HC petition alleges NSE arbitrator’s misconduct

AUG 27: The Bombay High Court has admitted a petition alleging misconduct by an arbitrator of the Arbitration Cell of the National Stock E...

AUG 27: The Bombay High Court has admitted a petition alleging misconduct by an arbitrator of the Arbitration Cell of the National Stock Exchange for favouring a leading stock broker.

According to the petitioner, disputes and differences arose between the parties about the amount payable under various bills under the vallan system. M/s Viraj alleged that M/s Motilal had manipulated, fabricated and forged bills and on the basis of that was foisting a claim four times more than shown in their books. M/s Motilal claimed that a sum of Rs 21,66,489/- lakhs was due to them whereas the sub-brokers countered that around Rs 5,80,978/-lakhs was payable. Viraj also alleged that Motilal had illegally terminated the sub-broker agreement and withdrawn the NEAT and BOLT facilities. Motilal filed an arbitration application on April 19, 1999. The matter was referred to the Arbitration Cell of the National Stock Exchange (NSE) under the arbitration of V Sundaram.

After arguments concluded, the arbitrator directed the petitioner to submit written arguments with express communication to the advocate of the petitioner that the written arguments was for his exclusive consideration to determine the issue in question. However after the petitioner submitting their written arguments on November 12, 1999 a copy of the same was handed over to Motilal in order to enable them to deal with the same. On January 20, 2000 delivering the award Sundaram held that M/s Motilal is entitled to receive a sum of Rs 21,66,489 lakhs as claimed by it.

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The petitioner challenged the award mainly on the ground that the award was obtained due to M/s Motilal’s clout in the National Stock Exchange. The matter was argued by Vibhav Krishna on behalf of Viraj. The sub-broker alleged that the award given by arbitrator Sundaram is "ex-facie, biased and in favour” of the member broker and “has shown a leaning bias towards the member broker." The arbitrator had “misconducted” himself since he provided the member broker an opportunity to deal with written arguments of the sub-broker. Even a copy of the written arguments was not furnished to the petitioner, the petition said.

The petitioner’s further said arbitrator had failed to consider that the M/s Motilal has not complied with Securities Exchange Board of India guidelines and had failed to produce contract notes duly acknowleged by the sub-brokers. Also that the arbitrator had completely ignored the deliberate and willful violation of NSE guidelines by providing terminal facilities without obtaining permission from NSE. The petitioner submitted that the “entire award is based on conjectures, surmises without any evidence of proof with a sole endeavour and malafide intent to somehow award the claim” to M/s Motilal. Contending that the arbitrator misconducted himself in the arbitration proceedings, the petitioners have sought the interference of the High Court to set aside the award. The petition has been admitted and made returnable after six weeks.

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