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2016 (7) TMI 1354 - HC - Indian LawsArbitrial proceedings - mandatory duty and obligation upon the trading member to demand margin money - Held that:- The onus was on the respondent to prove that the demand for amount of margin money as required under Regulation 3.10(a) was actually made by the respondent from the constituent and was not paid by the petitioner. Admittedly, the respondent had the e-mail ID of the petitioner. Not a single document was produced by the respondent before the arbitral tribunal to show that any demand for the margin money was made by the respondent member upon the petitioner of the amount which was demanded but not paid by the petitioner. In my view, the impugned award is without any evidence and thus deserves to be set aside. A perusal of the Regulation 3.10 framed by the Stock Exchange clearly indicates that the intent and purpose of demanding margin money in the event of any debit balance in the account of the constituent or if the security provided by the constituent is not sufficient for the purpose of carrying out the derivatives contract and in case of such default to close out the transaction with a view to mitigate the loss, if any, which may be suffered by the trading member in case of any volatile market condition or otherwise. If the trading member has chosen not to demand margin money through it is mandatory in compliance with Regulation 3.10 and permits the constituent to carry out further transaction, the same would be at the risk and cost of the trading member and in such a situation, the trading member cannot be allowed to recover any alleged loss suffered by the trading member from the constituent or cannot make the constituent suffer any loss due to the non-compliance of such mandatory provisions by the trading member. In my view Mr.Purohit, learned counsel for the petitioner is right in his alternate submission that under Regulation 3.10(b), the respondent broker could not have closed out the transaction on 22nd January, 2008 in respect of the alleged shortfall of the margin money in the account of the petitioner on 22 nd January, 2008 without giving an opportunity to the constituent to make the payment on the next trading day on F&O segment of the Exchange for the concerned settlement period. It is not in dispute that the respondent broker had closed out the transaction in the account of the petitioner in the morning trading hours on 22nd January, 2008 itself. The arbitral tribunal has totally overlooked these mandatory provisions of Regulation 3.10 in the impugned award and has committed patent illegality. Though the petitioner was carrying on transaction with the Chembur Office of the respondent, without any knowledge of the petitioner and without any intimation, the head office of the respondent had closed out the transaction allegedly based on the instruction received from the respondent from the Stock Exchange. No such instruction alleged to have been received by the respondent from the Stock Exchange were produced on record by the respondent before the arbitral tribunal. Insofar as counter claim made by the petitioner before the arbitral tribunal is concerned, the arbitral tribunal has rejected the counter claim on the ground that the petitioner had alleged to have accepted the position as on end of the day on 21st January, 2008. In my view this part of the award also shows patent illegality. Since the arbitral tribunal has committed patent illegality in allowing the claims made by the respondent broker for the reasons recorded aforesaid, the rejection of counter claim made by the petitioner by the arbitral tribunal on the same basis also shows patent illegality and deserves to be set aside. Insofar as other four petitions are concerned, since the parties have agreed that the reasons and conclusions drawn by this court in Arbitration Petition No.47 of 2009 would apply to those four petitions and have not addressed this court separately in respect of other four arbitration petitions, this court has not dealt with the facts in each of these four petitions separately. This court has proceeded on the basis of the statement made by the learned counsel appearing for the parties and have rendered a common judgment.
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