Participation and informed consent in trading negate claims of unauthorized trades in securities arbitration.

JUDGMENT :

Somasekhar Sundaresan, J.

Context and Factual Background:

1. This is a Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (“the Act”) impugning an Arbitral Award dated October 15, 2013 (“Appellate Award”), which in turn is an affirmation of another Arbitral Award dated April 15, 2013 (“Primary Award”), rejecting the Petitioner’s claims against the Respondent in arbitration proceedings conducted at the National Stock Exchange (“NSE”).

2. The Petitioner had demanded refund of a sum of Rs. 14,87,014.43, which the Petitioner claims is not payable by reason of all trades (except one) carried out by the Respondent being “unauthorised trades”. In this judgement, the Appellate Award and the Primary Award are collectively referred to as the “Impugned Award”.

3. It is noteworthy that the Petitioner also initiated proceedings in the Bombay Stock Exchange (“BSE”), which too have gone against him in the outcome and the pattern of arguments in those proceedings is similar. This Petition only impugns the outcome in the arbitration conducted at the NSE and reference to the BSE proceedings has been warranted only because of the Petitioner alluding to some elements of those proceedings, and the fact that the trades of the Petitioner were carried out on both exchanges

4. In this Court, these proceedings have had a chequered history. By an order dated December 2, 2015, the Impugned Award came to be upheld by a Learned Single Judge of this Court. In a challenge under Section 37 of the Act, a Learned Division Bench of this Court by an order dated November 16, 2016 found that reasons were absent in the order of the Learned Single Judge, and remanded the matter for reconsideration. The matter has remained on the docket of this Court since then.

5. I have heard at length, Ms. Prachi Pandya, Learned Counsel on behalf of the Petitioner and Mr. Naushad Engineer, Learned Senior Counsel on behalf of the Respondent. With their assistance, I have navigated the voluminous record generated in the matter. I have also closely examined both the Primary Award and the Appellate Award and the underlying material.

Grounds of Challenge:

6. The grounds of the challenge mounted by the Petitioner can be summarised thus:

a) According to the Petitioner, there is no evidence of prior authorisation of any of the trades, and therefore all the trades are unauthorised trades;

b) The Petitioner contends that he had repeatedly instructed the Respondent to stop trading on his account and once such written instruction is provided, further trades could have been effected only if he were to revoke the suspension of his trading in writing;

c) The Respondent closed out the trade positions in derivatives segment without giving the Petitioner any opportunity to make good any margin shortfall, and determining that there is a failure to make good the margin shortfall, and then squaring off the transactions;

d) The Petitioner insinuates that he is a man of meagre income (annual income of approximately Rs. 1 lakh during the period proximate to the proceedings) indicating that the volume of trading (about Rs.37 Crores) would not be commensurate to his financial strength;

e) The Petitioner indicates that he was promised portfolio management services by the Respondent with a promise of generating profits of over Rs. 30,000 to Rs. 35,000 per month by one Mr. Rajesh Kumar, a relationship manager who had been known to him in his earlier portfolio management relationship with ICICI Securities, another securities firm, which had a portfolio management service arrange