ORDER
P. S. Patankar, J.
1. Both these petitions can be disposed of by this common order since they involve the common questions. They are between the same parties.
2. These petitions are filed challenging the award passed by the Sole Arbitrator dated 24-5-1997 in Arbitrations Petition No. 191 of 1997. The claim made by the petitioner for an amount of Rs. 12,54,542.93 came to be rejected. In Petition No. 193 of 1997 the claim made by the petitioner of Rs. 11,62,276.69 came to be rejected.
3. Some time in the middle of 1995 respondent approached the petitioner for effecting the transactions in shares and securities on behalf of the respondent. The petitioner is a share broker and member of National Stock Exchange. It seems that the respondent was holding 2 accounts with the petitioner one Zenith Investments and other Trading Account Zenith Investments. It seems one was for delivery based transactions and the other for squaring up transactions. Some time in July-August 1996 the respondent suffered heavy tosses in the transaction and in spite of letters from the petitioner failed to pay the same to petitioners. The petitioners also received back certain shares regarding which the companies have raised objections and which were sold by the respondent through petitioner at the Exchange. The objections was raised that shares were jointly held by the respondent and his family members and the signatures on the Transfer Forma (Deeds) were forged etc. Because of these objections, the shares could not be transferred while the respondents were liable to the parties to pay the amounts in that respect Respondents failed and neglected to pay the said amounts and hence the matters were referred for arbitration as per bye laws of the National Stock Exchange of India Ltd. The respondents denied the liability and filed counter claims.
4. On 5-5-1997 the first hearing took place before the Arbitrator. The hearing remained inconclusive. On 8-5-1997 the petitioner sent certain documents to the Arbitrator pointing out that the claim made by them were correct and genuine. No further date was fixed and on 28-5-1997 the Arbitrator passed the Award.
5. The learned Counsel for the petitioner assailed the said Award on two grounds. He first submitted that the award was passed without giving any full opportunity to the petitioner to lead evidence and the material evidence tendered by petitioner was ignored and not considered. Thus the arbitrator has misconducted and the award is liable to be set aside. He invited my attention to the averments made in paras 12 and 14 of the petition. It is pointed out that though the meeting was held on 5-5-1997, it was not conclusive and further meetings were contemplated for considering the various contentions, documents and evidence but no further meeting was held.
It is also mentioned that on 8-5-1997, petitioner addressed a letter to the Arbitration Committee of the Stock Exchange and forwarded set of papers in support of its claim. They were not considered. No proper opportunity was given to point out, the same as no further hearing was held. It is also pointed out in para 15(f) that there was tape recorded statement of the respondent inter-alia admitting his liability for the amount claimed by the petitioner. The same was produced before the learned Arbitrator, but was not considered and was ignored by him. In reply filed on behalf of the respondent it was only stated that full opportunity was given to the petitioner, at the hearing on 5-5-1997 and award was passed considering all documents submitted. With reference to para 15(f), it is stated that 'with further reference to the said paragraph, I deny that my tape recorded statement admitting my alleged liability to the petitioners was not considered and was ignored by the learned arbitrator as alleged'. Thus except such vague denials or assertions there is nothing in the reply.
6. I find that the Arbitrator has not maintained any minutes of meetings. There is nothing to show that on the first date of hearing i.e. 5-5-1997 the arbitration reference was closed. Even it is not the case of the respondent in the reply. Therefore, prima facie the Arbitrator has misconducted by not considering the documents which were sent on 8-5-1997 which were 5 in number. There is no dispute that they were not taken into consideration. Further I find that there is absolutely no reference of whatsoever made to the tape recorded conversation by the learned Arbitrator. In fact it was a material piece of evidence and according to the petitioner the respondent has admitted his liability in the said conversation, Even in the reply filed by the respondent there is no clear denial that there is no such tape recorded conversation or that he has not admitted any such liability. Ignoring such material piece of evidence is nothing but misconduct on the part of the Arbitrator.
7. The learned Counsel for the petitioner has cited various judgments in support of his contention. I am making short reference to them as I am accepting his submission that no full opportunity was given to the petitioner in this case and the learned Arbitrator had ignored or not considered the material evidence tendered by the petitioner and hence misconduct.
i) A.I.R. 1937 Bom 410 Abiivajar Katuf v. Reception Committee of the 48th Indian National Congress and another. It was held that the legal misconduct is a term which is commonly used in reference to awards. It does not necessarily involve any moral turpitude or dishonesty on the part of the arbitrator. It is held that it is misconduct in the judicial sense where the material piece of evidence is tendered and rejected which entitles a party for setting aside the award.
ii) A.I.R. 1958 A.P. 384 Chinoy Chalani and Co. and others v. Y. Anjiah. It was observed 'We are firmly of the opinion that the arbitrators should perform their quasi judicial functions in a judicial manner and should not make a farce of the enquiry before them. They should give full opportunity to the parties to adduce their evidence and also allow them to be heard.'
iii) A.I.R. 1932 Bom 68 Pratapsingh v. Kishanprasad and Co. Ltd. It was held that the inquiry before the arbitrator should be assimilated as near as possible to proceedings in a trial in a Court of law, and therefore a party to the arbitration must not only have notice of the time and place of the meeting but he should be allowed reasonable opportunity of proving his case either by evidence or by arguments or both and of being fully heard.
iv) There is a recent judgment of my learned brother Rebello, J., Municipal Corporation of Greater Bombay v. M/s. Bharat Constructions, reported in : 1999(1)BomCR347 in which he has observed : 'It is now well settled law that the Arbitrator before closing the proceedings must give an opportunity to the parties intimating to them that the proceedings would be closed. 'He held that when such notice was not given there was denial of fair opportunity to the party to lead the evidence it would vitiate the award as it amounts to misconduct on the part of the Arbitrator.
v) : AIR1975SC1259 K.P. Poulose v. State of Kerala and another. The Apex Court observed : Under section 30(a) of the Arbitration Act an award can be set aside when an Arbitrator has misconducted himself for the proceedings. Misconduct under section 30(a) has not a connotation of moral lapse. It comprises legal misconduct which is complete if the Arbitrator on the face of the award arrives at an inconsistent conclusion even on his own finding or arrives at a decision by ignoring very material documents which throw abundant light on the controversy to help a just and fair decision. It is in this sense that the Arbitrator has misconducted the proceedings in this case.'
vi) Similarly in : [1994]3SCR551 Union of India v. Jain Associates and another. The Apex Court again relied upon the case of K.P. Poulose : AIR1975SC1259 and reiterated the principle. It was again observed that if the material documents are ignored which would throw abundant light on the controversy to help a just and fair decision, then it would amount to legal misconduct on the part of the Arbitrator.
8. The learned Counsel for the petitioner next submitted that the respondent herein made a counter claims. The learned Arbitrator instead of deciding the same, which arise out of these very transactions, opined that respondent can approach the National Stock Exchange for fresh arbitration. This was on the ground that he has not paid the arbitration fees. It is submitted that under bye laws of the National Stock Exchange of India it was not necessary for the respondent to pay such fees.
9. First I find nothing is prescribed regarding the arbitration fees forthe counter claim by the bye laws. In addition it was an error to postpone thecounter claim for subsequent arbitration and pass the award since claimsand counter claims were inter - related. The Arbitrator ought to have considered the counter claim and if arbitration fees were to be paid, he shouldhave called upon the respondent to pay the same. In : AIR1990SC53 K.V. George v. The Secretary to Government. Water and Power Department Trivandrumand another, the Apex Court in para 13 has observed:
'It is the duty of the arbitrator while considering the claims of the appellant to consider also the counter claims made on behalf of 'the respondents and to make the award after considering both the claims and counter claims'
In my opinion the learned Arbitrator has not applied his mind properly, and has misconducted. Considering this, I pass the following order :--
10. The awards dated 24-5-1997 passed by the Sole Arbitrator in both these petitions are set aside.
Interim order passed by this Court at the time of admission to continue for further period of one month.
Certified copy expedited.
11. Appeal allowed.