arbp297-10.doc 1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO.297 OF 2010 Shreepalkumar Pukharaj .. Petitioner Versus Edelweiss Securities Ltd. .. Respondents Mr.D.D.Madon, Senior Advocate with A.K.Maheshwari for petitioner Mr.Simil Purohit i/b. Purohit & Co. for respondents CORAM: S.C.DHARMADHIKARI, J. DATE : 28th FEBRUARY 2011 P.C. 1] This petition under section 34 of the Arbitration & Conciliation Act, 1996 (Act for short), challenges an award dated 6th March 2009 made by the Arbitral Tribunal of the National Stock Exchange. 2] The respondent applicant made a claim against the petitioners who were original constituents, for Rs.60,54,439.10 being outstanding debit balance along with interest thereon at 18% p.a., from 26th March 2008 till payment and/or realisation and cost arbp297-10.doc 2 of and incidental to the reference. 3] The Award directs payment of this sum of Rs. 60,54,439.10 but with interest at 12% p.a., from the date of filing i.e. 24th June 2006. There is no award made as to costs including the arbitration cost. 4] The two submissions canvassed by Mr.Madon, learned Senior Counsel appearing in support of this petition and while attempting to demonstrate that the Award is in conflict with the public policy of India are that, firstly the Arbitral Tribunal relied upon documents behind the back of the petitioner. He submits that at paras 5.4 of the Award, the panel of arbitrators has relied upon MG-13 report filed by the National Stock Exchange (NSE). Mr.Madon submits that during the course of arbitral proceedings an application was made by the petitioners to furnish details of the immediate margin forwarded by the Respondents -Applicants before undertaking F & O transaction in their name. Mr.Madon submits that without allowing this application nor passing any orders arbp297-10.doc 3 thereon but completely keeping the petitioners in dark, the Arbitrators called for documents from the exchange and perused them and made the Award against the petitioners. This, according to the learned Senior Counsel, violates the mandate of Arbitration Act and particularly sections 18 and 28 thereof. That is how the award is in conflict with public policy of India. 5] His second submission to elaborate this ground is that when the transactions were undertaken by the respondent, they failed to comply with the regulations of the subject exchange. Inviting my attention to para 2 of the petition and particularly Regulation No.3.10 so also the Client Margin Reporting Regulations, viz., Regulation 11.1, it is contended by Mr.Madon that once the respondents did not maintain necessary margin with the exchange, then, all the transactions undertaken were illegal. If these transactions are contrary to the Regulations framed by the Exchange and are illegal, then, there is no question of enforcing them or calling upon the petitioners to pay any sums thereunder. For all these reasons and the transactions themselves being vitiated, the arbp297-10.doc 4 Award must be set aside. Mr.Madon, then, invites my attention to pages 192 and 201 of the petition paperbook in this behalf. 6] On the other hand, Mr.Purohit appearing for respondents submits that both contentions are devoid of any substance. As far as calling for the documents from the exchange are concerned, the Arbitrators called for the same only to satisfy themselves with regard to the compliance with the regulations. There was never any issue or debate, let alone any dispute raised by the petitioners as far as claim of the respondents. All the transactions were admitted so also the contract notes. Even the liability has been admitted inasmuch as substantial payment was made by the petitioners to the respondents. It is purely as an after thought and in answer to the claim that a submission was canvassed but that too not on the basis that the entire transaction is illegal. The arbitral award amply clarifies the objection raised. The objection is that the transactions are “not acceptable”. There is no argument that the transactions being contrary to the regulations of the Exchange, they are wholly illegal and such illegalities strike at the very root of the same. In arbp297-10.doc 5 such circumstances, an argument raised in desperation at this stage should not be entertained and that too, to deny the admitted and undisputed liability. For all these reasons, he submits that the Award should not be interfered with as no ground is made out for any interference. 7] With the able assistance of the learned Counsel appearing for parties, I have perused the subject award and wherever necessary other materials brought to my notice. 8] As far as the first contention of Mr.Madon is concerned, I find that the petitioners have not suffered any prejudice by the course adopted by the arbitral tribunal. If the application made before the Arbitral Tribunal by the petitioners is perused (Annexure “D” page 139-140), it is apparent that the details were sought by the petitioners for effective adjudication of their claim. 9] There was no request made that the petitioners would like to have the records and documents from the Exchange summoned so arbp297-10.doc 6 as to peruse them and raise any objection with regard to the compliance with the Regulation by the respondents. It was just a request made to the Tribunal to call for the details so as to have an effective adjudication. In compliance of this request, the Tribunal did seek the details from the Exchange but it has been careful enough not to base its conclusions only on the contents of MG-13 Report. The Tribunal has while rendering the subject award held that the respondents issued and delivered to the petitioners the contract notes as well as bills which were received, retained and accepted by the petitioners. They did not raise any objection. Further, the Tribunal noted the argument that the petitioners raised objections to the transactions. However, no details of the transaction which was referred to as objectionable, were ever produced during the course of arbitral proceedings. There was no documentary evidence that the petitioners have objected to any of the transactions. The argument noted in para 5.3 is that the petitioners’ objection is that the respondents accounts are not acceptable. That has been dealt with by observing that this and the only objection pertains to non compliance with the minimum arbp297-10.doc 7 margin. Further, as far as the petitioners are concerned, they never objected to the transactions being carried on despite non compliance by the respondents with the NSE regulations. Shares worth more than Rs.50 lakhs were delivered. A sum of Rs.40,76,365 was paid. Contract notes have been issued and no objection was ever raised. The observations in para 5.4 and 5.5 will make it amply clear that the Tribunal concluded that there is no merit in any of the objections raised before it by the petitioners as all the transactions were conducted smoothly and without any objections from the petitioners. In such circumstances and noting the events that took place between 14th January 2008 to 21st January 2008 at the market where there was sudden and steep downward trend, that the award has been made by the Tribunal. 10] In my view, the award does not suffer from any illegality or perversity much less can be said to be in conflict with public policy of India. The Award has been made consistent with the materials produced including the documents and the undisputed position emerging from the accounts. If the Tribunal concluded that arbp297-10.doc 8 a substantial sum from the total amount as claimed by the petitioners has been paid by the respondents and that too without any objections having been raised, then, in the peculiar facts of the case, the other finding of the Tribunal that respondent has not violated the regulations of the concerned Exchange cannot be faulted. The transactions were going on smoothly. It is in such circumstances and bearing in mind the contents of paras 5.3 to 5.10 of the Award, I find that no case for interference is made out by the petitioners. 11] As a result of the above discussion, petition fails and it is accordingly dismissed. (S.C.DHARMADHIKARI, J)