1 Arbp206.06 kambli IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO.206 OF 2006 ... M/s.Indiabulls Securities Limited ...Petitioner v/s. Mr.Madhukar Sheth ...Respondent ... Mr.Janak Dwarkadas, Sr.Advocate with Mr.Zal Andhyarjina and Mr.Mohan G.Salian and Mr.Mayur Shetty and Ms.Shete i/b Gagrats & Co. for the Petitioner. Mr.B.M.Ganu for the Respondent. ... CORAM: D.K.DESHMUKH, J. DATED: 15th July, 2011 P.C.: 1. By this petition filed under Section 34 of the Arbitration Act the Petitioner challenges the award made by the Appellate Arbitral Tribunbal of the Bombay Stock Exchange dated 30th September, 2005 in Appeal No.6-A of 2005. By that award the Appellate Arbitral Tribunal has directed the Petitioner to pay a sum of Rs.66,85,368/- with interest. 2. The relevant facts are, the Respondent in his capacity as a broker for the Petitioner filed a statement of claim claiming that the Petitioner was his client , that the Petitioner started transaction 2 Arbp206.06 in February, 2001 and that “Respondent incurred a big debit of Rs. 81,27,849.38 as shown in Party Ledger up to 31-3-2003. This is due and recoverable from the Respondent.” The claims that were made by the Respondent against the Petitioner of the amount of Rs. 81,27,849.38 were based on the entry in the Ledger maintained by the Respondent. The Petitioner filed his reply denying the claim. 3. The Arbitral Tribunal of the Bombay Stock Exchange rejected the claims made by the Respondent against the Petitioner by its award dated 14th March, 2005. An appeal was filed by the Appellant before the Appellate Arbitral Tribunal of the Bombay Stock Exchange. The Appellate Arbitral Tribunal reversed the award made by the first Tribunal and made an award in favour of the Respondent and against the Petitioner. 4. In this case an unusual procedure appears to have been followed. The statement of claim filed by the Respondent does not have any pleading, no details of the transaction in relation to which the amounts have been claimed are given, entire reliance is placed on a copy of the ledger maintained by the Respondent. The Petitioner filed its reply to the statement of claim denying the claims. A rejoinder was filed by the Respondent. Thereafter a sur- 3 Arbp206.06 rejoinder was filed by the Petitioner. The procedure that is followed by the Arbitrators of the Stock Exchange is contrary to the procedure to be followed by the Arbitrators under the Act. In the reply and sur-rejoinder filed by the Petitioner authenticity of the documents filed by the Respondent in support of his claim was disputed, even allegation that the documents and signatures on the documents are forged was made. Still the Respondent did not lead any oral evidence. The Arbitral Tribunal, however, chose to rely on those documents without anybody proving those documents. 5. The first claim that has been awarded by the Appellate Arbitral Tribunal is claim of an amount of Rs.23,63,968/-. This claim related to 27000 share of Trent Ltd. Perusal of the award of the first Arbitral Tribunal shows that the Respondent was claiming an amount of Rs.36,73,932.01 as price of 27000 share of Trent Ltd., which according to the Respondent were purchased through him by the Petitioner. The first Arbitral Tribunal held that the Respondent has not been able to prove that these shares were delivered by the Respondent to the Petitioner and therefore, according to the first Tribunal the Respondent was not entitled to purchase price of these shares. 4 Arbp206.06 6. I have heard the learned Counsel for both sides on this aspect of the matter. Perusal of the award of the Appellate Arbitral Tribunal, which is impugned in the petition, however, shows that the Appellate Arbitral Tribunal has not given any reason as to why it found that the finding recorded by the first Tribunal that the Respondent has not been able to prove delivery of 27000 share of Trent Ltd. is in any way wrong. On the contrary in paragraph 15, it records that though the Appellant has not been able to prove that he transferred 27000 shares of Trent Ltd. to the account of the Petitioner, the Respondent has shown that 26800 shares of Trent Ltd. were transferred to the account of the Petitioner. The Appellate Tribunal has relied on the letter dated 1-3-2001 forgetting that the Petitioner had disputed the authenticity of that letter. Following submissions of the Petitioner in its sur-rejoinder have not even been referred to by the Appellate Arbitral Tribunal. “Tread done report”, total quantity of Trent shares traded by the Applicant for Respondent is 54,000 shares. Further as per the said Report out of the said 54,000 shares, the Respondent has sold 27,000 shares. It is the case of the Applicant that the balance 27,000 shares were purchased and the Respondent did not pay for the same. But the contents of the Bills annexed by the Applicant in his application at page 17 & 18 state a completely contrary story, once again exposing the credibility of Applicant’s claims against the Respondent, in terms of the said bills, the Applicant had 5 Arbp206.06 purchased 25,000 shares on 13-2-2001, 2000 shares on 15-2-2001 and 27,000 shares on 16-2-2001 on behalf of Respondent i.e. in total 54,000 shares were purchased. Further, the Applicant had also sold 27,000 shares on 16-2-2001 on behalf of Respondent. Thus, in total 31,000 shares were traded by the Applicant on behalf of the Respondent. The same is contrary to and inconsistent with the total trades of 54,000 shares as stated in the Trade Done Report. Further, without prejudice to the aforesaid submission, it is submitted that Applicant has conveniently ignored to substantiate his claim by annexing the evidence of delivery of said 27,000 shares to the demat account of the Respondent or even by transferring the proceeds of sale to one Mr.Sisir Mohapatra on instructions of his letter prepared by forging the signatures as stated hereinbefore in our reply. The simple question is that if shares were purchased then, where were the said shares delivered and if the said shares were sold, as claimed in the said forged letter, who was given the credit for the sale of said shares. Therefore, the alleged claim is false and no such purchase of said 27,000 Trent shares was made by the Applicant on behalf of the Respondent. The nature of claim made by the Petitioner was that his claim was entirely based on the entries in the Ledger that was maintained by him. Admittedly, there was no oral evidence led. In my opinion, therefore, unless there is a documentary or oral evidence led to show that actual delivery of these shares and reasons are given by the Appellate Arbitral Tribunal for reversing finding of the first Tribunal, the Appellate Tribunal could not have reversed that finding. The Appellate Arbitral Tribunal, therefore, in my opinion, was not 6 Arbp206.06 right in directing the payment of Rs.23,67,986/- on that account. 7. The second claim was in relation to a cheque of Rs. 30,00,000/- given by the Respondent on 23-3-2001. The case of the Respondent was that he has given this amount as deposit with the Petitioner and he was entitled to the refund of that amount. The defence of the Petitioner was that though this amount was given by cheque by the Respondent, he had instructed the Petitioner to deposit this amount as credit margin in the account of his son Mr.Pratik Sheth. It was the case of the Petitioner that it is only on the basis of this credit margin that the son of the Respondent was able to trade. The first Tribunal accepted this defence of the Petitioner and rejected the claim. Perusal of the award of the Appellate Arbitral Tribunal, however, shows that the Appellate Arbitral Tribunal reversed the finding recorded by the first Tribunal in this regard referring to the account from which this amount was transferred by the Respondent to the Petitioner. It has observed that because the amount was transfered by the Respondent from the client account, it cannot be said that the amount could be deposited in the account of his son. What is pertinent to be noted is that in the Memo of Appeal that was filed before the Appellate Arbitral Tribunal this case was not made out. In my opinion, the 7 Arbp206.06 inference that was drawn by the first arbitral tribunal that the deposit of the amount in the account of son of the Respondent by the Petitioner leads one to the inference that it must have been done on the instructions of the Respondent, in the absence of any motive been attributed to the Petitioner , in my opinion, was an inference which was the only possible inference. Unless there is a compelling reason given the finding based on this inference could not have been reversed by the Appellate Tribunal. In my opinion, the Respondent has not been able to give any valid reason why in the absence of any instructions from the Respondent the Petitioner would credit that amount in the account of the Respondent’s son. What is further pertinent to be noted is that the son of the Respondent was able to trade only because of the credit which was made in his account on the basis of the cheque given by the Respondent. In my opinion, therefore, the Appellate Arbitral Tribunal was not justified in setting aside the finding recorded by the first Arbitral tribunal, in any case it could not have taken into consideration facts which were never pleaded by the Respondent to support its findings. 8. The third claim was based on the ledger entry dated 28th March, 2001 for Rs.13,17,400/-. The claim was entirely based 8 Arbp206.06 on documents at Exh.D-1 & D-2. The Petitioner had contended that these documents are in no way connected to the Petitioner. It disputed the genuineness of those documents. The Appellate Arbitral Tribunal without the Respondent establishing the genuineness of the documents, placing any material which will connect those documents to the Petitioner, set aside the finding recorded by the first tribunal. In doing so the arbitral tribunal relied on a letter which does not admittedly relate to this transaction. In my opinion, therefore, the Appellate Arbitral Tribunal was not justified in reversing the finding of the first tribunal in this regard also. What is pertinent to be noted in this case is that though Section 23 of the Arbitration & Conciliation Act casts a duty on a claimant to file a statement of claim stating the facts supporting his claim and point at issue and the relief claimed by him. The Petitioner did not submit a statement of claim which will comply with the requirement of Section 23. The entire reliance is placed on the ledger entry in the ledger maintained by the Respondent. The learned Counsel appearing for the Petitioner, therefore, relying on the provisions of Section 34 of the Evidence Act submitted that the award merely based on the entry made in the ledger by the Respondent could not have been made. The learned Counsel for the Petitioner, in my opinion, rightly invited my attention to the 9 Arbp206.06 judgment of the Supreme Court in the case of Central Bureau of Investigation v/s.Shukla and ors, AIR 1998 SC 1406. The Supreme Court in that judgment has in clear term held that even correct and authentic entries in the Books of Account cannot without independent evidence of their trustworthiness fix liability upon a person. The observations of the Supreme Court found in paragraph 34 and 36, in my opinion, are relevant. They read as under: 34. The rationale behind admissibility of parties' books of account as evidence is that the regularity of habit, the difficulty of falsification and the fair certainty of ultimate detection give them in a sufficient degree a probability of trustworthiness (wigmore on evidence $ 1546). Since, however, an element of self interest and partisanship of the entrant to make a person - behind whose back and without whose knowledge the entry is made - liable cannot be ruled out the additional safeguard of insistence upon other independent evidence to fasten him with such liability, aha been provided for in Section 34 by incorporating the words such statements shall not alone be sufficient to charge any person with liability. 36. The same question came up for consideration before different High Court on a number of occasions but to eschew prolixity we would confine our attention to some of the judgements on which Mr. Sibal relied. In Yesuvadiyan Vs. Subba Naicker [A. I. R. 1919 Madras 132] one of the learned judges constituting the Bench had this to say: S.34, Evidence Act, lays down that the entries in books of account, regularly kept in the course of business are relevant, but such a statement will not alone be sufficient to charge any person with liability. That merely means that the plaintiff cannot obtain a 10 Arbp206.06 decree by merely proving the existence of certain entries in his books of account even though those books are shown to be kept in the regular course of business. he will have to show further by some independent evidence that the entires represent real and honest transactions and that the moneys were paid in accordance with those entries. The legislature however does not require any particular form or kind of evidence in addition to entries in books of account, and I take it that any relevant fact s which can be treated as evidence within the meaning of the Evidence Act would be sufficient corroboration of the evidence furnished by entries in books of account if true." While concurring with the above observations the other learned Judge stated as under: " If no other evidence besides the accounts were given, however strongly those accounts may be supported by the probabilities, and however strong may be the evidence as to the honesty of those who kept them, such consideration could not alone with reference to s. 34, Evidence Act, be the basis of a decree." In the present case the Respondent had not produced any evidence, except the entries in his book of account. In my opinion, therefore, the Appellate Arbitral Tribunal was not justified in passing the award in favour of the Respondent. 9. In the result, therefore, the petition succeeds and is allowed. The award impugned in the petition is set aside. (D.K.Deshmukh, J.)