G R DIDWANIA Vs. A C CHOKSEY

JUDGEMENT

(1.) PETITIONER by the present petition, impugns the Award dated 23-12-1998 in Arbitral Reference No. 156 of 1997. There were transactions between petitioner and respondent. The respondent is a member of the Stock Exchange, Mumbai. The petitioner was his constituent. It was the case of the respondent that on 15-1-1997, the petitioner had placed an order with the respondent for purchase of 7000 SIV shares. The respondent purchased the shares on the said date at the rate of Rs. 59. 75 being the market rate on the relevant date. It was the case of the respondent that on 15-1-1997 while he was talking on phone in his office with his O. C. B. Client regarding GDR transactions on SIV shares, the petitioner who had been afforded BOLT facilities by another member-Broker Shri Brij Mohan Sagarmal having office just adjoining to that of the applicant, overheard the talk and showed interest in the transaction. The petitioner asked him to buy 7000 SIV shares at Rs. 59. 75 knowing fully well that it was GDR transaction and delivery will be according to GDR standards and will be completed between 30 to 60 days. It is in these circumstances, that those shares were purchased. Delivery note clearly mentioned Delivery after thirty days on it. The petitioner received the contract note. However, that delivery was offered on 26-2-1997, he refused to accept the shares on that day and several times thereafter. Subsequent to exchange of correspondence with both the petitioner and Stock Exchange Bombay, respondent invoked arbitral clause and filed his claim in respect of the said transaction as also in respect of other disputes. The documents filed before the arbitrators included newspaper clippings, in support of the contention that it was normal practice, custom or usage that delivery period in respect of shares underlying GDR standards is 30 to 60 days. Reference is made to the reply filed by the petitioner on 4-6-1997 in reply to the respondents letter dated 10-5-1997 wherein it was contended according to respondents that he had agreed to purchase 7000 shares on spot basis and delivery thereof was agreed to be made within four weeks as the said contract of purchase of shares was special contract for delivery within four weeks. In the said letter it was also denied that the petitioner agreed to purchase shares as per the GDR standards. The case of the petitioner in the letter was that he refused to accept the delivery of the shares on the ground of non-delivery within four weeks. Apart from the said shares, disputes were also raised in respect of some other transactions. In respect of those transactions, the matter was settled as recorded in the minutes of proceedings before the arbitrator. The only dispute that survived was in respect of suit shares. Reference was earlier made to the bench of which one of the arbitrators resigned. The said vacancy was filled in and time for passing the Award was enlarged. In reply to the respondents claim, petitioner filed his reply dated 29-11-1997. It was contended that the transactions was spot delivery transaction and was to be given within four weeks, time being essence of the contract. The petitioner denied that the respondents had issued contract for the sale of 7000 SIV Industries Ltd. shares mentioning therein delivery after 30 days. The respondent was called upon to produce contract note for the purpose of verification as to whether the period of delivery of 30 days was accepted by the petitioner. The claim of the petitioner was that he wanted the delivery of the shares within four weeks but shares were not delivered within the said period. On January 20, 1998 the petitioner filed a second reply. The grievance made therein was that the respondent had failed to produce on record copy of the contract note for showing that the contract note undertaking delivery of 30 days was personally accepted. In these circumstances, they only awarded damages at the rate of Rs. 22. 50 per share along with interest on set out in the Award. It may be pointed out that the case of the petitioner in the correspondence and in the stand before the Arbitral Tribunal was that these were spot transactions. It was further contended that the petitioners had not agreed to the delivery period after 30 days but were agreeable to accept them if it was within 30 days. Refusal was on account of the fact that the shares were delivered after 30 days. It was also a stand taken by the petitioners that the GDR transactions in SIV shares was not permitted.

(2.) ON the reference being made, the Arbitral Tribunal found in favour of the respondents and observed that considering the material placed on record relating to several GDR transactions entered into with other clients, delivery period was between 30 to 60 days. A finding was given that the transaction was a GDR transaction. Further finding is recorded that as a matter of fact, that appears to be normal practice in respect of GDR transactions obviously because of the formalities involved in such transactions take that much time to complete. After having so recorded a finding, the Tribunal found explanation given by the respondents for holding the shares for quite a long time after the refusal as not satisfactory. The Tribunal found that the respondents ought to have taken steps to sell the shares. In these circumstances, they only awarded damages at the rate of Rs. 22. 50 per share along with interest as set out in the Award. The contract note which was the subject-matter was produced before the Tribunal. The Tribunal found that there is no endorsement on the note whether transaction in question was GDR transaction. It also found that the endorsement delivery after 30 days is absent. Respondent explained that by pointing out that the contract note was taken on computer, no copy was taken out at the time of the contract and that the endorsement delivery after 30 days was written by hand while delivering the original contract note to the respondent. That delivery was sought to be effected could be seen from the record of 26th February, 1997. The Arbitral Tribunal also found that that aspect need not be determined as the petitioner in his reply dated 4-6-1997 had specifically admitted that in written endorsement delivery after 30 days was on the contract note.

(3.) AT the hearing of the petition, on behalf of the petitioner, it is contended as under: