Pramod Kumar v. Religare Securities Ltd

judgment of Sudarsan Trading Company vs. Government of Kerala, (1989) 2 SCC 38= 1989(2) Arb.LR 6 (SC) inasmuch the court reiterated the position that –"Once there is no dispute as to the contract, what is the interpretation of that contract, is a matter for the arbitrator on which the court cannot substitute its decision." The continuity of this opinion is manifest from a reading of H.P. State Electricity Board vs. R.J. Shah & Co.,

(1999) 4SCC 214= 1999(2) Arb.LR 316 (SC) inasmuch the court reiterated the position that –"when the arbitrator is required to construe a contract then merely

Page 16

because another view may be possible the court would not be justified in construing the contract in a different manner and then to set aside the award by observing that the arbitrator has exceeded the jurisdiction in making the award." Numaligarh Refinery Limited vs. Daelim Industrial Company Limited, (2007) 8 SCC 466=2007 SCACTC471 (SC)=2007(3) Arb.LR 378 (SC) records that with regard to the interpretation of a contract, the decision of the arbitrator should not be interfered with by the court. After adverting to Tarapore & Company Vs. Cochin Shipyard Limited, 1984 2 SCC 680= 1985 Arb. LR2 (SC), Their Lordships recorded that "there can be no quarrel with the proposition that –if a question of law is specifically referred to by the parties to the arbitrator for decision, award of the arbitrator would be binding on the parties and court will have no jurisdiction to interfere with the award even on ground of error of law apparent on the face of award." Very recently, in McDermott International Inc.vs.Burn Standard Co.Ltd., (2006) 11 SCC 181=2006 SCACTC 283 (SC)=2006 (2) Arb.LR 498 (SC), after perusal of a plethora of precedents, Their Lordships have enunciated this aspect of the law in the following manner: "112. It is trite that the terms of the contract can be express or implied. The conduct of the parties would also be a relevant factor in the matter of construction of a contract. The construction of the contract agreement is within the jurisdiction of the arbitrators having regard to the wide nature, scope and ambit of the arbitration agreement and they cannot be said to have misdirected themselves in passing the award by taking into

Page 17

consideration the conduct of the parties. It is also trite that correspondences exchanged by the parties are required to be taken into consideration for the purpose of construction of a contract. Interpretation of a contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law. [See Pure Helium India (P) Ltd. v. ONGC: AIR 2003 SC 4519=2003(3) Arb. LR 409 (SC) and D.D. Sharma v. Union of India,

(2004) 5 SCC 325=2004(2) Arb. LR 119

(SC)].

¶113Once, thus, it is held that the arbitrator had the jurisdiction, no further question shall be raised and the court will not exercise its jurisdiction unless it is found that there exists any bar on the face of the award.

¶114The above principles have been reiterated in Chairman and MD, NTPC Ltd. v. Reshmi Constructions, Builders and Contractors: AIR 2004 SC 1330=2004)1) Arb. LR 156 (SC), Union of India v. Banwari Lal and Sons (P) Ltd. AIR 2004 SC 1983=2004(2)Arb.LR81(SC), Continental Construction Ltd. v. State of UP. : (2003) 8 SCC and State of UP. v. Allied Constructions:

(2003) SCC Arb.LR106(SC).

Page 18

¶20It is a settled proposition of law that while dealing with an award under Section 34 of the Arbitration and Conciliation Act, the Courts are not supposed to sit in appeal and re-appreciate the evidences as an appellate Court. This proposition of law is emphasized in Municipal Corporation of Delhi vs. Jagan Nath Ashok Kumar and Anr., reported in (1987) 4 SCC 485, Maharashtra State Electricity Board vs. Sterlite Industries (India) and Another, (2001) 8 SCC 482 and Markfed Vanaspati and Allied Industries vs. Union of India, (2007) 7 SCC 679. This principle was again reiterated in P.R. Shah, Shares and Stock Brokers Pvt. Ltd vs. B.H.H. Securities Private Limited and Ors, reported in (2012) 1 SCC 594.

¶21It therefore is a settled proposition of law that Section 34 of the Arbitration and Conciliation Act do not empowers the courts to re-appreciate and re-evaluate the evidences produced before the arbitral tribunal and thereafter to judge if the findings of the arbitral Tribunals are correct or wrong. It is so held by the Apex Court in the case of Steel Authority of India (supra) that "It is not permissible to a court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings." It means that the findings of fact by the Arbitral Tribunal, if based on evidence, even where a different opinion can be held on the basis

Page 19

of that evidences, the findings given by the Arbitrator has to be accepted and the Courts cannot substitute its opinion. The power to interpret the contract also lies with the Arbitrator. Once the courts reach to the conclusion that the Arbitrator has acted within its jurisdiction, even if the Courts are of the view that the opinion of the Arbitrator is wrong, it cannot be disturbed unless it is against the public policy. The Apex Court in steel Authority of India (supra), has categorically held that even where "the answer involves an erroneous decision on the point of law does not make the award bad on its face" . An award can be said to be bad only when it is contrary to the substantive provision of law or against the terms of the contract. The Apex Court in Steel Authority has also clearly held that "If the conclusion of the arbitrator is based on a possible view of the matter, the court should not interfere with the award."

¶22In the present case, the appellant has challenged the impugned order on the ground that the Tribunal has failed to consider that the act of the respondents was in violation of the regulations of NSE (F&O segment) and SCRA. The learned counsel for the appellant however has failed to point out from the award that it was in violation of the substantive law of the land. The AT and AAT has clearly observed that the violations of the procedures,

Page 20

if any, occurred was curable. There is concurrent finding of facts that all the transactions were within the knowledge of the appellant and he was duly informed and his consent was taken.

¶23It is a settled proposition of law that an award can be impeached only when it is against the public policy.

¶24The Hon'ble Supreme Court in the case of Sh. Lal Mahal Ltd. vs. Progetto Grano Spa 2013 (8) SCAL E 489, followed its earlier judgment in Oil and Natural Gas Corporation Ltd vs. Saw Pipes Ltd., AIR 2003 SC 2629 has propounded the principles for ascertaining the meaning of public policy. The Court held that an award can be said to be against the public policy if there is a patent illegality. The patent illegality should be such nature which goes to the root of the award. An award can be said to be against public policy if it is contrary to the substantive provision of law or against the term of Contract.

¶25As is clear from the impugned order, the learned Single Judge has dealt with all the arguments raised by the appellant. It also considered the nature of evidences produced by both the parties before the Arbitrator and then reached to the conclusion that the finding of the Arbitrator is based on the findings of the facts and on these findings of the fact, there is a

Page 21

concurrent findings of AT and AAT and that the appellant had failed to point out any single finding in the award which can be said to be perverse or contrary to the record of the case. Even before us, the appellant has failed to show that the award is in violation of any substantive law. The Apex Court have repeatedly said in its various pronouncements that while dealing to a challenge of an award under Section 34 of the Arbitration and Conciliation Act, it is not open to the Courts to substitute its opinions to that of Arbitrator after re-appreciating the evidences produced before the Arbitral Tribunal. It has been held in Municipal Corporation of Delhi (supra), read as under:- "4…..Appraisement of evidence by the arbitrator is ordinarily never a matter which the Court questions and considers. The parties have selected their own forum and the deciding forum must be conceded the power of appraisement of the evidence. In the instant case, there was no evidence of violation of any principle of natural justice. The Arbitrator in our opinion is the sole judge of the quality as well as quantity of evidence and it will not be for this Court to take upon itself the task of being a judge of the evidence before the arbitrator. It may be possible that on the same evidence the Court might have arrived at a different conclusion than the one arrived at by the arbitrator but that by itself is no ground in our view for setting aside the award of an arbitrator."

¶26The learned Single Judge reached to the conclusion that the award was not against the public policy and rejected the petition under Section 34

Page 22

of Arbitration & Conciliation Act. The jurisdiction of the Appellate Court is limited to ascertain if the learned Single Judge while disposing of the challenge under Section 34 of Arbitration & Conciliation Act has acted in consonance to the objects of Section 34 of Arbitration & Conciliation Act. The award cannot be said to be against the public policy if it is based on some evidences. It can be said to be against a public policy if it is based on no evidence. Two views on the facts proved before AT could be possible in law but if the view of the Tribunal is based on the evidences before it, the findings of the AT cannot be said to be against the public policy. The learned Single Judge has no jurisdiction under Section 34 of the said Act to substitute its opinion to that of the Arbitrator.

¶27For these reasons, we found no illegality in the impugned order and no grounds to interfere with it. The appeal has no merit and the same is dismissed with no order as to cost.

DEEPA SHARMA (JUDGE)

SIDDHARTH MRIDUL

(JUDGE) MARCH 01, 2018/ss

Page 1 * IN THE HIGH COURT OF DELHI AT NEW DELHI % Decided on: 01.03.2018 + FAO(OS) 368/2016 & CM. APPL. 46533/2016 PRAMOD KUMAR ..... Appellant Through: Dr. Harsh Pathak, Mr. Siddharth ` Shukla and Mrs. Shaveta Mahajan, Advs. versus RELIGARE SECURITIES LTD ..... Respondent Through: Mr. Rohit Puri & Ms. Swekcha, Advocates. CORAM: HON'BLE MR. JUSTICE SIDDHARTH MRIDUL HON'BLE MS. JUSTICE DEEPA SHARMA HON'BLE MS. JUSTICE DEEPA SHARMA 1. This appeal has been filed by the appellant under Section 37 of the Arbitration and Conciliation Act, 1996, whereby he has challenged the judgment dated 19.10.2016 in Original Miscellaneous Petition (OMP) No. 535/2015. In this OMP, the appellant had challenged the Arbitral Award dated 18.12.2014 passed by the National Stock Exchange (NSE) Arbitral Tribunal and the order of NSE Arbitral Appellate Tribunal (AAT) dismissing his appeal vide order dated 25.05.2015. The dispute between the appellant and the respondent was related to the Member-Client Agreement dated 31.05.2010. Page 2 2. The admitted facts are that the appellant vide Member-Client Agreement dated 31.05.2010 opened a DEMAT account with the respondent for equity trading. According to the appellant, he had made it clear to the respondent at the time of opening of the said account that he was interested in investing in portfolio of equity shares as a long-term investment and was not interested in short- term trading. It was also his case that he had not permitted the respondent to do any trading without the authorisation from him. According to him, a limited Power of Attorney was given to the respondent for opening of the share trading account. The petitioner was then allotted CRN Number, Depository client ID and trading user ID. The contentions of the appellant were that the respondent had started unauthorized trading in the futures and options ('F& O') segment w.e.f 16.08.2010, without his authorization. This trading continued between August 2010 to February 2011 and the respondent during this period zeroed the entire investment of the appellant. According to him, he had been visiting Ukraine for business purposes quite frequently during the period 16.06.2010 and 29.12.2010. On coming to know of the unauthorized trading, the appellant repeatedly asked the respondent officers to stop any trading in the F&O segment which had caused a loss of Rs. 4671840.79 up to Page 3 01.02.2011. As per the contention of the appellant, the respondents had assured him to compensate for the losses suffered and dissuaded him from filing any complaint. As per the appellant, his shares worth approximately Rs 52,00,000/- with Indiabulls Securities Ltd. were transferred from his account. A lot of 15 scrips got transferred on 14.08.2010 and 5 scrips on 26.08.2010. He learned on receiving the SMS from the NSDL that all stocks of the appellant were moved from the beneficiary account to broker margin account. This movement was done without his permission and without authorisation from him. He thereafter withdrew the PoA issued earlier by him in favour of the respondent. 3. As per the appellant, when the respondent failed to compensate him, he filed a complaint with 'Wecare', the respondent's customer care email ID, on 05.02.2011. In the absence of any progress on his complaint to 'Wecare', he filed a complaint against the respondent with the Investor Service Cell of the 'NSE on 09.03.2011. The dispute between him and the respondent was thereafter referred by NSE to the Arbitral Tribunal ('AT') comprising of three members. The respondent also filed a counter claim for a balance outstanding amount of Rs. 1,02,833.23 as on 11.02.2011 and the said amount grew to Rs. 1,78,020.44 as on 21.05.2017. The AT passed its Page 4 Award on 18.12.2014 whereby the claim of the appellant was rejected and the counter claim of the respondent was upheld. 4. The appellant's appeal to AAT against the order of Appellate Tribunal was also rejected. 5. Both the orders, of AT and AAT were chal