Order by:
Sh.Mohinder Singh Brar, Member
1. The complainant has filed the instant complaint under section 35 of the Consumer Protection Act, 2019 on the allegations that the complainant was having a Demat account (Trading & unique Client Code 1275887) with HDFC Securities Ltd. (Opposite Party no. 1) and a Saving Account number 0200 10000 28521 with HDFC Bank, Chamber Road, Moga Branch (Opposite Party no. 3). On 28.07.2020 Mahindra & Mahindra Financial Services called applications for issue of fully paid up equity shares on Rights Basis to the eligible equity shareholders of their company. As per application form last date for on market renunciation of Rights Entitlements was 07.08.2020 and Issue closes on 11.08.2020. On 07.08.2020 complainant applied for renunciation of rights entitlements of Mahindra & Mahindra Financial Services Ltd (Qty-2000) through HDFC Securities Ltd. for Rs.1,57,055.21. On 08.08.2020 an amount of Rs.1,57,055.21 for the aforesaid purpose was debited from saving account of the complainant. On 10.08.2020 complainant applied for Rights Issue of Mahindra & Mahindra Financial Services Ltd vide his application form no.31558156 through HDFC Bank Ltd Branch Moga. Amount of Rs.1,25,000 has been kept blocked/hold for said purpose. Complainant received an acknowledgement slip regarding same. The complainant got surprised that the amount kept on hold in his account has been lifted and then he immediately rang up the HDFC Securities Ltd branch office situated at Bathinda (Opposite Party no. 2), regarding the status of allotment of his Right Issues. They told the complainant that there was no allotment in his account and also confirmed that his Right Entitlement were kept in Pool account instead of crediting same in his demat account. In this regard complainant also received Email from opposite party that “they are unable to process the payout of below mentioned shares to your demat account due to "ISIN SUSPENDED" and same has been SHARE ARE LYING IN HSL POOL ACCOUNT”. Complainant also got the information that the allotment will be made on 20th or 21st Aug, 2020 and shares will be credited to his Demat Account on 25th of Aug, 2020 and listing date will be 27th of Aug, 2020. However till today neither any right shares are allotted to the complainant nor even a single share has been credited in the account of complainant. When the complainant came to know regarding above facts, then the complainant moved a complaint through email on 23.08.2020 to Opposite Party No.1 and also make numerous requests verbally to the Opposite Parties. On 25.08.2020 complainant received reply trough email of his complaint as under:-
As on the issue closing date 11.08.2020 the RE shares were not in your D-Mat hence the application towards the right issue could not be processed and right shares have not been allotted.
Further alleged that when on 07.08.2020 complainant had already applied for renunciation of rights entitlements of Mahindra & Mahindra Financial Services Ltd and on 08.08.2020 an amount of Rs.1,57,055.21 for the aforesaid purpose has already been debited from saving of complainant, then it is only due to negligence of Opposite Parties that renunciation of rights shares were not allotted in demat account of complainant. Hence, all these activities of the Opposite Parties amounts to unfair trade and practice and also amounts to deficiency in rendering the service on their part. Hence this complaint. Vide instant complaint, the complainant has sought the following reliefs:-
a) Opposite Parties may be directed to credit the Right shares, for which, complainant was eligible as per his application on market value of right shares.
b) To pay an amount of R.1,00,000/- as compensation for causing mental tension, harassment and agony.
c) To pay an amount of Rs.22,000/- as costs of litigation expenses.
d) And any other relief which this Commission may deem fit and proper be granted to the complainant in the interest of justice and equity.
2. Opposite Parties No.1 & 2 appeared through counsel and contested the complaint by filing written reply taking preliminary objections therein inter alia that complaint under the reply is not maintainable and is liable to be dismissed as the Complainant has attempted to misguide and mislead the Commission. The complaint is not maintainable and is liable to dismissed as no cause of action ever arose in favour of the Complainant and against Opposite party Nos. 1 & 2 to file the present complaint and hence, the complaint under reply is an abuse of the process of law. The Complainant does not qualify the ingredients of a valid complaint as envisaged in Consumer Protection Act, 2019. The present complaint is bad for non-joinder of necessary parties. The complainant applied for renunciation of rights entitlements of Mahindra & Mahindra Financial Services Ltd. The complainant was trading through the answering opposite parties with Mahindra & Mahindra Financial Services Ltd and National Securities Depository Ltd. The primary purpose of National Securities Depository Ltd. (herein referred as NSDL) is handling securities held in the Indian capital market in a dematerialized form and ultimately all the securities Depository has to be approved by NSDL as per the rules and regulations. It is submitted that Mahindra & Mahindra Financial Services Ltd & National Securities Depository Ltd are necessary parties to the present complaint which would clear the whole ordeal. The present complainant is not maintainable as the complainant does not fall under the definition of consumer as held by National Consumer Disputes Redressal Commission, New Delhi in a recent judgment of Baidyanath Mondal v Kanahaya Lal that:
A consumer is a person who buys goods or hires or avails of services for a consideration. The section, however, carves out an exception by providing that the person who purchases goods or hires/avails services for commercial purpose, shall not be included in the definition of Consumer.
Further as alleged by the complainant that he applied for renunciation of rights entitlement of Mahindra & Mahindra Financial Services Ltd on 07.08.2020 for Rs.1,57,055.21 through the answering opposite parties. On 10.08.2020 the complainant applied for rights issue of Mahindra & Mahindra Financial Services Ltd vide his application form no.31558156 through the answering opposite parties and amount of Rs.1,25,000/- has been blocked/hold for the said purpose. However the complainant was informed by the answering opposite parties that there was no allotment in his account and his Right Entitlement were kept in pool account instead of crediting the same in his Demat Account. It has been further alleged that till today right shares are not allotted to the complainant. Further alleged that the answering opposite parties will first clear the concept of Right Entitlement.
Rights Entitlement (RE) is the rights issued by the company to the existing shareholders to subscribe to the new shares/other securities that the shareholder of a company is eligible to apply for under the rights offer. REs are offered to shareholders based on a ratio of existing equity shares held as on the record date. Persons who have bought Rights Entitlements (REs) through On market renunciation/Off market renunciation, are eligible to apply for the shares/other securities offered under Rights Issue to the extent of the REs available in their demat account. The REs are credited in a separate ISIN to the demat account of the shareholders, against the shares held by them as on the record date. It is important to note that getting rights entitlement shares does not mean you have got the rights shares, you need to apply for rights shares based on entitlements received. It is also important to mention here that if no application is made by the purchaser of REs on or before Issue closing date then such REs will get lapsed and shall be extinguished after the Issue Closing Date. No shares/other securities for such lapsed REs will be credited.
Further alleged that the answering opposite parties duly informed the complainant that we were unable to processing payout of shares to his Demat account due to ISIN Suspended and the same has been lying in Pool account. The answering opposite parties received a communication from National Securities Depository Ltd stating that ISIN was suspended basis the instruction from the company i.e. Mahindra & Mahindra Financial Services Ltd. The answering opposite parties sent many emails to Mahindra & Mahindra Financial Services Ltd seeking clarification on the issue as to why the ISIN was suspended, but Mahindra & Mahindra Financial Services Ltd failed to address the issue. Further alleges that since ISIN was suspended basis the instructions received from Mahindra & Mahindra Financial Services Ltd, therefore the answering opposite parties were unable to transfer the shares in his Demat Account. Since there were no shares in his Demat account on the closing date i.e. 11.08.2020, therefore Rights Entitlement were lapsed after the closure of the Rights Issue. The answering opposite parties even contacted via email to National Securities Depository Ltd however NSDL responded that ISIN was suspended as per the request received from the issuer (Mahindra & Mahindra Financial Services Ltd) in accordance with SEBI Circular guidelines on Rights issue. Further alleged that the answering opposite parties is just an intermediary between the complainant and Mahindra & Mahindra Financial Services Ltd. Since Mahindra & Mahindra Financial Services Ltd instructed the National Securities Depository Ltd to suspend the ISIN therefore the answering opposite parties could not transfer the shares in his Demat Account. The Complainant has not disclosed the true & correct facts and are guilty of suppressing material particulars from the Court which should have been disclosed for the just and proper decision of the case. It is merely a concocted story which was manipulated by the complainant with the intention to defame the Opposite party Nos. 1 & 2, to take undue advantage of the complainant's own wrong and just to frustrate the process of law. On merits, all other allegations made in the complaint are denied and a prayer for dismissal of the complaint is made.
3. Upon service of notice, none appeared on behalf of Opposite Party No.3. Hence, Opposite Party No.3 was proceeded against exparte.
4. In order to prove his case, complainant tendered in evidence his affidavit Ex.CW1/A alongwith copies of documents Ex.C1 to Ex.C8.
5. To rebut the evidence of complainant, Opposite Parties No.1 & 2 tendered in evidence affidavit of Sh.Nitish Manocha, Manager Legal, HDFC Securities Ltd. Ex.OPs1 & 2/1 alongwith copies of documents Ex.OPs1 & 2/2 to Ex.OPs1 & 2/4.
6. We have heard the counsel for the parties and also gone through the documents placed on record.
7. During the course of arguments, ld. counsel for the complainant contended that complainant is dealing in share market and is having trade account with HDFC Securities and his livelihood depends on the earning from equity shares. Further contended that complainant purchased the renunciation of right shares of Mahindra & Mahindra Financial Services Ltd. on 07.08.2021 and applied for right shares before the due date. But shares could not be allotted to him because renunciation was not credited to his account. It is the primary duty of HDFC Securities to credit the renunciation in his demat account to make him eligible for right shares, but they were kept in pool account of HDFC Securities instead of crediting to his Demat Account, due to which the registrar of Mahindra & Mahindra Financial Services failed to allot the right shares as renunciation was not reflected in his Demat account because they were lying in pool account by the HDFC Securities.
8. The main plea taken by the Opposite Parties No.1 & 2 is that as the complainant availed the service of Opposite Parties No.1 & 2 for commercial purpose, so the complainant does not fall under the category of consumer and the present complaint is liable to be dismissed. But we do not agree with the contention of the Opposite Parties No.1 & 2, as in the present case, the complainant only claimed deficiency in service on the part of the Opposite Parties No.1 & 2, because the Opposite Parties No.1 & 2/HDFC Securities Ltd failed to credit renunciation right shares in the Demat account of the complainant, but kept the same in pool account, so there is deficiency in service on the part of Opposite Parties/HDFC Securities. As such, the same certainly amounts to rendering of ‘service’ as defined in the Act. The Hon’ble Punjab State Consumer Disputes Redressal Commission, Chandigarh, in First Appeal No. 127 of 2021 & others in case titled Savitri Devi Vs M/s Saharayan Universal Multipurpose Society Limited, decided on 21.6.2021 has held that Consumer Fora (now Consumer Commission) has jurisdiction to entertain the dispute, where the consumer comes to the Consumer Fora/Commission claiming the deficiency in service and unfair trade practice.
9. In the light of the facts, the complainant failed to obtain the right shares in spite of purchase of right shares renunciation and application of right shares well within time. As the complainant failed to get the right shares due to negligence on the part of HDFC Securities Ltd to credit the renunciation in the Demat account, but were kept in pool account, hence there is deficiency in service on the part of Opposite Parties No.1 & 2/HDFC Securities Ltd.
10. In view of the discussion above, we partly allow the present complaint and direct the Opposite Parties No.1 & 2/HDFC Securities to pay an amount of Rs.25,000/-(Rupees Twenty Five Thousand only) as compensation to the complainant for rendering deficient services. Complaint against Opposite Party No.3 stands dismissed. The compliance of this order be made by the Opposite Parties No.1 & 2 within 30 days from the date of receipt of the copy of this order, failing which, the Opposite Parties are further burdened with additional amount of Rs.5,000/- (Rupees Five Thousand only) to be paid to the complainant for non compliance of the order. Copies of the orders be furnished to the parties free of cost. File is ordered to be consigned to the record room.
Announced in Open Commission.
