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2010 Supreme(Mad) 4500
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE P. JYOTHIMANI
Motila Oswal Securities Ltd., rep by its Branch Manager
Versus
D. Renuka & Another
O.P.No.106 of 2008 & Application No.708 of 2010
Decided On :Decided On : 19-10-2010
For the Petitioner:P.V. Balasubramaniam, for BFS Legal, Advocates.
For the Respondents:R1 -K. Bijai Sundar, Advocate.
The court emphasized the limited scope of its jurisdiction under Section 34 of the Arbitration and Conciliation Act and the specific grounds for setting aside an arbitral award.
Headnote:
Arbitration and Conciliation Act - Jurisdiction - Section 34
Fact of the Case:
The case involved a dispute between a stock broker and a client regarding unauthorized transactions and losses incurred. The client filed a claim against the broker, and the arbitrator found the broker responsible for the losses but rejected a portion of the client's claim.
Finding of the Court:
The court found that it did not have jurisdiction to entertain the petition under Section 34 of the Act and dismissed the original petition. It also found that the arbitrator's award was reasoned and could not be set aside based on the grounds specified in Section 34(2) of the Act.
Issues: The main issues were the jurisdiction of the court to entertain the petition and the validity of the arbitrator's award under Section 34(2) of the Act.
Ratio Decidendi: The court held that it lacked jurisdiction to entertain the petition as no part of the cause of action had arisen within its jurisdiction. It also emphasized that the court's role under Section 34 of the Act was limited to specific grounds for setting aside an arbitral award, and the arbitrator's reasoning could not be challenged.
Final Decision: The original petition was dismissed, and the application to reject the original petition was allowed.
1. This Original Petition is filed under Section 34 of the Arbitration and Conciliation Act, 1996 (for brevity, “the Act”) to set aside the award of the sole Arbitrator, viz., the Second Respondent dated 20.7.2007, by which the Petitioner, who was the Respondent before the Arbitrator, has been directed to pay to the First Respondent an amount of Rs.4 Lkhs with interest at the rate of 18% per annum from the date of the Arbitral Award to the date of Fixed Deposit Receipt to be made out by the Petitioner for a period of not less than 91 days from the Clearing Bank and rejecting the counter claim of Rs.19,485.85 made by the Petitioner.
2. Application No.708 of 2010 has been filed by the First Respondent in the Original Petition, who was the Claimant before the Arbitrator, to reject the Original Petition.
3.1. The First Respondent, who is the Applicant before the Arbitrator, is a constituent of the Petitioner, which is a Trading Member and registered Stock Broker of the National Stock Exchange of India Limited, having its office at Mumbai and registered with SEBI.
3.2. It was the case of the First Respondent before the Arbitrator that in March, 2006, the First Respondent has entered into a Stock Broking Agreement and thereby has become a regular broking client of the Petitioner having executed a Member Client Agreement on 14.3.2006. The First Respondent has paid an amount of Rs.4 Lakhs by way of deposit towards the margin for trading. However, it has been the case of the First Respondent that the deposit amount of Rs.4 Lakhs would be utilised for delivery based transactions subject to her order and prior consent on case to case basis.
3.3. It has been her case that she got confirmation Memos for purchase and sale, for which no consent or prior permission has been obtained from her and that unilateral transaction was objected to and according to her, by such conduct of the Petitioner she had incurred loss to the extent of Rs.4,29,712/-as against her investment of Rs.4 Lakhs and therefore, she has claimed a compensation of Rs.4,69,000/-.
4.1. The Petitioner, in the Written Statement, has stated that the First Respondent has become a constituent member by entering into a Member Constituent Agreement dated 14.3.2006 and she not opened Portfolio Management Services account, since, as per the SEBI Regulations, such account cannot be opened unless there is a minimum portfolio of Rs.5 Lakhs.
4.2. It was the further case of the Petitioner before the Arbitrator that they have been sending regularly the contract notes to the First Respondent and also posted the same on the website of the Company. As far as the brokerage is concerned, it was stated that the same is payable regardless of profit or loss and even if the First Respondent has any Complaint or dispute, the same should have been raised within 24 hours of the receipt of the contract note, which has not been done.
4.3. It was the further case – that the square off has been done after 42 days when there was a shortage of the margin money requirement of the First Respondent constituent. Since the margin money deposit has not been received, there was no alternative but to square off. It is also stated by the Petitioner that as a broker it cannot place stop loss order on behalf of the First Respondent without specific instruction and there is an amount of Rs.19,485.85 due from her.
5. Therefore, before the Arbitrator, while the Petitioner has made a counter claim of Rs.19,485.85, the First Respondent has made a claim of Rs.4,69,000/-towards the damages, which includes the deposit amount of Rs.4 Lakhs, Rs.26,000/-towards 40% assured return on the investment, Rs.38,000/-being interest @ 12% per annum from 1.1.2006 till date and Rs.5,000/-towards miscellaneous expenses.
6.1. The Arbitrator, after elaborate enquiry and on perusing the documents and considering the oral and written submissions made by both the parties, has found that the First Respondent was buying and selling shares
