Absence of Findings on Contentious Issues Voids Arbitral Award: Bombay HC

The Bombay High Court has set aside an appellate arbitral award after finding that the tribunal failed to adjudicate upon the core legal and factual disputes, reinforcing that a 'non-speaking' award devoid of reasoning on rival contentions constitutes patent illegality. In a significant intervention under Section 34 of the Arbitration and Conciliation Act, 1996, the Bench ruled that an arbitral body cannot simply reproduce party submissions and pass an order without disclosing the adjudicatory findings that weigh in favor of its conclusion.

Justice Aarti Sathe, while hearing a challenge against concurrent awards passed by a Sole Arbitrator and an Appellate Arbitral Tribunal of the National Stock Exchange (NSE), emphasized that the judiciary cannot supply missing findings or undertake independent merits-adjudication where the tribunal has failed in its primary duty.

Key Takeaways

Adjudicatory Duty Refined

Arbitrators must not merely record submissions; they are legally bound to render specific findings on every contentious issue to ensure the award is not considered perverse.

Patent Illegality Threshold

An award that ignores vital evidence or fails to address the root of a dispute is liable to be set aside under Section 34(2A) for patent illegality.

Technical Glitch Liability

Liability for losses arising from system errors cannot be arbitrarily foisted on one party without examining contractual obligations and the impact of the glitch on trading decisions.

Limits of Judicial Intervention

While courts cannot re-appreciate evidence, they are duty-bound to intervene if an award is 'non-speaking' or 'unintelligible'.

The Requirement of a Reasoned Order

The High Court observed that the dispute centered on technical glitches in the Petitioner’s trading software, which provided the Respondent with excess margins. While the Petitioner claimed the trades were executed by the Respondent at his own risk, the Respondent alleged unauthorized trading and sought compensation for losses. The Court noted that the Appellate Tribunal merely foisted the liability on the Petitioner because it admitted to a system glitch, without determining if the trades were actually unauthorized or if the loss was directly attributable to the glitch.

The Court, in its reasoning, observed: "The Appellate Arbitral Tribunal was required to adjudicate rival contentions and record its findings on the rival contentions and other issues arising for determination. A mere reproduction of the submissions advanced by the parties could not constitute an adjudication of the dispute, inasmuch as, the impugned appellate arbitral award did not disclose what weighed in the mind of the Appellate Arbitral Tribunal in accepting one contention and rejecting the other one, nor did it disclose the material issues arising for consideration."

The Court has following directions:

"1) The impugned appellate arbitral award upholding the impugned arbitral award dated 6th June 2019 is set aside.
2) Any amount deposited in Court shall be released within the expiry of one month from the date on which this judgment is uploaded on this Court’s website.
3) The petition is allowed, and interim application(s), if any, do not survive and are accordingly disposed of.
4) The parties are at liberty to initiate fresh arbitration proceedings in respect of the present dispute in accordance with law."

Ratio

An arbitral award that fails to record findings on contentious issues or ignores material evidence is perverse and suffers from patent illegality that goes to the root of the matter. Such a 'non-speaking' award cannot be sustained under Section 34 of the Arbitration and Conciliation Act, 1996, as the Court is not empowered to supply missing findings or undertake an independent adjudication of merits to cure the defect.

Background

The Petitioner, a registered stock-broker, challenged an NSE appellate award that directed it to pay approximately Rs. 15.92 lakhs to its client (the Respondent). Between September and October 2018, a technical glitch in the Petitioner's system allowed the Respondent to trade with excess margins, eventually resulting in a debit balance. The Petitioner squared off the Respondent's positions and sold bonus shares of Adani Gas Ltd. to recover the dues, citing its Risk Policy.

The Respondent filed a complaint alleging that the trades in the derivative segment were unauthorized and executed by the Petitioner itself. Relying on Kotak Securities Vs. Gajanan Ramdas Rajguru ( "2025:BHC-OS:23272": 2025 CaseBase(BOM) 5115), Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd., and Associate Builders vs. Delhi Development Authority ( "2015 (3) SCC 49": 2014 CaseBase(SC) 661), the Petitioner argued that the award was perverse for lack of evidence and reasoning. Conversely, the Respondent cited Reliance Securities Ltd. vs. Vivek Sharma to argue that trading members are responsible for losses caused by technical glitches.

The Bombay High Court found that the tribunal had not answered critical questions, such as whether the Master Client Agreement mandated an obligation to inform the client of a glitch or whether the Petitioner's use of a wrong email ID in some documents was a mere typographical error. Citing I-Pay Clearing Services (P) Ltd. v. ICICI Bank Ltd., the Bench concluded that patent illegality was evident and set aside the award, granting the parties liberty to initiate fresh arbitration.

Case Details:
Case No.: ARBITRATION PETITION NO. 380 OF 2020
Case Title: 5 Paisa Capital Limited v. Ankit Agarwal
Appearances:
For the Petitioner(s): Mr. Kunal Katariya a/w Ms. Jyoti Ghag a/w Mr. Shailesh Prajapati a/w Mr. Vineet Jadhav and Ms. Riti Gada, Advocates, i/by Dua Associates
For the Respondent(s): Mr. Pranil Pawar, Advocate

Source: 2026 CaseBase(BOM) 7137