Court Finds Appellate Tribunal Failed to Render Findings on Key Contentious Issues Including Effect of Technical Glitch and Attribution of Losses; Parties Free to Initiate Fresh Arbitration
In a significant judgment delivered on October 30, 2026, the Bombay High Court, presided over by Justice Aarti Sathe, set aside an appellate arbitral award in a dispute involving 5 Paisa Capital Limited and its client, Ankit Agarwal. The case revolved around losses allegedly suffered by the client due to a technical glitch in the broker's trading system, which had reflected excess margin in the client's account, leading to subsequent trading losses.
The dispute arose when the client alleged that the stock broker's system malfunction had erroneously credited excess margin, enabling trades that resulted in a substantial loss of Rs. 15,00,509.31. The broker contested these claims, asserting that all trades were authorized and executed by the client using his login credentials, and that the client had been duly informed about margin shortfalls and risk policies governing squaring off of positions.
The learned Sole Arbitrator initially partly accepted the client's counterclaim and awarded compensation of Rs. 14,30,509 along with additional sums for bonus shares, rejecting the broker's claim for recovery of outstanding amounts. The broker challenged this award before the Appellate Arbitral Tribunal, which upheld the original award by concluding that both parties were responsible for notifying each other of any abnormalities in the trading system. However, the appellate tribunal did not delve into several critical factual and legal issues, including whether the technical glitch actually resulted in excess margin, whether losses were attributable to the glitch, the obligation of parties to notify the other, or the correctness of the squaring off and sale of shares.
The Bombay High Court, on reviewing the arbitral awards, found that the appellate award was a non-speaking award - it merely reproduced the submissions of the parties without rendering adjudicatory findings on the core contentious issues. The court observed that the absence of findings on such material issues constituted patent illegality and perversity going to the root of the matter. The court emphasized that under Section 34 of the Arbitration and Conciliation Act, 1996, it cannot supply missing findings or undertake independent adjudication on the merits.
Referring to precedents such as I-Pay Clearing Services (P) Ltd. v. ICICI Bank Ltd., Ssangyong Engineering & Construction Co. Ltd. v. NHAI, and Associate Builders v. Delhi Development Authority, the court highlighted that an arbitral award that fails to address the material issues or is based on no evidence is liable to be set aside on grounds of patent illegality and perversity.
Consequently, the court set aside the appellate arbitral award upholding the original award and allowed the petition filed by 5 Paisa Capital Limited. The parties were granted liberty to initiate fresh arbitration proceedings in accordance with law. The judgment underscores the importance of arbitral tribunals furnishing reasoned and speaking awards, especially on fundamental and contentious issues, failing which courts are compelled to intervene to uphold the integrity of the arbitration process.
Bottom Line:
Arbitration and Conciliation Act, 1996 Section 34 - Appellate arbitral award affirming original award set aside - Where Appellate Arbitral Tribunal merely reproduced submissions and failed to render findings on contentious issues such as effect of technical glitch, attribution of losses, obligation to notify, correctness of square-off and sale of shares, and alleged typographical error in e-mail address - Such non-speaking award suffers from patent illegality and perversity going to root of matter - Court cannot supply missing findings under Section 34 - Parties left at liberty to initiate fresh arbitration proceedings.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Section 31(3), 34, 34(2A), 34(4)
5 Paisa Capital Limited v. Ankit Agarwal, (Bombay) : Law Finder Doc Id # 3007118
