Bangalore District Court
Icici Securities Limited vs Aradhana Batabyal on 17 January, 2025
KABC170016692023
IN THE COURT OF LXXXVII ADDL.CITY CIVIL &
SESSIONS JUDGE, BENGALURU (CCH.88)
Present: Smt. Roopa K.N., B.Sc., LL.B.,
LXXXVII Addl.City Civil &
Sessions Judge, Bengaluru.
Dated : 17th Day of January, 2025
Com.A.P.No.89/2023
PETITIONER/S 1. ICICI Securities Limited,
Through Authorised Representative,
Having Corporate / Communication
office at:
Shree Sawan Knowledge Park,
Plot # D-507,
ITC Industrial Area,
M.I.D.C., Turbhe,
Navi Mumbai - 400705.
(By Sri.RRT, Advocate)
-Vs-
RESPONDENTS 1. M/s.Aradhana Batabyal,
W/o Mr.Atanu Batabyal
R/o Flat 7C Vega Aquila Heights,
27 HMT Factory Main Road,
Jalahalli, Bangalore,
Karnataka - 560013.
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Com.A.P.89/2023
2. Mr.Soumyasis Banerjee,
S/o Mr.Bijoy Kumar Banerjee,
R/o 4 A/1, Mothilal Nehru Road,
Kolkata - 700019.
(By Sri.NB, Advocate)
Date of Institution of the suit 15-07-2023
Nature of the suit (suit on U/S 34 of The Arbitration
pronote, suit for declaration & Conciliation Act.
Possession, Suit for injunction
etc.)
Date of commencement of -
recording of evidence
Date on which judgment was 17-01-2025
pronounced
Total Duration Year/s Month/s Day/s
01 06 02
(ROOPA K.N.),
LXXXVII Addl.City Civil & Sessions Judge,
(Exclusive Dedicated Commercial Court)
Bengaluru.
:J U D G M E N T :
This Petition is filed by the petitioner under Sec.34 of
Arbitration and Conciliation Act, 1996 challenging the
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Com.A.P.89/2023
impugned award dated 23/03/2023 passed by the
appellate Arbitral Tribunal in Appeal
No.NSEBEN/0026541/2122/ISC/IGRP/ARB/APPL.
2. The parties are referred as per their original rank
before the arbitral tribunal for the sake of clarity.
3. The brief facts leading to filing of this petition are as
follows; It is the case of the petitioner that it is a registered
stock broker having membership with BSE Limited and
NSE and previously undertaking trade under the name of
ICICI Web Trade Limited which was later merged with ICICI
Brokerage Services Limited and further it changed to ICICI
Securities Limited. Respondent No.1 is a constituent who
has been trading since 2004 and opened 3 in 1 account
including bank and demat account with ICICI bank from
26/10/2015. Thus 3 in 1 account is a joint offering by
ICICI Bank integrates a trading account, bank account and
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Com.A.P.89/2023
demat account to provide online trading facility. The
relationship between petitioner and respondent No.1 herein
commenced upon execution of a margin trading account
dated 26/10/2015 and during the span of five years there
was active association between the petitioner and
respondent. In the said agreement terms and conditions
were clearly stipulated. Respondent No.1 being an
educated, literate individual who had several years of
experience in online trading was aware of trading
procedures, rules, risks, terms and conditions, SEBI and
NSC guidelines. Respondent No.2 applied to NSC and BSE
to get registered as an authorised person in December 2014
and he was appointed as an authorised person in January
2015. Respondent No.1 at the time of opening the 3 in 1
account requested for linking her demat account with the
trading account. The said demat account had
Rs.42,00,000/- as on 3/11/2015 and at the time of
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Com.A.P.89/2023
opening the said account respondent No.1 was provided
with user ID and password which were used by her for
trading account. She agreed to share the confidential login
in credentials across all forums during her trading.
Respondent No.1 herein gave complete authority to
respondent No.2 to sell and purchase shares on her behalf
and allowed him to make payment from her bank account
by providing necessary authentication. Respondent No.1
and 2 were together agreed to their own professional set up
under the contractual obligations and respondent No.2 sold
and purchased shares on behalf of respondent No.1.
Respondent No.1 alleged that the dispute arose when
respondent No.1 stopped trading in 2020 due to her
personal reasons and in 2021 she adhered that her demat
account did not hold the shares which were displayed in the
portfolio tracker. Thereafter respondent No.1 went to the
office of petitioner to complete KYC formalities for closing
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Com.A.P.89/2023
her account and she was informed by the petitioner that
her demat account showed value of Rs.7,000/- only and a
loss of Rs.29.42 lakhs. In this connection respondent No.1
made email communication with this petitioner and she
also raised complaint against respondent No.2. According
to petitioner in respect of this dispute the respondent No.1
herein approached Arbitral Tribunal constituted under
NSEIL and the Arbitrators who are appointed therein
dismissed the claim petition of respondent No.1 on merits.
Respondent No.1 challenged this award before the Appellate
Arbitral Tribunal and the Arbitrators allowed the appeal
and set aside the arbitral award passed on 25/11/2022
and thereby directed this petitioner to pay Rs.12,77,858/-
within 30 days from the date of this award. Aggrieved by
this award passed by the Appellate Arbitral Tribunal the
petitioner herein who was the respondent No.1 filed the
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Com.A.P.89/2023
present petition under section 34 of Arbitration and
Conciliation Act seeking set aside of the award.
4. After service of notice respondent No.1 filed her
objections denying the averments of the petition and intra
alia contended that from December 2006 when she opened
the account for online share trading she was doing business
of selling and purchasing shares through respondent No.2
who was the authorised person under this petitioner and
the empty account was opened on 28/09/2015 and it was
the 2nd respondent who was doing all the trading
transactions with the consent of this respondent No.1 and
he used to update her about periodical share holdings by
sending portfolio tracker. According to respondent No.1 she
did not receive any demat account statement to her email
ID by this petitioner and this practice continued for five
years till October 2020 when this respondent No.1 informed
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Com.A.P.89/2023
petitioner and respondent No.2 that she will stop margin
trading due to personal reasons and at that time though PT
was showing value of her shares at Rs.61.68 lakhs in
October 2020 but however on checking with respondent
No.1 her demat account showed the value of her portfolio as
Rs.7,000/- only and showed net loss of Rs.29.42.
According to her this was the fraud committed by
respondent No.2 and hence respondent No.1 who is
vicariously liable to make payment to this respondent No.1.
Accordingly she sought for dismissal of the petition.
5. After holding a detailed enquiry and on hearing both
side, the learned sole arbitrator allowed the claim petition
passing award in favour of the claimant/respondent
aggrieved by which the present petition is filed by this
petitioner.
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Com.A.P.89/2023
6. Now the point that arise for my consideration are;
1. Whether, the present petition deserves to
be allowed and the impugned award dtd:
23.03.2023 passed by the Appellate
Arbitral Tribunal in Appeal No.NSEBEN/
0026541/2122/ISC/IGRP/ARB/APPL
requires to be set aside under Sec.34 of
Arbitration and Conciliation Act?
2. What Order?
7. My findings on the above Points are as under:
Point No.1 : In the “Affirmative”.
Point No.2: As per the final order for the
following reasons
-: R E A S O N S :-
8. Point No.1 :- I have carefully gone through both the
award passed by the three Arbitrators on 25/11/2022 and
also the award passed by the Arbitral Appellate Tribunal
dated 23/3/2023. In the present petition the petitioner has
taken following grounds for setting aside the award passed by
the Appellate Arbitral Tribunal. According to petitioner the
said award is liable to be set aside as the Arbitrators have
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Com.A.P.89/2023
committed patent illegality by not considering the case of the
petitioner. Apart from this they have also ignored the settled
principle of law and the decisions of IGRP order. Further the
Appellate Tribunal also failed to appreciate that respondent
No.1 and 2 entered into private arrangement by virtue of
which respondent No.1 privately authorised respondent No.2
to undertake the work of trading on her behalf and hence
holding this petitioner liable for payment is illegal. Both
counsels for petitioner and respondent filed the respective
written arguments which are the replica of their pleadings.
On careful perusal of both the awards it is an admitted fact
that this respondent No.1 was doing share trading through
respondent No.2. It is the specific contention of this
respondent No.1 before the Arbitral Tribunal that she opened
her empty account on 28/09/2015 and she stopped trading
in October 2020 and in July 2021 when she verified in the
office of this petitioner her demat account showed the value
of her portfolio at Rs.7,000/- only and loss of Rs.29.42 lakhs
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Com.A.P.89/2023
and through an email dated 6/7/2021 she brought this fact
to the notice of this petitioner requesting them to investigate.
Petitioner through an email dated 16/8/2021 stated that
current holdings of respondent No.1 stood at Rs.4,875/- as
per demat statement on 16/8/2021 and the higher value
shown in the PT was due to several entries being updated
manually without mentioning who had edited the entries.
Meanwhile petitioner terminated respondent No.2 for non-
compliance. According to respondent No.1 the manual
entries in the PT constitute misrepresentation of facts with
fraudulent intention of respondent No.2 and therefore she
requested the Arbitration Tribunal to direct this petitioner to
correct all the stocks in the PT to her demat account apart
from other reliefs. If we peruse the findings and conclusions
of the Arbitral Tribunal, the Tribunal gone through the merits
of the case and also heard the arguments of both parties and
raised a question as to whether the claim of the applicant
who is respondent No.1 herein is admissible and whether this
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Com.A.P.89/2023
petitioner is responsible for causing loss as alleged by her.
The Tribunal observed that it is not in dispute that the
respondent No.1 is a constituent of this petitioner since 2004
and she opened an online trading account with this petitioner
for purchase of shares and it is also not in dispute that
respondent No.2 was an employee of this petitioner with
whom respondent No.1 interacted from 2013 onwards. It is
also an admitted fact that respondent No.2 became a sub-
broker of this petitioner in 2015. The Tribunal also observed
as per the own admissions of respondent No.1 herein the
contract notes for the trade executed were sent to registered
email ID of respondent No.1 which were duly received by her
and she also admitted that she did not bother to check those
emails. According to petitioner demat account statements
were sent to R1 regularly on monthly basis and at no point of
time R1 raised any dispute during the five years period. The
Tribunal also observed that respondent No.1 had experience
of nine years in trading even prior to opening new trading
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Com.A.P.89/2023
account with petitioner in 2015 which was corroborated by
the records and it was also observed that with this experience
respondent No.1 was expected to know that trading members
sends periodical statement of holdings besides contract
notes, SMS, ledger statements, etc., on trade confirmation for
the trades done in her account. The Arbitral Tribunal
observed that ignorance of respondent No.1 with respect to
NSC regulations cannot be justified by any stretch of
imagination as respondent No.1 has accepted receipt of all
communications sent to her registered email ID by this
petitioner. Coming to the question of her claim of non-receipt
of demat accounts the Tribunal observed that the reason
given by respondent No.1 is not convincing as she never
bothered to take up that issue with this petitioner who was a
trading member though she knew that she had not been
receiving them in her registered email ID. The Tribunal also
observed the fact that this respondent No.1 shared her
confidential credentials to login to her trading account by this
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Com.A.P.89/2023
respondent No.2 which is also breach of confidentiality clause
which is accepted to be strictly adhered to by the claims for
operation of any account whether it is the bank account or
trading account. It was also observed that alleged fraud was
never reported to competent authority during the period 2015
to 2020 and this respondent No.1 herself committed fault on
both accounts sharing her password and not reporting the
fraud within time. For this reason the Arbitration Tribunal
passed an award on 25/11/2022 rejecting the claim of
respondent No.1 herein who was the claimant before the
Tribunal.
9. On perusal of the award passed by the Appellate
Tribunal while giving findings and conclusions the Tribunal
observed the undisputed facts between the parties and the
Tribunal ventured into the allegations made by this
respondent No.1 against respondent No.2 and observed that
there was a clear disclaimer given on the website of this
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Com.A.P.89/2023
petitioner that the PT is editable and the values shown in it
are not the true reflection of the share value. In para 8 of the
award in question the Tribunal held that there is
contradictory negligence on the part of this respondent No.1
in having compromised password and other credentials and
reposed compliance trust on respondent No.2 to carry out
trading in her account and further it also find fault that
respondent No.1 having not verified the contract notes,
demat statements, SMS alerts sent as and when the trade
was carried out periodically. The Tribunal also found fault
with respondent No.1 having not raised alarm with the
petitioner in respect of fraud committed by R2 within
reasonable time and also the fact of termination of R2 by this
petitioner. In letter dated 2/3/2021 petitioner herein has
clearly mentioned that respondent No.2 has violated the
trading rules and not complied with regulatory requirements
and committed violation of the said rules and in the same
letter it was also mentioned that the termination will not
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Com.A.P.89/2023
affect the liabilities and obligations and shall be liable for
satisfactory completion of transactions affected prior to
closing date. The Tribunal observed that the contents of this
termination letter finding fault with respondent No.2 having
carried out unauthorised trades in R1’s account and
petitioner agreed to the fact that these unauthorised trades
were done by R2 and hence they took administration action
and terminated him and only that can be done as per rules
and regulations of the petitioner. The Tribunal in para 9
observed “To a question on what will happen to losses if any,
suffered by the applicant, the respondent could not give
proper answer. This itself is an admission of the mistake /
unauthorised act committed by the respondent authorised
agent.” For this reason the Appellate Arbitral Tribunal set
aside the arbitral award passed by the Arbitrators. On
careful perusal of these two awards though respondent No.1
herein has categorically proved that she shown negligence,
ignorance for a period of five years without checking on the
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Com.A.P.89/2023
emails, SMS sent by the petitioner timely updated her trading
transactions on her empty account. Apart from this the
respondent No.1 though having experience in trading for a
long time is expected to know all the rules and regulations
and liability of a sub-broker and her boundaries while
sharing her password and other confidential credentials to do
trading from her account. Further respondent No.1 also not
placed any material before the Appellate Arbitral Tribunal to
show that how petitioner could be made responsible for the
fraud committed by respondent No.2. The documents
produced by the petitioner clearly shows that from 2015 to
2020 this respondent No.1 was silent and she woke up only
when an email was sent by the petitioner and thereafter she
terminated the trading agreement with this petitioner. On
careful perusal of the award in question I hold that it is
against to principle of natural justice and the negligence,
ignorance on the part of respondent No.1 was not considered
as an important credential to decide the dispute and instead
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Com.A.P.89/2023
the Tribunal held this petitioner liable to make payment
though respondent No.1 did not produce any documents to
show as to how and on what basis petitioner shall be held
responsible. During the course of arguments counsel for
respondent No.1 has produced following citations:
(1) (2019) 20 SCC 1 in Civil Appeal
No.2153/2010 between M/s.Dyna
Technologies Private Limited Vs.
M/s.Crompton Greaves Limited.
(2) (2015) 3 SCC 49 in Associate Builders
Vs. Delhi Development Authority
(3) 2020 SCC Online Del 2497 : (2020) 3
Arb LR 237 in Guru Gobind Singh
Indraprastha University Vs. Engineers
India Limited.
(4) (2022) 1 SCC 131 in Delhi Airport Metro
Express Private Limited Vs. Delhi Metro
Rail Corporation Limited.
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Com.A.P.89/2023
(5) 2024 SCC Online SC 2600 in OPG
Power Generation Private Limited Vs.
Enexio Power Cooling Solutions India
Private Limited and another.
10. Similarly counsel for petitioner also relied on following
citations:
(1) (2019) 15 SCC 131 in SSANGYONG
Engineering and Construction Company
Limited Vs. National Highways Authority
of India (NHAI).
(2) (2015) 3 SCC 49 in Associate Builders
Vs. Delhi Development Authority.
(3) (1978) 3 SCC 399 in State Bank of
India Successor to the Imperial Bank of
India Vs. Smt.Shyama Devi.
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Com.A.P.89/2023
(4) (2018) 16 SCC 758 in Lion Engineering
Consultants Vs. State of Madhya Pradesh
& others.
11. I have carefully gone through these decisions. In my
opinion the award passed by the Appellate Arbitral Tribunal
since suffers from patent illegality and the award was passed
by not considering the trading rules and regulations, same
needs to be set aside. Accordingly I answer point No.1 in the
“Affirmative”.
12. Point No.2:- For the aforesaid reasons, I
proceed to pass the following:
ORDER
The petition filed by the petitioner
under Sec.34 of Arbitration and
Conciliation Act, 1996 is allowed.
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Com.A.P.89/2023
The award passed by the Appellate
Arbitral Tribunal in
No.NSEBEN/0026541/2122/ISC/IGRP
/ARB/APPL dated 23/03/2023 is
hereby set aside.
Office to issue Soft copy of this
Judgment to both sides by e-mail if
furnished.
(Dictated to the Stenographer, typed by her, corrected and then pronounced by me
in open Court on this the 17th day of January, 2025).
(ROOPA K.N.),
LXXXVII Addl.City Civil & Sessions Judge,
(Exclusive Dedicated Commercial Court)
Bengaluru.
/22/
Com.A.P.89/2023(Judgment pronounced in the open
court vide separate detailed
Judgment)ORDER
The petition filed by the
petitioner under Sec.34 of Arbitration
and Conciliation Act, 1996 is allowed.
The award passed by the
Appellate Arbitral Tribunal in
No.NSEBEN/0026541/2122/ISC/IGR
P/ARB/APPL dated 23/03/2023 is
hereby set aside.
Office to issue Soft copy of this
Judgment to both sides by e-mail if
furnished.
LXXXVII ACC & SJ, Bengaluru.
(17.01.2025), (CCH-88)
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