COMPLAINT FILED:26.03.2009  

DISPOSED ON:11.01.2012.

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

11^th DAY OF JANUARY 2012

       PRESENT :-SRI. B.S.REDDY                  PRESIDENT                        

                         SRI.A.MUNIYAPPA                   MEMBER              

O R D E R

SRI. B.S.REDDY, PRESIDENT

This is a complaint filed U/s. 12 of the Consumer Protection Act of 1986 by the complainant seeking direction against the Opposite Party (herein after called as O.P) to pay sum of Rs.5,00,000/- with interest at 21% p.a. and to pay compensation of Rs.1,00,000/- towards mental agony and the loss of reputation on the allegations of deficiency in service.

2.         The brief averments made in the complaint are as follows:

The Complainants are husband and wife. They have opened a credit account bearing No.317065 and 761537 respectively with the OP Company for online trading. OP is carrying on business in the online trading of shares and debentures. The complainants have been intraday online trading customers and speculators of OP-Company since three years operating their business from Bangalore address of the OP-Company. Since the time they started their business, the complainants have been carrying on online trading activity without any remark or blemish and they have accordingly developed and maintained a good standing in the stock market. The online trading hours of the stock market as recognized by the stock exchange board of India is between 9.55 a.m. and 3.30 p.m. in the evening. During this time any online trading customer can operate the facility and indulge in buying and selling of shares and stocks. On 26.11.2008 the complainants while doing their regular online trading at the branch office of the OP, had transacted at 3.15 p.m. and placed an order for the purchase of around 2000 shares of Esser Oil and 800 shares of SAIL in their respective names. The said transaction was accepted by the OP-Company at 3.15 p.m. till then, their account being active and valid. However, on the very same day at about 3.20 p.m. when they tried to close their purchase orders the OP Company did not accept the transaction on behalf of the complainants and both the accounts of the complainants were shown as deactivated on all exchanges at 3.20 p.m. As per the timings stipulated by the stock exchange board of India, closing of the account or deactivation at 3.20 p.m. is illegal and arbitrary. The OP-Company having allowed the complainants to transact at 3.15 p.m. and have not allowed the complainants to complete the same before the closing hours, instead both the accounts were deactivated at 3.20 p.m. thereby rendering the complainants disabled to complete their transaction resulting in short selling of shares and securities. The complainants made efforts to contact the RMS of the OP-Company so as to secure their positions before closing hours. They were not able to access or reach RMS as the OP-Company did not respond or co-operate for such efforts. In the result, the transaction which was active at 3.15 p.m. could not be completed before closing hours, i.e., 3.30 p.m. on the same day. On account of short selling of the shares and securities which the complainants intended to purchase and not being able to do so on account of the negligent act of deactivation of the account by the OP-Company, the complainants have exposed to enormous loss monetarily as well as by way of loss of reputation in the business of online trading. The loss occasioned to the complainants is to the tune of over Rs.10,00,000/-. Due to the negligent act of deactivation of the account by OP, since then the complainants have not carried on business in online trading account as even to this day the account is deactivated. On the date of transaction i.e., on 26.11.2008, the complainant’s accounts were valid and subsisting and there was no overdrawing of the credit limit available to the complainants. The complainants contacted the OP to compensate them for the losses sustained, OP has not responded to the same, legal notices issued remained unanswered. On the other hand, OP is making an illegal claim that in the trading accounts of the complainants a sum of Rs.5,010/- is shown as outstanding and remained unpaid. The complainants are not liable to pay the said amount, there is no outstanding dues that is required to be paid by the complainants to the OP. Hence, the complaint.

3.   On appearance OP filed version contending that this Forum has to decide the issue of jurisdiction as preliminary issue before deciding the case on merits. Both the trading member and the clients who trade through them are bound by the Rules, Bye laws, Regulations of the Stock Exchange in which the transactions took place. The complainants were enrolled as OP clients, they have signed a member constituent agreement with OP agreeing to all the terms and conditions contained therein. Clause-31 of the agreement provides that the complainants and OP have submitted to the exclusive jurisdiction of the Courts in Chennai. Hence this Forum does not posses jurisdiction to entertain the complaint. Further as per Clause-30 of the agreement any dispute shall be resolved only by Arbitration. The complainants from the date of enrolment had traded in the Equity segment of both National Stock Exchange and Bombay Stock Exchange. The first complainant placed sell orders for 300 shares of SAIL and the second complainant placed sell orders for 2000 shares of ESSAROIL and 500 shares of SAIL. The complainants tried to cover the short positions by buying the said shares at prices as found in the Equity contract note register. Both the complainants after placing buy orders as aforementioned again placed fresh purchase orders at different price without deleting the buy order already placed. Hence the accounts of both the complainants were suspended as the second buy order placed by them without deleting the buy order already placed resulted in margin shortfall in their accounts, which the OP is entitled to do. The said transaction of placing buy order without ensuring the execution first buy order could be considered as only delivery buying for which sufficient margin should have been available in the complainants accounts. The first complainant had only a credit balance of Rs.11,355/-  in his account and the margin required was more than the credit available. The second complainant had a credit balance of only Rs.428/- and the margin required for the purchase orders was more than the credit available.  Due to this reason as shares were bought without sufficient margin auction took place in the complainant’s account for purchase of the said shares. The complainants are only due and liable to pay to the OP a sum of Rs.5,010/- and Rs.1393.80/- as on date and the OP is not liable to pay any sum to the complainants much less the sum claimed by them. The complainants did not have sufficient credit in their account to make the said purchase transactions. It is not clear as to how the complainants have arrived at the compensation. Moreover the complainants are not investors and are only speculators who have tried to buy and sell shares on a single day without having sufficient margin in their account. When the complainants have tried to cover the sale made by them by placing buy orders twice and without deleting the first buy order the complainants account are bound to be suspended which are well within the rights of the OP. The complainants cannot be considered as ‘consumers’ instead they are only speculators. The complainants act of claiming compensation for speculating by indulging in intra day buying and selling without sufficient margins in their account are not maintainable. The complainants are not entitled to approach this Forum, this forum has no jurisdiction to try the issue raised by the complainants. OP is not liable to pay any compensation or any amount towards mental agony. Hence, it is prayed to dismiss the complaint with costs.

4.   In order to substantiate the complaint averments, complainant No.1 filed affidavit evidence. The Authorized Signatory and representative of OP filed affidavit evidence in support of the defence version. Both the parties filed written arguments.

5.   Arguments on both sides heard.

6.   Since the main contention of the OP is, in view of the Clause-31 of the member constituent agreement executed by both the parties conferring exclusive jurisdiction of the courts in Chennai, this Forum has no jurisdiction to entertain the complaint, the same is to be decided as preliminary point without touching the merits of the case. Hence, the point for consideration is:

Whether this Forum has no jurisdiction to entertain the complaint.

7.We record our findings on the above points in affirmative.

8.The learned counsel for OP contended that both the trading member and the clients who trade through them are bound by the Rules, Bye laws, Regulations of the Stock Exchange in which the transactions took place. When the complainants were enrolled as OP clients, they have signed a member constituent agreement with OP agreeing to all the terms and conditions contained therein. As per Clause-31 of the agreement, the complainants and OP have submitted to the exclusive jurisdiction of the courts in Chennai, hence this Forum does not posses jurisdiction to entertain the complaint. Further it is also contended that the complainants are not ‘consumers’ as defined Under Seciton-2(1)(d) of the Act, as they are not investors but they are only Speculators who have tried to buy and sell shares on a single day without having sufficient margin in their account. 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 the complaint filed is not maintainable.

9.Clause-31 of the member and constituent agreement produced by OP executed by the complainant No.1 reads.

“Jurisdiction” The member (OP) and constituent (complainants) declare and agree all trades, transactions and contracts executed on the Exchange are subject to the Rules, Bye Laws, Regulations, of the Exchange and shall be deemed to be and shall take effect as wholly made, entered into and to be performed in the city of Chennai and the parties to such trade shall be deemed to have submitted to the exclusive jurisdiction of courts in Chennai for the purpose of giving effect to the provisions of the Rules, Bye Laws, Regulations of the Exchange.

  Thus it is clear that as per the above Clause both the parties have agreed to confer jurisdiction exclusively on the courts at Chennai. The Head Office of OP is at Chennai. In view of the same, when both the parties have agreed to subject themselves to the jurisdiction of Chennai Courts, this Forum has no jurisdiction to entertain the complaint. In view of the same, the complaint is to be returned for presenting the same before the jurisdictional Forum. Accordingly we proceed to pass the following:

O R D E R

        The complaint filed by the complainants is returned for presentation before the Jurisdictional District Consumer Disputes Redressal Forum. Considering the nature of dispute there is no order as to 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 11^th day of JANUARY-2012.)

MEMBER                                                                   PRESIDENT

Cs.