Morgan Securities & Credits Pvt Ltd v. Samtel Display Systems Ltd

19. If the intention of the parties was to make the claimant liable for the past due of the borrower, it ought to have spelled out in the letter of pledge itself. Surety can‟t be taken by surprise. How could he know that borrower owned certain amounts to the respondent under some other contract namely Bill discounting facility to which claimant was not party. Hence claimant could not have imagined. any other liability of the borrower under any other agreement. Any other existing agreement has to be read 'ejustem genesis' with the opening words of para 13. Black Dictionary sixth edition defines 'ejustem genesis‟ to mean in construction of laws, the ejustem genesis rule is where general words follow an enumerative of things, by words of a particular and specific meaning, such general words are not to be construed in their widest extent, but are to be held as applying only to things of the same general kind or class as these specifically mentioned. In this case opening words of para 13 are words of particular and specific meaning. Para opens with the word that "Securities shall be a continuing security to the lender for all moneys which are due from the Borrower for the entire amount of ICD facility in full together with interest, overdue interest, costs etc. remain unpaid. Therefore the expression whether under any other existing or future agreement are only general words which cann‟t be read in their widest extent. These words have to be understood keeping in view the openings words of para 13.

20. Para 8 of the letter of pledge authorizes the respondent to sell the shares if borrower failed to repay ICD to liquidate the amount due and then adjust amount outstanding against ICD. It does not whose authorizes the respondent to sell the shares and, adjust the amount pertaining to any amount due against some other contract lien of the respondent, to my mind, came to an end the moment borrower repaid the ICD along with other dues mentioned in the letter of pledge.

21. For the reasons stated above I hold that respondent is to return the Rs.11,00,000/- (Rupees Eleven lakhs) shares to the claimant.”

8. With regard to Claim no.2 (supra), the impugned award holds as under:-

9. With regard to Claim no.3 (supra), the impugned award holds as under:-

10. With regard to Claim no.4 (supra), the impugned award holds as under:-

Submissions on behalf of the parties

11. In the above conspectus, the petitioner has assailed the impugned arbitral award primarily on the ground that there is inconsistency/contradiction in the findings/conclusions rendered with regard to claim no.2 & 3 (supra). It is submitted that while adjudicating claim no.2 & 3, it has been categorically held that the respondent (claimant) had failed to establish that the market value of each pledged share was Rs. 21 at the time when the shares were liable to be returned and/or that the value thereof had gone down to Rs. 17 per share, at the time of filing of the statement of claim.

12. It is contended that despite rendering the aforesaid findings, claim no.3 has been adjudicated on the basis that the value of each share was Rs.17 per share. Consequently, for the purpose of claim no.3, the value of 11,00,000 shares has been worked out at Rs. 1,87,00,00,000/-; on this amount interest has been granted to the respondent (claimant) from the date of filing of the statement of claim till its realization.

13. It is contended that contradiction in the findings of the impugned award is apparent on the face of the award. Consequently, the award cannot be sustained.

14. It is further contended that the respondent (claimant) itself filed a petition assailing the findings rendered in para 22 and 23 of the impugned award; the said petition came to be dismissed by a Coordinate Bench of this Court vide judgment/order dated 14.05.2012 in O.M.P (COMM.) 459/2012.

15. Reliance is placed on para 5 of the aforesaid judgment/order dated 14.05.2012 to contend that the challenge of the respondent (claimant) to the findings rendered in respect of claim no.2 having been comprehensively rejected. It is all the more untenable to sustain the finding/conclusion qua claim no.3, inasmuch as it has been presumed that the value of claim in shares of the respondent (claimant) was Rs. 17 per share, for the purpose of claim no.3.

16. Per contra, learned senior counsel for the respondent has drawn attention to the pleadings filed before the learned sole arbitrator in respect of claim no.2 & 3 and has sought to contend that the price of shares on the date of pledge and the date of filing of statement of claim stands proved. Reliance in this regard has been placed on the pleadings filed in the arbitration proceedings.

17. It is further contended that the shares continued to be shown as pledged in the records of the concerned depository were to the effect that the petitioner has wrongfully failed to return the pledged shares. It is further contended that the value of shares as on 25.01.2008 was Rs. 21.5/- per share as is borne out from the documents filed by the petitioner along with its application under Section 17 of the Act. It is reiterated that the loan was repaid i.e. in April 2007 and the value of the shares as stated was not less than Rs. 21/- per share. However, on 01.07.2010 as per the data downloaded from the “moneystock” BSE website, the pledged shares were priced at Rs. 17 per share.

18. An affidavit dated 15.03.2023 has also been purported to be filed seeking to place on record the price of the pledged shares from time to time as reflected on the official website of BSE. It is also averred in the said affidavit that the pledged shares continued to be reflected on the records of the concerned depository participant of the respondent (claimant). Analysis and Conclusion

19. This Court is conscious of the limited scope of interference with arbitral awards in exercising jurisdiction under Section 34 of the Act. The law is well settled that an arbitrator is the final arbiter on factual issues. Further, the interpretation of the terms of the contract between the parties is within the domain of the arbitrator. While examining an arbitral award on the touchstone of Section 34 of the Act, it is impermissible for this Court to embark upon reappraisal of the factual and evidentiary aspects. Further, this court will defer to the arbitral award as long as the view taken by the arbitral tribunal is a possible view, even if it is not a plausible view.

20. Only if the award is so palpably perverse that it can be said that no reasonable person can arrive at the conclusion which the arbitrator has arrived at, would it be permissible to interfere with the impugned arbitral award in exercise of jurisdiction under Section 34 of the Act.

21. On appraisal of the impugned award on the touchstone of the settled parameters, the impugned award is liable to be set aside on the ground of being perverse and being vitiated by patent illegality for the reason that there is a direct contradiction between the findings rendered in the impugned arbitral award vis-a-vis claim no.2 and claim no.3.

22. As is evident from a perusal of the findings rendered in the impugned award in respect of claim no. 2, it has been categorically held that:-

(i) the respondent (claimant) has failed to prove that the market value of the concerned shares was Rs. 21/- per share as on 26.04.2007.

(ii) That the value of shares was Rs. 17/- per share at the time of filing of the statement of claim.

23. It has been categorically found that “neither the value of shares at the time of pledge is proved nor at the time of filing this claim petition”. Further, with regard to the charts downloaded from the internet sought to be relied upon by the petitioner before the Ld. arbitrator and also sought to be relied upon in affidavit dated 16.03.2023 filed in the proceedings, it has been held in the impugned award that “the charts downloaded from internet is no evidence in the eyes of law, nor can it be relied upon”.

24. The respondent (claimant) challenged the aforesaid findings contained in para 22 and 23 of the impugned award, which are comprehensively rejected by this Court vide judgment/order dated 14.05.2012 in O.M.P NO. 459/2012 in the following terms:-

The aforesaid findings have admittedly attained finality.

25. Thus, the value of the pledged shares as asserted by the respondent (claimant) vis. Rs. 21/- per share as on 26.04.2007 and Rs.17/- per share (at the time of filing of statement of claims) was not accepted in the impugned award while adjudicating claim no.2. However, in an utter contradiction of the said findings, the impugned award assumes the value of these shares to be to the tune of Rs. 17/- per share, for the purpose of adjudication of claim no.3. Furthermore, for the purpose of adjudicating claim no.3, the impugned award does not even mention the date on which it is presuming the value of each share to be Rs.17/- per share. In the statement of claim as filed by the respondent (claimant), claim no.3 was advanced on the basis that the average price per share was Rs. 21/- as of 26.04.2007 and it was on this basis that it was sought to be asserted that the respondent (claimant) was deprived from utilizing the amount representing the value of shares (on the basis that the value of shares stood at Rs. 21 per share as on 26.04.2007). Even the respondent (claimant) did not assert that the value of the shares for the purpose of claim no.3 should be taken to Rs. 17 per share.

26. Thus, the impugned award, while adjudicating claim no.3 proceeds in a manner which is at variance with the case set up by the respondent (claimant) itself. This is apart from the aspect of direct contradiction between the findings in respect of claim no.3 vis-a-vis findings qua claim no.2.

27. The attempt on the part of the respondent (claimant) to file an affidavit in these proceedings, without taking leave of this Court, purportedly for the purpose of establishing the value of shares, is also in contravention of the judgment of the Supreme Court in M/s Alpine Housing Development Corporation Pvt. Ltd. Vs. Ashok S Dhariwal and Others[2] wherein it has been held as under:- “The ratio of the aforesaid three decisions on the scope and ambit of Section 34(2)(a) pre-amendment would be that applications under Section 34 of the Act are summary proceedings; an award can be set aside only on the grounds set out in Section 34(2)(a) and Section 2023 SCC OnLine SC 55 34(2)(b); speedy resolution of the arbitral disputes has been the reason for enactment of 1996 Act and continues to be a reason for adding amendments to the said Act to strengthen the aforesaid object; therefore in the proceedings under Section 34 of the Arbitration Act, the issues are not required to be framed) otherwise if the issues are to be framed and oral evidence is taken in a summary proceedings) the said object will be defeated; an application for setting aside the arbitral award will not ordinarily require anything beyond the record that was before the arbitrator) however) if there are matters not containing such records and the relevant determination to the issues arising under Section 34(a), they may be brought to the notice of the Court by way of affidavits filed by both the parties) the crossexamination of the persons swearing in to the affidavits should not be allowed unless absolutely necessary as the truth will emerge on the reading of the affidavits filed by both the parties. Therefore) in an exceptional case being made out and if it is brought to the court on the matters not containing the record of the arbitrator that certain things are relevant to the determination of the issues arising under Section 34(2)(a), then the party who has assailed the award on the grounds set out in Section 34(2)(a) can be permitted to (i.e. affidavit in the form of evidence. However, the same shall be allowed unless absolutely necessary."

28. In any event, the failure on the part of the respondent (claimant) to establish the price of shares in the arbitration proceedings stands conclusively affirmed by a coordinate Bench of this Court while deciding the respondent/claimant‟s petition against the very same award. As noticed hereinabove, the Coordinate Bench of this Court has taken a view that the petitioner failed to discharge the burden of proof in the arbitration proceedings to establish and prove the value of shares (Rs. 21/- per share as on 26.04.2007 and Rs. 17/- per share on the date of filing of statement of claim).

29. In light of the aforementioned inherent inconsistency and internal contradiction within the award, this Court is constrained to set aside the award qua claim no.3.

30. The law is well settled that an award suffering from such internal contradictions would be perverse and patently illegal. The Supreme Court in McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181, has held as under:- “Vis-à-vis the duty to assign reasons

55. Another important change which has been made by reason of the provisions of the 1996 Act is that unlike the 1940 Act, the arbitrator is required to assign reasons in support of the award. A question may invariably arise as to what would be meant by a reasoned award.

56. In Bachawat's Law of Arbitration and Conciliation, 4th Edn., pp. 855- 56, it is stated: “… „Reason‟ is a ground or motive for a belief or a course of action, a statement in justification or explanation of belief or action. It is in this sense that the award must state reasons for the amount awarded. The rationale of the requirement of reasons is that reasons assure that the arbitrator has not acted capriciously. Reasons reveal the grounds on which the arbitrator reached the conclusion which adversely affects the interests of a party. The contractual stipulation of reasons means, as held in Poyser and Mills' Arbitration. In re, „proper, adequate reasons‟. Such reasons shall not only be intelligible but shall be a reason connected with the case which the court can see is proper. Contradictory reasons are equal to lack of reasons. The meaning of the word „reason‟ was explained by the Kerala High Court in the contest of a reasoned award…. „Reasons are the links between the materials on which certain conclusions are based and the actual conclusions….‟ A mere statement of reasons does not satisfy the requirements of Section 31(3). Reasons must be based upon the materials submitted before the Arbitral Tribunal. The Tribunal has to give its reasons on consideration of the relevant materials while the irrelevant material may be ignored…. Statement of reasons is a mandatory requirement unless dispensed with by the parties or by a statutory provision.”

57. In Konkan Rly. Corpn. Ltd. v. Mehul Construction Co. this Court emphasised the mandatoriness of giving reasons unless the arbitration agreement provides otherwise.”

31. In Union of India v. V. Pundarikakshudu and Sons, (2003) 8 SCC 168, it has been held as under:-

32. Recently, this court in Jaiprakash Associates Ltd. v. NHPC Ltd., 2023 SCC OnLine Del 3295, set aside an arbitral award containing contradictory findings. The relevant extracts of the said judgment are as under:-

33. In the circumstances, the impugned award is set aside to the extent of the findings/directions rendered in respect of claim no.3 in the arbitration proceedings.

34. The present petition, along with the pending application/s stand disposed of in the above terms.

DECEMBER 15, 2023/AT SACHIN DATTA, J