A client must adhere to contractual obligations regarding annual maintenance charges for reduced brokerage rates; failure to do so results in automatic application of normal charges.

JUDGMENT :

SANDEEP V. MARNE, J.

1. Petitioner, a stock broker, has filed the present Petition under Section 34 of Arbitration and Conciliation Act, 1996 (Arbitration Act) challenging the Award dated 29 August 2022 passed by the Three Member Appellate Arbitral Tribunal constituted under the Byelaws of National Stock Exchange (NSE) dismissing the appeal preferred by the Petitioner and confirming the Award of the learned sole Arbitrator dated 26 April 2022. The learned sole Arbitrator, by Award dated 26 April 2022, had overruled the decision of the Grievance Redressal Committee (GRC) and had allowed the claim of the Respondent in the sum of Rs.4,87,513/- without any cost and interest.

2. Petitioner is a stoker broker registered under the Securities and Exchange Board of India (SEBI) and is in the business of share/stock broking and buying and selling of shares/stocks for and on behalf of its clients. Respondent is the client of the Petitioner. In September 2007, Respondent had approached the Petitioner to sign up as a customer for commencing trading of shares and stocks with the Petitioners through online mode. On 25 September 2007 Agreement was entered into between the Petitioner and Respondent in respect of Bombay Stock Exchange and National Stock Exchange. Under the Agreement, Respondent agreed to pay brokerage and statutory levies on transactions effected in her trading account. Respondent also signed a Brokerage and Account Maintenance Charges form (AMC) under which she was liable to pay yearly sum of Rs.6,000/- and avail benefit of reduced brokerage. Accordingly, Respondent continued paying AMC charges from 2007 to 2012 of Rs.6,000/- per year and availed the benefit of reduced brokerage of 0.25%. According to the Petitioner, Respondent failed to pay AMC charges from the year 2013 onwards despite sending several reminders. On account of negative balance during the relevant years, Petitioner could not recover the AMC charges or to renew the AMC scheme which got deactivated on 19 October 2013. It appears that Respondent’s trading account was in a dormant stage during 2013 to 2020. In May 2021, Respondent commenced transactions in Future and Option segment (F&O). Petitioner permitted such transactions without securing any further KYC documents. On account of non-continuation of AMC scheme, Petitioner charged their brokerage on transactions effected by the Respondent. On 1 November 2021, Petitioner charged default brokerage on cash delivery @ 0.50% and derivatives @ 2.5%. Petitioner accordingly raised invoice of Rs.5,08,893.2/- towards brokerage. It appears that the Respondent incurred losses in the transactions to the tune of Rs.38,000/- and requested for reduction of brokerage charges. Petitioner has sent SMS dated 3 November 2021 reducing the brokerage rates from 3 November 2021 as a goodwill gesture.

3. On 8 November 2021, Respondent filed a complaint with NSE regarding charging of brokerage by the Petitioner. Petitioner responded to NSE with a reply justifying charging of normal brokerage on account of discontinuation of AMC scheme. GRC of NSE heard the complaint of the Respondent and by its order dated 10 December 2021, declined to grant any relief in favour of the Respondent.

4. Respondent applied for arbitral reference before the NSE. Accordingly, Arbitral Tribunal of the learned sole Arbitrator was constituted by NSE. The learned sole Arbitrator made Award dated 26 April 2022 holding the Petitioner responsible for not securing KYC documents from the Respondent at the time of reinitia