Appeal under Section 37 challenging dismissal of a Section 34 petition against NSE arbitral awards rejecting a remisier's claim of about Rs.38 lakh for want of a signed Memorandum of Understanding. The High Court upheld the jurisdiction finding (Chennai seat) and the merits, holding the awards reasoned, and dismissed the appeal.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 10TH DAY OF DECEMBER, 2024
PRESENT
THE HON'BLE MR JUSTICE V KAMESWAR RAO
AND
THE HON'BLE MR JUSTICE S RACHAIAH
MISCELLANEOUS FIRST APPEAL NO. 3693 OF 2020(AA)
BETWEEN:
SMT. SANDHYA CHAVAN, W/O SRI. PRAKASH CHAVAN, AGED ABOUT 57 YEARS, AT NO.10/2, KASURBA ROAD, BENGALURU-01.
…APPELLANT
(BY SRI. HEGDE SHRIPAD GANGADHAR, ADVOCATE) AND:
Digitally signed by K G RENUKAMBA Location: High Court of Karnataka
M/S. LALKAR SECURITIES PVT. LTD., V FLOOR, CRESCENT CHAMBERS, TAMARIND LANE, FORT MUMBAI-400 001, BY ITS MANAGER.
…RESPONDENT (BY SRI. KARAN GUPTA, ADVOCATE FOR SRI. PRADEEP NAYAK, ADVOCATE)
THIS MFA IS FILED U/S. 37(1)(C) OF ARBITRATION AND CONCILIATION ACT, 1996 AGAINST THE JUDGMENT AND DECREE DATED 22.11.2019 PASSED IN A.S.NO.17/2013 ON THE FILE OF THE VI ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, BENGALURU CITY (CCH-11), DISMISSING THE SUIT FILED UNDER SECTION 34 OF THE ARBITRATION AND CONCILIATION ACT, 1996.
THIS APPEAL COMING ON FOR ORDERS THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:
CORAM: HON'BLE MR JUSTICE V KAMESWAR RAO and HON'BLE MR JUSTICE S RACHAIAH
ORAL JUDGMENT
(PER: HON'BLE MR JUSTICE V KAMESWAR RAO)
The challenge in this appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (‘Act of 1996’ in short) is to an order dated 22.11.2019 passed by the VI Additional City Civil and Sessions Judge, Bengaluru City (CCCH-11), in a petition under Section 34 of the Act of 1996, whereby the learned Sessions Judge has confirmed the award dated 22.02.2012 in AM No.F&O/C-0047/2011, and thereby dismissed the petition filed by the appellant under Section 34 of the Act of 1996.
at its Bengaluru Office with effect from 2015. Later, the appellant was appointed as Remisier, which was recognized under the by-laws of NSEI with effect from 03.09.2010. The appellant herein had made a claim for Rs.38,69,490/-, which according to her is due to her, for which she made a demand on 14.03.2011. When the respondent failed to make the payment, the appellant made a complaint with the Investor Grievance Cell of the NSEI on 05.05.2011. The said amount having been denied, the dispute between the parties was not resolved, the matter was referred to Arbitration by the NSEI Limited consisting of a panel of three Arbitrators. The claim of the appellant was primarily for an amount of Rs.38,10,226/-.
sum of Rs.49,67,517/- against the appellant. The Panel of Arbitrators had vide final award dated 22.02.2012 rejected both the claim of the appellant and the counterclaim of the respondent herein.
appellant, which was also referred to a panel of three Arbitrators. The challenge was primarily on the following grounds:-
5. Suffice to state that the first Panel of Arbitral
Tribunal has rejected the claim of the appellant by stating in Paragraphs-IV and VI in its award dated 22.02.2012, as under:-
“V. OBSERVATIONS
5.1 The points for consideration are i) whether the Applicant's claim can be allowed; and ii) whether the counter claim of the Respondent can be allowed.
5.2 It is apparent from the papers submitted that some kind of arrangement existed between the Applicant and the Respondent for the last three years. The Applicant by herself, or through her husband/contacts seems to have brought clients to the Respondent and trades have taken place at the so called branch office of the Respondent, which was functioning in the office premises of the Applicant's husband. There is no satisfactory reply as to why the Applicant has not signed the MOU. Her contention that the terms of the MOU were not in conformity with the Rules, Regulations and Bye laws of NSE does not sound plausible. She could have negotiated for removal of the relevant clauses and signed the MOU. In the absence of any signed agreement between the two parties, she does not have any basis to make any claim. She is relying on the ledger printout and the TDS deduction and has not produced any written material to throw light on the type of business relationship that existed between the two.
The entries in the ledger are based on some understanding between the two parties but this has not been crystallized in any form. In the absence of such an agreement, it is not possible to determine the rights and obligations of the two parties. In view of the above, the claim of the Applicant cannot be allowed.
5.3 As regards the counter claim of the Respondent, the same observations apply and they do not have any agreement to support their counter claim. On the one hand; they have argued that the Arbitration panel does not have any jurisdiction and on the other hand, they are making a counter claim. The reasons for not inking the agreement for three years are not clear. Trades have taken place through the Bangalore branch office of the Trading Member and so it comes under the ambit of NSE Rules, Regulations and Bye laws. But in the absence of any written agreement, it is not possible to determine the nature of the business association and therefore the counter claim is also dismissible.
VI. AWARD
6.1 In view of the above observations, the claim of the Applicant for Rs. 38,10,226 and the counter claim of the Respondent for Rs. 49,67,517 are dismissed.
has framed the following three points:-
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Arbitrators Appellate in its award dated 21.09.2012, is as under:
“ IV. Point No.1 :- The respondent has opposed the appeal preferred by the appellant on one of the main grounds that it is barred by limitation. According to the byelaws, rules and regulations of the National Stock Exchange of India Ltd., an appeal against an award passed by the Arbitral Tribunal should be preferred within 30 days from the date of receipt of the award. The respondent herein maintained that the award in question was received by the appellant on 14.3.2012 and as such the appeal against the said award should have been filed on or before 13.4.2012 whereas the present appeal has been filed by the appellant only on 25.4.2012 i.e. after the expiry of 30 days from 14.3.2012 and as such the present appeal is barred by limitation. But during the course of the enquiry, the Learned Counsel for the appellant has argued that the appeal has been filed on 13.4.2012 itself i.e. within the period of 30 days with a DD for Rs.30,000/-, but NSE has returned the same through their letter dated 16.4.2012 to represent the same with a DD for Rs.30,190/- and copies of all documents
pertaining to the original arbitration reference within 15 days and that accordingly the appeal was represented on 25.4.2012 and as such the appeal is not timebarred. However, the learned Counsel for the respondent has argued that there is no provision for the return of the appeal by the NSE and to grant further time to represent the same. But this contention is not acceptable to us. On perusal of a letter dated 16.4.2012 of the NSE, a copy of which is obtained at the time of enquiry from the NSE which discloses that the appeal was received by the NSE on 13.4.2012 and the same was returned to appellant on the ground that she has to pay additional fee of Rs.190/- by way of DD and submit copies of the original arbitration references within 15 days as per the regulation of the NSE. Accordingly the same was represented on 27.4.2012 Hence the appeal which was originally filed within 30 days from the date of the receipt of the Award, subsequently it has been represented within 15 days as directed by the NSE. Hence there is nothing wrong in NSE returning the appeal to rectify a small defect and directing the appellant to represent the same in a short time frame as required by the NSE. As such we are of the considered view that the appeal has been filed within the stipulated time and it was not barred by limitation and we answer to the point No.1 in favour of the appellant.
Point No.2:
The Appellant has originally claimed the arbitration claim petition against respondent, claiming a
sum of Rs.38,10,226/- in her capacity as authorised person of the respondent. According to the appellant, she was providing Business Development and client introduction services to the respondent at their Bangalore Branch office for nearly 4 years and that the respondent has credited the remuneration payable to her by deducting TDS and remitting the same in the account of Government of India, but did not make the payment due to her. As such she has filed the original Arbitration Claim Petition for the said sum of Rs.38,10,226/-. On the other hand, the Respondent resisted the claim of the appellant on the ground that the Appellant was registered as an authorised person of the respondent by NSE only from 3.9.2010 and before that the appellant was paid only professional fees, that the respondent remitted some amount to the account of the appellant based on a Memorandum of Understanding to be signed by the appellant, but since the appellant did not sign the Memorandum of Understanding and did not provide the service of collecting dues from the clients introduced by her, they have reversed the entries made in the account of the appellant, as such she is not eligible to claim the amount as prayed for. The respondent has also contended that the appellant cannot maintain the Arbitration Claim Petition in respect of any amount due prior to her registration as authorised person on 3.9.2010. The respondent has also claimed a sum of Rs.49,67,541/- as counter claim from the appellant. The Learned Panel of Arbitrators who have heard the rival contentions of both the parties have held that since the
appellant did not sign the Memorandum of Understanding, it is not possible to determine the rights and obligations of the two parties and as such the claim of the appellant and counter claim of the respondent cannot be allowed and they dismissed both the claim through the impugned award. Aggrieved over the impugned award, the appellant has filed the present appeal. The respondent is resisting the appeal on the ground that the recognition of the appellant as authorised person by the NSE was only from 3.9.2010 and not prior thereto and therefore the claim of the appellant in respect of any due prior to 3.9.2010 was not arbitrable before the NSE. This contention of the respondent is acceptable to us also. If at all the appellant proves that some amount is due from the respondent prior to 3.9.2010, she cannot claim the same through arbitration reference before NSE, since she was recognied as an authorised person by NSE only on 3.9.2010. The contention of the appellant that the respondent was deducting TDS from the amount due to the appellant and was remitting the same to the Government of India and as such she is entitled for the recovery of the balance amount in her credit is not acceptable to us as we held that this proceedings cannot be invoked for the same.
The respondent contends that the claim of the appellant was based on her calculation of her brokerage at 40%, but she is not entitled to have the brokerage at 40% without signing the Memorandum of Understanding which alone provides such a brokerage
subject to the condition that it was the responsibility of the appellant to recover the outstanding amount from the client introduced by her and as such the appellant cannot claim the amount without signing the Memorandum of Understanding If the appellant felt that some of the clauses of the Memorandum of Understanding are not in conformity with the byelaws, rules and regulations of NSE, she should have returned the same to the respondent and tried to delete the objectionable clauses and thereafter should have signed the Memorandum of Understanding. But the appellant failed to do so. Without an Memorandum of Understanding between appellant and respondent, one cannot fix the rights and liabilities of the parties herein and in the absence of such an Memorandum of Understanding, the appellant is not entitled to claim any amount from the respondent. Moreover, the appellant was not able to segregate the amount due prior to 3.9.2010 and after 3.9.2010 on which date she was recognised as an authorised person. Hence we are of the considered view that the appellant is not entitled to have any claim over the respondent, and this appeal is not to be allowed and we answer to the point No.2 against the appellant.
Point No.3 : Our findings in point No.2 are equally applicable to the cross objection and counter claim of the respondent also. When the respondent contends that the claim of the appellant in respect of the dues prior to 3.9.2010 is not arbitrable before the NSE, this is equally applicable to their counter claim
also. So we are of the considered view that the cross appeal of the respondent is also not to be allowed and we answer to the point No.3 against the respondent.
AWARD:
In view of our findings in Points Nos: 2 and 3 above, we are not inclined to interfere with the award passed in AM No. F&OC/0047/2011 on 22.2.2012 by the Learned panel of Arbitrators and we hereby dismiss both the appeal of the appellant as well as the cross appeal of the respondent.
Dated at Chennai on this the 21st day of September, 2012.”
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negative. On Point No.3, the learned Sessions Judge has
stated as under:-
ORDER
Suit filed under Section 34 of the Arbitration and Conciliation Act, 1996 by Plaintiff to set aside the award dated 21.09.2012 passed by Panel of Arbitrators in Arbitration Matter (AM) Appeal No.F&OC/C-0047/2011, confirming award dated 22.02.2012 passed by panel of Arbitrators in A.M.No.F&O/C-0047/2011, is hereby dismissed.
No order as to costs.”
conclusion of the learned Sessions Judge in Paragraph 37, is as under:-
“37) Having come to the arbitration Clause in bye-laws, as per provisions of bye-laws, the seat of arbitration has been decided as Chennai, the address provided by Plaintiff in the KYC Form and it mandates that consequent appeal under Section 34 of the Act
shall be filed in the competent court nearest to the address provided by Constituent in the KYC Form. Under such circumstances, it is abundantly clear that, application under Section 34 of the Arbitration and Conciliation Act, against Appellate Arbitral Award should have been filed by Plaintiff within the nearest District Court in Chennai. It is not all the case of Plaintiff that, after passing Appellate Arbitral Award, she has changed her address in the KYC Form. When matter being thus, there is no reason to contend that there exists no agreement between Plaintiff and Defendant regarding seat of arbitration. Hence, this court is of the view that, Section 34 petition ought to have been filed before the Court in Chennai.”
learned Sessions Judge has held that, the Panel of Arbitrators have passed reasoned awards and no perversity or illegality can be found in the awards and accordingly upheld the awards.
It is his submission that as the learned Sessions Judge has
also considered the award(s) on its merit and as such, the conclusion on Jurisdiction could not have been given. In other words, if the learned Sessions Judge has stated that, it is the Court in Chennai, which had the jurisdiction, he should not have commented on the merits of the case. He also stated that the conclusion drawn by the learned
Sessions Judge, that the claim of the appellant for Rs.38,10,226/-, should have been segregated is also not tenable as the claim of the appellant was in respect of cumulative amount, which the appellant was entitled to, from the respondent.
appellant after 03.09.2010, when the appellant was working as a Remisier and on technicality, the Panel of Arbitrators should not have dismissed the total claim. He also stated that the finding of the Panel of Arbitrators that, the appellant had not executed the Memorandum of Understanding in support of her claim is also untenable conclusion. According to him, the payment having been made by the respondent to the appellant, as a Business Development Executive, that too by deducting TDS, is an indication that the appellant is entitled to the claim from the respondent. He states that the learned Sessions Judge has wrongly upheld the awards of the Panel of Arbitrators.
was in Chennai, he could not have decided the challenge to the awards on merit, as such a decision has to be the
Court in Chennai. Even otherwise, it is his submission that the learned Sessions Judge having considered the challenge to the awards of the Panel of Arbitrators on merits, wherein he has held that, in the absence of the segregation of the amounts alleged to be payable to the appellant, the claim petition was rightly dismissed. This according to him is because, it is only a claim for the period effective from 03.09.2010, when the appellant’s status was recognized as Remisier, which can be decided under the aegis of NSEI. In other words, any claim before 03.09.2010 when she was only a Business Development Executive, had to be made before a Civil Court. According to him, the claim, post 03.09.2010 is also not payable, because the appellant has not executed the Memorandum of Understanding, which stipulated the brokerage payable to the appellant.
parties and perused the record, it must be stated that, we have already re-produced the conclusion drawn by the learned Sessions Judge on Point No.1 ie., on the maintainability of the petition under Section 34 of the Act of 1996 before him. The clause 17 of the by-laws which we re-produce as under, clearly states that the application
under Section 34 shall be filed in a Court nearest to the address provided by the constituent in KYC Form or as per the change in address communicated thereafter by the constituent to the trading member. In fact, when we had
heard the counsel for the parties on 27.11.2024, the learned counsel for the appellant had sought time to produce KYC Form as the same was not on record. But, he could not able to produce KYC Form. In the absence of KYC form, it must be held that the appellant could not able to controvert the finding on Jurisdiction. In any case, as the learned Sessions Judge has decided the challenge to the award(s) on merits, the conclusion of both the Panel of Arbitrators and the Sessions Judge cannot be
contested. The Sessions Judge has in paragraphs 27 to 31
of the impugned order held as under:-
“27) In Associate Builders Vs. Delhi Development Authority, [(2015) 3 SCC 49] the Hon'ble Supreme Court was pleased to hold that:
"In all cases, the Arbitral Tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction. Thus, the third sub-head of patent illegality is really a contravention of Section 28(3) of the Arbitration Act. This contravention must be understood with a caveat. An Arbitral Tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground. Construction of the terms of a contract is primarily for an arbitrator construes the contract in such a way that it could be said to be something that no fair-minded or reasonable persons could do.”
28) Hence, it is abundantly clear that, Aribitral Tribunal and Appellate Arbitral Tribunal have rightly
held that, it is not possible to determine the rights and obligations of the parties in the absence of agreement. If the Arbitral Tribunals ventured to hold that there exists a contract, same would be against the provisions of the Arbitration and Conciliation Act, 1996. Plaintiff, by putting forth such contention, wants this court to reappreciate the facts, which comes within the exclusive domain of the Arbitral Tribunal. Scope of interference by this Court in interfering with the award is limited to the grounds as enumerated in Section 34 of the Arbitration and Conciliation Act, 1996.
29) In P.R.Shah, Shares and Stock Brokers Private Limited V. B.H.H. Securities Private Limited and Others [(2012) 1 SCC 594] , the Hon'ble Supreme Court was pleased to hold that :
"Court cannot sit in appeal over award by reassessing or re-appreciating evidence to find out whether different decision could be arrived at against findings of arbitral tribunal in absence of grounds under S.34".
30) Appellate Tribunal finds that, Plaintiff was not able to segregate the amount due to Plaintiff prior to 3.9.2010 and after 3.9.2010 on which date, she was recognized as an authorized person. Plaintiff's contention is that, the date wise statement of Account was already on record and available to Arbitrators, from which, it would have been simple to ascertain the amount due to Plaintiff. By saying so, task of
ascertainment of amount due to Plaintiff after 03.09.2010 passes on to Arbitral Tribunal. It is important to note. that, Plaintiff made claim of Rs.38,10,226/-. Arbitral Tribunal found that there exists no agreement between Plaintiff and Defendant, as Plaintiff has not signed the agreement. Here, Appellate Arbitral Tribunal has come to the specific finding that, it was not able to segregate the amount prior to 03.09.2010 and after 4 03.09.2010. Under such circumstances, there is no reason to contend that Arbitral Tribunal could have ascertained the amount due to Plaintiff when Plaintiff herself was not able to segregate the amount due to her. Hence, this Court remains abstained from analyzing this factual aspects of the case, which has been appreciated by both Arbitral Tribunals. Plaintiff has placed reliance on Judgment in
Rashtriya Chemicals & Fertilizers Vs. Chowgale Brothers [AIR 2010 SC 3543], wherein, the Hon'ble Supreme Court was pleased to hold that:
"Valid part of Award can be saved by severance from invalid part."
Ratio laid down in judgment supra, does not come to the aid of Plaintiff, which specifically authorizes the Court which entertains Section 34 petition. Court in which Section 34 petition is filed, if it is found that valid part of award can be saved, then, Court can sever valid part of award from its invalid part.
31) In Associate Builders Case , stated supra,
the Hon'ble Supreme Court was pleased to hold that:
“It must be clearly be understood that when a court is applying the "public policy" test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. Once it is found that the arbitrators approach is not arbitrary or capricious, then, he is the last word on facts."
appellant has not contested the recognition of the appellant’s status as a Remisier with effect from 03.09.2010. He stated, the claim of the appellant as a
Remisier is only to the extent of Rs.8,68,781/- and whereas the professional fee payable for the period before 03.09.2010 is Rs.29,41,445/-. In that sense, at least the amount of 8,68,781/- was payable to the appellant. The plea is unmerited for the same reason which we have
stated above, that the appellant has not executed the Memorandum of Understanding which incorporates
brokerage. Further the Counsel for the appellant has not shown any document in support the claim of the appellant for that amount. So it follows, the claim as made by the appellant before the Panel of Arbitrators and also the order of the learned Sessions Judge rejecting the claim/dismissing the appeal/petition under Section 34 of the Act of 1996 cannot be contested. We do not find any merit in the appeal and the same is dismissed .
No costs.
Sd/(V KAMESWAR RAO) JUDGE
Sd/(S RACHAIAH) JUDGE
KGR*
List No.: 1 Sl No.: 4
2 issues framed by the court
Was the Section 34 petition maintainable before the Bengaluru Sessions Court given the Chennai seat of arbitration under NSE byelaws?
Did the arbitral awards dismissing the remisier's claim for lack of a signed Memorandum of Understanding warrant interference under Section 34?
2 provisions across 1 enactments
Smt. Sandhya Chavan
M/s. Lalkar Securities Pvt. Ltd.
V Kameswar Rao
S Rachaiah
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
