The court emphasized the need for a prima facie case of fraud or corruption to grant an unconditional stay to an arbitral award for payment of money, and highlighted the importance of following the provisions of the Arbitration Act over the CPC.

JUDGMENT :

ANIL S. KILOR, J.

1. Heard.

2. RULE. Rule made returnable forthwith. Heard finally by consent of the learned counsel for the parties.

3. In an application filed by the respondent under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Arbitration Act”), an application for grant of unconditional stay to the implementation of the arbitral award was allowed by District Judge-1, Amravati vide order below Exh.5 dated 14/09/2022. The same is under challenge in this writ petition.

4. Brief facts of the present case are as under:

It is the case of the respondent in the application filed under Section 34 of the Arbitration Act, that, on 26/07/2019, based on the presentation given by the petitioner as Trading Member (TM) of the Exchange for providing commodity broking services and advisory services for commodity trades, the respondent executed Member Client Agreement (MCA) and Know Your Client from (KYC) and appointed the petitioner as the consultant cum commodity broker.

5. The petitioner allotted a Unique Client Code No. HCA-1116 and registered the respondent as a constituent for the purpose of advising and execution of transactions at the Exchange and Multi Commodity Exchange of Indian Limited (MCX) subject to the rules, regulations and bye-laws of the Exchange read with SEBI Circulars. The MCA defines the terms and conditions including the arbitration clause and was subject to payment of stamp duty under the Maharashtra Stamp Act.

6. The respondent based on the advice given by the petitioner started executing transaction in castor and other commodities. On 24/09/2019 the respondent instructed the petitioner to close all his open positions and return his balance amount after adjusting MTM profit or loss after close out.

7. The respondent states that even otherwise also, the petitioner under the Exchange’s bye-laws and regulations was under obligation to close all open positions of the respondent on the next day when there was margin shortfall or insufficient margin and non payment of MTM losses by the respondent. The respondent had not placed any orders thereafter including an order for the creation of the long position in the CASTOR contract for November and/or December 2019 expiry.

8. The petitioner has failed to close the open position as instructed or also otherwise. The petitioner partially acted on the respondent’s instruction and executed a transaction for the sale of 2,855 Tons of Castor for the October 2019 expiry. However, the petitioner illegally and unauthorizedly executed new trades for the purchase of 2,153 Tons of Castor for the November 2019 expiry and 700 Tons for the December 2019 expiry. The said transactions were illegal and unauthorized for the two reasons (i) there was no instruction to create a new long position and (ii) on 26/09/2019 the ledger account of the respondent in the books the petitioner was showing a credit shortfall of Rs. 8,68,11,033.90 which established non availability of margin.

9. It is submitted that execution of a transaction without margin is prohibited by Regulation 5.7 of the Exchange.

10. It is further submitted that ledger account produced by the petitioner as Exhibit-P of SOC shows no payment by the respondent post 25/09/2019 either for margin or MTM and therefore, the petitioner was under an obligation to (i) not to execute any new transaction and (ii) close all open positions.

11. In short, it is contended that under the bye-laws and regulations of the Exchange, the petitioner was under an obligation to close the open positions of the respondent immediately, on the next day, when there was margin shortfall as well nonpayment of MTM by the respondent.

12. Based on the said illegal and unauthorized transactions, the petitioner created large debit in their books and based on the said illegal debit balances, sent a notice of demand through their advocate on 04/03/2020 and called upon the respondent to pay the alleged outstanding amount by alleging tha