SURESH KABRA Vs. TRUSTED SHARES AND INVESTMENTS LIMITED

JUDGEMENT

(1.) ADMIT. Learned Counsel for the contesting respondents waive service. By consent taken up for hearing and final disposal.

(2.) THESE are proceedings under section 34 of the Arbitration and Conciliation Act, 1996. The petitioners are the original claimants in arbitration proceedings that were held before the Arbitral Tribunal of the Stock Exchange, Mumbai. The petitioners challenge the Award dated 31st January, 2002 of the appellate forum constituted by the stock exchange. The appellate proceedings in turn, arose out of an Award dated 21st March, 2001 of the Arbitral Tribunal constituted by the stock exchange. The case of the petitioners in the claim in arbitration is that on or about 2nd August, 1996, they delivered to the first respondent, 5 lakh shares of a company known by the name of Rhutu Bearing and Estates (I) Limited ("the company") together with duly executed transfer documents under two delivery memos bearing Nos. 451 and 452. The case of the petitioners was that these shares were delivered to the first respondent for the purpose of sale in the open market. According to the petitioners, the first respondent acknowledged receipt of the shares by embossing its rubber stamp and a signature on its behalf. The first respondent, according to the petitioners, in turn, sold and delivered the aforesaid 5 lakh shares to one Messrs. Mahesh Kothari (M. K.) upon whom the first respondent raised Bill Nos. 159 and 160. M. K. is alleged to have accepted the delivery of these 5 lakh shares and to have acknowledged it by a receipt dated 2nd August, 1996. The petitioners, rely upon a compilation of documents which includes (i) Bill Nos. 159 and 160 of the first respondent on M. K. recording that on 1st August, 1996, 3,25,600 shares and 1,74,400 shares had been bought from the first respondent by the latter; (ii) A letter dated 23rd August, 1996 of the first respondent to M. K. recording that the transaction had been carried out on 1st August, 1996 for which Bill Nos. 159 and 160 dated 2nd August, 1996 had been issued and, requesting M. K. to hand over a cheque of Rs. 1 crore to the bearer of the letter; (iii) A complaint by the first respondent to the General Manager of the Investors Service Cell of the stock Exchange recording that on 24th August, 1996, the first respondent sent a representative for collection of a cheque, together with a contract note and Bill Nos. 159 and 160 dated 2nd August, 1996, and that a representative of M. K. forcibly took away the original documents after which payment was being refused; (iv) A letter dated 30th November, 1996 addressed by the first respondent to the second petitioner recording that on 2nd August 1996 the latter had approached the first respondent for help in concluding the sale of 5 lakh shares of the company to M. K. According to the first respondent, the transaction was required to be done through a member of the stock exchange and the first respondent had agreed to facilitate the petitioners to complete the transaction. According to the first respondent, the BOLT timings of the stock exchange were over and the transaction could not be reported to the exchange. The first respondent had recorded in that letter that M. K. had refused to honour the transaction as a result of which the first respondent was required to refer the matter to arbitration. Subsequently, M. K. returned 3,73,400 shares out of 5 lakh shares given to him and the first respondent had filed a police complaint in respect of the balance of the shares. The second petitioner was informed that the arbitration committee of the stock exchange had rejected the claim of the first respondent for the recovery of moneys from M. K. The second petitioner was thereafter, asked to intimate what was required to be done by the stock exchange so as to safeguard the interest of the second petitioner. The second petitioner was called upon to take back 3,73,400 shares which were lying with the first respondent. The aforesaid letter referred to the transaction between the second petitioner and M. K. as "vour deal" and M. K. as "vour party". A police complaint was also filed by the first respondent.

(3.) THE case of the first respondent is that the petitioners had approached it after the trading hours of the stock exchange on 2nd August, 1996 and sought its help in concluding the transaction between the petitioners and M. K. which is a firm of brokers on the Bombay Stock Exchange. This transaction related to the proposed placement of 5 lakh shares of the company in question. According to the first respondent, the trading time was over whereupon the petitioners represented that they did not desire that there should be any delay in the transaction. The case of the first respondent is that the petitioners stated that they had shares along with transfer deeds and a list of shares ready which should be directly delivered to M. K. However, since it was necessary to put the said transaction through a broker on the Stock Exchange, the first respondent was requested to depute a member of its staff together with a rubber stamp of the first respondent to be affixed on the reverse of the transfer deeds. According to the first respondent, it was the petitioners who requested it to raise two bills on M. K. for the aggregate sale of 5 lakhs shares at the rate of Rs. 20/- per share, in a total amount of Rs. 1 crores, following which this was done by the first respondent. Thereafter, the first respondent at the behest of the petitioners deputed a member of its staff along with the bills for collection of payment from M. K. on behalf of the petitioners. The bill/contract was, however, torn off by a representative of M. K. However, 3,73,400 shares were returned subsequently by M. K. to the first respondent. The first respondent claimed that it had filed arbitration proceedings and a complaint against M. K. but, in the arbitration proceedings, the arbitral forum had concluded that there was no claim recoverable by the first respondent on behalf of the petitioners from M. K. In other words, the defence of the first respondent was that (i) it denied having received the original share certificates from the petitioners (ii) it denied the existence of any transaction between the petitioners and the first respondent as alleged by the petitioners; (iii) the 5 lakhs shares were delivered by the petitioners directly to M. K. ; (iv) Delivery Memo Nos. 451 and 452 were not genuine; (v) the first respondent or its representatives had not signed the delivery memos; (vi) the shares were delivered by the petitioners to M. K. directly and the first respondent had affixed its rubber stamp on the transfer deeds, raised bills on M. K. demanded payment, filed a complaint and instituted arbitration proceedings against M. K. acting at the behest of the petitioners; (vii) 3,73,400 shares were delivered back to the first respondent by M. K. and these the first respondent was ready and willing to deliver to the petitioners.