Anjali Avinash Kulkarni vs Prabodh Artha Wardhini Pvt. Ltd.

Anoop V. Mohta, J.—The Petitioners-original Constituents, have filed the Petition under Section 34 the Arbitration and Conciliation Act, 1996 (Arbitration Act) and thereby, challenged final award dated 23 September 2011 passed by the Appellate Tribunal under the bye-laws, rules and regulations of the National Stock Exchange of India Limited (NSE), whereby the award passed by the sole Arbitrator dated 9 May 2011, in A.M. No. CM/M-0095/2010 was set aside, and thereby rejected the claims and the case of the Constituents in toto.

The learned sole Arbitrator had passed the final award on 9 May 2011 in the following terms:-

"a) The Respondent No. 1 and 2 are jointly and severally is directed to return 135 shares of L & T, 140 shares of Maharashtra Scooters Ltd. And 40 shares of Ultratech Cement along with all the dividends and corporate benefits accrued from October, 2008 till the date of delivery of those shares.

b) Respondent No. 1 and 2 to bear their own costs and Respondent No.1 to bear the cost of the claimant in these proceedings."

The submissions of both the learned counsel, as well as, the material placed on record show that those shares, as directed by the sole Arbitrator, as referred in the chart submitted by the Respondent No.1-the Trader, item Nos. 5 to 7 are in the account of some third person -Darshan Ashok Gujarathi, who was admittedly not party to the Arbitration proceedings, being not party to the agreement between the parties-which is clear from Respondent No. 1''s affidavit dated 15 September 2014. The relevant paragraphs of the affidavit read as under:-

"2. I state that, Shri. Deepak S. Gosavi was the employee of the Prabodh Arthwardhini Private Limited. Annexued hereto and marked as EXHIBIT ''A'' is a copy of three Client Registration Forms showing the name of Shri. Deepak S. Gosavi as a Branch Head. Colly.

I state that, this Hon''ble Court had also orally directed to disclose the name of the person holding the Demat Account No. 1203750000002472 with Prabodh Arthwardhini Private Limited (Depository Participant) as mentioned in Table format at Page No. 64 and 65 of the proceedings. The said Account is of Shri. Darshan Ashok Gujarathi. Annexed hereto and marked as EXHIBIT ''B'' is a copy of the Client Master Report of the Depository."

.............Respondent is not aware of the other transactions of the Complainant which the Complainant has done with the demat account No. 1203750000002472, as the said account does not belong to this Respondent. It is clear that the Complainant is trying unnecessary to involve this Respondent in the Complainants mysterious dealings an in attempts to camouflage the Complainants own wrong-doings."

I state that, Prabodh Arthwardhini Private Limited has given a credit to the Petitioner in respect of the shares mentioned in first four columns of the table mentioned at Page 64 and 65 of the proceedings. Annexed hereto and marked as EXHIBIT ''C'' is a copy of the statements showing credit given to the Petitioner."

The Petitioners unable to counter the same as stated to be the information placed on record in his Petition. Even otherwise, the chart so placed on record by Respondent No.1 and as the same was before the sole Arbitrator referring to the account number against these shares, which was admittedly not Demat Account of Respondent No.1, and definitely not owned and/or have no control over those shares of Respondent No.1. The shares in question, which are already in the account and/or owned by the third person, who was not party to the Arbitration proceedings, there was no question of passing order of transferring those shares in favour of the Petitioners. It is difficult for the parties, even in whose favour the order is passed to execute such award as the same was against third person, who was not party to the proceedings. Such un-executable award and the proceedings arising out of the same, in my view, is unsustainable. The Apex Court while dealing with the concept of "public policy" under the Arbitration Act, recently in Oil and Natural Gas Corporation Ltd. Vs. Western Geco international Ltd., has observed thus-

"39 No less important is the principle now recognised as a salutary juristic fundamental in administrative law that a decision which is perverse or so irrational that no reasonable person would have arrived at the same will not be sustained in a court of law. Perversity or irrationality of decisions is tested on the touchstone of Wednesbury principle Associated Provincial Picture Houses Limited v. Wednesbury Corporation, (1948) 1 K.B. 223 of reasonableness."......

"40 ..."if on facts proved before them the arbitrators fail to draw an inference which ought to have been drawn or if they have drawn an inference which is on the face of it, untenable resulting in miscarriage of justice, the adjudication even when made by an Arbitral Tribunal that enjoys considerable latitude and play at the joints in making awards will be open to challenge and may be cast away or modified depending upon whether the offending part is or is not severable from the rest."

As aggrieved by the impugned order Respondent No.1 challenged the said award. Respondent No.1 is a trading member. Respondent No. 2 is the employee of Respondent No.1 however, according to the Petitioners, he is the Branch Head of Nigdi, Pune office of Respondent No.1. Apart from long association of the constituents with Respondent No.2, the fact of agreement between the constituent and trading member was not in dispute and so also the fact of Respondent No. 2''s employment with Respondent No.1. Because of the trading agreement, the Petitioners had handed over the blank Depository Instrument Slip of HDFC DP , with instructions to Respondent No.2 as stated for transfer the shares in the Demat Account opened by the Petitioners with Respondent No.1. Those shares were transferred in the third person''s name (Darshan Gujarathi). The Petitioners received no consideration whatsoever, therefore, disowned the transactions itself of those shares. Petitioner No.1 appeared before the Sole Arbitrator in person through her husband-Petitioner No.2.

The parties appeared before the sole Arbitrator and filed reply and documents. Admittedly, no further evidence lead nor evidence filed through the affidavit on record. Therefore, all these allegations/ counter allegations remained to be proved and/or unproved. The sole Arbitrator, however, based upon the documents as recorded above, had passed the un-executable Award. The Appellate Tribunal also while setting aside the award, not dealt with specifically the claims of the Petitioners, in the background of transactions in question, based upon the blank signed Instruction Notes, so referred above. The Petitioners admittedly, lost those shares, as well as, the ownership without any consideration, as nothing placed on record to account the same. It is difficult to accept the case that the share- holders/owners would handover such Instruction Notes and in return, would not accept any benefit and/or any monitory consideration. The issue with regard to the Instructions Notes handed over to Respondent No.2 independently and/or individually and/or based upon their earlier relationship and/or intended to hand over for the transaction through Respondent No.1, as admittedly there was agreement entered into between the Petitioners and Respondent No.1 ought to have been considered by the Tribunal in detail, by giving opportunity to all the concerned before rejecting the claims of the Petitioners in such fashion. The Sole Arbitrator had passed the award, though the shares were in the name of third person, but not specifically dealt with the aspects of monitory claim and/or consideration in place of transfer of those shares. The monitory claim ought to have been considered, instead of ordering the transfer of shares by the sole Arbitrator. The Appellate Authority also failed to consider the case of Petitioners, so far as the alleged unauthorized transactions and the loss the Petitioners suffered because the Petitioners disowned all these transactions. There is nothing to show that such transactions took place as intended by the Petitioners and they received any considerations. The Appellate Tribunal also, while setting aside the award, not expressed anything so far as the Petitioners'' case, except blaming them for handing over such Instruction Notes to Respondent No.2-Deepak Gosavi. There is nothing denial and/or no contra material on record to show that Respondent No.2-Deepak Gosavi had no relation and/or no contract and/or no employment with Respondent No.1. There is nothing on record to show that Respondent No.2-Deepak Gosavi was not authorized to entered into and/or to deal with the transactions, based upon the agreement of Petitioner with Respondent No.1. Normal practice of entering into the transactions through the agents and/or employees of such Traders, also cannot be overlooked. However, the Appellate authority rejected the claims by reversing the award of sole Arbitrator.

Therefore, taking overall view of the matter and in the interest of justice and also for the fact that the Petitioners, at the relevant time before the Sole Arbitrator did not appear through any advocate and that resulted into injustice and hardship to the Petitioners, as they have suffered the loss of shares, as well as, received no compensation whatsoever. The aspect of individual roles of all the parties and specifically of Respondent''s employee, just cannot be brushed aside without giving full opportunity to the Petitioners. There is no case of fraud and/or misrepresentation. To verify the truth of transactions, an appropriate reasoning and/or opportunity required to be given to the Petitioners to prove their case. Those shares are in the account of third person-Mr. Darshan Gujarathi. Therefore, in my view, a case is made out to quash and set aside final award dated 23 September 2011 passed by the Appellate Tribunal and award dated 9 May 2011 passed by the Sole Arbitrator. The matter is remanded back for re-consideration by keeping all points open.

In Section 34 of the Arbitration Act and in the background and as there is no bar, I am inclined to remand the matter for re-consideration, by restoring the original complaint on record filed by the Petitioners. The Arbitral Tribunal to consider the same, in accordance with law by giving an equal opportunity to all the concerned including for the averments so made by Respondent No.1 through affidavit dated 15 September 2014, referring to the actual transfer of shares in the name of third person and its effect on the Petitioners'' claims.

Therefore, the following remand order:-

ORDER

a) Award dated 23 September 2011 passed by the Appellate Tribunal and Award dated 9 May 2011 passed by the Sole Arbitrator, are quashed and set aside on all counts and the original complaint filed by the Petitioners, is restored to file.

b) The learned Sole Arbitrator and the Appellate Tribunal to decide the claims in accordance with law, by giving equal opportunity to all the concerned, as early as possible, preferably within six months from today.

c) Both the parties to co-operate, accordingly.

d) The Petition is accordingly allowed.

e) There shall be no order as to costs.