Case Note & Summary
The petitioner, Mrs. Kaberi Mondal, filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging portions of an arbitral award dated 18 June 2012 and a supplementary award dated 17 April 2015. The petitioner had opened a trading and demat account with the respondent, BMA Commodities Private Limited, a registered stock broker, in March 2011. She alleged that an employee of the respondent, Mr. Priotosh Ghosh, induced her to invest by promising high returns and collected Rs. 27,50,000 in installments between March and May 2011. She claimed that the employee made unauthorized trades without her instructions, resulting in losses. The arbitral tribunal rejected her claim for return of the invested amount and for losses, holding that she failed to prove unauthorized trades. The High Court examined the evidence, including the fact that the respondent did not produce any written instructions or trade confirmations signed by the claimant. The court held that the tribunal's finding was perverse and contrary to the evidence, as the burden of proof was on the respondent to show authorization. The court also noted that the respondent was vicariously liable for its employee's actions. The court set aside the award to the extent it rejected the claim for unauthorized trades and remanded the matter for fresh consideration on the quantum of damages. The petition was partly allowed.
Headnote
A) Arbitration Act - Section 34 - Challenge to Arbitral Award - Public Policy - The court examined whether the arbitral tribunal's rejection of the claimant's claim for unauthorized trades and return of investment was contrary to the terms of the contract and evidence, and whether it violated public policy. The court held that the tribunal failed to consider the evidence of unauthorized trades and the respondent's vicarious liability for its employee's actions, and thus the award was set aside in part. (Paras 1-30) B) Contract Law - Stock Broker Agreement - Unauthorized Trades - The claimant alleged that the respondent's employee made unauthorized trades without her instructions. The court held that the burden was on the respondent to prove that the trades were authorized, and the tribunal erred in placing the burden on the claimant. (Paras 15-20) C) Evidence - Burden of Proof - Unauthorized Transactions - The court held that the arbitral tribunal's finding that the claimant failed to prove unauthorized trades was perverse and contrary to the evidence, as the respondent did not produce any written instructions or confirmations from the claimant. (Paras 21-25)
Issue of Consideration
Whether the arbitral tribunal's rejection of the claimant's claim for unauthorized trades and return of invested amount is contrary to the terms of the contract and the evidence on record, and whether the award is in conflict with the public policy of India.
Final Decision
The High Court partly allowed the petition, setting aside the arbitral award to the extent it rejected the claim for unauthorized trades and remanded the matter for fresh consideration on quantum of damages.
Law Points
- Section 34 of the Arbitration and Conciliation Act
- 1996
- Public Policy
- Unauthorized Trades
- Burden of Proof
- Vicarious Liability of Stock Broker
