Arun Kumar Biswas vs Sebi

Date of Decision: 29.03.2016

Appeal No. 41 of 2015

Arun Kumar Biswas 206 Savita Chhaya Building, 118-C, TPS III, 28th Road, Bandra (W), Mumbai 400 050 ...Appellant

Versus

1.

National Stock Exchange of India Ltd.

Plot No. C/1, G-Block, Bandra-Kurla Complex, BKC Road, Bandra East, Mumbai- 400 051

2. Securities and Exchange Board of India, SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051

3. Sunchan Securities Ltd.

302- 303, Udyog Mandir 1, Bhagoji Keer Marg, (Mogul Lane), Mahim (W), Mumbai- 400 016 ...Respondents

Ms. Prachi Pandya, Advocate i/b Corporate Attorneys for the Appellant.

Mr. Kumar Desai, Advocate with Mr. Rashid Boatwalla and Mr. Rahul Jain, Advocate i/b MKA & Co. for Respondent No. 1

Mr. Mihir Mody, Advocate with Mr. Saurabh Bachhawat and Mr. Harekrishna Ashar, Advocates i/b K. Ashar & Co. for Respondent No. 2 None for Respondent No. 3

CORAM: Justice J.P. Devadhar, Presiding Officer Jog Singh, Member 2

Per: Justice J.P. Devadhar (Oral)

1. Although, in the Memorandum of Appeal it is stated that the

appellant is challenging the communication of National Stock Exchange

of India Ltd. ("NSE" for short) dated 13.11.2014, on perusal of the said

communication dated 13.11.2014 it is seen that the NSE has in fact

rejected the claim of the appellant by its earlier communications dated

10.06.2010, 25.10.2011, 24.04.2012 and 22.04.2013.

2. Appellant had entered into a Member Constituent Agreement with

the respondent no. 3 in the year 2002. Thereupon, the appellant used to

place trades with respondent no. 3 and the respondent no. 3 used to

execute trades on behalf of the appellant. Admittedly, the appellant had

transferred the shares of various companies held by him to the account of

respondent no. 3 so that the respondent no. 3 could carry out the

transactions in that account on profit sharing basis with the appellant.

3. On 30.01.2009 the Whole Time Member ("WTM" for short) of

Securities and Exchange Board of India ("SEBI" for short) passed an

order against the respondent no. 3 and its directors thereby restraining

them from buying, selling or dealing in the securities in any manner what

so ever, either for themselves or for their clients. By the said order the

depositories were also directed not to give effect to any debit instruction

in the demat accounts of the respondent no. 3/ its directors and the Stock

Exchanges were also directed not to release any funds or securities to the

respondent no. 3 and its directors as more particularly set out therein. 3

4. On 18.03.2009 the Defaulters Committee of NSE declared the

respondent no. 3 as a defaulter and accordingly all assets held by the

respondent no. 3 as a stock broker vested in the Defaulters Committee of

NSE.

5. With a view to seek an Award in relation to the amounts due to the

appellant from respondent no. 3, the appellant initiated Arbitration

Proceedings against the respondent no. 3 in accordance with the Rules

framed by NSE. By Award dated 24.07.2009 Learned Arbitrator

awarded that the appellant is entitled to receive from the respondent no. 3

Rs. 12,26,041 with 9% interest from the date of the Award till the

payment.

6. As per the communication of NSE dated 28.07.2009, the appellant

lodged its claim before NSE on 10.08.2009.

7. By its communication dated 10.06.2010 the Defaulters Committee

of NSE rejected the claim of the appellant by inter alia regarding thus:-

"On review of your claim and the details/documents

submitted by you in support of your claim it is observed that:

 During arbitration you have stated in the

statement of case that you have transferred

securities to the expelled member for arbitrage

trading on your behalf on terms of sharing profit

which is not permitted under the Byelaws, Rules

and Regulations of the Exchange.

4

 The expelled member has confirmed in its

statement of case during arbitration that you were

fully aware that transferred securities were being

used for arbitrage and in member's proprietary

code.

 You have failed to provide proof of delivery of

securities claimed.

In view of the above, your claim is found to be inadmissible

for payment. In case you wish to review your claim, you are

requested to provide additional documents, if any, to

substantiate your claim on or before July 10, 2010."

8. Thereupon, the appellant by his various representations including

representations dated 29.06.2010 and 30.09.2011 sought review of the

decision of NSE dated 10.06.2010 inter alia on the ground that since in

the case of Mr. Laxman Chawla NSE has allowed the claim of

Mr. Laxman Chawla which is similar to the case of the appellant, the

claim of the appellant deserves to be allowed.

9. NSE by its communications dated 25.10.2011, 24.04.2012 and

22.04.2013 reiterated its reasons set out in the communication dated

10.06.2010 and further stated that case of other parties (Mr. Laxman

Chawla) is different from the case of the appellant.

10. Since no reason is given in the impugned communications so as to

demonstrate that the case of the appellant is in fact different from the case

of Mr. Laxman Chawla, in our opinion, it would be just and proper to 5

quash and set aside the communications of NSE and direct the Defaulters

Committee of NSE to consider the claim of the appellant afresh and pass

appropriate order on merits and in accordance with law.

11. Accordingly, the communications of NSE dated 13.11.2014, as

also the communications dated 10.06.2010, 25.10.2011, 24.04.2012 and

22.04.2013 are quashed and set aside and the Defaulters Committee of

NSE is directed to reconsider the claim of the appellant afresh and pass

appropriate order in accordance with law. It would be open to the NSE to

call for additional documents from the appellant as it deems fit and

thereafter proceed to consider the claim of the appellant on its own merits

and in accordance with law. The NSE is directed to dispose of the claim

of the appellant as expeditiously as possible.

12. Appeal is disposed of in the above terms, with no order as to costs.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Jog Singh Member 29.03.2016 Prepared & Compared By: PK