Case Note & Summary
The petitioner, M/s. Angel Capital & Debt Market Limited, a share broker, challenged an arbitral award dated 13 November 2009 passed by a sole arbitrator under the bye-laws of the National Stock Exchange of India Limited (NSEIL). The arbitrator dismissed the petitioner's claim for recovery of margin shortfall and losses arising from the respondent's failure to maintain sufficient margin in her Futures and Options (F&O) account. The respondent, Mrs. Rajkumari Laddha, was a client of the petitioner. The arbitrator recorded that both parties agreed there was a net margin shortfall on 17, 18, and 21 January 2008, but held that the petitioner ought to have squared off the open position on 21 January 2008 rather than 22 January 2008. The arbitrator also noted that the market had witnessed a heavy downfall, increasing losses and margin requirements. However, the arbitrator did not consider the petitioner's positive averments and evidence, including a rejoinder stating that the petitioner had made several requests to the respondent to provide more margin or square off positions, and that the respondent urged retention of positions in hope of a market upswing. The petitioner contended that its action of squaring off on 22 January 2008 was in consonance with NSE bye-laws and the agreement between the parties. The court found that the arbitrator ignored this material evidence and the bye-laws, and that the award was perverse. The court set aside the award under Section 34 of the Arbitration and Conciliation Act, 1996, and remitted the matter back to the arbitrator for fresh consideration, directing the arbitrator to consider all evidence and submissions and pass a reasoned award within four months. The respondent's counterclaim had been dismissed on limitation grounds, which was not interfered with.
Headnote
A) Arbitration - Setting Aside Award - Section 34 Arbitration and Conciliation Act, 1996 - Perversity and Ignoring Evidence - The arbitral award dismissed the petitioner's claim for margin shortfall and losses despite recording that both parties agreed there was a net margin shortfall on 17, 18, and 21 January 2008. The arbitrator held that the petitioner should have squared off on 21 January 2008 instead of 22 January 2008, but failed to consider the petitioner's evidence that the respondent requested accommodation and that the squaring off was in accordance with NSE bye-laws. The court held that the award is perverse and liable to be set aside as it ignores material evidence and the bye-laws. (Paras 2-6) B) Arbitration - Counterclaim - Limitation - Section 34 Arbitration and Conciliation Act, 1996 - The arbitrator dismissed the respondent's counterclaim on the ground of limitation based on then existing rules. The court did not interfere with this part of the award. (Para 3)
Issue of Consideration
Whether the arbitral award dismissing the share broker's claim for margin shortfall and losses is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 for ignoring material evidence and the bye-laws of NSEIL.
Final Decision
The court allowed the petition, set aside the arbitral award dated 13 November 2009, and remitted the matter back to the sole arbitrator for fresh consideration. The arbitrator was directed to consider all evidence and submissions and pass a reasoned award within four months from the date of the order. The respondent's counterclaim, dismissed on limitation, was not interfered with.
Law Points
- Arbitration award can be set aside under Section 34 if it ignores material evidence
- fails to consider bye-laws
- or is perverse
- Arbitrator must consider all evidence and submissions
- Court can interfere if award is contrary to law or contract
