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2015 (4) TMI 1192 - HC - Indian LawsArbitration and Conciliation proceedings - bye-law providing a liberty to the broker to close out the transactions by selling the securities, in case the clients failed to make the full payment to the broker for the execution of the contract - Held that:- Whole purpose of such bye-laws in the Multi Commodity Exchange of India Ltd. is to provide safeguard that there is mitigation of loss and thus it makes mandatory for the broker to square off the transactions immediately upon there being a shortfall which according to the broker had not been paid by the constituent inspite of demand. If the petitioner would have squared off the open position when there was shortfall of margin money prior to 30th March, 2013, the petitioner would not have faced the volatility in the market on 30th March, 2013. In view thereof since the petitioner had not carried out their obligation by squaring up the transactions when there was a shortfall in the margin money and which according to the petitioner was not paid by the respondent though demanded, the petitioner cannot be allowed to make any claim against the respondent constituent for such unauthorised transactions carried out by the petitioner in the account of the respondent. Considering the said bye-law which provided a liberty to the broker to close out the transactions by selling the securities, in case the clients failed to make the full payment to the broker for the execution of the contract, this court held that the said provision was not mandatory but was discretionary. In view thereof the said byelaw considered by this court and bye-laws which are the subject matter of this petition are totally different. Under bye-laws 8.6.5 to 8.6.6 of the Multi Commodity Exchange, the broker is under an obligation to liquidate/close out any of the position of the constituent if the constituent default in paying the daily margin. Those bye-laws have been interpreted by this court at length in the judgment delivered by this court in case of M/s.BMA Commodities Pvt. Ltd. (2014 (12) TMI 1291 - BOMBAY HIGH COURT) which squarely applies to the facts of this case. The findings rendered by the learned arbitrator are also based on the interpretation of the agreement entered into between the parties which interpretation is a possible interpretation and thus cannot be substituted by another interpretation under section 34 of the Arbitration Act. Arbitration Petition dismissed.
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