Chand igarh Adm i n istration e-Stamp INDIA NON JUDICIAL lN-cH296554597642017 02-Aug-2O21 04:01 pM chgurnghi [MPACC (cv)/ chimpspoT/ E-sN4p tND AREA pHASE-1/ CH_CH suBlN-CHCH VpSpo7591 63521 84.1 1 737 CHANDAN KAPOOR Article 12 Award Not Applicabte 0 \Zeto) : JUSTICE VINEY I\,1ITTAL : SUFINDER KUMAR AND SBICAP SECURITIES LTD : JUSTICE VINEY IVITTAL . 100 (One Hundred only) *.1-- . \ rt(<{qq qqd Certificate No. Certificate lssued Date Certificate lssued By Account Reference Unique Doc. Reference Purchased by Description ol Document Property Descriptjon Consideration Price (Rs.) First Party Second Party Stamp Duty Paid By Stamp Duty Amount(Rs.) ,lt 'r..I\, \"/.,1 . - - - -.please write or type below this line IN THE ARBITRATION MATTER UNDER BYE LAWS, RULES AND REGULATIONS OF NATIONAL STOCK EXCHANGE OF INDIA LTMITED Before paner of Arbitrators comprising Justice (Retd.) Viney Mittar, Presiding Arbitrator, Shri B.R. Bansai and Mrs. Madhu ,. Singn, Arbitrators. 7 760
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Chand igarh Adm i n istration
e-Stamp
INDIA NON JUDICIAL
lN-cH296554597642017
02-Aug-2O21 04:01 pM
chgurnghi
[MPACC (cv)/ chimpspoT/ E-sN4p tND AREA pHASE-1/ CH_CH
suBlN-CHCH VpSpo7591 63521 84.1 1 737
CHANDAN KAPOOR
Article 12 Award
Not Applicabte
0
\Zeto)
: JUSTICE VINEY I\,1ITTAL
: SUFINDER KUMAR AND SBICAP SECURITIES LTD
: JUSTICE VINEY IVITTAL. 100
(One Hundred only)
*.1-- . \rt(<{qq qqd
Certificate No.
Certificate lssued Date
Certificate lssued By
Account Reference
Unique Doc. Reference
Purchased by
Description ol Document
Property Descriptjon
Consideration Price (Rs.)
First Party
Second Party
Stamp Duty Paid By
Stamp Duty Amount(Rs.)
,lt'r..I\,
\"/.,1
. - - - -.please write or type below this line
IN THE ARBITRATION MATTER UNDER BYE LAWS, RULES AND REGULATIONSOF NATIONAL STOCK EXCHANGE OF INDIA LTMITED
Before paner of Arbitrators comprising Justice (Retd.) Viney Mittar,Presiding Arbitrator, Shri B.R. Bansai and Mrs. Madhu ,. Singn,Arbitrators.
7 760
1.
2.
BETWEEN
MT. SURINDER KUMAR ...Applica nt/Cla imant
80, Sector L2 A, Panchkula, panchkula, Ambala. HARYANA _ I34tt2
Applicant/claimant: sh. Vivek sethi Advocate with Applicant surinder Kumar
Respondent: Sh. Deepak Dhane Advocate and Ms. Monica Choghale
AWARD
BRIEF FACTS OF THE CASE:
This is an application against the Order of GRC dated 06.10.2020
declining the claim of the claimant to the extent of Rs. 10,89,000/-.
The claimant had filed the complaint before GRC that the Respondent
had squared off his position of 1,.76 lakh shares of yes Bank on
06.03.2020 without his consent and had caused him a loss of Rs.
10,89,000/-. As per claimant he had cut position of 10,000 Shares of pNB
and one lot offuture on 06.03.2020 in his trading account. Even after cut
position the balance in his account was Rs. 1g,gO,O0O/-. Besides he
deposited Rs.6,00,000/- and he bought 1.,7S,OOO yes Bank Cash Shares.
So, there is no explanation for squaring off his position.
In the present claim petition, besides above allegations, the claimant has
alleged criminal breach of trust and fraud and increased his claim to Rs.
3.
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4.
53,96,600/-, for 1,76,000 quantity of shares, purchased @ Rs. 36.85 per
share, which were sold off @ Rs.6.1875 per share causing loss of Rs.
53,96,600/-, as explained in para 16 of the claim petition. The claimant
also stated that he has not been provided a copy of KyC by the
Respondent and this amounts to fraud and unfair trade practice on his
part. The complainant had signed the KYC on i.6.06.2014 and since then
he has been trading through the respondent.
It is alleged that after repeated reminders through e-mails and SMSs the
Respondent has finally provided a copy of KYC through e-mail on
02.03.2021as mentioned in para 9 of the claim petition. lt is maintained
by the Applicant that the act of the Respondent is in violation of Clause
15 of SEBI Circular No. MTRSD/SE/Cir-I9/2009 dated 03.1.2.2009, as
mentioned in para 8 of the claim petition. lt is thus, alleged that the
respondent has fraudulently sold off his stocks on 06.03.2020 without his
consent and knowledge and has committed fraud upon him as mentioned
in para 22 of the claim petition.
On the other hand, in the proceedings before GRC, as before this Tribunal
also, representative of the TM denied all the allegations stated by the
complainant. As per TM with regard to the transaction in dispute, i.e.,
squaring off transaction of FUTSTK YESBANK 26MAR20 on 06.03.2020, a
quantity of 1.,76,000 shares was squared off, as M2M loss exceeded 70%
of total available margin, as on 06.03.2020. YESBANK future rate dropped
down to approximately 85%. The said act of squaring off on his part was
as per terms and conditions of KYC and was very much in the knowledge
of the claimant. The TM reiterated that mark to market loss was 76.13%
of the available margin, hence as per terms and conditions of KYC, the
position of FUTSTK YESBANK 26MAR20 176000 quantity was squared off.
The TM clarified that at 9:57 AM on 06.03.20 thev sent an e-mail to the
complainant that shortfall observed in derivatives segment in his trading
account was Rs. 351546.76/- and requested to transfer funds to cover the
total shortfall by 11 AM on 06.03.2020. The TM further stated that the
client was cautioned vide the said e-mail that the positions may be
squared off earlier, in case of MTM losses reachin g 7O%o ol margin
5.
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6.
available before the stipulated time, without any notice on realtime basis.The mail was delivered to the client as per mail logs.
On the basis of the Contract note of trade date 06.03.2020, the TMexplained that additionar margin of Rs. 14,40,000/- was avairabre aftertaking into account the amount of Rs. 10,g9,000.00/_ realised aftersquaring off FUTSTK YESBANK 26 MAR20 176000 quantity at 1L:36:13 to11:38:38 and Rs. 3,52,335.500/- on sale of FUTSTK pNB by the client at09:L8:47. Further the crient sord i.0,000 shares of pNB between 09:i.9:37to 09:20:51 for Rs. 4,25,00O/-. The client had also transferred Rs.
6,00,000/- in his account on 06.03.2020. Thus, the client after thesquaring off the position by the TM had about Rs. 24.65 rakh out of whichbought YES BANK LTD 1,75,000 shares for Rs. 24,28,100.00/_ at 11.:51,:07
to 11:52:53 and also atI4:42:I3.
According to the TM, on 06.03.2020, due to market volatility, there washuge fluctuation in the yEsBANK share rates ranging from the Rs. 33.20 toRs.5.55 per share, and at the crose the price was Rs. r.6.20. The crient,sopen position of FUTSTK YESBANK 26MAR2O 1,,76,000 quantity wassquared off as M2M ross exceeded 7o% of the totar avairabre margin. on06.03.2020 Yes Bank future rate dropped down to approximately g5%.
The complainant had bought the shares after the TM had squared off theposition.
8. The GRC held that the TM acted in a bonafide manner as per terms of KyC
and declined relief to the complainant.
9. lt is in these circumstances that the comprainant has chosen to file thepresent application/reference raising a dispute against the said orderdated 06.10.2020 of tGRp.
10. Accordingly, the present arbitral tribunal is constituted.
Ll.Keeping into consideration the present pandemic situation, and with theconsent of all concerned, the matter was decided to be taken up by wayof video-conferencing, facilitated by NSE. Accordingly, a notice was sent
M-"- Confidential
1,2.
15.
1,4.
to parties intimating that the proceedings were to be held on 0g.07.202rat 4 PM. The parties were informed to submit their rerevant
claim/defence papers beforehand.
The aforesaid fixed time and date, the matter was taken up by way ofvideo-conferencing through the link provided by NSE. Besides allthe threeArbitrators, the Parties through their authorized representatives, as
noted above in the column of appearances, were present.
Both the parties were heard in detail. During the course of arguments also
the parties merely reiterated the stand taken by them, respectively intheir statement of claim/reply.
Primarily, it was maintained by the claimant that GRC has ignored the fact
that even if the value of his shares is taken to be nil, still the opening
ba la nce of the cla ima nt's trad ing accou nt was more tha n Rs.g,25,709.49/_
Hence, his account could not be squared off, and that too without his
consent.
As per the contention of the Applicant, GRC has also ignored the fact thatthe Respondent used to give margin call or send an e-mail in case of the
margin short falls of the trading account, and for those specific charges
are also deducted from the trading account of the claimant, as is evident
from the statement dated 05.03.2020, where an amount ofRs.1,8,973.87/- has been charged by the Respondent.
rt.
ro. It is further contended that,
06.03.2020 at 11:30 AM, when
balance of Rs. 19,26,709.49/-
bought 3,1.1.,387 shares @ Rs.
squared off.
GRC has overlooked the fact that on
his shares were squared off, still he had a
in his account and the TM could have
5.L875/share on which his shares were
L7. Lastly, it is contended that the GRC has also ignored his past good conduct
and ill effects on his health suffered due to the acts of omission ano
commission of the Respondent. Further, besides, challenging the Order of
Confidential
the GRC, the claimant has also alleged non-supply of KyC documents and
criminal breach of trust and fraud by the Respondent.
18. All the aforesaid contentions have been vehemently contested and
denied by the Respondent-TM.
19. At the outset, the Respondent raised the objection that the allegations ofcheating, fraud and criminal breach of trust levelled by the claimant are
non- arbitrable, and, therefore, the present Arbitration claim is not
maintainable. In support of this contention, strong reliance has been
placed upon the judgement of Hon'ble Supreme Court in the matter of
Ayydsqmy vs. A. Paromasivam and Ors.2016 SCC Online SC 1110.
wherein it is held that "cases where there are serious allegations of fraud,
they are to be treated as non-arbitrable and it is onlv the civil court which
should decide such matters." Accordingly, it is stressed that on this
ground itself the present Arbitration reference deserves to be dismissed.
20. The Respondent confirmed that the claimant got himself registered as an
online client on 16.06.2014 and a copy of the KyC documents was duly
delivered to him on 21,,06.201.4, vide, DTDC Courier pOD M09116400.
Thereafter the claimant has been trading regularly since June 25,201,4 on
NSE F&O segment and he is well versed with the security market. Thus, it
is maintained that there is no violation of clause 15 of KyC committed bv
him.
The Respondent has further stressed as follows:
a. The Claim made by the Applicant is vague, unclear and without any
oa rticu la rs.
b. The Applicant firstly without any particulars made a vague claim
for Rs.10,89,000/- before the GRC of NSE. Thereafter vide the
present SOC, Applicant has made a claim for Rs. 53,96,000/- again
without any basis and particulars.
c. The Applicant has not provided any materialto show on what basis
he has arrived at a purchase price of Rs. 36.85 and there is no
material in support of the said price.
21.
v
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d. The Applicant while providing vague calculations at para nos. 6, LG
and 33 of his SOC has completely lost sight of the fact that theYESBANK F&O position 176000 was not purchased bv theApplicant on one particular day at a particular price. The said F&Oposition was purchased/accumulated by the Applicant in a span ofaround 4 months i.e., from December 27,2079 till March 2,2020and therefore the price of Rs. 36.g5 taken by the Applicant isincorrect and is without any justification and/or evidence insupport of the same. On this ground also the present Arbitrationclaim deserves to be dismissed.
e' Further, the Respondent is entitred under the Kyc (Ex-A attachedwith the Respondent,s statement of defence) and its MTM policyto square off the F&o positions on March 6,2020, the disputeddate of trades.
t. As per KYC clause no. LL, as agreed between the Applicant andRespondent, the Applicant is under an obligation toimmediately/forthwith pay all margins, as considered necessary bythe Exchange and by the Respondent/Stock Broker. Further, theRespondent is permitted in its sole discretion to collect additionalmargins (even though not required by Exchange) and the Applicantis obliged to pay such margins within stipulated time.
C. Further as per clause 19 of KyC, the Respondent is also entitled toexercise its right to riquidate/close out ail or any of the Appricantspositions for non-payment of margins or other amountsoutstanding debts etc., and it is agreed that ail rosses and chargeson account of riquidation/crose out shail be charged to and sharl
be borne by the Applicant.
h. Applicant and Respondent had also specifically agreed vide, clause
6 of KYC, i.e., "Liquidation policy,,, wherein it is agreed that theproduct features/guiderines of riquidation poricy are crarified onRespondent's website. The said policy, inter alia, also authorizesthe Respondent to square off/close out positions on days of high
market volatility or reasons beyond control.i. Applicant has also agreed and undertaken to immediatery deposit
with the Respondent all margins as per clause no. 11 of KyC.
I Further it is clear from the MTM Loss policy available on the
Respondents website, that the Respondent is entitled to square offpositions in case MTM Loss reaches 70o/o of margin available before
the stipulated time on real time basis without any further
intimation to the Applicant. lt is relevant to note that not only that
the said policy is available on the Respondents website, but same
was also informed and brought to the notice of the Applicant vide
an email dated March 6,2020 at 9.57AM (Ex-E of SOD).
The respondent has drawn our attention to the details relating to
computation of Margin and MTM in order to analyze the said 70%
threshold, and the said computation is reproduced hereunder:
Particulars Values
Unrealized MTM: 2437600.OO
Realized MTM : 2315645.OO
G ross collateral: 40910.o0
Brokerage: 2336.L4
Cash margin: 6r.9s582.88
MTM Loss (in %\: (2437600.00 + 2316645.00) /6195582.88 - 2336.14) * 100 =
76.73%
l. Besides demonstrating the above details, even otherwise
Respondent was entitled to square off the F&O positions on
account of shortfall in margin.
m. The Applicant was provided margin statement at the end of day on
March 5, 2020 and was called upon to cover the shortfall.
n. The Applicant was specifically called upon vide an email at 9:57 am
on March 6,2020 to cover the shortfall by 11 AM. However, the
Applicant chose to ignore the aforesaid requests/demands made
Confidential
22.
by the Respondent. Therefore, the Respondent was entitred tosquare off the Applicants positions on account of non_payment ofma rgins.
o. Appricant during his terephonic conversations had acknowredgedshortfall of funds in his account and was wefl aware about thetosses which he is rikery to incur on the yESBANK F&o positions. rn
fact, the voice recordings clearly establish that the Applicant,sallegation of fraud, cheating, unauthorised trading are false and isan attempt to misread this Hon'bre Tribunar. The Respondentsubmitted that the ailegations made by the Appricant are baseress
and without any merit and the order of the GRC is reasoned,
without any illegarity and infirmity and has prayed for the dismissalof the present claim petition.
The arguments, through vid eo-co nfe rence, in th is case were heard on July08,2021, and the Award was reserved. The parties were also required tosubmit written submissions in the matter, which they have durysubmitted.
We have duly considered the entire matter, amongst ourselves also, andhave also gone through the Statement of Claim filed by the Applicant_
Claimant and the Reply filed by the Respondent-TM.
In our opinion there is no merit in the present Application/Reference filedby the Applicant-claimant and therefore, the same needs to be reiected.
25. The first question arises as to whether the allegations of criminal breacn
of trust, cheating and fraud in the claim petition are non_arbitral?
26. The claimant has alleged criminal breach of trust, cheating and fraud bythe Respondent on grounds of unauthorized squaring off his positions
without his knowledge and consent on 0G.03.2020 and thereby causing
him financial loss of Rs.53,96,600/-.
27. The Respondent raised the objection, that the allegations of cheating,
the claimant, are non-
23.
24.
Confidential
28.
arbitrable and, therefore, the present Arbitration claim is not
maintainable. In support of this contention, he has relied upon thejudgement of Hon'ble Supreme Court in the matter of A. Ayyasamy vs. A.
Paramasivam and Ors.,Supro, wherein it is held that ,,coses where there
ore serious ollegotions of froud, they ore to be treoted os non-arbitroble
dnd it is only the civil court which should decide such motters.,, lt is thus
argued that on this ground itself the present Arbitration reference
deserves to be d ismissed.
In the written submissions, on this issue, however, the claimant has relied
upon the Judgement of the Hon'ble Supreme Court titled as Avitel post
SCALE 733;2020(3) Law Herald (SC) 2183 whereby it has been held that
" Mere foct thot criminol proceedings can or hove been instituted in
respect of allegotion of froud would not lead to conclusion thot the
dispute which is otherwise arbitrol, ceoses to be so."
After giving our deep and thoughtful consideration to this issue on the
basis of pleas of both the parties, we find that as of date no criminal
action has been initiated by the Claimant Therefore, we restrain
ourselves from going into the veracity or otherwise, of the said
allegation, levelled by the claimant.
The issue of arbitrability of allegations of fraud appears to has been
settled by the Supreme Court in A. Ayyasamy vs. A. Paramasivam and
Ors. (supra), wherein it was laid down that the allegations of fraud
simplicitor may not be a ground to nullify the effect of arbitration
agreement between the parties. lt may be done where there are serious
allegations of fraud which make a virtual case of criminal offence, or
where allegations of fraud are so complicated that it becomes absolutely
essential that such complex issues can be decided only by a civil court,
on the appreciation of the voluminous evidence that needs to be
produced. 0N
,..2-./-.,..
29.
30.
Confidential
10
31. In the case of A. Ayyasamy vs. A. paramasivam and ors., 20r.6 scc onlineSC 1110, the Hon'ble Supreme Court has held as follows:
"ln the instant case, there is no dispute about the arbitration
agreement in as much as there is a specific arbitration clause in thepartnership deed. However, the question is as to whether the
dispute raised by the Respondent in the suit is capable ofsettlement through arbitration. As pointed out above, the Act does
not make any provision excluding any category of disputes treating
them as non-arbitrable. Notwithstanding the above, the courts
have held that certain kinds of disputes may not be capable of
adjudication through the means of arbitration. The courts have helo
that certain disputes like criminal offences of public nature,
disputes arising out of illegal agreements and disputes relating to
status, such as divorce, cannot be referred to arbitration. Following
categories of disputes are treated as non-arbitral:
i) Patent, trademarks and copy right;
ii) Anti-trust/com petition loss;
iii) Insolvency/windingup;
iv) Bribery/corruption;
v) Fraud;
vi) Criminal matters.
Fraud is one such category spelled out by the decisions of this Court where
disputes would be considered as non-arbitrable.
'Fraud' is a knowing m isrepresentation of the truth or concealment of a
material fact to induce another to act to his detriment. Fraud can be of
different forms and hues. lts ingredients are an intention to deceive, use
of unfair means, deliberate concealment of material facts or abuse of
position of confidence. The Black's Law Dictionary defines'Fraud'as a
concealment or false representation through a statement or conduct that
injures another who relies on it. However, the moot question here which
has to be addressed would be as to mere allegation of fraud by one party
against the other would be sufficient to exclude the subiect matter of
Confldential
11.
32.
dispute from arbitrations and decision thereof necessary by the civilcourt."
The Supreme court further observed that:".'.The allegations of fraud shourd be such that not only these allegationsare serious that in the normal course these may even constitute criminaloffence, they are also complex in nature and the decision on these issuesdemand extensive evidence for which civir court shourd appear to bemore appropriate forum than the arbitral tribunal....,,
still further, in the case of Ameet Larchand shah Vs Rishabh Enterprises,(2018) 15 SCC,678, the Apex Court once again reiterated the principleslaid down in Ayyasamy (Supra), and made the following observations:
"under the Act, an arbitration agreement means an agreement which is
enforceable in law and the jurisdiction of the arbitrator is on the basis ofan arbitration clause contained in the arbitration agreement. However, ina case where the parties alleged that the arbitration agreement is vitiatedon account of fraud, the Court may refuse to refer the parties toarbitration. In Ayyasamy case, this court held that mere allegation offraud is not a ground to nullify the effect of arbitration agreementbetween the parties and arbitration clause need not be avoided and theparties can be relegated to arbitration where merely simple allegation offraud touched upon internal affairs of parties is levelled. Justice A.K. sikriobserved that it is only in those cases where the court finds that there are
serious allegations of fraud which make a virtual case of criminal offence
and where there are complicated allegations of fraud then it becomes
necessary that such complex issues can be decided only by the civil courton the appreciation of the evidence that needs to be produced.......,,
In a recent Judgement of the supreme court of India titled as Avitel post
studioz Limited & ors. Vs. HSBc pl Holdings (Mauritius) Limited cited at2920(9) SCALE 733;2020(3)Law Heratd (SC)2183, it has been held that"Mere fact thot criminol proceedings con or hove been instituted inrespect of ollegation of fraud would not lead to conclusion thot the disoute
33.
which is otherwise orbitral, ceoses to be so.,'
Confidential
34. It is clear from the pleadings of both the parties that the claimant has
preferred to initiate legal proceedings only under the Arbitration Act, and
has reserved his right to initiate appropriate action under provisions ofIPC against the respondent. The allegations of fraud and misconduct and
breach of trust etc. levelled by the Applicant are, to our mind, simply
allegations, at this stage and cannot be treated serious enough to oust thejurisdiction of this Arbitralrribunalfrom proceeding with the adjudication
of the matter. Thus, it is clear that the law laid down by the Hon,ble
Supreme Court, as noticed above, squarely covers the facts of the present
case. Thus, we hold that the present application/claim petition filed by
the claimant/applicant before this Arbitral Tribunal is maintainable.
Whether the respondent had provided a copy of KyC or not?
With regard to non-supply of copy of KYC, it has been maintained by the
claimant that he has not been provided with a copy of duly executed KyC.
The allegation of the Claimant of non-furnishing of a copy of the duly
executed KYC is not established. We fully agree with the arguments of
the respondent that a copy of the KYC was delivered to the claimant on
21.06.2014, vide, DTDC Courier POD M09116400 dated 17.06.20'J,4, and
there is no rebuttal evidence on record by the claimant. We have no
reasons to disagree with the Respondent, who has discharged his
obligations as per clause L5 of KYC. So, the bald allegation of the Applicant
and his self-serving statement of non-supply of a copy of KYC, without any
supportive evidence is of no help to him. Further this allegation of non-
supply of a copy of KYC was not raised before the GRC. Nor any request
was made to the respondent by the claimant, at any stage. This plea of
the claimant is an afterthought, just to confuse the matter and provide an
illusory support to his claim. Undisputedly the claimant has been trading
through the respondent since June,20L4 and being an online investor had
access to all documents and details of the trades including the disputed
trades.
Whether the squaring off future shares
respondent were unauthorized or not?
35.
of Yes Bank on 06.03.2020 by
c\V13
36.
37.
with regard to this contentious issue, it has been maintained by theclaimant that there has been unauthorised squaring off positions on
06.03.2020, causing financial loss of Rs. 53,96,600 /_. The aforesaidcontentions have been specifically denied by the respondent.
At this stage, it would be relevant to notice the following observationsmade by GRC in the impugned Order:
"During the GRC proceedings, the complainant mentioned that on
05.03.2020 his position of FUTSTK yESBANK 2 MAR2O 176000quantity was squared off @ 0G.1g75 per share by the TM withouthis knowledge and consent although he was having sufficientmargin in his trading account. Complainant further stated that on
06.03.2020 he had sold his pNB shares and he had deposited
Rs.6,00,000/- in his account, therefore, balance in his account was
Rs.18,80,000. He further questioned that if there was shortage ofmargin in his account then how he was able to buy on cash 1,75,000
Yes bank shares of approximately of Rs.24,90,000/- on 06.03.20.
According to the complainant there is no valid explanation forsquaring off his position.
The TM reiterated that mark to market loss was 76.73% of theavailable margin, hence as per terms and conditions of KyC, the
position of FUTSTK YESBANK 26MAR2O 176000 quantity was
squared off. The TM clarified that at 9.57 AM on 06.03.20 they sent
an e-mail to the complainant that shortfall observed in derivatives
segment in his trading account was Rs. 3,5L546.76/_ and requested
to transfer funds to cover the total shortfall by 11 AM on
06.03.2020. The TM further stated that the client was cautioned
vide this e-mail that the positions may be squared off earlier, in case
of MTM losses reaching 70% of margin available before the
stipulated time without any notice on realtime basis. The mail Was
delivered to the client as per mail logs.
On the basis of the Contract note of trade date 06.03.2020, the TM
explained that additional margin of Rs. 4,40,000/- was available
after taking into account the amount of Rs. 10,g9,000.00/- realised
after squaring off FUTSTK YESBANK 26 MAR2O 1.76000 quantity at
1,4
11:36:L3 to L1:38:38 and Rs. 3,52,335.500/- on sale of FUTSTK pNB
by the client at 09:18:47. Further the client sold j.0,000 shares of
PNB between 09:L9:37 to 09:20:51 for Rs. 4,25,000/-. The client
had also transferred Rs. 6,00,000/- in his account on 06.03.2020.
Thus the client after the squaring off the position by the TM had
about Rs. 24.65 lakh out of which bought yES BANK LTD 1,75,000
shares for Rs.24,28,100.00/- at 11:51:07 to LL:52:53 and also at
1,4:42:13.
On 05.03.2020, due to market volatility, there was huge fluctuation
in the YESBANK share rates ranging from Rs. 33.20 to Rs. 5.55 per
share and at the close the price was Rs. 16.20. The client's open
position of FUTSTK YESBANK 26MAR20 t,76,000 quantity was
squared off as M2M loss exceeded 7Oo/o ol the total available
margin. On 05.03.2020 Yes Bank future rate dropped down to
approximately 85%. The complainant had bought the shares after
the TM had squared off the oosition".
38.No tenable explanation has been offered by the claimant before us to
justify as to differ from the said reasoning. Obviously, the entire burden
of proof to prove the unauthorized squaring off his positions on
06.03.2020 i.e., the above said disputed transactions, was upon the
claimant which has not been discharged at all. The mere allegations
without any supportive evidence cannot be relied upon.
39.On the other hand, the Respondent has produced a copy of the e-mail
(Exhibit E) dated 06.03.2020, 9:57 AM, showing intimation to the claimant
regarding shortfall of Rs. 3,51,546.76 in his trading account and also
intimated that the position may be squared off in case Mark to Mark
fosses (including full net option premium) reaching 7 0%o of margin
available before the stipulated time on realtime basis without any further
intimation. The Respondent has also explained the positions in a tabular
form of the details relating to computation of margin and MTM loss of
76.73% much above the 70% threshold. The Respondent has further
played the audio recording (Exhibit C) showing the confirmation of
squaring off the positions on account of failure to meet out the margin
short fall by the claimant on 05.03.2020. The claimant has, in n ncertain'n\\'-'..75
terms confirmed his voice and admitted the contents of the voicerecording, before this Tribunal. This clearly established that on 06.03.2020the squaring off the positions by sale of 1,76,000 vESBANK SHARES @ Rs.
6.L875 per share by the Respondent was in the knowredge of the craimantand well within the rights of the Respondent in accordance with theagreed terms of the Kyc and on account of losses exceeding 7o%io as per
MTM policy. The claimant very weil understood the reasons andcircumstances under which the F&o positions were squared off on rea
time basis. The conduct of the Appricant crearry shows that whenYESBANK FUTURE on 06.03.2020, after squaring of his position, furtherdropped down by approximately g5%, and the Claimant in order tomitigate his losses in yESBANK F&o positions, immediatery bought1,75,000 equity shares of yESBANK, as is evident from Exhibit_F, i.e., a
copy ofcontract notes forthe trades executed on 06.03.2020. There is no
rebuttal evidence by the claimant on record.
40.Thus, we are of the clear opinion that in this transaction time was theessence to meet the margin shortfall and despite the claimant having
been put to notice the claimant failed to act. Due to high volatility in the
market, when the M2M loss was 76.73% of the available margin, the
Respondent was left with no option but to square of the position. The
Respondent has acted bonafide and had given a prior intimation to the
claimant before squaring off his position as the claimant failed to meet
out the deficit margin. The squaring off by way of sale of shares ofclaimant by the Respondent are in consonance with the agreed terms and
conditions between the parties and the Rules and Regulations of SEBI.
41.In these circumstances, we entirely agree with the reasoning given by the
GRC as extracted above, and hold that TM has acted bonafide in order tomitigate the losses due to huge volatility in the stock market. He further
acted as per the agreed terms and conditions of KyC.
42.No other point arises for our consideration nor has
the parties.by any ofbeen argued
a
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43.Accordingly, for the above stated reasons, we find no merit in the present
Applicatioq/claim Petition fired by the craimant, and dismiss the sameand accordingly the order of the GRC is upheld.