Order-18.
Date-18/04/2018.
AUTHOR. RABIDEBMUKHOPADHYAY, MEMBER
This is an application u/s 12 of the C.P. Act, 1986.
The complainant stated that due to his personal use/ purpose he purchased 10 – Equity shares from his brother Anil Kumar Jain in the year of 1994 at the cost of Rs. 5,000/-and said Anil Kumar Jain duly handed over the same to the complainant without any hesitation.
That the complainant further stated that the distinctive numbers of the said shares No. are 4069841 to 4069850, corresponding Certificate Number is 319985, regd. No. Folio No. is A – 48587, and present certificate No. is 5617.
The complainant stated that due to an enquiry by the Income Tax Department, I.T.Deptt. seized the petitioner’s some goods along with the aforesaid shares on 26.07.1994 and the I.T. Department released the said shares to the petitioner in the year of 2014 and the complainant has written that the petitioner is a beneficial owner of the aforesaid shares, not only that the I.T. Department also informed that said department earlier issued a letter to the complainant on 25. 10. 2013 enclosing a certificate dated 19.12.12 to the complainant but the complainant could not receive the same.
The complainant further stated that after receiving of the aforesaid letter by the I.T. Deptt., the complainant through telephone informed the same to the opposite parties and also requested the O.Ps. to transfer the aforesaid shares in the complainant’s name and the complainant is ready to comply with the formalities, if any.
The complainant is stated to have written a letter to the O.Ps. for transfer of the same but at present, the diary is misplaced from the petitioner’s house. The complainant stated that on 16.01.2014 the O.Ps. No. 1 and 2 issued a letter to the petitioners and wrote that they had sent the said shares to Anil Kumar Jain in place of the complainant and the O.Ps. 1 and 2 in violation of the I.T. department letters had illegally sent that letter to Anil Kr. Jain.
That it is seen from I.T department letter that the complainant is a beneficial owner of the said shares; so, the opposite parties are bound to send the said shares with other facilities to the complainant within time otherwise they should come under the provisions of C.P Act 1986 for deficiency in service.
It is stated that the complaint is a consumer under the definition of C.P Act, 86 and the opposite parties are bound to send the aforesaid shares to the petitioner with dividend and other facilities but they did not do anything till the date of filing of this case.
It is stated that due to such Unfair Trade Practice on part of the O.Ps. No. 1 and 2 the complainant suffered huge loss and mental agony.
In the above facts and circumstances, the OP’s No. 1 and 2 may kindly be directed immediately to send the aforesaid shares to the petitioner, to pay compensation a sum of Rs. 3.00 lakhs due to unnecessary harassment, mental agony and unfair practice litigation cost of Rs. 50,000/-.
It is stated that for proper adjudication, the complainant made O.P No. 3, a party.
Written Version by OPs-1&2
Opposite Party No.1 stated that.
In the year 1990 one Anil Kumar Jain, the Performa opposite party herein purchased 10 Equity Shares bearing Distinctive Nos. 4069841 to 4069850 from the opposite party company having face value of Rs. 100/- each.A Certificate bearing No. 319985 dated 1/1/1991 was duly issued in favour of Anil Kumar Jain.
On 13.01.2014 the answering opposite party received a letter from the complainant with enclosures of share transfer deed and also share certificate claiming that the aforesaid shares have been transferred in his favour. Through the said letter and its enclosures, the complainant requested the opposite party company to transfer the aforesaid shares in his favour. It is significant to mention herein that prior to 13.01.2014 neither any information pertaining to such transfer nor any claim from the complainant for transfer of such shares in his favour was received by the opposite party company. Interregnum shares of face value of Rs.10/- each were sub-divided in two new shares of face value of Rs.2/- each and consequently new share certificate being No. 5617 for 1000 equity shares was issued to Mr. Anil Kumar Jain.
After receipt of application for transfer of shares from the complainant, the opposite party No.1 initiated the process of verification of details. At the time of verification it was found that the signature of Mr. Anil Kumar Jain as is appearing in the share transfer deed does not match with the specimen signature of Mr. Anil Kumar Jain available in the records of the opposite party No.1. Moreover, after sub-division of shares, new share certificates were issued and there was no existence of previous shares of face value of Rs.10/-.
The Opposite party company vide their reply dated 16.01.2014 duly informed the complainant about their inability to process the transaction due to mismatch of signature and requested the complainant to get a fresh share transfer deed executed in his favour from Anil Kumar Jain for the new shares and to forward the said new deed to the opposite party company for necessary processing at their end. A copy of the reply dated 16.01.2014 is annexed hereto and marked as Annexure – A.
As the complainant did not provide fresh share transfer deed, the opposite party company could not process the request of the complainant for transfer of shares in his name.
It is submitted that the subject shares were issued in name of Anil Kumar Jain and till 13.01.2014 the opposite party company never received any intimation regarding transfer of shares in favour of complainant. The opposite party company had no knowledge regarding seizure of share certificates by I.T. Department and subsequent release of shares by the department till the opposite party company received letter dated 03.01.2014 on 13.01.2014. It is repeated and reiterated that on 13.01.2014 the opposite party company for the first time received share transfer deed, share certificate from the complainant together with request to transfer the shares in his name.
It is further submitted that company shares are commercial items and are meant to derive profit from the dividend paid by the company to its shareholders. As such, they cannot be termed to be consumer goods, consequently, they cannot be said to be covered within the ambit of the Consumer Protection Act.
The opposite party company is neither aware about lodging any diary with local police station nor is concerned with the same. It is emphatically denied and disputed that the opposite party company violated any direction of the Income Tax department, as alleged or at all. It is submitted that upon receipt of request for transfer of shares in the name of complainant, the opposite party company started the process of verification; however, signature of Mr. Anil Kumar Jain as appearing in the transfer deed did not tally with the specimen signature registered with the opposite party company for which the transfer could not be affected. The opposite party company duly informed the aforesaid fact to the complainant vide their reply dated 16.01.2014.
It was further intimated that as the opposite party company was never intimated either by the complainant or by the I.T. Department regarding seizure of those shares hence the same could not be marked as stop transfer. Thereafter the said shares were sub-divided with the face value of Rs.2/- per equity share and the opposite party company dispatched the new share certificate to Mr. Anil Kumar Jain, the recorder shareholder. It was also requested in the said reply that the complainant should furnish fresh share transfer deed along with the said share certificate and other requisite documents. It is denied and disputed that the complainant was the recorded owner of those shares. As the transfer of shares in favour of complainant was not effected, the complainant cannot be termed as beneficial owner of those shares. The opposite party company as per the rules sent the new share certificate to the recorded owner. It is denied and disputed that the opposite party company has committed any deficiency in service.
It is denied and disputed that the complainant is a consumer of the opposite party company. The purported claim of the complainant is with regard to certain number of equity shares of the opposite party company which under no circumstances can be termed as purchase of any goods or availing of any service against payment of consideration as defined under the Consumer Protection Act, 1986. Moreover, the complainant has no relationship with the opposite party company in as much as the subject share which the complainant is claiming belongs to Anil Kumar Jain and till date the complainant has failed to submit any valid share transfer deed showing him to be the owner of the shares. It is denied and disputed that the opposite party company in absence of a valid transfer of shares in the name of complainant, was bound to send the share certificate to the complainant with dividend and other facilities, as claimed or at all. It is denied and disputed that the opposite party company has committed any unfair trade practice which is caused any mental agony or loss to the complainant, as alleged or at all.
Written Version by OP-3
Opposite party No.3 stated that he had purchased 10 equity shares of HDFC Ltd. having Face value of Rs.100/- through allotment in year 1990 and the said company issued to him the certificates bearing distinctive nos. 4069841 to 4069850 having certificate no. 319985 dated 01.01.1991 in favour of the OP-3.
It is also stated that OP-3 had sold 10 shares of the company to Shri Kailash Prasad Jain, on individual capacity as he wanted to invest in the company.He handed over the shares to Shri Kailash Prasad Jain on 24.07.1994 against receiving Rs.5000/- towards consideration of his shares along with transfer deed duly signed.That Shri Kailash Prasad Jain has been the owner of these shares since 1994 and he is holding original shares certificate with him.He is eligible for dividends and subsequent sub-divided shares by the company.As informed by Shri Kailash Prasad Jain that the shares have been seized by the Income Tax Department and being satisfied with the transaction, they have declared that Shri Kailash Prasad Jain as the beneficial owner of this shares along with subsequent benefits.
That certificate no.5167 for 1000 shares of Face value Rs.2/- sent at his old address and not traceable, as such, he asked Shri Kailash Prasad Jain to repot the matter to the police station.
That as regards his signature at the time of application is not available with him and it might have changed with the passage of time, which he does not remember.
In view of the above, it is stated that OP-3 has no objection if the shares are transferred in the name of Kailash Prasad Jain on Buyer’s signature as per law. Accordingly, he informed Kailash Prasad Jain to get the shares transferred on his own as he has already been declared beneficial owner by Income Tax Authorities.
POINTS FOR DISCUSSION
- Whether the complainant is a consumer under the OPs;
- Whether the complaint is maintainable and is barred by limitation;
- Whether the OPs-1&2 are deficient in rendering service to the complainant;
- Whether the complainant deserves relief.
DECISION WITH REASONS
*1) We had already decided in our order no.2 dated 02.08.2017 that shares are goods in terms of the three judge verdict of Hon’ble Supreme Court of India in Morgan Stanley Mutual Fund – vs. Kartic Das, citation. 1994 SCC (4) 225. As per para 27 of the said judgement, it is held that Section 2(7) of the Sale of Goods Act states that stock and shares are goods. Para 28 of the said judgement states inter alia… part ‘in India, by the terms of contract act, these choses in action are goods…… it is clear that not only the registered shares but also this class of choses in action are goods’……
*2) OPs 1 and 2 stated at WV para 2 and 8 those company shares are commercial item and are meant to derive profit and so they can’t be covered within the ambit of CP Act.
In reply it may be pointed out that one can buy some shares of his choice; that does not mean that the complainant deals in share trading and does also not
mean that it earns his bread and profit for such meagre 10 nos. of shares. He is professionally a businessman. OPs 1 and 2 failed to prove that the complainant is a businessman in shares or share trading. An owner of cotton Mill is a business man but if he buys 10 A.C. machines or 20 pedestal fans for the maintenance of administration or for the benefit of his employees, and if some of the purchased items become defective, can’t that owner or businessman of the Cotton Mill approach the consumer forum for relief from the supplier?
There must not be any question of commercial purpose as the purchased items are not directly linked to the main course of production of cotton. Similar case is the instant one.
*3) In this connection, complainant filed a copy of order dated 21.01.2016 in FA/1008/2014 of West Bengal State Commission, wherein the learned Advocate appellant/ complainant referred at last para of page 2 of the judgement, a host of judgements of Hon’ble National Commission Hon’ble Supreme Court and even of another judgement of the Hon’ble West Bengal State Commission (in FA/509/2009 dated 19.03.2010), where it has been held that the complainant was a consumer as he was not engaged in trading of shares but, only invested his hard earned money for supplementing his income for livelihood. Hon’ble State Commission also observed likewise.
So, the complainant is a consumer in terms of Section 2 (1) (d)(i) or 2 (1) (d)(ii) of the CP Act, 1986. Learned Advocate for the complainant in our instant case was insisting during final argument on Section 2(1) (r) on being challenged on the question of consumer but, we relied on Section 2(1) (d) (i) or 2 (1) (d)(ii) of the Act.
* 4) Regarding bar in Limitation as stated at WV Para 11.
Again the judgement of Hon’ble West Bengal State Commission dated 21.01.2016 may be referred to. It is settled that there has been a continuous cause since June, 2014 and as such law of limitation does not affect his (complainant’s) right to seek redressal. The shares and other documents were under seizure by the Income Tax Department for long 20 years. About three years also elapsed as the complainant had filed a consumer complaint in CDRF, Kolkata–Unit-I in CC No.14/651(lodged in 2014) and finally was withdrawn on 13.04.2017 vide order no.14, copy of which was filed on the date of final argument in the instant case.
*5) Regarding Mismatch of Signatures.
The OPs-1&2 stated at WV para-5(d) and 9 that transfer of shares could not be effected due to mismatch of signatures of the transferor (Anil Kumar Jain) (as recorded in the Company’s register).
i) In case of mismatch of signature the OP should have intimated under letter head in annexure-3 the reasons/defects for objection.
(ii) Schedule VII (Transfer of Securities of SEBI) Llisting obligations and Disclosure and Requirements) Regulation, 2015 states that regulations 40(7) and 61(4) – (B) difference in signature.
- In case of minor differences in the signature of transferor, the listed entity (here, the OP- 1 & 2) shall follow the procedures for registering transfer of securities.
The listed entity shall promptly send to the first transferor via speed post an intimation of the aforesaid defect and in the form the transferor that objection supported by valid proof is not lodged by the transferor with the listed entity within 15 days within receipt of the listed entities letter, then the securities shall be transfer.
- If the intimation to the transferor is delivered and the objection from the transferor with supporting document is not received within 15 days, the listed entity shall transfer the securities provided the listed entity does not suspect fraud or forgery in the matter.
- In case of major differences in or known availability of the signature of transferor,
Listed entity shall promptly send to transferee via speed post, an objection memo along with documents in original marking the reason as ‘material signature difference / non-availability of signature’ an advice to ensure submission of requested documents of the transferor.
- The listed entity shall also send a copy of the objection memo as per clause (a) sub-Para (2), to the transferor via speed post simultaneously.
- With such objection memo, listed entity shall also aske for additional documents of transferor for effecting the transfer like
i) An Affidavit to update transferor’s signature in its records;
ii) An original unsigned cancelled cheque and banker’s attestation of
Transferor’s signature and address;
iii) Contact details of the transferor.
- If intimations to both the transferor and transferee are delivered, listed entity is to tally the bank attested documents with its data base, then listed entity shall transfer the securities provided the listed entity does not suspect fraud or forgery in the matter.
*6) It appears from about SEBI regulations that OP has done nothing in accordance with the detailed procedure except a letter dated 16.01.2014 sent to the complainant with copy to OP-3. Moreover, no charge for fraud or forgery has been levelled by OPs 1 and 2 in the matter. The Income Tax Department also vindicated the transfer of shares to the complainant.
*7) The OP- 1 denied emphatically at WV para 9 that it violated any direction of the Income Tax Department and confirmed that they had started, on receipt of request for transfer, process of verification but for mismatch.
At WV para- 5 (c) and 9, OP. 1 and 2 stated that prior to 13.01.2014 the fact of share transfer was not intimated to them nor any claim was sent by the complainant to OP- 1 and 2 for transfer; consequently the OP.1 issued the split 1000/- shares at the rate of Rs.2/- to recorded holder Anil Kumar Jain, under new certificate no. 5617.
But OP-1 and 2 did not file any evidence that said 1000 shares were delivered to Anil Kumar Jain (OP-3) who denied having received such shares. OP-1 and 2 failed to show any evidence that such shares were received by OP-3 at his address. OP-3 stated that the same could be sent to his old address (WV Para 3 by Op-3) and the same was not traceable.
Moreover, if we, for the sake of argument, hold that the OPs-1&2 were in dark about the transfer of the shares in question, all interim benefits like bonus, dividend etc. should have been sent to the recorded holders of the shares for the intervening period. Neither the OPs-1&2 could file any evidence to this effect nor OP-3 has admitted this.
*8) The complainant stated at Para-7 that the certificate dated 19.12.2012 was sent by the I.T Department on 25.10.2013 to OPs with enclosure of seized documents regarding release of shares of complainant, with a copy sent to the complainant (as appeared from the copy of the letter dated 25.10.2013 itself). The complainant stated that he did not receive his copy. The complainant sent letter to OPs on 03.01.2014 asking procedures for transfer of shares. The OP-1 replied on 16.01.2014 to complainant under their reference no. 43343 with copy to OP- 3.
*9) We find from original documents (shown to us during final argument with copies available with the complaint) that the original form SH-4(Securities Transfer Form) and the original transfer form (form- 7B) signed by both transferor (OP-3) and transferee (complainant) were stamped by the OP-1 (HDFC Ltd.) on 27th June, 2014. This indicates that the said original documents were presented to OP.1 for necessary transfer but, no action was taken towards transfer of shares from OP-3 to the complainant in spite of payment of necessary fees for such transfer.
*10) OP-3 stated in his WV confirming the averments of the complainant regarding sale of ten shares to the complainant and confirmed no objection in the transfer of the said ten shares or split 1000 shares at the rate of Rs2/- to the complainant. An Affidavit executed on 14th December, 2011 by OP-3 in this connection has been filed during final hearing with copy to learned Advocate of OP-1.
*11) In the above detailed discussions, all the points of objections of OP-1 and 2 have been explained and clarified. It transpires that OP-1 (HDFC Ltd.) did not perform appropriate duties towards transfer of shares in complainant’s name, even after advice to them by the Income Tax Department to effect such transfer. I.T. Department though not a regulator in Company Affairs, is an expert organization under the Govt. of India, in realizing income tax and exploring economic offence in this area and they have high level mechanism in dealing with fraud of forgery in the field.
The Income Tax Department had directed the OP (HDFC Ltd, Mumbai) to transfer the split shares of face value Rs.2/- bearing certificate no. 5617 in lieu of certificates of face value Rs.100/- along with accrued benefits like bonus, dividend etc. to the complainant vide their no, DCIT /CC-XX/KOL/MISC/2014-15/136 dated 21.07.2014. But, OPs- 1 and 2 virtually ignored and neglected such advice and direction of the Income Tax Department, though at WV Para-9, they emphatically denied violation of IT Department’s directions. The OPs 1 and 2 are, therefore, deficient as well as they are negligent.
*12) OPs 1 and 2 could have followed proviso to Section 56 of Company Act 2013 [ Transfer and Transmission of Securities] to register the transfer but OPs- 1 and 2 did nothing and kept the complainant awaiting for long time leading to his financial loss, physical harassment and mental agony. So, OPs- 1 and 2 are deficient in rendering proper service to the complainant. The complainant also needs to be compensated to some extent.
In the circumstances, we are constrained to pass
-
That the complaint be and the same is allowed on contest against OPs 1 and 2 and dismissed against OP-3 in terms of section 13 (2) (b) (i) of the Consumer Protection Act 1986 as amended so far;
That OP-1 and OP-2 are directed to jointly and severally transfer the splitted shares of Face Value Rs 2/- each under certificate no. 5617 in lieu of previous certificates of face value Rs.100/- each, along with accrued benefits like bonus, dividend, etc. from 21.07.1994 (date of sale/transfer by the original purchaser/OP-3/ transferor) in favour of the complainant on summoning of necessary documents ,if any, from the complainant, within 30 days from the date of this order;
That the OPs 1 and 2 are further directed to pay Rs.25,000/- as compensation u/s 14 (1) (d) of the Act for physical harassment and mental agony and Rs.10,000/- as litigation cost, to the complainant , within 30 days from the date of this order.
That on non-compliance of any of above orders by the OPs 1 and 2, the complainant shall have liberty to put the orders into execution in terms of section 27 of the Act ibid.
Let copy of the order be supplied to parties when applied for.
