ARBITRATION PETITION NO.1543 OF 2014

Arbitration petition under Section 34 of the Arbitration and Conciliation Act, 1996 to challenge the arbitral awards passed by the first and second arbitral tribunals.

The petitioner (original respondent in the arbitration) sought to set aside the arbitral awards dated 3 September 2013 and 16 May 2014.

The petitioner was aggrieved by the awards that held it liable to pay compensation and interest, alleging that the awards were based on incorrect appreciation of evidence, overlooking of coercion and unauthorized trades.

The first arbitral tribunal (of NSE) passed an award on 3 September 2013 directing the petitioner to pay Rs.2,35,16,348/- with interest @10% p.a. to the respondent. The second arbitral tribunal passed an award on 16 May 2014.

Whether the impugned arbitral awards are liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996.

Petitioner argued that the respondent’s CMD coerced the petitioner’s employees into obtaining a confessional statement, that the petitioner was entitled to square off positions per exchange bye-laws and agreements, that the trades were authorised, and that the first arbitral award was erroneous. Respondent argued that the petitioner had been carrying out unauthorised transactions, that the power of attorney was revoked, that the petitioner squared off positions causing illegitimate loss, and that the arbitral awards correctly awarded compensation.

By this petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (for short “the Arbitration Act”), the petitioner has impugned the arbitral award passed by the second arbitral tribunal dated 16 th May 2014 and also challenged the arbitral award dated 3 rd September 2013 passed by the first arbitral tribunal- the arbitral tribunal of the National Stock Exchange of India Ltd. The petitioner is a “Trading Member” registered with the National Stock Exchange of India Ltd. and has been such a Trading Member since 30 th July 1996 in the cash segment and since 5 th October 2000 in the derivative segment and till date.

On 11 December 2010, the parties entered into a Client Registration and Member Client Agreements. On 12 February 2013, the respondent received an email claiming daily margin. On 13 February 2013, petitioner’s employee responded seeking a meeting. On 28 February 2013, an email was sent by the petitioner’s employee (under alleged threat) regarding unauthorized trades. On 1 March 2013, the petitioner forwarded a margin shortfall intimation; the respondent denied the positions. On 2 March 2013, the respondent obtained a handwritten confessional statement from the petitioner’s employee and revoked the power of attorney. The petitioner sent a threatening email on 2 March 2013 and squared off positions from 4 to 6 March 2013. On 8 March 2013, the respondent filed a criminal complaint under Section 154 CrPC and a complaint with the NSE Investor Service Cell. On 6 March 2013, the petitioner discovered the alleged coercion. On 8 May 2013, the respondent filed its Statement of Case before the first arbitral tribunal (sole arbitrator of NSE) claiming Rs.4,48,55,092. The petitioner filed its Statement of Defence on 4 July 2013, and the respondent filed a rejoinder on 18 July 2013. The first arbitral award was passed on 3 September 2013, directing the petitioner to pay Rs.2,35,16,348 with interest. On 3 October 2013, the petitioner filed a Statement of Case before the second arbitral tribunal challenging the first award and with a counterclaim. On 28 November 2013, the petitioner applied to lead evidence. The respondent filed its reply on 15 January 2014. The second arbitral award was passed on 16 May 2014. The present petition under Section 34 was filed thereafter; it was reserved for judgment on 3 May 2018 and pronounced on 21 June 2018.

• Arbitration and Conciliation Act, 1996: 34
• Code of Criminal Procedure, 1973: 154