the Petitioner claimant sought Rs. 21,99,424/- as the amount which the Respondent, allegedly, compelled the Petitioner to pay to one Abrol family. This family was the complainant. They were holding certain accounts with the Respondent through the petitioner claimant. By their letters dated 12 th April, 2006 and 28 th April, 2006 that family SSM 3 arbp.518.10.doc complained to the Respondent. The complaint was that, without their authorization and instructions, the Petitioner deducted from their respective Beneficial Account 1050 shares and 98 shares of Tata Iron and Steel Company on 24 th November, 2003. The family, therefore, requested that the Petitioner claimant should return these shares which were unauthorizedly debited together with the bonus shares and short credit. This complaint was received and thereafter a meeting was held on 6 th June, 2006. The representative of the Tisco, also, confirmed that the shares were erroneously sold in the account of Mr. Manish Sehgal. The Petitioner informed by a letter dated 9 th May, 2006 to the Respondent that the delivery instruction slip based on which the securities were transferred, had been misplaced. The Petitioner was called upon to submit the copies of the slips signed by the account holders or replacement of shares to Abrol family. In response to this, a letter was addressed by the Petitioner claimant. The said letter dated 19 th June, 2006 reads as under:- SSM 4 arbp.518.10.doc HAND DELIVERY To, Dated 19 th June, 2006 Central Depository Services (India) Ltd. Phiroze Jeejeebhoy Towers, 17 th Floor, Dalal Street, Mumbai – 400 023. KIND ATT-MR. SUHAS KULKARNI Dear Sir, Sub.: TISCO Shares. Ref.: Mr. M. K. Abrol and Vipin Abrol. This is further to the personal discussions we had with your officials alongwith our Whole time Director, Mr. Kirit Vora. During the discussion, our Director explained in detail how the aforesaid complainant, even after receiving consideration for the Disputed TISCO shares has been claiming for the shares using the Exchange / Regulatory mechanism. We had also explained how the complainant in his written complaint to the Jalandhar Police admitted the he has received payments towards the sale of these shares and while in his submissions to CDSL claims that the payment received is relating to some other transactions. We had during our earlier meetings provided your office with a copy of the FIR and other relating papers SSM 5 arbp.518.10.doc filed before the Police at Jalandhar. A statement of the shares transacted at the said Jalandhar center along with a copy of the payment statement was also provided to your office. Closer security of these documents will provide details of our stand on the complainant. We, therefore, once again request your good self to call for an explanation from the said complainants as regards their claim and also call for necessary documentary proof thereof. In the meanwhile, on your insistence, we have arranged for the 1050 shars of TISCO alongwith 525 bonus shares in the name of Mr. M. K. Abrol and 98 shares of TISCO alongwith the 49 shares in the name of Mr. Vipin Abrol. We now request y our good self to kindly provide us with the Escrow account details, to enables us to have these shares transferred in to your Escrow account. We will also arrange for the Dividend in respect of these shares immediately on receiving your communication. We once again confirm our earlier assurance that we will have no claim what so ever in respect of this matter against you and we shall not file any proceedings or claim in respect of these shares, against your organization. Thanking you Yours faithfully For Asit C. Mehta Investment Intermediates Limited SSM 6 arbp.518.10.doc Ravi Ramchandran Asst. Vice President-Legal cc. Securities And Exchange Board of India, Mumbai. 4. On 18 th July, 2006, the Respondent informed the Petitioner that its request to hold the transfer of shares from Tisco account to account of Abrol family alongwith the dividend in abeyance for 10 days, cannot be accepted since the copy of the delivery instruction slip was not forwarded. It was stated that an indemnity declaration was, also, executed but the shares in question were not received. The Petitioner was informed that the shares would be transferred to the account of the Abrol family without any further reference to the Petitioner. 5. It is thereupon, that a Writ Petition was filed by the Petitioner in this Court challenging this decision of the Respondent. That Writ Petition was disposed off on 4 th September, 2006 by this SSM 7 arbp.518.10.doc Court. After the decision of this court, the shares were transferred from the Tisco account to Abrol family. 6. Thereafter, the Petitioner claimant filed Arbitration Application No. 68 of 2007 under Section 11 of the Arbitration and Conciliation Act, 1996 and by an order dated 25 th September, 2008 this Court allowed the application and appointed an Arbitrator. 7. That is how the claim was lodged and it was alleged that the Petitioner was pressurized by the Respondent to handover the shares under the threat of discontinuing the DEMAT facility thereby adversely affecting the business. Therefore, the claim made should be awarded. 8. On behalf of the Respondent, the stand was that under Regulation 52 of the Securities Exchange Board of India (Depository Participants) Regulation, 1996, it was obligatory upon the Respondent to redress the grievance of the beneficiary owner within 30 days from the date of receipt of the complaint. SSM 8 arbp.518.10.doc 9. In view of this and the complaint received from the Abrol family that the letters were addressed to the Petitioner claimant and at no time any pressure or coercion was alleged. The Petitioner voluntarily addressed a letter and deposited the shares in the Escrow account with a clear assurance that it would not make any claim against the Respondent for this act. 10. The Arbitrator, on perusal of the entire materials and in the light of the rival contentions concluded that the Petitioner could not substantiate the allegation that any force or pressure was exerted. The Petitioner, on its own, deposited the shares in view of their inability to produce a copy of the delivery instructions slips. Concluding thus, the claim has been rejected. It is against such an Award that the present petition has been filed. 11. Shri. Sharma appearing on behalf of the Petitioner contended that the Arbitral Tribunal proceeded in a haste and without SSM 9 arbp.518.10.doc complying with the principles of natural justice. The Petitioner was not given any opportunity to produce documents nor to lead evidence. The matter was concluded hurriedly and the Award came to be rendered. 12. It is then contended that the Award is vitiated because the Arbitrator has failed to take note of all the documents produced on record. The Arbitrator has taken up some letters but has omitted to take into account the contents of some crucial documents, namely, a letter dated 11 th July, 2006. For all these reasons, the Award is contrary to public policy and cannot be sustained. If material evidence is ignored by the Sole Arbitrator, then, the Award must be set aside. Reliance is placed on the two decisions of the Hon'ble Supreme Court in the case of Bharat Coking Coal Ltd. V/s. Annapurna Construction reported in (2003) 8 SCC 154 and in the case of Union of India V/s. Banwarilal and Sons (P) Ltd. SSM 10 arbp.518.10.doc reported in (2004) 5 SCC 304. 13. On the other hand, it is submitted on behalf of the Respondent that the Award does not suffer from any infirmity or error. On the other hand, the attempt is to have a re-appreciation and re-appraisal of the evidence on merits. It is submitted firstly that the Award in question is rendered on 17 th March, 2009. A copy of the Award was forwarded on 18 th March, 2009. This Petition has been filed on 23 rd September, 2009. It is clearly barred by limitation. No reliance can be placed upon the letter addressed in July, 2009 by the Respondent because on that day one more copy of the Award was forwarded to the Petitioner on request. Therefore, the Petition is time barred. In any event, it is false to state that the material evidence has been ignored because the letter dated 11 th July, 2006 has been replied by the Respondent on 18 th July, 2006. The Award refers to the letter dated 18 th July, 2006 in extenso. All the letters addressed by the parties to each other are admitted documents. SSM 11 arbp.518.10.doc 14. In these circumstances, their contents have been construed to render a finding on merits and that is not perverse. Once it is not so, then, in the limited jurisdiction, this court cannot interfere with the Award and particularly when no grounds under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside the Award have been made out. In these circumstances, the Petition may be dismissed. 15. Having heard the learned Counsel appearing for the parties and perusing with their assistance, the Award and some documents, I am of the opinion that there is no merit in this Petition. 16. Assuming that the Petition has been filed on 23 rd September, 2009 and therefore, when it challenges the Award dated 17 th March, 2009 and copy of which was received on 18 th March, 2009, hence it is clearly time barred, I do not wish to rest my conclusion only on this aspect. There may be some merit in the SSM 12 arbp.518.10.doc contention raised by the Respondent on the point of limitation, but having been perused the letter addressed in July, 2009, I proceed on the basis that the Petition could have been entertained. 17. However, the finding rendered by the sole Arbitrator on the merits require no interference as they are rendered on the basis of the letters and documents placed on record. There is no dispute that the claim made by the Petitioner is arising on account of the fact that the Petitioner is a Depository Participant. There is an agreement between the Petitioner and the Respondent. Under the said agreement, the parties have agreed to abide by the Rules and Regulations framed by SEBI and other regulatory bodies. In terms of these regulations, the powers to adjudicate upon disputes between the participant and the respondent are conferred. They are conferred by the agreement between the parties as well. Therefore, there was never any dispute raised with regard to the jurisdiction of the Arbitral Tribunal. Further, the claim was lodged on the basis that the SSM 13 arbp.518.10.doc Respondent exerted pressure or force on the Petitioner and that is how it parted with the shares. There is absolutely no substance in this contention. The material documents have been considered including the letter dated 18 th July, 2006. The Petitioner does not dispute the letter dated 19 th June, 2006. The contents thereof are reproduced above. They indicate that the Petitioner is a corporate member and having experience in dealing with securities at both exchanges and being a participant under the Depository Participant agreement, was aware of its obligation. The Petitioner may have grievance or complaint against the Abrol family but that is not the subject matter of arbitration nor any cognisance could have been taken of the same by the Tribunal. In such circumstances, merely because the word used in the letter is that “on respondent's insistence”, the Petitioner has arranged to deposit the shares in the Escrow account by itself and without anything more does not mean that pressure was exerted or the Petitioner is forced to part with the shares. Thus, the Sole Arbitrator SSM 14 arbp.518.10.doc is right in concluding that the grievance of the Petitioner is without any basis. Such a conclusion being based on the documentary evidence on record and by no means can be said to be perverse, is not liable to be interfered with in my limited jurisdiction. The Petition is devoid of any merit and it is, accordingly, dismissed. 18. The decisions brought to my notice by the learned Counsel for the Petitioner are rendered in the peculiar facts. In the first decision, it was clear that the Arbitrator had misconducted himself by travelling beyond the contract and awarded claims which were not entertainable at all. That is how the Supreme Court concluded that the jurisdiction of the Arbitrator is confined to the contract and he cannot travel beyond the same. The conclusion that the Award is irrational and capricious is rendered in the other decision. It was clear that the Arbitrator passed his award on principles of valuation which were erroneous and inapplicable in the facts before the Arbitrator. That is how the Award was vitiated by misconduct. In these SSM 15 arbp.518.10.doc circumstances, the Award was set aside. That was a relevant piece of evidence, that the Arbitrator could not have ignored and that is why the Supreme Court interfered with the Award. Such is not the case before me. On facts, I find that it is the Petitioner claimant who failed to submit the necessary proof in support of the allegations of force and pressure by the Respondent. 19. In the result, the Petition fails and dismissed, but without any order as to costs. (S. C. DHARMADHIKARI, J).