KpRALA G6ogo *.rd r{ 094127 E @ lN THE ARBITRATION APPEAL MATTER Under the Rules Regulations and Byelaws of the National Stock $ fxchange-

Arbitration Appeal No.- NSEKOC/O273LlL9-2OltSC/tGRp/ARB/AppL B* panel Before the of Appellate Arbitrators Comprising of:

1. Justice Sri. K. Ealakrishnan Nair ... Presiding Arbitrator

2. Sri. K. Balasu*amanian ... Co-Arbitrator

3. Sri. Gopala St{ramania Kurup ... Co-Arbitrator

Appealragainst the Arbitral Award passed by sole Arbitrator on 12th day of February,2O2O which in turn is filed agltnst IGRP order dated 14.10.2019 passed by lGRp Memtrer on the file of National Stock Exchange of lndi-a Limited, Kochi. E BETWEEN

ts AP'ELtANT RESPONDENT

P.G. Prabhath C B N Rathi Securities Limited S/ o Pappali Kunpn Gopalan R/ o 6-3-652. 4th floor, Kautilya €urukripa Platinum Flora, Unichira Amrutha Estatr:s, Somajiguda Changampuzha flagar Hyderabad - 500082 P.O. -q82033 AEZPP51,2TL (Constituent)g (Trading Mermber)

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The c6mplaint was referred to the IGRP as per the NSEIL regulation which provides for interna I grieva nce red ressal mecha nism. ii

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I ! i t 2 7 !$Uf,n Gs LTSS \/L. C.f,f,t ( \€ tr,ril - ceo$HHKERALA cT 1 6381 9 After hearing, the Ld. IGRP Member held that the disputed trades were un- I authorized and done against the mandatory regulatory rr-'quirements and SEBI norms. TM was held liable for an admissible claim of Rs.7, 08, 83-1.25, being the I Consequently the value of the MRF shares sold by them.

! Aggrieved, the TM approached the Arbitral Tribunal

I Proceedings of the Sole Arbitrator. I After meticulously considering the submissions of ther pafties, the Ld. Arbitrator held that the disputed transactions were authorized and authentic, that the conduct of the t investor in keeping silence despite the timely receipt of intimations regarding the trades, was suggestive that the disputed trades were done with his knowledge and consent and I that there was no violation of SEBI norms. Thus, reversing the impugned order of IGRP, the of the liability for payment of the claim amount. I trading member was exonerated This appeal is filed at the instance of the investor challenging the order of the Ld. Arbitrator and seeking to set aside the impugned arbitral award and restore the IGRP order. I I

4-lLl6r^\-o VvJr^s"Yrwrruu l<-wU{t *--t(Js'." t-?l*.r ( ...o,u./.-,/.2 - rzra. \r= Llrl" r,.a..-....& N4 rAt l{' l?a-lal<*t' 3v'> o ao I s N0',2020 ESsASTIAN ,(,7r,Jc.r*M^ {tvz O6To q,'rd c T 1 63820 I Main Grounds of challenge in the appeal The impugned findings are entered without any legal arnd factual basis, I The Arbitrator ought to have held on the face of evidence that the disputed trades were unauthorized and done without the knowledge and consent of the appellant and in disregard of the regulatory requirements,

The reasons offered for the delay in raising the conrplaint and the lack of trading I experience of the appellant were also not properly considere

I The conclusions are not supported by reasonin;g and beyond the scope of su bmissions. I Response statement of the TM. I Practically reiterating the case projected in the pleadings filed before the IGRP and supporting the findings entered by the Arbitrator, it is statr-.d that the trade orders were authorized and done on instructions. lnvestor has sufficient trade experience. The delay in I raisingthe complaint writ large. The impugned award is not infirm on any grounds as stated in the appeal memorandum and therefore appeal is only to bre dismissed, it is submitted. e

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I On the basis of rival contentions, the following points emerge for determination

I 1. ls there any merit in the case of the appellant that the disputed trades were unauthorized and done in violation of SEBI norms? I 2. Whether the trading member is liable for the loss caused to the investor?

3. Whetherthe impugned award of the arbitrator is legal and sustainable?

4. Reliefs and costs

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-Q:notr h^&4Dryh4,; k*u^d' Discussion

Trade relationship between parties the is not in dispute. Trades were carried out in the account of the appellant for hardly 8 months and by thertime, it appears, disputes and differences arose between the parties. The main issue was over unethical trades. Respondent claimed that they were sending communications and account statements peftaining to the trades carried in out the account of the appr:llant in the registered email lD with sMS whenever such transactions were carried out, whereas appellant denied of receiving any trade communications. lt is the case of the appellant that wrong email lD and mobile number were created by the TM in his trading credentials to expedite the opening of the account. ln other words, the e-mail lD and mobile number stated therein did not belong to him, and the messages sent to them were never received by him.

The materials on hand would show that immediately after the opening of the trading account, TM sent a welcome letter, Annexure A2, to the arppellant incorporating all the personaldetails of the appellant as mentioned in the KYC forrn, which contained his mobile number and email lD. Apparently appellant did not raise any,objection with respect to the alleged discrepancy in the email lD and mobile number. He did not also point out any such discrepancy in the subsequent request (ANN 3) made for adding one more bank account in his trade credentials. A request made by the appellant (Annexure-4) on 26-04-20lg for updating his contact number using his disowned email lD anr1 the submission made before the learned IGRP, that he was not comfortable with online communications are yet other circumstances, which shatter his self-serving plea that he had never received any trade communications, as the Email lD and mobile number were not his.

Annexure 9 is the copy of a letter dated 24- 8-2018 addressed to the respondent requesting to transfer the remaining holdings in his de mat ar:count in which the appellant has categorically confirmed that all the transactions don,= in the above account are authentic. ln other words he had no dispute over the disputed trades. ln this context it is also peftinent to note that the appellant had no quarrel with respect to the other trades carried out in his account afterthe sale of the MRF shares usirrg its proceeds. Appellant also received the balance pay out in his account from the TM on two occasions without any demur. Appellant raises the dispute forthe first time only aft,:r a lapse of about 17 months of leaving the trading member in the complaint filed before the NSEIL. The delay was attempted to be explained by projecting medical reasons whir:h was also not substantiated. Since the appellant in this case was fully aware of transactions carried out by the respondent in his account and did not raise any objection at any point of time or at least within a reasonable period, such transactions could not be considered as unauthorized. At any rate, appellant, by his conduct has acquiesced to the disputed transactions.

-PJt\*{ --____t_ Appellant also made a feeble attempt to projectthat his dearth of trade experience was exploited by the office of the respondent.

Appellant has no case that he is illiterate. The fact tlrat the appellant has a mail id and online account and he was sending email are all suggestive that he has minimum required familiarities familiar with modern gadgets. Appellant had also prior trade experience is evident from the very fact that he was e,arlier a constituent of Geojit Financials' lt seemsthat ' allthese pleas are projected pretending blissful ignorance onlyto by-pass the inconvenient situation faced by him.

The SEBI circular dated 22-03-2018 which came into effect on 1,-4-201.g mandates that the stock brokers shall carry out trades in the account ol the investor only after getting pre- trade confirmation. ln this case there is no evidence of pre trade confirmation. But as rightly observed by the Ld.Arbitrator, transactions having ber-.n carried out before date, no invalidity could be attached to the disputed trades for want,cf pre-trade confirmation. The learned counsel who represented the appellant submitted that though the sEBl circular technically came into effect only subsequent to the disputed transactions, stillthe spirit and principles behind it is applicable to the case on hand.

After all, the circular is issued in order to ensure transparency at all levels and to prevent carrying out of unauthorised trades by the unscrupulous stock brokers. The situation is different in this case. From the materials on record, there is no reason to disbelieve the case of the TM that post trade intimations were being sent to the appellant by Email and SMS. But he did not demur about any irregularrity within a reasonable time limit. Moreover, as held by the division bench of Bombay High Court in Mahesh Bai Hiralal Champnera Vs. Kotak Security Ltd the dispute, If any, regarding any contract hasto be raised within a couple of days failing which the transactions are deemed to be duly carried out.

Conclusion

On a meticulous consideration of the materials on hand, it is found that the disputed trades were authorized and there is no infraction of SEtll guidelines. Therefore, the respondent is not answerable for the loss, if any, caused tro the appellant-investor. The arbitrator has considered the entire legal and factual issues in the correct perspective .The impugned award of the arbitratordoes not suffer from any infirmity or illegality warranting interference. The Appeal is without any merit and therefore liable to be dismissed.

Award

ln the result, an award is passed in favour of the respondent dismissing the appeal and confirming the impugned award passed by the Arbitrator. The parties shall bear their respective costs. The Arbitral award shall be prepared in triplicate, ont-. original each shall be sent to the parties and the stamped originar shail be retained by the erxchange.

Dated this 4yW. lr 1.Jus:Sri.K.BalabkrishnanNair l4 +_

2. Sri. K.Balasubramanian

-_..5r '--r-f --- t 3.Sri. Gopala Subramonia Kurup :

Koch i

Date: 6lJ^^laoal