Scope of Section 34 Interference Is Restricted to Correcting Patent Illegality Without Re-Appreciating Evidentiary Findings of Fact

The Respondent opened a trading account with the Appellant in 2007. Although the Respondent discovered a zero balance in 2014, he filed a complaint with SEBI only on 18.02.2019 alleging unauthorized trades.

The Investor Grievance Redressal Panel (IGRP) admitted the claim for ₹9,42,000 on 03.04.2019, finding the Appellant failed to justify trades or produce SMS/e-mail alerts.

A Sole Arbitrator set aside the IGRP order on 06.08.2019, ruling the claim was time-barred.

This was upheld by the Appellate Arbitral Tribunal on 04.11.2019, which found the Respondent had knowledge of account status by 2012–2014 and had signed the authorization for the broker’s employee.

The District Judge, under Section 34 of the Arbitration Act, set aside the arbitral awards and restored the IGRP order, finding fraud existed and limitation began only in 2019.

1. Whether the District Judge exceeded the scope of Section 34 of the Arbitration and Conciliation Act by re-appreciating evidence and returning findings of fraud not pleaded before the Arbitrator.

2. Whether a claim filed in 2019 regarding transactions from 2007-08 is barred by limitation.

3. What constitutes a just and final settlement regarding the principal and interest amounts.

The court applied Section 34 and Section 37 of the Arbitration and Conciliation Act, 1996, regarding the limited scope of judicial interference with arbitral awards.

The court relied on Jharkhand v. HSS Integrated DSN and Delhi Airport Metro Express Pvt. Ltd v. DMRC, stating that a court cannot substitute its own view for a plausible view taken by the tribunal.

The court applied Hindustan Construction Company Limited v. NHAI, affirming that courts cannot re-assess evidence in Section 34 proceedings.

The court also considered SEBI Circular Ref CIR/MRD/DSA/2/2011 regarding the limitation period for investor grievances.

The Court observed that the Sole Arbitrator and the Appellate Tribunal had reached findings of fact regarding limitation and the validity of the authorization letter based on the evidence.

The Court found that the District Judge erred by returning findings of fraud based on "conjectures and surmises" without foundational pleadings or documentary evidence, which directly contradicted the Appellate Tribunal's reasoned findings.

The Court found this offer reasonable, as the Respondent’s Section 34 petition had only sought the restoration of the IGRP’s ₹9,42,000 award without a prior award of interest.

The High Court modified the IGRP and District Judge’s orders by directing the Appellant to pay a consolidated sum of ₹20,00,000 to the Respondent within four weeks. If the Appellant fails to pay the directed sum, it shall be liable to pay 18% compound interest per annum on the principal of ₹10,42,000 from 18.02.2019.