COMPLAINT FILED: 23-03-2009

DISPOSED ON:29.02.2012

BEFORE THE DISTRICT CONSUMER DISPUTES REDRESSAL FORUM AT BANGALORE (URBAN)

29^th DAY OF FEBRUAR 2012

       PRESENT :-SRI. B.S.REDDY                 PRESIDENT                        

                           SRI.A.MUNIYAPPA                     MEMBER

O R D E R

SRI. B.S.REDDY, PRESIDENT

         The complainant filed this complaint u/s. 12 of the C.P. Act of 1986 seeking direction against Opposite Parties (herein after called as OP) to refund a sum of Rs.3,56,893/- with interest at 21% p.a. and to pay compensation sum of Rs.2,00,000/- on an allegations of deficiency in service on the part of the OPs.

2.  The case of the complainant to be stated in brief is that:-

        OP1 is a company dealing with stock and shares and financial services.  OP2 is branch and representative of OP1 in Bangalore.  The complainant approached Mr.Rajesh Jain a representative of OP1 and offered to invest a sum of Rs.5,00,000/- in the scheme of Portfolio Management Services (PMS), being the minimum amount to be deposited under the said scheme.  On 24-06-2005 the said Mr.Rajesh Jain came down to the residence of the complainant to prepare the documents for PMS scheme.  Further discussed about treating the complainant as an investor with ‘moderate risk appetite’ that all decisions regarding the transactions would be taken by OP1 under PMS.  The complainant signed all the documents relating to PMS and issued cheque for Rs.5,00,000/- along with additional cheque for Rs.200/- to open a demat account necessary for PMS. The complainant was assured that copy of the agreement would be forwarded after it was signed by authorized signatory of the company in Mumbai.  He was also informed that periodic statement of account would be furnished regarding transactions made in his account. Since complainant was not forwarded copy of the agreement, he approached OP2 for a copy of agreement and statement of account from July’2005.  He was informed that the same would be forwarded through mail. The complainant did not receive the agreement copy, he went to meet OP2 and met Ms.Pavithra who was handling his account after Mr.Jain was transferred to another branch.  Since there was no response he sent an e-mail to Jain on 26-10-2006 requesting his help in getting the said copy, after repeated requests complainant was issued a statement of account on 13-06-2006 and same showed a loss of Rs.2,17,088/-. Further penalty charges were debited for his trading in future with insufficient margin, though he had not given any instructions.  On demanding the issues with OP2, he was assured that loss would be made good as soon as possible and the penalty charges would be reversed. On 04-01-2007 e-mail was sent to OP2 stating neither the agreement copy of PMS nor any profit and loss account statement was sent to him, even though the PMS account was opened as far back as on 24-06-2005.  A written complaint was submitted to SEBI on         04-06-2007 stating that OP1 failed to furnish copy of agreement and the investment of Rs.5,00,000/- with OP1 under PMS scheme has not yielded any returns and most of the capital has been eroded; that only MOSL has gained by way of hefty brokerages.  SEBI sought explanation from OP1, OP1 claims to have replied to SEBI on 13-07-2007, copy of which was furnished to complainant on 08-08-2007.  The complainant was shocked to know that only part of the agreement copy was enclosed with the letter to SEBI.  Ops have mislead SEBI by furnishing false information stating that complainant is only a normal broking client and not Portfolio Management Services client, that all trades in the client’s account have been done under his specific instructions; regular contract notes were forwarded to him in digital format confirming the trades that statement of accounts for also been forwarded regularly, penal charges on the amount remaining out standing have been charged at 17%.  Ops have furnished false information to SEBI.  Having made him believe that a PMS account has been opened OP1 infact cheated complainant. Complainant has sent detailed response to the explanation submitted by the Ops to SEBI denying all the false and evasive statements made by Ops. OP1 failed to furnish agreement copy for PMS even till date, the statement of account have been forwarded on the regular basis.  The complainant has entered into agreement only for PMS and none other; that the representatives of Ops have misled and made him believe that Ops were operating his PMS account and the money sent to him periodically from profit generated from his account.  Non-furnishing copy of the PMS agreement and failure to furnish the statement of account regularly is the deficiency of services on the part of the Ops, negligence, incompetence, inefficiency and lethargic and careless attitude of Ops caused a capital loss of Rs.3,56,893/- to the complainant.  The complainant got issued legal notice demanding to pay the said sum with interest and damages to the extent of Rs.2,00,000/-.  Ops have neither complied the said notice nor replied to the same, hence both the Ops are jointly and severally liable to compensate the complainant.  These acts of Ops amount to unfair trade practice.  Due to this deficiency in services of Ops the complainant had to under go undue hardship, mental agony, suffer inconvenience and harassment, therefore the complainant is entitled to compensation of sum of Rs.2,00,000/- as punitive damages.  Hence the complaint seeking necessary relief as said above. 

3. On appearance OP1 & 2 filed version contending that the present transactions come under purview of the commercial transactions as such the complainant cannot be defined as Consumer as contemplated under the C.P.Act.  It is said that the complainant on his own entered, signed and executed the member client agreement along with risk disclosure document to commence dealing in the capital market segment of securities market.  The complainant was well informed about the maintenance of account and the risk involved in the securities market.  OP1 is Chairman and Managing Director of Motilal Oswal securities Ltd., and OP2 is Regional Head South of the company.  The contention of complainant that OPS are companies incorporated under Indian Companies Act engaged in the business of financial services is false and hence denied. The complaint pertaining to the trading account of the complainant Motilal Oswal Securities Ltd., and hence the complaint is not related and concerned in any manner with Motilal Oswal Financial Services Ltd.  The complainant is a normal broking client registered client code BG0390 and not Portfolio management services client. The agreement executed by the complainant is for availing the brokering services of Motilal Oswal Securities Ltd., in BSE and NSE for the both the segment and the same is based on modal format prescribed by SEBI.  The client availing PMS are required to execute a separate agreement which contains a minimum requirements as specified in schedule IV of the SEBI regulations of 1993.  The contention of the complainant that he executed all documents relating to PMS is absolutely false and baseless and hence denied in toto.  The complainant has taken payouts from time to time as reflected in the ledger statement of account of the complainant. The funds lying to the credit of the account of the complainant have been taken by way of payouts by the complainant from time to time, from which it is evident that complainant was aware of the trading account is opened and the trades executed in the said account pursuant to his specific instructions.  The complainant has made the payment of Rs.5,00,000/- at the time of opening the trading account with a clear intention to carry out the trades in his account which is evident from the fact that immediately the complainant has started trading in his account and the payment so made has been adjusted towards the said trades and the pay outs against the said trades have also been taken by the complainant which is evident from the ledger, the penalties levied on all the accounts when the clients fail to make the payments towards their margin requirement.  The said penalty is rightly levied on the complainant for failure to replenish his margin requirements despite giving him margin calls.  All details and documents associate with requisite for carrying on trading activities were provided to the complainant and all the trades were executed as per specific instructions received from the complainant.  The details of the trades were sent to complainant digital contract notes for trades executed in the account of the complainant as per instructions sent on regular basis. Apart from digital contract notes the complainant is also been sent DP statements vide post where in the complainant was aware of the details of transactions in his DP account.  According to clause 15 of the agreement in case the complainant had any dispute with regard to trade executed in his account, he should have pointed out within 24 hours of receiving the contract notes.  As complainant never raised objection on the contract notes at any time earlier, which clearly indicates that the trades done by the complainant and the contract notes issued to him were acceptable to him.  The contention that the complainant was assured that the penalty charges would reversed and the losses would made good are false and baseless.  The question of providing any PMS account does not arise as the complainant had never executed any PMS agreement.  The copy of trading agreement was provided to the complainant.  The complaint filed by the complainant with SEBI has been duly replied.  The allegations that the complainant was misled by representatives of Ops and the money taken by him as payouts being out of profit generated in his account are false and baseless hence denied.  The complainant regularly receiving digital contract notes and ledger confirmation statement which were evident of the fact that the complainant has executed a normal trading account by executing a member constituent agreement and not a PMS agreement. The complainant was provided telephonic instructions for executing trades in his account pursuant to which only trades have been executed in the account.  The profit or loss in the account is solely liable and responsible of account of trade carried out by the complainant.  The allegations that due to negligence by inexperienced staff of OPs causing capital loss is false and baseless hence denied.  The complainant himself is liable and responsible to loss caused in his account on the account of trade carried out by him in his account.  There is no cause of action and the alleged cause of action does not given rise to any claim before this forum.  Hence it is prayed to dismiss the complaint with exemplary costs. 

4. The complainant filed affidavit evidence in order to substantiate the complaint averments.  The Authorized person Naveen R of OP 1 & 2 filed affidavit evidence in support of the defence version.

5. Both parties filed Written Arguments and Additional Written Arguments.

6.Arguments heard regarding maintainability of the complainant.

7. Points for consideration is:-

Whether the complainant is a ‘Consumer’ as defined under the Consumer Protection Act and complaint is maintainable.

8. We record our findings on the above point in the negative.

R E A S O N

9. The relief claimed by the complainant is to refund sum of Rs.3,56,893/- being the balance amount payable out of the initial amount of Rs.5,00,000/- paid by him by way of cheque dt.24.06.2005 along with interest at 21% and to pay an amount of Rs.2,00,000/- as compensation alleging deficiency in service and unfair trade practice on the part of the Ops. The disputed transaction relates to investment made by the complainant by availing the services of the Ops dealing in buying and selling of the shares and the Ops rendered service by receiving the brokerage for the service rendered. The main contention of the Ops is that the present transactions come under the purview of the commercial transactions as trading of securities is outright a commercial trade carried out for commercial gains, as such the complainant cannot be defined as a ‘Consumer’ as contemplated under the Consumer Protection Act 1986 as amended.

10.The learned counsel for the complainant mainly relied upon the principles laid down in 2008(1)ALJ 560 (Senior Manager, Delhi Stock Exchange etc.-V/s-Ravindra Pal Singh and another) wherein it was held that the sale and purchase of shares-share broker-stock exchange renders ‘service’ to the investors and investor would be ‘Consumer’-share broker declared defaulter by Stock Exchange-complaint for recovery of amount invested by the investor would be maintainable against share broker and Stock Exchange Securities contracts (regulations) act (42/1956) Section-19.

It may be noted that the transactions in respect of which the dispute had arisen in the above case relates to the transactions earlier to amendment added by Act-62/2002 which had come in force with effect from 15.03.2003 for sub-Section(d) of Section-2(1) of the Consumer Protection Act, 1986 and the question as to whether the share trading is a commercial activity was not point in issue as such the principles laid down in the above said ruling cannot be made applicable to the facts of this case.

            It may be noted that a person who avails services for any commercial purposes has been excluded from the definition of a ‘Consumer’ as per amendment added by Act 62/2002 with effect from 15.03.2003. The relevant portions of sub Section-(d) of Section-2(1) of the Consumer Protection Act 1986 provides.

            “(d) “Consumer” means any person who:

(i)         buys any goods…………..,or

(ii)                        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 or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person but does not include a person who avails of such services for any commercial purpose;

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;”

11.The complainant has invested an amount of Rs.5,00,000/- for the purpose of share trading by availing the services of Ops as such the share trading is a commercial activity, and the services availed for that purpose are to considered to have been availed for commercial purpose. The person availing such services cannot invoke the jurisdiction of ‘Consumer Protection Act’. In 2010 CTJ 1194 (CP)(SCDRC) Anand Rathi Securities Ltd and others V/s Smt.Rajshri Verma and another it was held that:

“Undoubtedly the share trading is a commercial activity and the services availed for that purpose are obviously to be considered to have been availed for commercial purpose, as such a person availing such services cannot be invoke the jurisdiction of the Consumer Protection Act”.

Further in 2010 CTJ 1092(CP)(SCDRD) Raghubir Singh V/s India Bulls Securities Ltd and others, wherein complainant opened a demat account with Ops-transactions in shares made by the Ops through the account allegedly without the complainant’s permission-loss of as much of Rs.3,45,000/- caused to him-complaint dismissed by the District Forum in Appeal it was held that evidently large scale trading in shares done through the account for earning huge profits-Definitely a commercial activity-complainant held to be not a consumer under the Act-where the complainant, Ops committed any fraud as alleged-the question could not be gone into by the Consumer Forums under their summary jurisdiction. The Appeal was dismissed. At Para-11 of the judgment it was observed that from the record it is evident that large scale of sale and purchase of shares had been done through the account of the complainant for earning huge profits. This activity is definitely commercial in nature and therefore the complainant is not a ‘Consumer’ as defined under the CPA, 1986. Further there are allegations of fraud committed by the Ops and these cannot be gone into by the Consumer Fora under its summary jurisdiction as per the settled law. In view of the above, we are of the considered view that the complaint is not maintainable before the Consumer Fora.

In this case, the main allegation against the Ops is that Ops have not furnished the copy of the agreement entered into for opening a PMS account for which the complainant is legally entitled for even Ops have not furnished a copy of the broker client agreement said to have been entered into in 2005, by defrauding the complainant got the signatures on the blank forms for opening the account making him to believe that a PMS account has already been opened. Thus the question as to whether Ops have played fraud by obtaining the signatures on all the documents relating to open a demat account necessary for PMS but the said account was not opened is to be decided. Under summary jurisdiction the allegations of fraud cannot be decided by this Forum.

12.In view of the principles laid down in the above rulings, it becomes clear that the complainant has availed the services of Ops for commercial activity as such the complainant is not a ‘Consumer’ as defined under the CPA, 1986, the complaint is not maintainable. Accordingly, we proceed to pass the following:

O R D E R

The complaint filed by the complainant is dismissed as not maintainable.  However the complainant is at liberty to avail any other remedy that may be available under the law. Considering the nature of dispute no order as to costs.

        Send copy of this order to both the parties free of costs.

(Dictated to the Stenographer and typed in the computer and transcribed by her verified and corrected, and then pronounced in the Open Court by us on this the 29^th day of February-2012.)

MEMBER                                                    PRESIDENT

Cs.