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TMI Blog2015 (1) TMI 1516X X X X Extracts X X X X X X X X Extracts X X X X ..... r husband gave first cheque to the petitioner herein for an amount of Rs. 25 lacs from a bank account jointly operated by them towards initial deposit. On August 01, 2011, certain trades were conducted in their account, for which they received contract notes from Sai Soft Securities. It was their case that they could not make out the difference between the respondent company and Sai Soft Securities. The respondents have also averred that in addition to signing KYC and other documents, they had also executed a written agreement on September 24, 2011 with Sai Soft Securities signed by Dr. Mayank Dubey as its authorized signatory, wherein they had given specific instructions as to how the trades in their account were to be conducted. 3. According to them, the petitioner had suggested that the respondents could enhance the value of the trade by giving securities as margin. On such representation, the respondents transferred securities as margin to demat account of the persons nominated by the petitioner. Regular transactions thereafter took place. These transactions were in the name of Sai Soft Securities. According to the respondents, on November 05, 2012 they had noticed that trades ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondents have never been issued by the petitioner and are fictitious. The petitioner however admitted the receipt of cheque of Rs. 25 lacs jointly signed by the respondents. 5. The Tribunal consisting of two Arbitrators and one Presiding Arbitrator considered the issues which fell for their consideration. The first question was whether the Arbitral Tribunal had the jurisdiction to entertain the disputes or not. The Tribunal had referred to the agreement dated September 24, 2011. It was its conclusion that the said agreement was signed by Dr. Mayank Dubey on behalf of Sai Soft Securities. He was one of the Directors of the petitioner herein namely Sai Soft Securities Ltd. while Mr.Mayur Dubey, the other director of the respondent had signed it as a witness, which fact was admitted by the petitioner during the hearing before the Tribunal. The Tribunal was of the view that Sai Soft Securities was represented to be a body corporate and Dr. Mayank Dubey is its authorized signatory. It was also noted that the agreement represented that Sai Soft Securities is registered with SEBI and the Exchange and specific registration numbers have been given. It was the conclusion of the Tribunal that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received despite follow through e-mail dated 19.11.2011. The respondent in its reply has denied signing of KYC by the claimant. The respondent has asserted that no trading account was opened by the claimant with the respondent. The respondent has, however, admitted to having received the cheque of Rs. 25 lakh from the joint bank account of the claimant and her husband, without explaining the purpose for which the deposit was accepted and the specific account to which the money was credited. The respondent as a trading member/broker cannot accept deposits from the public. It can accept margin money from its clients for carrying out the trades in their accounts. Therefore, there appears truth in the contention of the claimant that she executed KYC and other documents. It is, accordingly, held that the deposit was made by the claimant towards initial margin as a client of the respondent after executing KYC and other documents. In fact, in the agreement dated 24.09.2011 further reinforces the finding. It has been clearly recited in the agreement that the claimant has executed the Member- Constituent Agreement. The Member/Constituent Agreement referred to in the agreement dated 24.09.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Sai Soft Securities Ltd."; D. Set aside the action taken by NSE withholding the deposit of Rs. 140 lakhs of the petitioner with it." 9. The AAT in the impugned order dated 12.12.2014 noted the fact that the petitioner had received the amount of initial deposit of Rs. 25 lacs paid by the respondents herein for the purpose of trading in their account with the petitioner. The AAT was of the view that the respondents had clearly established that they had made payment to the petitioner for the purpose of trading after they opened trading account with the petitioner. The transfer of securities to the petitioner and other director and employee of the petitioner was also pursuant to the opening of the trading account and was in pursuance of the respondents' intention to trade with the petitioner. The AAT also holds that the petitioner has not denied the contention of the respondents that they gave instructions to the petitioner not to carry forward or roll over the trades and asked the petitioner to return the money which was admittedly not returned. 10. The AAT justified the lifting of corporate veil to ascertain the real state of affairs, particularly when the Tribunal found t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of the petitioner. 13. Learned counsel for the petitioner even in these proceedings, under Section 34 of the Act has raised similar pleas as were advanced before the Arbitral Tribunal and the AAT. The said contention of the petitioner is primarily by placing reliance on Clause 1 of Chapter 11 of the bye-laws of the Exchange with respect to matters which can be referred to arbitration. Clause 1 of Chapter 11 of the byelaws which relates to arbitration is reproduced as under:- "(1) All claims, differences or disputes between the Trading Members inter se and between Trading Members and Constituents arising out of or in relation to dealings, contracts and transactions made subject to the Bye-Laws, Rules and Regulations of the Exchange or with reference to anything incidental thereto or in pursuance thereof or relating to their validity, construction, interpretation, fulfilment or the rights, obligations and liabilities of the parties thereto and including any question of whether such dealings, transactions and contracts have been entered into shall be submitted to arbitration in accordance with the provisions of these Byelaws and Regulations." 14. The contention primarily ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned in the circular no. ClR/MRD/lCC/16/2012 dated June 15, 2012. The correspondence with the Member & investor (who is client of a Member) may be done on email if the email id of the investor is available in the UCC database. The Member (Stock Broker, Trading Member and Clearing Member) shall provide a dedicated email id to the stock exchange for this purpose. b) In case the matter does not get resolved, conciliation process of the exchange would start immediately after the time lines stated in sub-para (a) above. c) Investor Grievance Redressal Committee (IGRC) shall be allowed a time of 15 days to amicably resolve the investor complaint. d) IGRC shall adopt a two-fold approach i.e. for proceedings leading to direction to the Member to render required service in case of service related complaints and proceedings leading to an order concluding admissibility of the complaint or otherwise in case of trade related complaints. e) In case the matter is not resolved through the conciliation process, IGRC would ascertain the claim value admissible to the investor. f) Upon conclusion of the proceedings of IGRC, i.e. in case claim is admissible to the investor, Stock Exch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son so involved from henceforth accessing the benefits of this Circular. vi In case the complaint is decided in favour of the investor after conclusion of the proceedings, then amount released to the investor shall be returned to IPF from the blocked amount of the Member by the Stock Exchange and the rest shall be paid to the investor. vii Total amount released to the investor through the facility of monetary relief from IPF in terms of this Circular shall not exceed Rs. 5lac in one financial year." 15. From the perusal of the aforesaid circular, it is clear that, the Trading Member (Petitioner) had an option to pursue the next level of resolution i.e. the Arbitration. In fact, is seen that after the order dated 09.01.2014 was passed by the Investor Grievance Resolution Panel, the respondents filed a claim petition before the Arbitral Tribunal which was responded to by the petitioner by filing a counterclaim. In other words, the petitioner had actually opted for the arbitration, or to say, submitted to the jurisdiction of the Arbitral Tribunal in terms of the clause (g) of circular dated September 26, 2013. If the petitioner had not opted for the arbitration, the consequenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Arb. LR 105 (Delhi) (DB), wherein at pages 112-115, it has been held as under:- "6. ....A Section 34 proceeding, which in essence is the remedy of annulment, cannot be used by one party to convert the same into a remedy of appeal. In our view, mere erroneous/wrong finding of fact by the Arbitral Tribunal or even an erroneous interpretation of documents/evidence, is non- interferable under Section 34 and if such interference is done by the Court, the same will set at naught the whole purpose of amendment of the Arbitration Act. 7. Arbitration is intended to be a faster and less expensive alternative to the courts. If this is one's motivation and expectation, then the finality of the arbitral award is very important. The remedy provided in Section 34 against an arbitral award is in no sense an appeal. The legislative intent in Section 34 was to make the result of the annulment procedure prescribed therein potentially different from that in an appeal. In appeal, the decision under review not only may be confirmed, but may also be modified. In annulment, on the other hand, the decision under review may either be invalidated in whole or in part or be left to stand if the plea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was against the terms of the contract and held that it could not be said that the Arbitral Tribunal had travelled outside its jurisdiction and the Court could not substitute its view in place of the interpretation accepted by the Arbitral Tribunal. It was reiterated that the Arbitral Tribunal is legitimately entitled to take the view which it holds to be correct one after considering the material before it and after interpreting the provisions of the Agreement and if the Arbitral Tribunal does so, its decision has to be accepted as final and binding. Reliance in this regard was placed on Sumitomo Heavy Industries Ltd. Vs. ONGC Ltd. (2010) 11 SCC 296 and on Kwality MFG.Corporation Vs. Central Warehousing Corporation (2009) 5 SCC 142. Similarly, in P.R. Shah, Shares & Stock Broker (P) Ltd. V. B.H.H. Securities (P) Ltd. (2012) 1 SCC 594 it was held that a Court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or reappreciating evidence and an award can be challenged only under the grounds mentioned in Section 34(2) and in the absence of any such ground it is not possible to reexamine the facts to find out whether a different decision can be arrived at. A D ..... 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