D.O.F. 05.06.2009
D.O.O. 30.09.2011
IN THE CONSUMER DISPUTES REDRESSAL FORUM KANNUR
Present: Sri. K.Gopalan : President
Smt. K.P.Preethakumari : Member
Smt. M.D.Jessy : Member
Dated this the 30th day of September 2011.
C.C.No.150/2009
C.K.Pradeep,
Tranquility, Moora Kunnu,
Chirakkara.P.O.,
Thalassery. Complainant
(Rep. by Adv. C.K. Rathnakaran)
1.Manger,
Kotak Securities,
Nirlon House,
4th floor,
Dr.Annie Besant Road,
Mumbai 400 025.
2.Manager,
Kotak Securities Ltd.
40/1400, Ensign enclave,
2nd floor, M.G.Road,
Jose Junction,
Kochin. 11.
3.Manager,
Kotak Securities,
Fort Road, Kannur. Opposite Parties
(Rep. by Adv.M.K.Santhosh for OPs 1 to3)
O R D E R
Smt. K.P. Preethakumari, Member.
This is a complaint filed under Section 12 of Consumer Protection Act for an order directing the opposite parties to pay an amount of `5,67,375 with 15% interest per annum and to pay `10,000 as compensation with cost.
The complainant’s case is that he was an NRI and returned to India after giving up his job. Attracted by the advertisement given by the opposite parties indifferent media, he expressed his willingness to associate with opposite party through his e.mail and accordingly the 2nd opposite party deputed two executives and they made believe the complainant that, if he is intending to invest in the share market he need not know anything about the stock market and they will do trading on behalf of the complainant and also assured that they will do trade in the account of the complainant only after getting confirmation for each transaction. Believing the words of opposite party the complaint had invested a total amount of `10,00,750 with the opposite party and signed all papers demanded by the executives of 2nd opposite party during September 2007. The opposite party traded through the account of opposite party even without informing the complainant. The 2nd opposite party has done derivative trade in the demat account of the complainant without getting any confirmation even though the opposite parties were aware that for doing derivative trade the complainant has to pay margin money and the opposite party has to open a separate bank account in the name of the complainant and the account has to be settled from the bank account of the complainant. On 15th November 2007, the staff of 2nd opposite party contacted the complainant for doing trade and the complainant didn’t give the approval and requested the opposite party to sent the ledger showing the trade done from his account, but they didn’t complied the instructions. Later the complaint was informed that the complainant has suffered heavy loss as a result of the trade done by the opposite party. Although the complainant suffered huge loss the opposite party made a handsome brokerage of over 1.7 lakhs by entering into fraudulent dealings with the money of the complainant. Opposite party made 40% loss of investment of the complainant by doing trade without the confirmation of the complainant only with a dishonest intention to get brokerage for the trade done in the account of the complainant. The complainant contacted the opposite party several times for getting loss of `5,67,375 from the opposite party. But there is no positive approach on the part of opposite party. The opposite parties have done derivative trade in the account of the complainant without the written authority and without any kind of instruction from the complainant. The complainant did not give any margin money for doing the derivative trade in his account. The opposite party did not issued any contract note to the complainant for the alleged derivative trade done in his account. All the shares in the demat account of the complainant were in the opposite party’s account. The opposite party cannot sell the shares without the written consent of the complainant and they did not inform the complainant about the selling of shares from his account. The acts of the opposite parties amount to unfair trade practice and deficiency in service and 3rd opposite party is refusing to provide statements of accounts showing the transaction done in the complainant’s account. The acts of the 3rd opposite party caused severe mental agony to the complainant for which he assesses `10,000 as compensation. The opposite party is liable to compensate the complainant and to pay the value of shares in his account as on the date of sale of shares. Although the opposite parties received the notice issued by the complainant, they neither replied nor paid the money. The cause of action for the complaint arose on 15.11.07, the date on which opposite party carried out trade without the approval of the complainant and there after within the jurisdiction of the Forum. Hence the complaint.
In pursuance to the notice issued by the Forum all opposite parties appeared and filed their version admitting that 2nd opposite party is the Member in NSE and acting as share broker obeying guidelines of SEBI. The opposite parties contended that the complainant is not a consumer since the trades were executed with speculative motive to earn profit and hence the complainant falls under the exception to the general rule under section 2(1)(d) of Consumer Protection Act 1986 and hence the complaint is not maintainable before this Forum. According to the opposite parties the complainant have not furnished any details of the claim amount as there is no break up or calculation as to how the complainant has arrived at the claim of `5,67,375 which the complainant is allegedly entitled to receive from opposite party. The complainant has not disclosed details such as scrip, quantity, segment, price etc. and hence claim is not maintainable. The opposite party alleges that the complainant has disputed the trades executed in F & O Segment, but the details such as period, quantity, price, scrip etc. are not specified by the complainant in his complaint filed before the Forum. The complainant concealed the fact that he had received pay-in of funds from the statement of account claiming the disputed period. The complaint cannot be entertained, since as per the agreement signed between the parties agreed, court in Mumbai shall have exclusive jurisdiction to any other court. The opposite party admits that the complainant had entered into an agreement with them. They further admits that the complainant deployes `10,00,750 in his ledger account maintained with the opposite party. They denied the allegation that they had started to do trade in account of the complainant without informing him. Opposite party did the derivative trade in the demat account of the complainant without getting any confirmation, pay margin money by the complainant, open separate account etc. the opposite party had send copies of contract notes, bills, trade confirmation statement of account to the respondent through digital mode in the e-mail id and physically in his mailing address as and when due and there was no protest/objection or demur raised by the complainant in any form against the trades executed in his account. the complainant after execution of the trades had taken a pay out of 58,496.54 as evident from his ledger account dt.1.2.08.The opposite party states that the complainant had disputed al trades executed in his account as an after thought in order to palm off the trading losses if any in the account of the opposite party and extort money from the opposite party on one way or the other. The opposite party denied the statement that the complainant suffered los in his account due to trades executed by the opposite party allegedly against the consent of the complainant and is put to proof and also denies the contention that the complainant had made a brokerage of 1.70 lakh as falsely alleged. The opposite party further denies the allegation that they had made a loss of 40% of the investment and the trades were executed without confirmation of complainant with a dishonest intention to earn brokerage for opposite party. According to opposite party the complainant had invested `10,00,750. The loss amount if any as trading loss which shall be attributed solely on the act of complainant and not of opposite party. The complainant is not entitled to recover any amount from opposite party.
The complainant did not furnished margin money to trade in F and O segment. There is no deficiency of servie on the part of oppsoit party. The opposite party denied the statement that the complainant had so far not received any copy of statement of account. The opposite parties have not caused any mental agony and hence the complainant is not entitled to any compensation. The opposite party states that the sale proceeds of all securities liquidated are duly credited in the ledger account of the complainant and hence the complainant is not entitled to any relief and hence the complaint is liable to be dismissed.
Upon the above contentions the following issues have been
raised for consideration.
1. Whether the complainant is a consumer?
2. Whether there is any deficiency of service on the part of
opposite parties?
3. Whether the complainant is entitled to any relief?
4. Relief and cost.
The evidence in the above case consists of oral testimony of
PW1 and Ext. A1 to A4.
Issue No.1
The opposite party contend that the complainant cannot be treated as consumer since the trades were executed with speculative motive to earn profit. So the complainant falls under the exception to the general rule and cannot be termed as consumer under section 2(1)(d) of consumer protection Act 1986. Admittedly the complainant in this case is an NRI and he returned to India after giving up his job in gulf. The Sec 2(i)d(ii) of Consumer Protection Act defines a consumer as a person who “hires or avails of any services for a consideration which has been paid or promised or partly paid and partly promised or under any system of deferred payment and includes any beneficiary of such services other than the person who hires the services for consideration. Paid or promised or partly paid and partly promised or under any system of deferred payments, when such services are availed of with the approval of the 1st mentioned person (but does not include a person who avails of such services for any commercial purpose).
Explanation for this purpose for this clause, “commercial purpose” does not include use by a person of goods bought and used by him and services availed by him exclusively for the purpose of earning his livelihood, by means of self-employment). Admittedly the complainant is a retired NRI having no job and he has engaged in the trade business for the purpose of earning his livelihood by means of self employment. In Laxmi Engineering Works Vs P.S.G Industrial Institute which was reported in 1995(3) SCC 583 the Hon’ble Supreme Court pointed out that “commercial purpose” shall be governed by the facts of each case. While going through the pleadings it is seen that the objective of the trade business of the complainant is his livelihood.
Moreover the complainant’s counsel vehemently argued that the amount was deposited as security and the complainant has not given any consent to opposite party for trading business. So the complainant had deposited the amount as in the bank and hence he will definitely come under the definition of consumer, since they have received consideration. The opposite parties have not produced even single document to show that the complainant had given consent for trading business. So we are of the opinion that the complainant in this case has the status of depositor as deposited before the bank. So from the above discussion we are of the view that the complainant is a consumer and the Forum has ample jurisdiction to try the case and issue No.1 is found in favour of the complainant.
The further case of the complainant is that he had entrusted `10,00,750 with opposite party and has sustained a loss of 40% investment by doing trade without the confirmation of the complainant and incurred loss of `5,67,375 and hence they are liable to refund the above said amount to the complainant. In order to prove his case he was examined as PW1 and has produced notice dt.31.1.09, lawyer notice and two acknowledgement cards. The complainant contended that the 3rd opposite party had done derivative trade without informing and without his confirmation. But he deposed before the Forum that “ Hmtcm trade\p ap³t] Ft¶mSp consult sN¿m-dn-Ã. hnh-cT And-bn-¡pT . Every transaction Fs¶ inform sN¿pT. From this it is seen that the opposite party used to inform all the trades to the complainant. The opposite parties admits that the complainant deployed funds to the extend of `10,00,750 in his ledger account maintained with him. But denied that the business was conducted without instruction of the complainant and according to opposite party they used to send copies of contract notes, bills, trade confirmation statement of account to the complainant by digital mode in his e-mail id and physically in his mailing address as and when due. But the very specific case of the complainant is that he did not give any instruction or approval for conducting trade in the account of him. As per annexure I(3)(5) of SEBI(Stock brokers and sub-brokers) Regulations 1992, the investor have obligation to give any order for buy or sell of a security in writing or in such form or manner as my be mutually agreed and ensure that contract note is issued to the investor by the member which contains minute records of every transaction. Similarly as per section 17 of SEBI (stock – brokers ad sub-brokers regulation 1992, it is obligatory on the part of stock broker to maintain proper books of accounts, records etc. As per section 17(1) every stock broker shall keep and maintain the following books of accounts, records and documents namely(a}register of transaction (Suda Book)(b) client’s register(c)general ledger (d) Journals (e) cash book, (f) Bank pass book (g) Documents register containing interalia particulars of security received and delivered in physical form ad the statement of account and other records relating to receipt ad delivery of securities provided by the depository participants in respect of dematerialized security(h) Members contract books showing details of all contracts entered into by him with other members of the same exchange or counterfoils or duplicate of memo’s of confirmation issued to other members (i) counter foils or duplicates of contract note issued to clients (j) written consent of clients in respect of contract entered into as principles,(k) Margin deposit book(l) Register of accounts of sub-brokers(m) Agreement with sub-broker specifying the scope of authority and responsibilities of stock broker ad sub-broker (n) an agreement with the sub-broker and with the client of the sub broker to establish privity of contract between the stock broker and the client of sub-broker. Section 18 states that every stock broker shall preserve the books of accounts and other records maintained under Regulations 17 for minimum period of five years. So it is very clear that it is obligatory on the part of stock broker to maintain or preserve all relevant records for five years. Admittedly the amount was invested during 2007. So the transaction was before 4 years. So the opposite parties are bound to keep the records. The complainant contended that he had never instructed for trading business and not given any contract note. So in order to disprove the contention of the complainant the opposite party can very well produce all those documents, which are obligatory on their part to maintain for 5years from the date of transaction. The Forum has directed the opposite parties to produce the demat account of the complainant from the date of commencement of the trade till 16.2.11, the account showing the cash trade and the account showing the derivative trade done in the account of the complainant etc, as per the petition filed by the complainant for cause production. But the opposite parties instead of producing those documents filed an affidavit stating that the company already sent those documents to the complainant and also states that the complainant has admitted in evidence that he is in possession of the document sought to be produced. So the opposite parties willfully evaded from the liability of producing documents. Even if copies of the documents are issued to the complainant, it is obligatory on the part of the opposite parties to produce documents. So non-production of documents helps to draw adverse inference in favour of the complainant. So there is deficiency and unfair trade practice on the part of opposite party. Moreover, schedule II of the above said Regulation speaks about the code of conduct for stock brokers. As per Regulation 7 A a stock broker shall maintain higher standards of integrity, promptitude and fairness in the conduct of all his business. The facts and circumstances of the case shows that the opposite parties failed to maintain such degree of integrity, promptitude and fairness as envisaged by the above said regulations. More over the complainant deposed the Forum that Rm³ 10e£T cq] sImSp-¯Xp professional fund Management\p thn-bmWv.. Bank  depositsN¿p-¶-Xp-t]mse sImSp-¯-Xm-Wv.. But the opposite party has not produced any document to prove otherwise. So we re of the opinion that there is grave deficiency of service and unfair trade practice on the part of opposite parties 2 and 3. Regarding the amount the complainant contended that he is entitled to get
`5, 67,375. So we are of the opinion that he is entitled to get the said amount of `5, 67,375. It is a fact that the complainant had sustained loss due to the deficient service of opposite party. He made many compliant before the higher authority and it is also a fact that he had suffered so much of financial loss and mental agony. The complainant contended that he had deposited the amount for professional fund management as like as bank deposit. But the opposite party has not produced any documents or not even convinced the Forum that they are not liable to give `5,67,375. It is also found that there is deficiency of service on the part of opposite party for which we assess `5000 as compensation and `1000 as cost of the proceedings and order passed accordingly. Since the Complainant has no claim against 3rd opposite party, 3rd opposite party is exonerated from liabilities.
In the result, the complaint is allowed directing the opposite parties 1 and 2 to refund `5, 67,375(Rupees Five lakhs sixty seven thousand three hundred and seventy five only) along with `5000 (Rupees Five thousand only) as compensation and `1000(Rupees One thousand only) as cost of the proceedings to the complainant within 30 days from the date of receipt of this order, failing which complainant is entitled to execute the order as per the provisos of consumer protection Act.
Sd/- Sd/- Sd/-
President Member Member
APPENDIX
Exhibits for the Complainant
A1.Copy of the notice dt.31.1.09 sent to OP
A2.Copy of the Lawyer notice sent to Ops
A3 & A4. Postal acknowledgments
Exhibits for the opposite parties: Nil
Witness examined for either side: Nil
/forwarded by order/
SENIOR SUPERINTENDENT
