* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ FAO No.188/2008
% 13th July, 2011
M/S. OM PARKASH MALIK (HUF) ...... Appellant
Through: Mr. S.K.Maniktala, Advocate with Mr.
Alok Tripathi, Advocate.
VERSUS
ADROIT FINANCIAL SERVICES PVT. LTD. ...... Respondent
Through: Mr. Ajay Kumar Gupta, Advocate. CORAM: HON'BLE MR. JUSTICE VALMIKI J.MEHTA
1. Whether the Reporters of local papers may be
allowed to see the judgment?
2. To be referred to the Reporter or not?
3. Whether the judgment should be reported in the Digest?
VALMIKI J. MEHTA, J (ORAL)
1. The challenge by means of this First Appeal under Section
37 of Arbitration & Conciliation Act, 1996 (hereinafter referred to as
„the Act‟) is to the impugned order dated 12.2.2008 by which the
objections of the appellant under Section 34 of the Act were dismissed
by the trial Court. The trial Court has upheld the Award dated
22.4.2005 passed by the sole Arbitrator acting under the Bye Laws,
Rules and Regulations of the National Stock Exchange of India Ltd. The
facts of the case are that the respondent/claimant a broker filed a
claim for recovery against the appellant/constituent for an amount of
FAO No.188/2008 Page 1 of 10
Rs.16,44,451/- alongwith interest besides other charges for the V-SAT
equipment installed with the appellant. There was a relationship of
member and constituent i.e. broker and sub-broker alleged by the
respondent. The claim of the respondent/member/broker was allowed
by the Arbitrator. Some of the relevant findings and observations
made by the Arbitrator are contained in paras 12, 13 and 18 to 20 and
the same read as under:-
“12. The applicant has denied that the Agreement
in question is a forged one or has been prepared by
superimposing it over another agreement form. They
have submitted that certain columns were left blank
initially e.g. depository participant as well as the D-Mat
account which was issued later in August/September
2003 and filled in but that Respondent was well aware
of these. They have also not denied that the code AK-I
was allotted to Shri A.K. Jain in May, 2003 and was filled
in later on to quickly identify the person, as there could
be other persons by the same name. Shri Ajay Gupta,
AR of Applicant has submitted that while it is correct
that one Shri M.M. Verma had introduced the
Respondent, Shri O.P. Malik, to them, it is also a fact
that in addition, Shri A.K. Jain had also introduced the
Respondent whose name appears in the Introduction
column in the Agreement signed by the parties. They
have submitted that the portions left blank were filled in
with the consent of the Respondent. According to the
Applicant, Mr. Verma sometimes visited the office but
never looked after the branch or introduced any clientFAO No.188/2008 Page 2 of 10
to the branch, which was mostly done by the
Respondent.
13. The Respondent, Shri Malik himself, has stated
in his reply dated 15-12-2004 that he had met Mr. Atul
Gupta, Director of the Claimant Company in November
2002 as he was desirous of becoming a sub-broker. He
has also submitted a document from the Punjab
National Bank to show that he had issued three cheques
in favour of Applicant Company on 7-2-2003, 14-2-2003
and 10-3-2003 for a total amount of Rs.7.5 lacs. The
Applicant company states that Respondent actually paid
Rs.8.5 lacs instead of Rs.7.5 lacs, as mentioned by
Respondent which has been credited in his margin
account. There is a reference by both the parties to an
amount, Rs.2,17,750/- which was paid by the
Respondent to the Applicant. While the respondent
states that this amount was paid by cheque as security
deposit for installation of V-SAT at his premises, the
Applicant submits that he had agreed that the total
amount shall be credited to his running account which
was done, as per Respondents request (Annexure A-1).
The Applicant’s AR has submitted that after adjusting
these amounts as well as other amounts through sale of
shares as credit amount, a balance of Rs.16,44,451.04 P
is still outstanding against the Respondent which he has
to pay. The Respondent has not produced other
relevant documents or controverted the above claimed
amount given in the Statement of Account.
18. In the reply filed by the Respondent and in the
subsequent applications submitted by him during theFAO No.188/2008 Page 3 of 10
hearing, Shri Malik has taken the plea that the
Agreement dated 12-11-2002 annexed by the Applicant
is a forged and fraudulent document which was never
entered into between the parties. According to him the
entire document has been fabricated by the Applicant
company, and hence, the Arbitrator has no jurisdiction
to entertain such a dispute. Respondent has relied on
the judgment of the Hon’ble Supreme Court in S P
Chengalvaraya (Dead) Vs. Jaganath (Dead) 1994
Rajdhani Law Reporter (SC 102). In this case the
Supreme Court has held that a litigant who approaches
the Court is bound to produce all relevant documents to
the litigation executed by him. It was also held that a
person whose case is based on falsehood can be
summarily thrown out at any stage of the litigation and
has no right to approach the Court. The Respondent
has repeatedly contended that the contract documents
and the arbitration agreement relied upon by the
Applicant are invalid and tainted by fraud. It is settled
law that fraud vitiates any transaction. However, it is
also settled law that the mere allegations of fraud
without clear and sufficient proof of the offence will not
suffice.
19. Admittedly in the present case, the
Respondent, Shri O.P. Malik does not deny that he has
been having financial transactions with the Applicant
company for a number of years. He has inter alia,
submitted in his reply that in November, 2002, he had
met Mr. Atul Gupta, a Director of the Claimant company
as he was desirous of becoming a sub-broker. He has
also allowed the installation of the V-SAT in the branch
FAO No.188/2008 Page 4 of 10
office at his premise, paid of an amount of Rs.2,17,750/-
by a cheque (Para 8 of the reply), which he states was
his security deposit and the Applicant claims was
credited to his running account by cheque received
dated 25-11-04. The Respondent has also submitted
that he had made payments by cheque for several lakhs
of Rupees in favour of the Applicant Company. From
Statement of Account of the Respondent, annexed to
the Claim Statement it is seen that, inter alia, credit has
been given to him for an amount of Rs.8,50,000/00 (P
63) and Rs.2,17,750/00 (Pages 68 and 76). The
Respondent has also submitted a form signed by him to
the Applicant requesting/authorizing them to maintain a
Running Account (P 29 of Rejoinder) and this amount
has been shown as credit in his account. Respondent’s
contention that this amount was paid as security
deposit by him for installation of V-SAT in his premises
has not at all been established. The latter amount is
stated to have been received by cheque dated 25-11-
2002 by the Applicant and the Respondent has been
given credit for this amount in the particulars.
Therefore, on a careful perusal of the relevant
documents and averments made by the parties, there
is no doubt that the Applicant and Respondent have
signed a Member and Constituent Agreement dated 12-
11-2002. The Respondent has not denied that his
signature appears on this document and has also
averred that he has issued several cheques and had
financial transactions with the Applicant Company. He
has also stated that the branch office started
functioning on 6-2-2003. The Hon’ble Supreme Court inFAO No.188/2008 Page 5 of 10
Bharati Knitting Co. Vs. DHL Worldwide Express
(JT 1996 (6) S.C. 254) has held that “when a party to the
contract disputes the binding nature of the signed
document, it is for him to prove the terms in the
contract or circumstances of the present case, the
Respondent has failed to establish that he is not bound
by the contract in question or any other terms and
circumstances in which he had signed the documents.
20. In this connection, it is relevant to note that the
Respondent in his reply dated 15-12-2005 has annexed
a letter from the Applicant dated 27-5-2004, wherein
they gave asked him to clear the debit balance of
Rs.16,44,451.04 P immediately within three days, failing
which they will take suitable legal action. This is the
same amount claimed by the Applicant in the present
case. The Respondent had pointed out that in this
letter the Applicant has referred to the MCA as sated
“25-11-2002” and not “12-11-2002” as given in the
claim statement. The AR of the Applicant again referred
to this as an “inadvertent mistake” on their part as they
had erroneously noted the date of the cheque received
from the Respondent for the aforesaid amount of
Rs.2,17,750/- i.e. on 25-11-2002, instead of the correct
date of MCA which is 12-11-2002. However, it is also
relevant to note that the Respondent had neither
disputed the actual amount claimed or given any earlier
reply to this letter, as submitted by him during the
hearing.”(emphasis added)FAO No.188/2008 Page 6 of 10
2. The trial Court has also noted that transactions have taken
place between the parties from 2003 to 2004 and during which period
the appellant never took up a stand that there was no agreement at all
entered into between the parties. The relevant observations of the trial
Court read as under:-
“Before this Court too, the objector has not succeeded in
establishing forgery or fraud. Fraud in terms of contract
occurs where false documents have been created and
the party to the fraud has gained and the victim of fraud
has suffered damage. In the present case the objector
had acted on the MCA having conducted business over a
period of time gaining from the transactions till the
situation arose where the objector fell short of liability
tot he member i.e. respondent No.1 and the present
dispute arose. As regards the allegation of forgery none
of the interpolations constitute forgery as no element of
dishonesty existed. In the present case, the
interpolations in the agreement are factually correct
relating to client code and D-MAT account number. The
objector does not dispute the authenticity of these facts
and he only claims that the numbers have been allotted
in the year 2003. Between 2003 and the time in May
2004 when the present dispute arose the present
objector never raised objections with the
members/respondent No.1 regarding these facts being
entered into the agreement and continued to carry out
transactions on the basis of the MCA. It is also not the
case of the objector that the D-MAT account mentioned
was never used in these transactions. Again there isFAO No.188/2008 Page 7 of 10
nothing to show how the respondent no.1/member
gained by these interpolations wrongly and how
wrongful loss has been cause to the objector. Thus, no
case of fraud and forgery have been made out by the
present objector.
Rather it appears that once the present objector was
faced with the prospect of the liability it has raised an
objection of fraud and forgery without foundation.
Having acted on the agreement and having benefited
from the same, the objector cannot now wriggle out of
his liability by calling the same agreement tainted. The
conclusion of the Ld. Arbitrator in this regard cannot be
therefore faulted as being perverse to review the
Arbitrator’s award under Section 34 of the Arbitration
Act.” (emphasis added)
3. Learned counsel for the appellant very vehemently argued
that agreement in question is forged and fabricated and therefore no
liability could have been fastened upon the appellant on this basis. On
being pointed out as to whether in the reply filed to the claim petition
in the arbitration proceedings, the appellant had specifically denied his
signatures, nothing was pointed out to me on behalf of the appellant
showing that the signatures of the appellant were alleged to be forged
and fabricated.
In view of the above, there is no perversity whatsoever in
the findings of the Arbitrator and of the Court below that a person who
FAO No.188/2008 Page 8 of 10
has conducted many transactions over a long period should not be
allowed to dispute the factum of having entered into the agreement.
4. The second argument urged by the learned counsel for the
appellant is that the statement of account filed by the respondent was
believed without calling upon the respondent to lead evidence. Strict
provisions of the Evidence Act, 1872 do not apply to the arbitration
proceedings in view of Section 19 of the Arbitration and Conciliation
Act, 1996. The Arbitrator has considered various correspondences and
other documents and the circumstances of the case to fasten liability
upon the appellant. I completely agree with the observations of the
trial Court that the objector is now endeavouring to somehow or the
other wriggle out of his liability with respect to various transactions
conducted between him and the respondent.
5. So far as the issue with respect to S-VAT equipment
charges are concerned, the trial Court has rightly held that the
Arbitrator fastened liability upon the appellant because equipment was
not returned by the appellant to the respondent after termination of
the agreement and therefore the respondent had to pay charges to the
National Stock Exchange for the said equipment.
6. The scope of hearing objections to an Award under Section
34 of the Act is limited. Unless there is gross perversity or illegality in
the Award, a Court hearing objections cannot interfere under Section
FAO No.188/2008 Page 9 of 10
34. The issue as to apprising of evidence and adopting one view out of
the two views cannot be said to be filed in the category of perversity or
illegality for a Court to interfere under Section 34 of the Act. If the
scope of objections to an Award is limited, then, surely the scope of
hearing an appeal against the objections is further limited. This Court
cannot be converted into an Arbitrator or a Court hearing objections
under Section 34.
7. In view of the above, I do not find any merit in the appeal
which is accordingly dismissed, leaving the parties to bear their own
costs.
JULY 13, 2011 VALMIKI J. MEHTA, J.
Ne
FAO No.188/2008 Page 10 of 10