Sharekhan Ltd. v. Arjav Jagannath Chakravarti

20. Reliance was placed by R[1] on the voice recording of 2.9.14 to prove pre-trade confirmation. The Ld. Arbitral Tribunal has rejected the same as of no use since it was made much after the last trade was done on 22.7.14 and when the entire capital of the Applicant was wiped out. Moreover the recording was not about any particular trade but general in nature.

21. The Appellant Original R[1] Broker has referred to SMS, email and confirmation ledger to show that the Applicant was aware of the trading carried out in his account. But the same are post trade. The Appellant, has not been able to show any evidence that the Appellant Broker had been given prior authorization for carrying out trades in his (Client's) account. According to the Client Registration form and the Power of Attorney in favour of the Appellant, the Broker could operate the demat account and transfer shares from or to the account of the Applicant only on the basis of instruction given by the Applicant. Therefore express instructions/authorization from the Applicant had to be obtained by the Broker before carrying out any trading in the Applicants account. The Appellant Broker not only acted contrary to the requirements set out in the said documents but also disregarded the guidelines issued by SEBI. The Appellant Broker was aware that obtaining the prior instruction of the Applicant R[1] was mandatory for carrying out any trades and the Appellant in fact has stated that all trades were carried out upon instruction of the Applicant. The Applicant has failed to produce any evidence that the trades were carried out with prior authorization of the Applicant. The Ld. Arbitral Tribunal was fully justified in coming to the conclusion that the trades carried out in the Applicants account were unauthorized and in holding the Appellant broker responsible for the loss occasioned by the Applicant. The Appeal thus needs to be rejected. [Emphasis Supplied]

15. In sharp contrast, at the MCX, the unanimous appellate award holding against Arjav underlines the importance of the post-transaction confirmation of trades and contract notes, to hold that Arjav’s case of not having authorised the trades is unbelievable. This was precisely the stance of the dissenting arbitrator at appellate stage at the NSE. In this award, the recorded voice conversation is considered relevant and held as a pointer to Arjav’s awareness of the trades. The following extracts would be adequate to bear this out:-

5) We, the Panel of Arbitrators heard the Appellant's Advocate Mr.Rohit Gupta and Advocate Mr. Deepak Sharma, who represented the Respondent No.1 on 7th December, 2016. We also heard Respondent No. 2 and Respondent No. 3 who made few oral submissions denying the contentions of the Appellant. They also filed short reply in writing. We scrutinized the entire record and proceedings and the impugned Award dated 5th September, 2016. The said Award is a reasoned well-written Award which has taken care of all the contentions of the parties. We do not find any error in it. We are also not impressed by the arguments of the Appellant's Advocate or by the grounds of appeal which are general in nature and are repetitive. The transcript of the vice recording indeed exposes the falsity of the Appellant's claim and nails him. The conversation in the said transcript between the Appellant and Respondent's employee is quite interesting. It's authenticity and contents are not denied by the Appellant nor has he said that the voice answering the questions was not his. With respect to ECN also the Appellant has changed his version. Initially he has stated that he did not receive any contract note; later on however he has made a statement that he did not receive contract note with respect to all the transactions. All along he has pleaded his so called ignorance and naivety in understanding dealings; but he cannot use them either as a shield or as a weapon. In the financial world, one has to be alert and cautious otherwise he has to blame himself for the outcome. His grievance about not being able to file written submissions is also not worth taking cognizance. Written submissions are not mandatory. They are not the pleadings which envisage only a plaint, reply and rejoinder, if required. If the defendant is not allowed to file response/reply, it may result in failure of justice that is not the case here. Written submissions may sometimes aid the Judge to write his judgement if facts are very complex and complicated. In fact, sometimes they are unwelcome since there is apprehension that parties may make certain submissions which are not part of the pleadings and may interpolate them in the written submission. In fact in the present Appeal, the Appellant has filed Rejoinder when it is not the practice to do so.

16. This dichotomy in assessing evidence in adjudicating on the same elements of circumstantial evidence is clearly exceptionable. What had a ring of confidence for the learned arbitrator when interpreting the same evidence in the appellate arbitral proceedings at the NSE sounded hollow to the very same arbitrator when he sat in a different combination at the appellate arbitral proceedings at MCX. The resounding endorsement at the MCX of the case against Arjav is in fact the stance taken by the dissenting arbitrator at the NSE. The diametrically opposing views taken by the learned arbitrator who was common to both is fatal to the two awards. If his stance at the MCX appellate arbitral proceedings were to be applied at the NSE, the dissenting award would have hypothetically become the majority award. Yet, one cannot accept one version of his adjudication and reject the other, simply because the Section 34 Court is not an appellate court but a court that looks only to the limited grounds statutorily stipulated, including perversity and patent illegality.

17. This anomalous position simply does not permit acceptance of either of these awards. Each is polluted by the diametrically opposing view taken by a member of the arbitral tribunal when acting as a member in the other arbitral tribunal. Worse, the two diametrically opposing views have been expressed within a span of less than two weeks of each other.

18. The ledger for the trades on the NSE and the BSE is one and the same, considering that the trades attributed to Arjav were executed by Sharekhan (as opposed to Sharekhan Commodities on the MCX). I am unable to accept the feeble attempt by Learned Senior Counsel for Arjav to indicate that one of the two views could be upheld by this Court with that view being applied across the board.

19. The perversity obtaining from the same arbitrator taking diametrically opposite views in two contemporaneous arbitral proceedings cannot be countenanced. Proceedings under Section 34 not being appellate proceedings, this Court cannot delve into a reappreciation of evidence to substitute the view of the arbitrator with its view. It is trite law that the parameters of review are narrow. One of the prime factors to consider when assessing a challenge to an arbitral award is whether any reasonable man could have come to the view taken by the arbitral tribunal. There is no prospect for holding that a reasonable arbitrator could have taken two diametrically opposite views on the same fact pattern within a span of two weeks.

20. I have also given my consideration to whether the arbitral award at the BSE could be considered without regard to the problematic situation that has been posed by the awards passed at the NSE and MCX. I am afraid all the arbitral awards that are subjected to challenge in the captioned proceedings would need to be quashed and set aside. The proceedings at the BSE present another complexity. The chartered accountant who filed Arjav’s tax returns (the husband of the authorised person of Sharekhan and Sharekhan Commodities) had been made a respondent in all the three arbitral proceedings. At the BSE, he is seen to have initially refuted the allegation that he executed the sale of the corporate bonds without instructions from Arjav, but in the next round, he appears to have helpfully led evidence that he had indeed carried out trades without the knowledge of Arjav. This change of stance is not dealt with at all in the BSE appellate award.

21. Instead, the BSE appellate award holds that the only trade on the BSE was to sell the bonds that had been acquired by Arjav, to address the debit balance arising out of the trades in securities on the NSE. Therefore, the appellate arbitral tribunal held that the sale of the bonds were unauthorised and ought to be reversed. The following extracts are noteworthy:-

15. Though the R-3 remained absent at the hearing of the lower bench remained present in this hearing and pleaded that there were no transactions in the account of the applicant in BSE exchange except the sale of bonds which are in dispute; and the same have been executed by me without any instructions from the appellant.

16. The respondents (R-1) have relied on the well accepted principles of “Man can lie, but documents Can't lie” however the following documents presented by R-1 is against what they have relied and stated in their defence:

R-1, could not reconcile the credit balance of Rs.6812 stated by R-1 in spite of sufficient time being provided to them during hearing

17. There is no reason assigned by the lower bench as to why the sale of PSU bonds took place on BSE exchange on behalf of the appellant and the reasons for the same. R-1 failed to substantiate these facts; however R-3 confirmed the said sale by him to create the credit balance in the account of appellant to be adjusted against the debit balance of the appellant in other exchange and hence we are of the opinion the sale of bonds on the floor of BSE exchange was unauthorised and without the consent of the appellant. Hence the appeal is allowed.

22. What is evident from the foregoing is that the trades on the NSE form an integral element of the account of Arjav in Sharekhan’s books. I have dealt with above, with the perversity in the interpretation of the trades on the NSE. If those trades on the NSE were to be held as being validly executed, the sale of the bonds on the BSE would get justified, with the two counterparties being the same – Arjav and Sharekhan. If such trades on the NSE were to be held as being unauthorised, there could be consequences for whether the sale of the bonds on the BSE was justified. More importantly, the arbitral tribunal of the first instance at the BSE has noticed that the bonds were sold on May 16, 2013 and sms alerts of the same had indeed been sent to Arjav.

23. More importantly, the arbitral award of the first instance at the BSE records that the chartered accountant had strongly refuted the allegations against him – that he had carried out trades on Arjav’s behalf without authorisation. However, the very same person who refuted the allegation of trading without authorisation confirmed in appeal that the trades were indeed executed by him and without authorisation. At the least, the appellate arbitral tribunal ought to have dealt with this change of heart and analysed it. It simply accepts the new position. On the BSE, there is no reference to the recorded voice conversation that were analysed at the NSE and the MCX in diametrically opposite directions. All in all, the three awards are riddled with contradictions – primarily by a learned arbitrator who was a member of the appellate arbitral tribunals at the NSE and the MCX giving contradictory findings in assessing the very same evidence, all within a span of less than two weeks. This infects the proceedings at the BSE, where again, the appellate tribunal has taken a stand diametrically opposite to the arbitral tribunal of the first instance, in an implausible manner without explaining why the complete change of stance by the chartered accountant should be accepted.

24. I have no hesitation in holding that all the three awards have been rendered implausible. It is not possible to segregate them from one another to save one award from the infirmities of the other awards. All the three arbitral awards deserve to be quashed and set aside.

25. When the matter was heard on September 11, 2025, I found that it had not occurred to either side that there had been a common arbitrator in the two arbitral tribunals that contemporaneously conducted proceedings to deliver opposite outcomes. I put it to the parties, considering the sheer length of time for which these proceedings had been pending if they would be willing to proceed before a sole arbitrator who is a domain expert in the field of securities trading, to be appointed by consent in the course of disposal of these petitions. Learned Counsel sought time to take instructions. On September 16, 2025, the Learned Counsel for the parties jointly submitted that they had instructions to proceed to arbitration by a sole arbitrator whose identity too they had consensus on (Justice (Retd.) Akil Kureshi) to take over the entire record as obtaining in the three strands of arbitration, with only the final hearing in the matter to be conducted to adjudicate the matter on the basis of the completed record.

26. In these circumstances, an arbitral tribunal is constituted by consent of the parties in the following terms: A] Justice Akil Kureshi, Former Chief Justice of Rajasthan and Tripura High Court and former judge of this Court, is hereby appointed as the Sole Arbitrator to adjudicate upon the disputes and differences between the parties covered by this Application; Office Add- 617, Raheja Chambers, Nariman Point, Mumbai. Email id – akil.kureshi@gmail.com B] A copy of this Order will be communicated to the Learned Sole Arbitrator by the Advocates for the Petitioner within a period of one week from the date on which this order is uploaded on the website of this Court. The Petitioner shall provide the contact and communication particulars of the parties to the Arbitral Tribunal along with a copy of this Order; C] The Learned Sole Arbitrator is requested to forward the statutory Statement of Disclosure under Section 11(8) read with Section 12(1) of the Act to the parties within a period of two weeks from receipt of a copy of this Order; D] The parties shall appear before the Learned Sole Arbitrator on such date and at such place as indicated, to obtain appropriate directions with regard to conduct of the arbitration including fixing a schedule for pleadings, examination of witnesses, if any, schedule of hearings etc. At such meeting, the parties shall provide a valid and functional email address along with mobile and landline numbers of the respective Advocates of the parties to the Arbitral Tribunal. Communications to such email addresses shall constitute valid service of correspondence in connection with the arbitration; E] All arbitral costs and fees of the Arbitral Tribunal shall be borne by the parties equally in the first instance, and shall be subject to any final Award that may be passed by the Tribunal in relation to costs.

27. Needless to say, nothing contained in this order is an expression of an opinion on merits of the matter or the relative strength of the parties. All issues on merits are expressly kept open to be agitated before the arbitral tribunal appointed hereby. This judgement is limited to quashing and setting aside each of the impugned arbitral awards for the reasons set out above.

28. It shall be open to the Learned Arbitral Tribunal to stipulate an explicit form of an arbitration agreement for the parties to execute, considering that the original track of arbitration in the matter commenced as statutory arbitration, under the bye laws of the respective exchanges. The parties shall extend all cooperation to the Learned Arbitrator to expedite the hearing and final disposal of the proceedings, considering that no fresh pleadings or applications are necessary. Each party waives any right to file fresh pleadings or applications, considering the efflux of time (transactions having taken place in 2012-2013, and the awards having been passed in 2016-2017). The Learned Arbitral Tribunal is requested to consider the submissions of the parties at the earliest and issue appropriate instructions on how to proceed further and conclude the matter expeditiously.

29. Any monies deposited by either party before this Court or before the Stock Exchange shall continue to remain deposited, and shall abide by the outcome in the arbitration proceedings as hereby agreed upon by the parties.

30. The Petitions are finally disposed of in the aforesaid terms, setting aside all the three impugned arbitral awards. Any interim applications filed in any of them would also stand disposed of.

31. All actions required to be taken pursuant to this order, shall be taken upon receipt of a downloaded copy as available on this Court’s website. [SOMASEKHAR SUNDARESAN, J.]