BEFORE M.V.BADRINATH (SOLE ARBITRATOR) In the matter of Arbitration under the Bye-Laws, Rules and Regulations of the National Stock Exchange of India Ltd. A.M.NO.CM/C-0021/2009 BETWEEN APPLICANT RESPONDENT (Trading Member) (Constituent) M/s India Infoline Ltd., Mr.Mahaveer Naginchand Mehta 75, Nirlon Complex 1 st Floor, Sutankar bldg., Off Western Express Highway, Goregaon(E) Behind N.P.Building, R.C. Nagar, Mumbai-40 063. Belgaurm, Karnataka-590008
:: 2 :: WHEREAS by a letter No. NSE/CRO/ARBN/09-88198-6 dated March 25, 2009, the National Stock Exchange of India Ltd., Chennai,(NSE), conveyed that I have been selected as Arbitrator in the Arbitration Matter referred to above and had also forwarded the documents connected therewith. AND WHEREAS the claim averments are as follows: I. PARTIES TO THE ARBITRATION MATTER The Applicant for the Arbitration, M/s India Infoline Ltd. (IIL) (Trading Member) is having its registered office at No.75, Nirlon Complex, Off Western Express Highway, Goregaon (E), Mumbai 400 063 with SEBI Regn. No. INF: 231097537. Mr. Mahaveer Naginchand Mehta, residing at 1 st Floor, Sutankar bldg, Behind N.P.Building, R.C.Nagar, Belgaum, Karnataka-590 008 is a constituent of IIL.
:: 3 :: II. STATEMENT OF CASE 2.1 In its statement of case, the Applicant has mentioned that the Respondent, after execution of the registration form and other documents, started placing orders for sale and purchase of shares and the Applicant executed all the transactions through the online trading terminal. The ledger account of the Respondent was showing a debit balance of Rs.1, 20,525.51 for NSE transactions recoverable from the Respondent. As the Respondent was not paying the dues, the Applicant followed up the matter by sending reminders. Even after receipt of notice dated 29 th August 2008 through its counsel calling upon the Respondent to pay the outstanding amount, he has failed and neglected to pay the amount. 2.2 The Respondent, in its reply dated Nil received in NSE on 12 th March 2009 has stated that the claim amount has arisen as delayed payment charges levied on the outstanding balance of Rs.7,96,392.72 in his BSE ledger account which is in dispute with the Arbitration Committee of the BSE. After an award is passed in that arbitration case only proceedings can be initiated in the NSE case. III. CLAIM AMOUNT BY THE APPLICANT 3.1 The Applicant has lodged a claim of Rs.1,20,525.51 together with interest @ 18% p.a. from 04-01-09, cost of the proceedings and any other relief. IV. ARBITRATION HEARINGS 4.1 On 21 st May 2009, the initial hearing was posted when the Applicant s representative Mr. G.G.Pandiyan appeared while the Respondent was himself present. Both the Applicant and the Respondent made additional submissions. The Applicant in its additional submissions stated that the Respondent had signed an agreement for maintaining combined ledger of his accounts and with regard to the delayed payment charges, the same was on the net debit balance considering the combined balance of both NSE and BSE transactions in the Respondent s account. After bifurcation of the charges relating to the two exchanges, the claim application had been filed in both the exchanges. The claim amount in the current case related to NSE only and therefore, the claim be allowed. 4.2 The Respondent in his additional submissions has denied having received any contract note or ledger from the Applicant on his email ID. He saw them only along with the arbitration notices sent to him. In the Account Opening form his email ID has been mentioned as squarecut_veer@yahoomail.com instead of yahoo.co.in and therefore the contract notes and ledger statements were not reaching him. Despite his telling that he would fill up the formats, the marketing personnel of the Applicant said that they would have the forms filled in and he should merely sign. Before the dispute date of 21-08-08, the BSE ledger had a credit balance of Rs. 68,519.43 and the NSE
:: 4 :: ledger a debit balance of Rs.62,328.14 and there was a net credit of Rs.6,281.29 and the debit balance of NSE should have been adjusted against the available credit. A dispute in the BSE has gone to the arbitration and hearing is yet to take place. If the debit balance in the NSE had been adjusted, there would not have been any penal interest and therefore the outcome of the BSE arbitration proceedings only would be decisive. 4.3 To specific questions, the Respondent replied that he was trading in the cash segment only in NSE and was doing online trading and he was assigned the nearest Belgaum branch. He was doing the trades online and he was not aware whether it is under BSE or NSE since he was not getting the contract notes. He added that he started trading in 2007 and stopped on 21-08-08. Since the additional submissions were made by them on the hearing day, they were advised to furnish their replies, if any, by 29 th May 2009 and it was decided to have an adjourned hearing. 4.4 In its additional submission dated 01-06-09, the Applicant has pleaded that the Respondent has not denied any trade/ transaction carried out in his account and he had raised the issue of non-receipt of contract notes. Since opening of the account in November 2007, he never complained about the contract notes. All the contract notes had been sent to his registered email ID. The KYC forms are normally filled in by the Applicant s office based on the details furnished by the constituents. As regards the separate accounts for BSE and NSE, they are maintaining two accounts and also a combined account as per the agreement. The claim relates to the dues in the NSE segment only. The question of adjusting the debit balance in the NSE segment with the credit in the BSE segment does not arise. Regarding the delayed payment charges, they are being charged on the unpaid balance as per the terms of the Agreement. Since the balance in respect of the amounts due in the NSE, it had no relevance with the other BSE transactions under arbitration separately and the application may be adjudicated for the NSE balance only. 4.5 During the hearing held on 22 nd June 2009, the authorized representative of the Applicant, Mr. Rajesh, Branch Manager, appeared while the Respondent was not present. The Applicant filed a letter dated 22 nd June 2009 stating that both the parties had arrived at a mutual settlement and furnished a copy of the agreement containing the consent terms. It has prayed for withdrawing with liberty to reopen the same in case of default in the payment and subject to the clearance of the postdated cheques by the Respondent. 4.6 In terms of the Deed of Consent Terms dated 16 th June 2009, there is a combined debit balance of Rs. 9,16, 918.23 (including the arbitration claim amount of Rs.1,20,525.51) in the NSE & BSE trading accounts of the Respondent as on the date of the Deed. Against the total amount of Rs.9,16,918.23 due for the trades done by the Respondent in the NSE and BSE, he had proposed to settle the claim in full and final settlement by paying an amount of Rs.3,50,000/- in four instalments. The Applicant has accepted the above proposal in full and final settlement of its claims and has agreed not to
:: 5 :: claim from the Respondent the difference between the claim amount and the settlement amount of Rs.3,50,000/-, withdraw the arbitration proceedings initiated in the NSE and BSE and not proceed against the Respondent in any court and not treat the Respondent as a defaulter. The Respondent had agreed to close the trading and demat accounts with the Applicant. In case of breach of the terms of the Agreement, the Applicant shall be entitled to recover the claim amount from the Respondent along with interest, costs, charges etc. V. AWARD ON CONSENT TERMS: 5.1 AND WHEREAS having fully examined and considered the Statement of Claim filed by the Applicant and all other correspondence, documents, and records concerning the said claim as also the arguments during the oral hearing and the Deed of Consent Terms executed by the Respondent and the Applicant before a Notary on 16 th June 2009, I, M.V.BADRINATH, ARBITRATOR, do hereby issue the following award on consent terms: ( i ) The Respondent would give a demand draft of Rs.2,00,000/- on 04-06-09 and three post dated cheques of Rs.50,000/- each dated 10 th of every month. ( ii ) On the 10 th of every month, the Respondent shall give a demand draft for Rs.50,000/- in exchange of the postdated cheques already deposited with the company for the next three months. ( iii ) In the event of the Respondent failing to give a demand draft on 10 th of every month, the Applicant shall deposit the post-dated cheque in its possession with the bank and in case of dishonour of the cheque, the Applicant will have the right to initiate necessary legal action including reviving the arbitration applications filed before the NSE & BSE. ( iv ) The Applicant shall have no claim over the Respondent after makes the payment as detailed above. 5.2 The Applicant to bear the costs. This Award is made and signed by me on the 3 rd day of July 2009 at Chennai. (M.V.BADRINATH) SOLE ARBITRATOR