Bombay HC Sets Aside ₹15.9-Lakh Award Against 5Paisa In Trading-Glitch Dispute Over Tribunal’s Failure To Decide Key Issues

In brief

The question

Whether the Appellate Arbitral Tribunal’s failure to return findings on the parties’ material and contentious issues rendered its award liable to be set aside under Section 34 of the Act

The court held

The Court allowed the Section 34 petition and set aside the impugned appellate arbitral award confirming the Sole Arbitrator’s award, on the ground that material contentious issues had not been adjudicated.

It also directed

Any amount deposited in Court was directed to be released within one month of upload of the judgment; the parties were left at liberty to initiate fresh arbitration proceedings in accordance with law. No costs were ordered.

01Facts

The Respondent, a client of the Petitioner stockbroker, alleged losses arising during a period when a technical glitch allegedly caused excess margin to appear in his account and disputed trades and square-offs carried out during that period.

¶ 2(iv)–(xviii) · pp. 3–8

The Sole Arbitrator rejected the Petitioner’s recovery claim and partly allowed the Respondent’s counterclaim, awarding Rs.14,30,509 and Rs.1,62,162 for bonus shares.

¶ 2(xxii) · pp. 9–10

The Appellate Arbitral Tribunal dismissed the Petitioner’s appeal, reasoning that both parties had a responsibility to report abnormalities but holding the Petitioner liable for losses associated with the excess margin.

¶ 2(xxiv) · p. 10

The Petitioner challenged the awards under Section 34 of the Arbitration and Conciliation Act, 1996, principally on the ground that the Appellate Tribunal had not adjudicated material issues.

¶ 4–10 · pp. 11–16

02Issues

i.Whether the Appellate Arbitral Tribunal’s failure to return findings on the parties’ material and contentious issues rendered its award liable to be set aside under Section 34 of the Act

¶ 16–21 · pp. 20–24

ii.Whether the Court could itself determine the disputed merits, or remit the matter to the tribunal, where the award contained no findings on those issues

¶ 21–23 · pp. 24–26

03Law Applied

Section 34 permits interference with an arbitral award only on the statutory grounds, including patent illegality under Section 34(2A); it does not permit routine reappreciation of evidence or substitution of a plausible arbitral view.

¶ 16 · p. 20 · Ssangyong Engineering & Construction Co. Ltd. v. NHAI · ¶ 23 · pp. 26–27

Under I-Pay Clearing Services (P) Ltd. v. ICICI Bank Ltd., an award that contains no findings on contentious issues may be set aside for patent illegality; Section 34(4) cannot be used to supply missing findings, although it may permit reasons or gaps in reasoning to be addressed where a finding already exists.

¶ 22 · pp. 25–26

Associate Builders v. DDA explains that a finding based on no evidence, or one that ignores vital evidence, may be perverse and that an award giving no reasons contrary to Section 31(3) may constitute patent illegality.

¶ 23 · pp. 27–29

Provisions in the judgment · 3 · Linked ones open on LawLens

Arbitration and Conciliation Act, 1996 Section 34 Section 31 Section 28

04Reasoning

The Appellate Tribunal reproduced the parties’ submissions but did not determine whether the glitch caused excess margin, whether the Respondent’s trades and losses resulted from it, what notification duties arose under the parties’ agreement, or whether the Petitioner’s square-off and sale of shares complied with its Risk Policy.

¶ 18–20 · pp. 21–24

Its conclusion that both parties had a duty to report abnormalities, followed by imposing liability on the Petitioner, did not disclose the adjudicatory reasoning connecting the alleged breach to the losses.

¶ 19–24 · pp. 22–29

The Court held that it could not supply those missing findings or independently decide the merits under Section 34; the absence of findings on contentious issues constituted patent illegality.

¶ 19–24 · pp. 22–29