HARINARAYAN G BAJAJ Vs. RAJESH MEGHANI

JUDGEMENT

(1.) THIS appeal arises out of an order passed by Mr. Justice D. K. Deshmukh on 5th June, 2003 in an arbitration petition instituted under section 34 of the Arbitration and Conciliation Act, 1996.

(2.) ON 21/06/2001, the first respondent submitted a claim for the recovery of a net amount of Rs. 3,46,89,636. 12 before an Arbitral Forum constituted under the By-laws, Rules and Regulations of the National Stock exchange of India Ltd. ("n. S. E. " ). The first respondent was a member of n. S. E. , while the appellant was his constituent. A member-client agreement dated 15/01/2001 was seated to have been entered into between the parties. The basis of the claim was that transactions had been entered into on behalf of the appellant through the on line screen based trading system of N. S. E. and, in Settlement 10 of 2001 covering the period between 7/03/2001 and 13/03/2001, the first respondent bought for and on behalf of the appellant, 1,61,000 shares of a Company known by the name of Amar Raja Batteries Limited ("a. R. B. L") in three lots. The appellant, it was alleged, had initially made a payment of Rs. 50 lakhs by a cheque dated 18/03/2001. The cheque was returned unpaid and thereafter was substituted by a Banker's Pay Order of a like amount which was encashed. According to the first respondent, the appellant had not effected payment of the balance of Rs. 4. 12 crores which was due and payable. The first respondent relied upon contract notes, the bills issued to the appellant and on a copy of the ledger accounts for the relevant period. The first respondent was initially suspended and thereafter declared as a defaulter on 1 9/06/2001 and he avers that the default occurred because of the nonpayment by the appellant of the price of the shares which had been purchased by the first respondent for and on behalf of the appellant. According to the first respondent, the transactions were completed in march, 2001 much prior to his being declared in June, 2001 as a defaulter. The appellant contested the claim lodged by the first respondent before the arbitral Forum. The appellant challenged the maintainability of the claim and put forth a defence on merits.

(3.) BY an Arbitral Award dated 31st July, 2002, the Arbitral Tribunal constituted by N. S. E. allowed the claim and directed the appellant to pay an amount of Rs. 3,46,89,636/- together with simple interest calculated at the rate of 12% per annum from 2 1/06/2001. The Arbitral Tribunal held that : (i) The first respondent had conducted and concluded transactions as a stock broker for and on behalf of the appellant who was a client-constituent; (ii) The first respondent had purchased 1,61,000 shares of a. R. B. L. in three lots in March, 2001; (iii) The liability of the appellant to effect payment of the purchase price was established in view of the contract notes, bills, statement of ledger accounts and other documents and exhibits furnished by the first respondent together with the claim for arbitration; (iv)At the relevant time, when the transactions were completed, the first respondent was authorised to act as a duly registered stock broker; (v) The first respondent acting in the capacity of a member stock broker of N. S. E. duly completed the transactions for the appellant who was a client; (vi)These transactions were completed on the Stock Exchange and inasmuch as they related to trading in shares recourse, for the resolution of disputes to arbitration was valid; and (vii) The subsequent declaration of the first respondent as a defaulter on 19th June, 2001 after the completion of the transactions in March, 2001 would not prejudice or affect the right of the first respondent to recover the amount due and payable by the appellant in respect of the transactions completed earlier. The Arbitral claim was accordingly allowed.