Before the Panel of Arbitrators comprising of: Mr. G. K. Sharma Mr. G. A. Nayak Mrs.

Padma Rajendran - Presiding Arbitrator - Co Arbitrator - Co Arbitrator

In the Matter of Arbitration under Bye-laws, Rules and Regulations of National Stock Exchange of India Limited (NSE) Arbitration Matter No. F&O/M-0017/2012 BETWEEN Mr. Rajesh H. Shah (Constituent) 10-A, Ajinkya Apartments, 80C,Tagore Road, Santacruz (West), Mumbai - 400 054. PAN: ACRPS8391P AND

:
: : : : Applicant

Sharekhan Limited (Trading Member) Lodha I Think Techno Campus, 10 Floor, Beta Building, Kanjur Marg ( East ) , Mumbai 400 042. : Appearances : Applicant :
th

: : : : Respondent

1. Mr. Rajesh H Shah, Applicant in person 2. Ms. Prachi Pande, Advocate for the Applicant.

Respondent :

1. Mr. Kashyap Chokhavatia, AVP, Authorized official for the Respondent. 2. Mr. Rajesh Desai, Advocate for the Respondent. Award

1. The National Stock Exchange of India Limited (NSE) vide their letter dated March 29, 2012 referred the above Arbitration matter to the Panel of Arbitrators comprising of

Mr. G.K. Sharma, Presiding Arbitrator, Mr. G.A.Nayak and Mrs. Padma Rajendran, CoArbitrators to adjudicate the said matter under the Bye-Laws, Rules and Regulations of the NSE. 2. These Arbitration proceedings are initiated by the Applicant, Mr. Rajesh H Shah vide his application dated February 23, 2012. The Applicant is a constituent of the Respondent, Sharekhan Limited, a Trading Member of the NSE. The Applicant has prayed for an Award against the Respondent, for a sum of Rs. 48,17,617.82 ( Rupees Forty Eight Lakh Seventeen Thousand Six Hundred Seventeen and Paisa Eighty Two only). The case of the Applicant is that the Respondent has not acted as per his instructions given vide his letter dated January 11, 2008 and letter dated January 16, 2008 resulting in substantial loss to the Applicant for which the Applicant has filed the present application. 3. The Applicant had earlier filed the Arbitration proceedings on December 29, 2008. The claim was then rejected on the ground that it was barred by limitation. Thereafter, the Applicant preferred an application dated February 11, 2010 in Honble Bombay High Court, under Section 34 of the Arbitration & Conciliation Act, 1996 against the said impugned Award. SEBI vide its circular dated August 11, 2010, modified the period of limitation to 3 years. The said circular stated that the limitation period for filing an arbitration reference shall be governed by the law of limitation, i.e., The Limitation Act, 1963. Thereafter, the Honble High Court passed an order dated June 23, 2011 based upon a motion of withdrawal of petitions by the petitioners, whereby they were permitted to file fresh arbitration proceedings on the basis of Circular issued by the SEBI. Accordingly, the Applicant has filed the present Arbitration application. 4. The Initial hearing was fixed for May 11, 2012 at the office of the National Stock Exchange of India Limited, Exchange Plaza, Bandra Kurla Complex, Mumbai by notices issued to both the parties by the Arbitration Department of the National Stock Exchange of India Limited. As the Applicant was out of India, he sought adjournment of the initial hearing, though the Respondent was present at the hearing. Accordingly, the hearing was adjourned and was to be held on June 21, 2012. However, the adjourned hearing

was rescheduled for June 22, 2012. Subsequently, the adjourned hearings were held on July 26 2012 and August 27, 2012. 5. The Applicant (Constituent) had entered into an agreement with the Respondent (Trading Member) by signing Member Client Agreement on March 23, 2006 and was allotted unique client code 101694. He has since been trading in Cash segment and Derivatives/Future and Option segment with the Respondent. In the statement of case dated February 23, 2012, The Applicant states that trades in his account were executed pursuant to his instructions to the designated relationship manager/dealer of the Respondent over phone and would receive contract notes/bills either by courier/post or by the representative of the Respondent personally handing over the same at Applicants residence. The Applicant states that he traded through the Respondent between March 2006 and January 16, 2008 and thereafter, did not place any order. 6. The Applicants wife and his two sons also had their respective account with the Respondent. The Applicant states that he, his wife and his two sons executed a group adjustment letter with the Respondent on January 10, 2008. The Applicant further states that he and his family member, thereafter, decided to restrict the group adjustment to the extent of Rs. 2, 00, 000. 00 and executed another group adjustment letter on January 11, 2008. According to the Applicant, the letter was handed over by the Applicant to the Respondents peon, Mr. Nitin Bhingade, who in the past also had visited the Applicants residence on several occasions to collect/deliver documents. 7. The Applicant states that he was informed on or about January 16, 2008 by the Respondents dealer that a Branch manager of the Respondent had executed some trades in the Applicants and his family members accounts without their instructions and certain trades in F&O and cash segment as instructed by the Applicant were not executed. The Applicant further states that being highly perturbed, the Applicant vide letter dated January 16, 2008 instructed the Respondent to square off all his open F&O positions immediately on January 16,2008 or latest by January 17,2008. According to the Applicant, the letter is duly acknowledged by the Respondents staff employee.

8. It is the case of the Applicant that the Respondent unilaterally and contrary to Applicants instructions squared off all of his open positions on January 23, 2008 and January 31, 2008 and also sold his shares lying in his demat / pool account. The Applicant states that since the day he instructed to square off the open position, i.e. January 16, 2008 and until January 31, 2008, he incurred a debit of Rs 1,33,84,317.10 and it is due to this alleged loss that the Respondent sold Applicants shares on the floor of BSE for which there is independent proceedings at the relevant forum pending. The Applicants closing F&O ledger balance as on January 16,2008 was Rs.41,83,754.35 (credit), whereas his closing F&O ledger balance as on January 31,2008 was Rs. 1,33,84,317.10 (debit). The Applicant states that even if it is assumed without admitting that the trades in Applicants account on or after January 16, 2008 are genuine, it is pertinent to note that the Respondent did not make any demand towards margin requirement. The Applicant further states that the Respondent unilaterally squared off his open positions and further sold his shares without first making a demand upon the Applicant. The Applicant states that when he became aware of the unilateral and discretionary conduct of the Respondent on January 24, 2008, the matter was immediately taken up with the Respondent vide letters dated January 24 and January 26, 2008 and thereafter also sought clarifications but the Respondent has not been very forthcoming. The Applicant states that it was after several attempts, the Respondent handed over the ledger statement of the account as on April 11, 2008. The Applicant states that he actually became aware of the actual position of his account on April 11, 2008. The Applicant states that he persistently followed up with the Respondent and thereafter, also filed complaint with NSEs Investors Grievances Redressal Committee on May 24, 2008. 9. The Applicant has computed his claim of Rs. 48,17,617.82 by adding (i) NSE F&O ledger credit balance as on 17.01.2008 at Rs. 42,36,828.28 and (ii) NSE Cash ledger credit balance as on 04.10.2007 at Rs. 5,80,789.54 and prayed for an Award in his favour together with interest at 18% p.a. from 18/01/2008.

10. In the statement of defense dated May 11, 2012, the Respondent states that they have not received the Applicants letter dated January 16, 2008 for selling the shares on January 16, 2008 and the said letter does not bear the receipt of acknowledgement of the Respondent. Further, the Applicant was aware of the position of his account as all the contract notes, bills/ ledger statements were delivered to the Respondent on his email id. The Respondent has submitted that the Applicant has signed a mandate to issue contract notes and statements of funds in digital format and cannot deny the receipt of contract notes, bills and ledgers at this stage. Besides, the Respondent has averred that the Applicant had submitted the group adjustment letter dated 10/01/2008 to adjust the debit/credit of accounts of his family, i.e., Mrs. Parul Shah, wife, Mr. Jimit Shah and Mr. Kartik Shah, sons. 11. The Respondent states that the Applicant cannot plead that he became aware of his account on April 11, 2008 that his and his group account was in shortfall of Rs. 8,47,33,641.92 as on January 23, 2008 and that the Applicants and his group account was informed vide letter dated January 24, 2008 about the position of their account and also informed that as additional funds were not available on January 23, 2008, the Respondent had no option but to square off the position and the same was communicated to the Applicant. The Respondent further states that they have supplied the ledger statement, script wise margin report, etc. vide their letter dated January 29, 2008 which bear acknowledgement of the Applicant. The Applicant cannot deny that he was unaware of the position of his account. 12. The Respondent also states that the contract notes were regularly delivered to the Respondent. The Respondent also states that they also sent open position through emails for the period November 1, 2007 to January 23, 2008 to Applicant. The Respondent submits that they have received reply from the Applicant through email, and therefore, Applicant cannot deny the position of account. 13. The Respondent further, states that the Applicant has not disputed the group debit balance and as prudent investors, the Applicant and his family invested crore of rupees

in share transactions and it is difficult to believe the Applicant and his group members actually became aware of the position of their account only on April 11, 2008. 14. The Respondent has acknowledged the receipt of the group adjustment letter dated January 10, 2008 but denied the receipt of the Applicants letter dated January 11, 2008 and letter dated January 16, 2008. The Respondent states that the Applicant along with his family members entered into a criminal conspiracy with Nitin P. Bhingarde and placed the bogus group adjustment letter dated January 11, 2008 stating the limit of adjustment amount not exceeding Rs.2,00,000.00 which is handwritten and the said letter is not signed by Parul Shah, Kartik Shah and Jimit Shah which proves it is a fabricated document. The Respondent had filed an N.C.R.No. 1158/08 dated May 22, 2008 at Khar police station against the said Nitin Bhingarde, wherein he confessed that Applicant and his family member has prompted him to plant the said letter dated January 16, 2008 along with other letter dated January 11, 2008 in records of the Respondent. Further, it is submitted that there is no rubber stamp of Respondents inward acknowledgement on the aforesaid letters. 15. The Respondent has denied that their representative personally visited the Applicant to handover contract notes and bills. That all the contract notes, bill ledgers were delivered to the Applicant through post, courier and email provided by the Applicant. The Respondent states that the most important point to be noted is that the Applicant admits the receipt of contract notes which prima facie proves he is aware of the position of his account. 16. The Respondent denies that the Applicant did not trade after January 16, 2008 and states that the Applicant was actively trading after January 16, 2008. The Respondent also denies that their Branch Manager had executed some trades in the Applicants and his family members account without their instructions. The Respondent points out that the Applicant failed to mention the name of the dealer and branch manager who he alleges to have executed some trades. That the Applicant has for the first time come up with a new story of dealer and the branch manager which was never brought on record before the earlier Arbitration Tribunal at NSE. The Respondent object to letter dated

January 16, 2008 which according to them was never received by them and therefore, Applicant cannot plead the alleged breach of instruction to sell the shares on January 16, 2008. 17. In the statement of defense, the Respondent also states that the Applicant never instructed the Respondent on January 16, 2008 for selling the shares vide letter dated January 16, 2008 and has denied the allegation that they unilaterally and contrary to the Applicants instructions squared off Applicants open position on January 23 and January 31, 2008 and sold shares lying in demat/pool account. The Respondent denies that demand towards margin requirement was not made and that the clauses in memberclient agreement pertaining to margin are self explanatory. The Respondent further states that there was a group debit and therefore, the position of Applicant was squared off. 18. The Respondent has prayed that the claim of Applicant be dismissed and cost of Arbitration be provided. 19. In his rejoinder dated July 3, 2012, the Applicant confirms what is stated in the statement of case. The Applicant refuted that the letter of January 16, 2008 is an afterthought and that the Respondent neither denied nor disputed the said letter even though his email dated February 15, 2008 makes a specific reference to his letter dated January 16, 2008. Further, the Applicant states that the Applicant had written another latter dated January 16, 2008 to the Respondent categorically instructing for squaring off his open position, holding, etc. by that day or latest by January 17, 2008 and that letter is duly acknowledged by the Respondent and bears its stamp. 20. The Applicant reiterates that he would receive contract notes and bills either by courier/ post or by the representative of the Respondent personally handing over the same at Applicants residence. The Applicant also submits that he had written a letter to the Respondent on March 28, 2006 wherein he had categorically in writing instructed the Respondent to send all correspondence and documents in hard copy to his postal address mentioned in the said letter. The Applicant states that the Respondents letter dated January 24, 2008 was not proved or substantiated with any supporting

documents and hence the Applicant could not have relied upon the said letter and that the Applicant immediately denied the contents of the letter dated January 24, 2008 vide his letter dated January 26, 2008. In the rejoinder, the Applicant states that the Respondent along with his letter dated January 29, 2008 has enclosed the group adjustment letter dated January 11, 2008 which clearly goes to prove that the said group adjustment letter was in fact the letter agreed by and between the parties and it superseded the letter of January 10, 2008. The Respondent for the first time denied the group adjustment letter of January 11, 2008 only during the course of Arbitration as an afterthought to wriggle out of its liability. Regarding the open position emails attached by the Respondent, the Applicant states that they pertain only for the period November 2007 and that no such email was sent to him on or about January 2008. While the Respondent has provided the details of SMS which were allegedly sent on 23/01/2008 and 24/01/2008 which is post facto of the unauthorized trades executed in the Applicants account and after dispute arose between the parties. The said SMS log also does not provide details of SMS sent anytime during or prior to the disputed period. Referring to details of incoming calls provided by the Respondent, the Applicant states that the Respondent has merely provided details of incoming calls but has not furnished the details of the tape recorded conversation. 21. Referring to the complaint filed by the Respondent with the economic offences wing of Mumbai police, the Applicant states that the Respondent has filed the complaint only against its employee and no complaint has been filed against the Applicant and if the Respondent is alleging that the Respondent criminally conspired along with one Mr. Nitin Bhingarde (Respondents employee) against the Respondent, then Respondent should have also filed the complaint against the Applicant, which is not the case. Therefore, the Respondent cannot allege criminal conspiracy against the Applicant. The Applicant also points out that it has been nearly four years since the Respondent has filed the said criminal complaint, yet till date no charges have been framed against the Applicant or any action has been taken against him. Further, the Applicant states that it is pertinent to note that the Respondent states that its employee Mr. Nitin Bhingarde

criminally conspired with the Applicant against the Respondent and despite the fact that the Respondent has also filed a criminal complaint against him, it is surprising and perplexing to note that the said employee continues to be in the employment of the Respondent. 22. The Respondent in their sur-rejoinder, reiterates that they have not received any instruction from the Applicant for selling the shares on January 16, 2008. The Respondent has denied that they had received any instruction from the Applicant to send all communication including contract notes and bills to his residential address. The Respondent deny that they had enclosed the group adjustment letter dated January 11, 2008 along with their letter dated January 29, 2008 but had enclosed group adjustment letter dated January 10, 2008. Regarding details of incoming calls, the Respondent states that tape recording of trades is not mandatory for retail clients. The Respondent further, states that the Respondent for the sake of saving his skin is objecting the receipt of PODs and trade confirmation at this stage. With regard to allegations pertaining to Nitin Bhingarde, the Respondent states that the investigation is going on and the charges will be framed after the completion of investigation. 23. The Respondent again reiterated that Respondents have not received letter dated January 11, 2008. The Respondent also state that the Applicant had submitted letter dated January 11, 2008 along with his statement of case without the stamp of Sharekhan Ltd., at the same time Applicant submitted the same letter along with his rejoinder which bears the stamp of Sharekhan Ltd. which are contradictory and can not be relied upon. The Applicant is producing bogus letter dated January 11, 2008 at his own whims and convenience. 24. The Applicant vide his letter dated August 6, 2012, made additional submissions of certain documents. The additional submissions included among others, a copy of NSEs letter dated May 2, 2008 along with letter dated 11, 2008 duly acknowledged by the Respondent, a copy of fax transmission sent on January 11, 2008 of the group adjustment letter dated January 11, 2008 sent by the Applicant to the Respondent and a copy of Respondents letter dated March 13, 2009 to the arbitration department of BSE.

25. The Respondent in their reply dated August 21, 2012, reiterated that they are relying upon group adjustment letter dated January 10, 2008 and the Applicant is misguiding the Honble Arbitral Tribunal. The Respondent states that the Applicant had earlier filed claim of RS. 1, 76, 21, 145.38 and at present he has filed claim of Rs. 48, 17, 617.82 which prima facie proves the contradiction in the claim amount of the Applicant. As regards the copy of letter dated May 02, 2008 of NSE, ISC, the Respondent states that the letter is addressed to Mr. Kartik Shah, who is the son of the Applicant and has no correlation to the present claim. The Respondent submits that there was no mention of group adjustment letter dated January 11, 2008 in their letter dated April 19, 2008 wherein they had clarified the complaint before NSE. The Respondent states that they have been denying receipt of group adjustment letter of January 11, 2008 even before Investor Service Cell of NSE. The Respondent also made reference to Arbitral award in case of another group account in the name of Mr. Kartik Shah, wherein the Award was given in favour of the Respondent and the petition u/s 34 of Arbitration and Conciliation Act challenging the award was also rejected by the Honble High Court. The Respondent states that Mr. Kartik Shah has not moved an appeal against the order from which inference can be drawn that he has accepted the ruling of Panel of Arbitrators of NSE. The Respondent states that if the group account members had any dispute, then why did Mr. Kartik Shah made payment of Rs 52.50 lakh in the month of January 2008, which prima facie proves contradiction of submission of the Applicant and that the Applicant was very well aware of the position of his group accounts. Referring to Applicants submission of copy of fax transmission sent on January 11, 2008, the Respondent denied the same and states that it is for the first time the Applicant has come up with an afterthought story that the said letter was sent through the mode of fax and that the fax receipt does not prove the contents of the letter. 26. During the hearings held in the matter, the Applicant reiterated the arguments given in his earlier submissions. The Applicant states that the Respondent has accepted the receipt of letter dated January 11, 2008 in its own complaint to EOW and when pointed out during the hearing, the Respondent very conveniently stated that it is a typographic

error the same should read as January 10, 2008. The Applicant also points out that the said letter bears the stamp of Respondent Company and also initials of one of its employee. The Applicant also states that the cover letter dated January 11, 2008 enclosing the above letter also bears the Respondents stamp and signature of its employee Sujata and the same has some handwritten note of Ms . Sujata. Regarding letter dated January 16, 2008, the Applicant reiterated that the letter is duly acknowledged by the Respondents employee namely Mr. Nitin Bhingarde and was also handed over to the Respondents branch as the same bears the rubber stamp of the Respondent company. The Applicant states that the Respondent has never denied or disputed the letter of January 11, 2008 prior to the arbitration. The Applicant also referred to his letter dated February 11, 2008 to the Respondent and states that he has not only referred to his letter of January 11 and January 16, 2008 in this letter but also enclosed the copies and that Respondent has neither denied the receipt of this letter nor has it denied the contents of the said letter. 27. During the course of hearing, the Applicant again denied the allegation of the Respondent that the Applicant along with his family members entered into a criminal conspiracy with Mr. Nitin Bhingarde and placed the bogus group adjustment letter dated January 11, 2008 stating the limit of the adjustment amount not exceeding Rs. 2 lakh. The Applicant states that no complaint of criminal conspiracy has been filed against him. Besides, the Respondent has also not filed N.C.R. No. 1158/08 dated May 22, 2008 along with the Respondents pleading against Mr. Nitin Bhingarde at Khar police station and it is surprising that Mr. Bhingarde continues to be the employee of the Respondent. Further, the Applicant states that to the best of his knowledge no matter is pending before the EOW, as the EOW vide letter dated December 11, 2008 has forwarded the complaint to BSE and has categorically stated that this office has not carried out any enquiry in this matter and the Office has not kept any copy of the said complaint on record. 28. During the hearings, the Applicant again argued that the Respondent did not act as per their instructions given vide letter dated January 11, 2008 and January 16, 2008 which

resulted in their account showing debit balance which was in credit on January 16,2008 and reiterated his claim of Rs. 48, 17, 617. 82. 29. During the course of hearing, the Respondent reiterated that they have not received the alleged group adjustment letter dated January 11, 2008 and letter dated January 16, 2008. That the Respondent has adjusted the account of Applicant for more than Rs. Two Lakh, and therefore, contention of the Applicant that the Respondent relied upon the group adjustment letter is not tenable. The Respondent states that the alleged letter was produced by the Applicant during the hearing at Investor Service Cell of NSE and was inadvertently produced by the Respondent before BSE Arbitration Tribunal and that the Respondent vide letter dated March 12, 2009 prayed for withdrawal of said letter. The Respondent states that even BSE Arbitration Tribunal has stated about the mala fide intentions of Applicant in sending alleged letter dated January 11, 2008. The Respondent further states that the Applicant is relying upon the Respondents complaint to Economic Offence Wing against the Applicant, wherein they inadvertently mentioned about the group adjustment letter dated January 11, 2008, but if read in continuity it is also mentioned that which does not contain pecuniary limit, which proves that they have relied upon group adjustment letter dated January 10, 2008. In respect of Applicants allegation that his letter dated February 11, 2008 was not replied, the Respondent referred to their email dated February 02, 2008 and email dated February 4, 2008 wherein, among others, it was stated that As informed to you earlier all the confirmation will be done from head office and non replying of any of your email/letter will not amount to acceptance of your any communication. 30. The Respondent made submission that the Applicant submitted copies of letter dated January 11, 2008 with different acknowledgement receipts as (i) copy submitted with statement of claim has no receipt & initials and no stamp of Respondent and (ii) the copy submitted with Respondents rejoinder has stamp of Respondents Khar Branch. Further the said letter contains handwritten addition stating the limit which is also not countersigned by claimant and his family. The Respondent also states that the copies of covering letter of alleged letter dated January 11, 2008 filed by the Applicant on two

occasions has contradiction in the acknowledgement of receipt as (i) the copy filed during the course of argument on July 26, 2012 has acknowledgement of Nitin Bhingarde and has no stamp of the Respondents and (ii) copy filed with Applicants submission dated August 6, 2012 has stamp of Respondent and signature of Sujata. The Respondent again referred to N.C.R.No.1158/08 dated May 22, 2008 against the said Nitin Bhingarde and states that therein he confessed that Applicant and his family member has prompted him to implant letter dated January 11 , 2008 and letter dated January 16, 2008 in records of the Respondent. As regards allegation of Applicant that his shares were sold on January 23, 2008 and on January 31, 2008 without his instructions, the Respondent states that they had intimated the group members vide letter dated January 24, 2008 that the Applicant and his group account was in shortfall of Rs.8, 47, 33, 641.92 as on January 23, 2008. The Respondent further, states that the clause 1.7.5 of the Member Client agreement authorizes the broker to close out/liquidate clients position, if required. 31. We have gone through the submissions made by the Applicant and the Respondent in detail. We have observed that the dispute between the parties has arisen on account of the Applicants letters dated January 11, 2008 and January 16, 2008 in respect of which the Respondents contention is that they have not received these letters. In his letter dated January 11, 2008 the Applicant instructed for restricting the pecuniary limit of Rs.2 lakh in the group adjustment and in his letter dated January 16, 2008, the Applicant requested immediate closure of all open positions at market rate in respect of the Applicants and his wifes account with the Respondent on 16/01/2008 itself or latest by 17/01/2008. The Applicant has categorically stated in his pleadings that since opening of his account in March 2006 and until 16/01/2008, trades were executed in his account by the Respondent as per the Applicants instruction. After 16/01/2008, the Applicant did not place any order or undertake any transaction through the Respondent. The issues arising out of the said two letters are discussed in the following paragraphs. 32. Applicants Group adjustment letter dated 11/01/2008

From the pleadings of the parties it is clear that the Applicant has relied upon the amended group adjustment letter dated 11/01/2008 whereas the Respondent is firm on its contention that it has placed its reliance on 10/01/2008 and acted based on it. While the Respondents main objection is that the said letter dated 11/01/2008 was never received by the Respondent but was implanted by the Applicant with the help of the Respondents employee, i.e., Mr. Nitin Bhingarde, Peon against whom ostensibly the criminal case has been filed with the Khar Police Station. The Respondent has contended that the said letter dated 11/01/2008 does not bear the stamp of the Respondents office, although the Respondent had accepted the copy of the letter dated 10/01/2008 bearing no stamp and signature as genuine. The Applicant subsequently produced the same letter dated 11/01/2008 with the stamp of the Respondents Khar Branch and also a copy of the covering letter dated 11/01/2008 with signatures of Mr. Bhingarde as well as that of one Sujata, employee of the Respondent with the rubber stamp. To establish and emphasize its contention the Respondent has taken the help of the criminal case allegedly filed by them with the Khar Police as also the Award of the NSE in the matter pertaining to the son of the Applicant Mr. Kartik Shah. The Panel of Arbitrators of the said Award of the NSE in Mr. Kartik Shahs case referred to by the Respondent, has also opined that the Respondent cannot escape the fact that the letters are indeed acknowledged by their employee, Mr. Nitin Bhingarde (Page 14 of the Award dated 24/08/2009). However, looking to the fact that Mr. Bhingarde and Ms. Sujata continue to be in employment of the Respondent, no complaint has been filed against the Applicant and that no headway has been made in the criminal case despite elapse of over 4 years and the Respondent has also failed to provide evidence as to what point in time the said letter was implanted by the Applicant with the help of Mr. Bhingarde, the contention of the Respondent in this regard is difficult to accept. After examining the pleadings and documents presented by the Applicant and the Respondent on this matter, we are of the view that prima facie the letters dated 11/01/2008 have been received by the employee/s and as such the Respondent cannot disown the Respondents responsibility.

33. Applicants letter dated 16/01/2008 It is seen that there is also denial by the Respondent about the receipt of the said letter. The Applicant has provided the copy of the letter bearing the rubber stamp of the Respondents Bandra Branch and also copies of subsequent letter dated 11/02/2008 and email dated 21/02/2008 wherein the reference was made to the said letter dated 16/01/2008 to buttress his claim. However, the Respondent has flatly refused to accept the contention of the Applicant and held their ground that they have not received the said letter and that the same was implanted by the employee, Mr. Bhingarde, who had confessed to the Khar Police about his involvement in this respect. Though there is a mention about the letter dated 16/01/2008 in the complaint reportedly filed with the Economic Offence Wing, the Respondent chose to deny the receipt of the said letter. We are, therefore, of the opinion that the story of the Respondent is difficult to accept on the basis of merely denial particularly when the copy of the said letter produced by the Applicant bears the stamp of the Respondents Bandra Branch. 34. Trades executed in the Applicants F&O segment account We have also gone through the transactions in the trading account of F&O segment post 16/01/2008, as the Applicant had no dispute about any transactions till 16/01/2008. It is seen from the Bills for the F&O transaction submitted by the Applicant along with the statement of account that as on 16/01/2008 carried forward open positions were in respect of futures of Adlab Films, GMR Infra, Nifty and NTPC. On 17/01/2008, the transaction was only relating to Infosys Tech option and the open position of 16/01/2008 was carried forward to 18/01/2008. On 18/01/2008, the transaction was relating to NTPC Fut which was squared off at a loss of Rs. 815.10 and balance open positions carried forward to 21/01/2008. The transactions on 21/01/2008 were only in respect of purchase of 6 option contracts of various securities and REL Fut. The trend of 22/01/2008 was similar that 3 contracts of options of 3 securities were purchased and the REL Fut was squared off. However, on 23/01/2008, all the open positions in F&O segment were squared off and the losses were booked for option contracts. Thereafter, on 24/01/2008 onwards transactions were confined to only option contracts. From the

bills made available from 11/01/2008 till 16/01/2008, it is observed that the Applicants transactions were only with respect to futures and not option contracts. Besides, the Respondent failed to provide the evidence of the placement of order by way of documentary record or voice loggers, though the Respondent sent SMS on 23/01/2008 after the Applicants positions were squared off. 35. We have examined the margin positions of the Applicant on the date prior to square off i.e. 23/01/2008 and 24/01/2008 as per the Respondents letter dated 24/01/2008, MG13 statement filed by the Respondent along with their submission dated 21/08/2012 and Risk Report at Annexure F of the Respondents defence statement dated May 11, 2012 and found that the margin shortfall of the group accounts of the Applicant of Rs. 8,47,33,641.97 as on 23/01/2008 shown in the Respondents letter dated 24/01/2008 is not supported by MG13 statement as also Risk Report. Further, The margin collected as shown in the MG 13 in respect of the Applicants account No 101614 for the dates 21/01/2008 to 25/01/2008 are different from those shown in the Bills filed by the Applicant along with his pleadings for the corresponding dates. Thus, the veracity of the statements and information on margin and the shortfall thereof cannot be precisely assessed. The Applicant has also stated that no demand for margin short fall was made by the Respondent before squaring off the open positions as required under F&O regulation 3.10, though denied by the Respondent at the arbitration hearing, Further, the Respondent has relied upon the judgment in Arbitration petition No 566 of 2010 dated 27/02/2012 of the Honble Bombay High Court in the matter of Anand Rathi Share and Stock Brokers Ltd. vs Devendra Singh Bagga in which Justice Anoop V Mohta has held that the discretion with regard to margin collection in such situation is always with the trading member based upon the relationship between the parties and commercial exigencies. We have gone through the said judgment of the Honble Bombay High Court, and are of the view that the same is not strictly applicable in this case in the light of the credit balance in the ledger account of the Applicant when the letter dated 16/01/2008 was allegedly received by the Respondent to square off the position before 17/01/2008 and there was no group margin shortfall till 18/01/2008 as evident from the

MG 13 statement submitted and there is no third party letter relied upon in this case. Besides, the basis on which the squaring off of the open positions on 23/01/2008 of the Applicant and liquidation of his collaterals effected by the Respondent based on group adjustment letter of 10/01/2008, is questionable in the light of the subsequent group adjustment letter dated 11/01/2008, wherein pecuniary limit of Rs.2 lakh has been fixed. 36. Taking an overall view of the matter as also considering the circumstances as enumerated in the aforesaid paragraphs, the arguments put forth by the Applicant seem to be more acceptable and believable. Since these are civil proceedings, the criterion for deciding the issue is preponderance of probabilities. Thus, based on the authenticity of the facts presented by the parties the decisions are taken. We are, therefore, of the opinion that the arbitration application is support worthy and maintainable. Hence, the Applicant is entitled to his claim of Rs.48,17,617.82 or say Rs. 48,17,618/-. In the result, we pass the following Award:1. The Respondent, Sharekhan Limited, (Trading Member) is directed to pay a sum of Rs. 48,17,618/- ( Rupees Forty Eight Lakh Seventeen Thousand Six Hundred Eighteen only) to the Applicant, Mr. Rajesh Shah ( Constituent) with interest at 12% per annum from 18/01/2008 till the date of payment and/or realization. 2. The cost of Arbitration shall be paid by the Respondent. 3. No order as to other cost. 4. The Award is signed on three stamped engrossments, one each for NSE, the Applicant and the Respondent.

G. K. Sharma Presiding Arbitrator

G. A. Nayak Co Arbitrator

Padma Rajendran Co - Arbitrator

Mumbai Dated this