Reserved
State Consumer Disputes Redressal Commission
U.P. Lucknow.
Complaint Case No.327 of 2018
Ram Lal Arora aged about 68 years,
R/o A-16, Gyatripuram, Kursi Road, Lucknow.
…Complainant.
Versus
1- Karvy Stock Broking Ltd., Registered Office,
situated at 46, Avenue, Street no.1, Banjara Hills,
Hyderabad through its Director.
2- Devashish Saxena, Stock Broking Limited.,
3/58, Sector G. Jankipuram, Lucknow-226021.
3- Security and Exchange Board of India, through
Its Chairman Situated at Plot no.C-4-AG Block,
Bandra, Kurla Complex, Bandra East, Mumbai.
...Opposite parties.
Present:-
1- Hon’ble Sri Sushil Kumar, Member.
2- Hon’ble Sri Vikas Saxena, Member.
Sri P.M. Tripathi, Advocate for the complainant.
Sri Dilip Singh, Advocate for the Opposite Party no.3.
None for the Opposite parties no.1 & 2.
Date : 23.3.2023
JUDGMENT
Per Sri Vikas Saxena, Member- By means of the instant complaint, the complainant has sought a direction to opposite party for refund of amount of shares (bonds) worth Rupees 26 54 711. 67 alleging illegal and sham transactions of shares, owned by the complainant, done by the opposite party who were working as agents of the complainant, without obtaining his consent from his De-mat account with the opposite party. The complainant opened the margin account with the opposite parties no. 1 & 2 on 04.02.2013 in order to secure his post retirement life and to get some earning through sale in purchase of shares through this account. The share for
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Rs.24,29,896/- where kept in margin and Rs.10,05,626.65 we are kept in De-mat account which were managed by the opposite parties. The opposite parties in a most illegal and arbitrary manner and without consent by the complaint made 766 fraudulent transactions from his De-mat and margin account which caused lost to the complainant to the tune of Rs.26,54,711.67. This is alleged by the complaint that in this manner the opposite party committed serious deficiency in service as well as unfair trade practice and caused irreparable loss and injury to the complainant. The complainant has made this complaint for the compensation and damages as above. The opposite party number 3 security and exchange Board of India is a statutory authority established under section 3 of security and exchange Board of India Act, 1992, which is also made a party to the complaint.
Opposite party number 1 and 2 submitted their written-statement with the contentions that the complainant is not a consumer as per section 2(1)(d) of the consumer protection act, 1986 under which, a consumer means a person who buys any goods for a consideration but does not include a person who obtain such goods for resale or for any commercial purpose. That complainant is a trader of shares in stocks and he purchases the goods in shares for the sale, therefore, the state Commission has no jurisdiction to entertain the complaint which is related to a commercial activity. It is also contented by the opposite party number 1 and 2 that under securities and exchange Board of India Act, 1992 a mechanism has been provided for redressal of investors grievance against listed company or stock broker registered
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with SEBI. Even if, the grievance is not redressed by this mechanism the investor can file and application for arbitration of his dispute before the arbitration division of respective Stock Exchange. An investor agree with by an arbitral award may appeal to the appellate panel of arbitrators and also an arbitrary award may be satisfied by the court of district judge under section 34 of arbitration and conciliation act, 1996. It is further alleged by the opposite party number 1 and 2 that they have not committed any deficiency in service and all the transactions have been done as per instructions and consent of the complainant. The complainants has conferred the power of attorney to the opposite parties for use of De-mat account for the purpose of pay in and pay out of securities and for the purpose of receiving security allotted in IPOs as well as for the purpose of transfer of shares for maintenance of margin obligations in his trading account.. This is also submitted that no illegal or un-authorised trade has been executed by the opposite parties in the account of complainant. the trades executed between 14.07.2017 to 08.09.2017 we are also concentrate by the complainant before leaving for London the complainant has signed the Ledger balance confirmation dated 08.07.2017, 18.09.2017, 02.12.2017 and dated 17.03.2018 confirming all the trades and balance holding in the account on 21.03.2018. The complainant had concentrate to receive Electronic Contract Notes (ECN) of all the transaction executed bhai confirming through ECN at the registered email ID of the complainant. Some physical notes we are also sent to the complainant’s registered address for some undelivered ECNs and no unauthorised trades has been executed by the opposite party
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in the account of the complainant during his stay at London and from date 01.03.2017 to 31.03.2018.
We have heard learned Council Shri Piyush Mani Tripathi, advocate for the complainant and Shri Adil Ahmed, advocate on behalf of the opposite parties number 1 and 2 while the Advocate on behalf of opposite party number 3 security exchange Board of India remained absent. On perusal of the pleadings submitted on behalf of both the parties, documents/copies of documents and evidence adduced by both the parties. The following preliminary point emerge for decision of this complaint: —
1. Whether the complainant is a consumer and this complaint is maintainable in this Commission, under Consumer Protection Act, 1986.
2. Whether any deficiency in service has been proved by the opposite parties in the impugned transactions.
Regarding the first point the opposite party no.1 & 2 have alleged that the complainant is not a consumer and the complaint file by the complainant is not a consumer case because under the provisions of section 2(1)(d) of the consumer protection act, 1986 a consumer means any person who buys a good for a consideration but does not include a person who obtain such goods for resale or for any commercial purpose or who hires or avails of any services for consideration but does not include a person who hires such services for any commercial purpose. The complaint in this case is a trader of share and stocks who purchases these for resale. We have found that the opposite Party number 1 and 2
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have only alleged this fact and did not produce any evidence to substantiate this version. On the other hand, the complainant in paragraph number one of the complaint has said that he is a retired government servant and in order to secure his post retirement life and to get some earning out of his money in order to meet out his daily as well as his medical needs he is transacting in shares and stocks. In this way the complainant. In this way the complainant has brought his case under exception of section 2(1)(d) of the consumer protection act, 1986 which is as follows:
Explanation.— For the purposes of 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 purposes of earning his livelihood by means of self-employment;
This has been held by the Honorable National Consumer Redressal Commission(NCDRC), in case Baidyanath Mandal vs. KanhaiyaLalRathi reported in III (2022) CPJ page 339 ( NC) that if any person transacts share and stocks from share market for earning his livelihood he cannot be said to be doing it for a commercial purpose and he is a “Consumer” in view of section 2(1)(d) of the consumer protection act, 1986 but if this fact is not pleaded by the complainant then he cannot be presumed to be a consumer within definition of the consumer protection act.
In case Indiabulls Financial Services Ltd. vs. Verghese Skaria & anr., II(2012) CPJ 382 (NC), the Hon’ble NCDRC, New Delhi again reiterated this point in paragraph (12) of the judgment that investment made in shares not for commercial
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gain but to earn their livelihood after retirement then they are ‘consumer” as per the Act of 1986.
In this instant case the complainant has specifically mentioned in the complaint that he has maintained De-mat account with the opposite party for transactions of stocks and shares only for the purpose of his post retirement financial needs including medical expenses which in other words can be construed as earning his livelihood, because medical expenses are also part of livelihood expenses which are very much required for subsistence after the retirement, when income of an employee declines.
In respect of point no.2, the deficiency in service by the opposite party has been pleaded by the complainant in the complaint that he has engaged opposite party number 1 and 2 for brokerage of his shares and stocks transactions but they in an unauthorized and illegal manner sold these shares and stocks during the period of financial year 2017 - 18 from his account a without his knowledge and consent. The complaint has said in paragraph 5 of his complaint that "The opposite parties in order to procure maximum brokerage, executed these afore mentioned fraudulent, illegal and unauthorized transactions". In this manner the complaint has alleged deficiency in service by the opposite parties. The opposite party has countered this allegation by saying that that trades executed between 14-07-2017 to 08-09-2017 were well consented by the complainant before leaving for London. Besides that the complainant has signed the ledger balance confirmation dated 08-07-2017, 18-09- 2017, 02-12-2017 and dated 17-03-2018 confirming all the traits and balances and
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holdings in his account on 21 - 03-2018. The opposite party has submitted copies of these ledger balance confirmation (LBCs) which shows sign of the complainant at the bottom of each page. Admittedly, these were confirmed by the complainant on later date at 21 - 03- 2018, which clarifies that the signature of the complainant where taken on this document after the transactions were complete. The opposite parties no.1 & 2 fail to produce any evidence which proves that these transactions were executed by them after receiving consent of the complainant.
In this connection it is pertinent to note that in the letter dated 7th August 2017 of Karvy stock broking it is mentioned that they have replied a complaint of the complaint on date 13-04-2018, which further clarifies that immediately after signing the ledger balance confirmation (LBCs) and noticing the irregularities, that complainant made a complaint regarding the transactions, which shows that the complaint never consented to the transactions made by the opposite parties no.1 & 2 executed on behalf of the complainant and immediately after noticing the transactions he made complaint regarding these. Besides these signed ledger balance confirmations there is no evidence on record which can show that all these transactions where executed by the opposite parties number 1 and 2 with the consent and knowledge of the complainant.
In addition it is also worth noticing that after the inquiry the Investors Grievance Redressal Committee (IGRC) of BSE found that the trading member COP no.1 & 2 failed to substantiate pre-trade consent of the complainant. A copy of
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The report dated 27- 12- 2018 of Shri Mukesh Kumar Agarwal, igrc penal member, placed on record by the opposite party number 1 and 2 themselves, which has concluded as following —
" The IGRC noted the following facts:
1..........................................................................................................................................................
2. That TM failed to Substantiate pre-trade consent and confirmation from the complainant about the alleged transactions."
Thus from record we find that the opposite parties no.1 & 2 has admitted the transactions executed by them perportedly on behalf of the complainant but no evidence has been produced which can prove that these transactions were done with the previous consent and knowledge of the complainant. Therefore the opposite party number 1 and 2 are liable to compensate the complainant for the damages suffered by the complainant on account of these unauthorised transactions.
The complainant has contended that he occasioned loss of Rupees 16,73, 667/- but he could not give the details for them as to how much loss he has suffered by each transactions and in what manner. Therefore, in absence of details and proof of these details, this Commission finds that instead of the aforesaid loss as claimed by the complainant, it is proper to award a General damages of Rupees 10 lakhs to the complainant to be given by the opposite parties no.1& 2.
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Besides, the opposite party is also liable to refund taxes imposed by the competent authority on the complainant Rs.3,40,342.94 this amount has not been controverted by the opposite party number 1 and 2. In addition to that, the opposite party number 1 and 2 are also liable to pay Rs.10,000/- as costs of the complaint. In this manner the complaint is fit to be partially allowed.
ORDER
The complaint is allowed. The opposite parties no.1 & 2 are directed to pay Rupees 10 lakhs to the complainant. Besides, the opposite party is also liable to refund taxes imposed on the complainant Rupees3,40,342.94/- this amount has not been controverted by the opposite parties no.1 and 2. In addition to that, the opposite parties no.1 and 2 are also liable to pay Rupees10,000/ as costs of the complaint.
The stenographer is requested to upload this order on the Website of this Commission today itself.
Certified copy of this judgment be provided to the parties as per rules.
(Vikas Saxena) (Sushil Kumar)
Member Member
Judgment dated/typed signed by us and pronounced in the open court.
Consign to record.
(Vikas Saxena) (Sushil Kumar)
Member Member
Jafri, PA II/VS
Court 2