- 1 - NC: 2025:KHC:11500 MFA No. 8640 of 2016 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 19THDAY OF MARCH, 2025 BEFORE THE HON'BLE MR JUSTICE HANCHATE SANJEEVKUMAR MISCELLANEOUS FIRST APPEAL NO.8640 OF 2016 (AA) BETWEEN: M/S. ICICI SECURITIES LIMITED A COMPANY REGISTERED UNDER THE COMPANIES ACT, 1956HAVING ITS CORPORATE OFFICE AT SHREE SAWANKNOWLEDGE PARK, GROUNDFLOOR, PLOT NO D – 507, TTC INDUSTRIAL AREA, MIDC THURBE, NAVI MUMBAI – 400705 REPRESENTED BY ITS AUTHORIZED REPRESENTATIVE & CHIEF MANAGER ABHIJIT BHANUSHALI S/O VILASBHANUSHALI AGED ABOUT 39 YEARS …APPELLANT (BY SRI. CHANDRASHEKAR. S, ADVOCATE FOR SRI. VIVEK HOLLA, ADVOCATE) AND: 1. V.V. LAKSMINARAYANAN S/O SRI VIJAYARAGHAVANVELLUR, AGED ABOUT 70 YEARS A-5, 514, GHATAPRABHA, NATIONAL GAMES VILLAGE, KORAMANGALA BANGALORE – 560047. 2. G PRABHAKAR THE ARBITRATION DEPARTMENT, BOMBAY STOCK EXCHANGELIMITED, Digitally signed by RAMYA D Location: HIGH COURT OF KARNATAKA - 2 - NC: 2025:KHC:11500 MFA No. 8640 of 2016 REGIONAL OFFICE – SOUTH, NO 4,VIJAYA TOWERS, 3RDFLOOR,OPP HOTEL PALM GOVE, KODAMBAKKAM HIGH ROAD, CHENNAI – 600034. 3. T.S. GOPINATHAN THE ARBITRATION DEPARTMENT BOMBAY STOCK EXCHANGELIMITED, REGIONAL OFFICE SOUTH NO 4,VIJAYA TOWERS, 3RDFLOOR,OPP HOTEL PALM GOVE, KODAMBAKKAM HIGH ROAD, CHENNAI – 600034. 4. P.R.ARULOLI THE ARBITRATION DEPARTMENT BOMBAY STOCK EXCHANGELIMITED, THE ARBITRATION DEPARTMENT BOMBAY STOCK EXCHANGE LIMITED, REGIONAL OFFICE SOUTH NO 4, VIJAYA TOWERS, 3RD FLOOR, OPP HOTEL PALM GOVE, KODAMBAKKAM HIGH ROAD, CHENNAI – 600 034. 5. THE ARBITRATION DEPARTMENT BOMBAY STOCK EXCHANGE LIMITED, REGIONAL OFFICE SOUTH NO 4, VIJAYA TOWERS, 3RD FLOOR, OPP HOTEL PALM GOVE, KODAMBAKKAM HIGH ROAD, CHENNAI – 600 034. 6. MR T N C KAUSHIK HON’BLE SOLE ARBITRATOR CHENNAI …RESPONDENTS (R1 IS SERVED AND UNREPRESENTED; V/O DATED 05.01.2019, NOTICE TO R2 TO R6 ARE DISPENSED WITH) - 3 - NC: 2025:KHC:11500 MFA No. 8640 of 2016 MFA FILED U/O.37(1)(C) OF THE ARBITRATION AND CONCILIATION ACT, AGAINST THE JUDGMENT AND AWARD DT.14.09.2016 PASSED ON A.S.NO.77/2012 ON THE FILE OF THE VI ADDITIONAL CITY CIVIL & SESSIONS JUDGE, BENGALURU CITY (CCCH-11), DISMISSING THE ARBITRATION SUIT FILED U/S.34 OF THE ARBITRATION AND CONCILIATION ACT. THIS APPEAL, COMING ON FOR FINAL HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE HANCHATESANJEEVKUMAR ORAL JUDGMENT The plaintiff in arbitration suit in A.S.No.77/2012 has preferred this appeal being aggrieved by the judgment and decree dated 14.09.2016 passed in A.S.No.77/2012 by the VI Additional City Civil and Sessions Judge, Bengaluru City (hereinafter referred to as ‘the Trial Court’ for short) thereby, the arbitration suit filed by the plaintiff is dismissed. 2. For the sake of convenience and easy reference, the parties are referred to as per their rankings before the District Court. - 4 - NC: 2025:KHC:11500 MFA No. 8640 of 2016 3. Defendant No.1 opened a 3 in 1 account with the plaintiff thorough sub broker one Mr. Rajeev Bhansal, on 27.03.2009. Defendant No.1 transferred a part of his portfolio maintained with M/s. Share Khan Ltd., to his demat account with the plaintiff. On 31.03.2009, the shares were sold and the amount was credited to the defendant’s linked account. When this being the fact, the defendant claims that he had not given any instructions to the sub broker to sell his shares or deal in future and options and that these transactions were carried out by the sub broker without his instructions and knowledge. When the Income Tax Department asked for returns, the defendant came to know all these facts and he subsequently represented these facts to the plaintiff and asked for redress. At the time of opening 3 in 1 account, the defendant had issued a blank uncrossed cheque to the sub broker to meet the expenses of account opening and other charges, which was issued against his linked account with ICICI Bank. - 5 - NC: 2025:KHC:11500 MFA No. 8640 of 2016 4. On 02.04.2009, the sub broker utilized the said cheque to withdraw Rs.1,00,000/- in cash from the linked account. It was observed that the Bank did not follow the due procedure in making payments to third parties. Therefore, the appellant/plaintiff allegedly failed to exercise due diligence and follow procedure, resulting in losses to defendant No.1. Consequently, defendant No.1 has preferred arbitration reference with defendant No.5/Bombay Stock Exchange Limited and the arbitrator has passed award on 15.02.2012 holding that the plaintiff was not responsible for the personal transactions entered into by the sub broker. However, it was observed that the plaintiff ought to have issued contract notes in physical form and taken acknowledgment from the defendant as he had not given any email ID. The plaintiff without authority used dummy email IDs for sending the contract notes and did not comply with by law No.247A and the regulation of exchange notice No.4914/96 dated 13.08.1996 and held that the plaintiff should reinstate the shares or pay the value of the shares to the respondent within four weeks - 6 - NC: 2025:KHC:11500 MFA No. 8640 of 2016 from the receipt of the order. Against which, the plaintiff has preferred an arbitral appeal No.12A/2012 before the appellate authorities and the appellate authorities had confirmed the order passed by the sole arbitrator, directing the plaintiff herein to remit a sum of Rs.4,65,000/- to the defendant along with simple interest at the rate of 8% p.a. from 15.02.2012 till realization. 5. Being aggrieved by this, the plaintiff herein has preferred the arbitration suit under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act, 1996’ for short) before the District Court and the learned District Judge has dismissed the arbitration suit. Against which, the plaintiff has preferred this appeal. 6. Learned counsel for the appellant/plaintiff submitted that the plaintiff is not responsible for the transactions between defendant No.1 and the sub broker, as the sub broker’s actions were beyond the plaintiff’s control. Further argued that the arbitrator has not - 7 - NC: 2025:KHC:11500 MFA No. 8640 of 2016 appreciated the evidence and facts correctly, resulting into passing of erroneous award. It was contended that when defendant No.1 issued a self cheque to honour the said cheque, the plaintiff took all necessary recourse and exercised due diligence thereby committing no lapse. However, the arbitrator and the District Court failed to consider this aspect. Further the District Court also has not appreciated this fact correctly while considering the suit therefore, prays to make interfere with the orders passed by the arbitrator and District Court and allow the appeal. 7. Though the notices were served to the respondents, they remained absent and unrepresented. 8. It is undisputed fact that defendant No.1 has opened a demat account with the plaintiff/M/s. ICICI Securities Ltd., Defendant No.1 had transferred 56 scrips from the plaintiff to defendant No.5 through sub broker one Rajeev Bhansal. When the account was opened, the - 8 - NC: 2025:KHC:11500 MFA No. 8640 of 2016 sub broker has requested that the cheques be issued without specifying the amount, citing lesser expenses for photocopying transportation to the bank etc. It is stated that defendant No.1 had no intention of engaging in trading and therefore did not pay attention to the demat account, believing that nothing could happen to the scrips. However, when the Income Tax department requested particulars of all transactions, defendant No.1 had come to know that he had zero stock in his balance as the sub broker had sold all the shares without his authority and he had not withdrawn the sale proceeds. Furthermore, the sub broker had withdrawn a sum of Rs.1,00,000/- using the blank cheques. 9. When this being the fact, the Arbitration Tribunal held that the plaintiff had caused losses to defendant No.1 and therefore allowed the arbitration petition in part. Upon considering the evidence on record, it is clear that defendant No.1 dealt with the sub broker by issuing cheques in his personal name for investing in gold - 9 - NC: 2025:KHC:11500 MFA No. 8640 of 2016 bonds and also issued blank cheques. At the same time, defendant No.1 dealt with sub broker as if he was dealing with the plaintiff/securities. Therefore, defendant No.1 brought to the notice of the appellant/plaintiff that the bounced cheques issued by the sub broker for personal transactions has made him to believe that after the sub broker’s death, the records were taken over by the appellant/securities. 10. Learned arbitrator has found that the impugned order of the Trial Court regarding book keeping, administration and procedural compliance prescribed by BSE as well as SEBI and the said document was listed out plenty of deficiencies in the sub broker’s office and none of them was owned by the sub broker. However, the appellant/plaintiff refused to take cognizance of this report just to avoid liability and thereby causing loss to defendant No.1. 11. Further, as per Section 34 of the Act, 1996, an award can be challenged and set aside on the grounds - 10 - NC: 2025:KHC:11500 MFA No. 8640 of 2016 enumerated therein. It is not the case of the appellant/plaintiff that the arbitral award violates the principle of natural justice. Therefore, the scope of interference with the arbitral award under Section 34 of the Act, 1996, is very minimal. Therefore, award passed by the arbitrator and the judgment and award passed by the learned District Judge do not suffer from any infirmity as per Section 34 of the Act, 1996. Hence, there are no grounds to interfere with the judgment and award passed by the learned District Judge. The appellant/plaintiff failed to follow due procedures when the cheque amount exceeds Rs.1,00,000/-, the bank typically calls the account holder on the register number to confirm the transaction. However, in this case, the appellant/plaintiff sent emails to a fake email address that was not defendant No.1 actual email ID. The arbitrator found that the appellant/plaintiff had added bogus email addresses for all the customers. Therefore, the arbitrator was correct in directing the appellant/plaintiff to reinstate the shares to defendant No.1’s account. Learned District Judge also found no good - 11 - NC: 2025:KHC:11500 MFA No. 8640 of 2016 grounds to interfere with the award passed by the arbitrator. As the District Judge is not appellate authority to sit over the award passed by the Arbitrator to find out the veracity of the order, their role is limited to acting under Section 34 of the Act, 1996, to interfere with the Arbitral award otherwise not. 12. Therefore, upon considering the reasons assigned by the learned District Judge, there is no need to make interfere with the judgment and award passed by the learned District Judge. Hence, the appeal is liable to be dismissed. 13. Accordingly, the appeal is dismissed. SD/- (HANCHATE SANJEEVKUMAR) JUDGE SRA List No.: 1 Sl No.: 44