IMPORTANT POINT
Judicial review of arbitral awards under the Arbitration and Conciliation Act is limited, focusing on adherence to public policy and fundamental legal principles.

JUDGMENT :

Devashis Baruah, J.

The instant Appeal is an Appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (for short, ‘the Act of 1996’) challenging the order dated 14.08.2017 passed in Misc.(J) Case No.149/2014 whereby the application filed under Section 34 of the Act of 1996 was dismissed.

2. The brief facts leading to the filing of the instant Appeal are that the respondent No.1 herein had opened a Trading and Demat Account with the Appellant Company by executing a member client agreement. On the basis thereof, the respondent No.1 was given a Unique Client Code being CXO 0075. It is relevant to mention that the respondent No.1 had opened the Trading and Demat Account with the Appellant Company through its authorized person (AP) one Swapna Rani Paul. However, the business of the said authorized person was looked after by one Swarup Paul, her son. It is the further case of the respondent No.1 that he applied for initial public offer of Coal India Limited through the Appellant Company in October, 2010 and he was allotted 100 shares of Coal India Limited which was lying in his Demat Account with the appellant Company. It was alleged that the authorized person requested the respondent No.1 to transfer his earlier investments so made in his Demat Account lying with the Stock Holding Corporation to the Demat Account with the Appellant Company. The respondent No.1 agreed to transfer the same as he found no conceivable reason to mention two Demat Accounts. It was not a direct transfer of the said shares of the Respondent No.1 but took the shape of sale and buy back transaction which was done through the Demat Account of the respondent No.1 maintained with the appellant Company. It was alleged that after the stocks were transferred to the appellant Company, the authorized person made massive and erratic trading, mainly in currency derivatives and equity derivative segments, that too, without the consent of the respondent No.1. In view of the actions on the part of the authorized person who as per the Respondent No.1 unauthorizedly did it, there were huge losses. The authorized person in order to make good the said losses, sold the existing stocks of the respondent No.1 in the month of August, 2012 and that too without his consent. The respondent No.1 sensing that something was wrong, in the first week of November, 2012, requested the authorized person to provide his transaction details and holding statement which was however not provided inspite of various requests. The respondent No.1 thereupon enquired in the Office of the Appellant Company situated at Kolkata and Delhi about his holdings and was shocked to learn that majority of his investments have been wiped out due to huge trading losses and they sent him the relevant documents showing the transactions since July, 2012. As per the respondent No.1, the said transactions occurred sometime in the month of July, 2012 to December, 2012. The respondent No.1 thereupon approached the authorized person who assured that the losses so suffered by the respondent No.1 would be made good. However, the respondent No.1 sensing that there were certain fraudulent and unauthorized trading activities in his Account, lodged a complaint before the Appellant Company on 05.04.2013 as well as the NSE Investor Grievance Cell on the 22.04.2013. In response to the complaint so filed, the Appellant Company defended the actions of the authorized persons and dismissed the complaint stating that all the transactions were done with the due knowledge of the respondent No.1. It is under such circumstances, the arbitration proceedings were initiated.

3. Pursuant to the said the arbitration proceedings being filed, the Appellant Company submitted its defence stating inter-alia that the respondent No.1 had due notice of all the transactions inasmuch as the Appellant Company duly informed the respondent No.1 through SMS as well as through contract notes. At this stage, it is relevant to take note of