This is a complaint filed U/s. 12 of Consumer Protection Act by the complainant Smt. Anita Arun Daftary against the four Respondents for deficiency in service and claimed compensation of Rs. 16,55,000/- together with current and future interest at 15% p.a. along with cost. The Respondent No- 1 to 3 by their Authorized Representative/Assistant General Manager and Respondent No-4 appeared through their respective counsel & have filed separate written version denying the claim of complainant. <br /> <br /> 2. During the course of enquiry the complainant has filed her sworn affidavit by way examination-in-chief reiterating the contents of the complaint. In rebuttal Assistant General Manager of Respondents 1 to 3 filed his sworn affidavit by way of examination-in-chief as RW-1 reiterating the contents of written version of Respondent No- 1 to 3. The Vice President of National Securities Depositories Limited (Respondent No-4) filed his sworn affidavit by way of examination-in-chief as RW-2 reiterating the contents of written version of Respondent No-4. On behalf of complainant in all (27) documents were got marked as Ex.P-1 to Ex.P-27. On behalf of Respondents 1 to 3 some (5) documents were got marked as Ex.R-1 to Ex.R-5 and out of which Ex.R-2 was marked as subject to proof by Respondent NO- 1 to 3. Similarly on behalf of Respondent No-4, (2) documents were got marked as Ex.R-6 & Ex.R-7 and this E.R-7 has been marked as subject to proof by Respondent No-4. Subsequently on 26-05-08 Assistant General Manager of Respondent No- 1 to 3 (RW-1) filed memo stating that they have no Postal Acknowledgement of the letter at Ex.R-2 which was marked as subject to proof so in-view of non-production of Postal Acknowledgement Card of Ex.R-2 in-token of the service of certificate of Ex.R-2 on the complainant. So the Ex.R-2 which was marked as subject to proof is taken has not proved. Similarly the L.C. for Respondent No-4 submitted that they have no Postal Acknowledgement of certificate of letter at Ex.R-7 on the complainant’s counsel. Hence Ex.R-7 is also taken has not proved by Respondent NO-4.<br /> <br /> 3. Heard the arguments of counsel for respective parties. In addition to the oral arguments the L.C. for the complainant has filed written arguments. The Representative of Respondents 1 to 3 has also filed written arguments on behalf of Respondents 1 to 3. The following points arise for our consideration and determination:<br /> 1.Whether the complaint is not maintainable by virtue of Arbitration clause of Agreement between the complainant & Respondents, as alleged.?<br /> <br /> 2.Whether the complainant proves deficiency in service by the Respondents 1 to 4, as alleged.<br /> <br /> 3.Whether the complainant is entitled for the reliefs sought for.<br /> <br /> 4. Our finding on the above points are as under:-<br /> 1. In the negative.<br /> 2. In the affirmative.<br /> 3. As per final order for the following <br /> <br /> REASONS<br /> <br /> POINT NO.1:-<br /> <br /> 5. We shall discuss Point No- 1 & 2 simultaneously in-order to avoid repetition of pleadings and evidence.<br /> The case of the complainant in brief is that she had a demat accounts with Respondent No-1 at their Raichur branch vide her client No. ID NO. 30529499 and had deposited her 1000 shares of M/s. Shilpa Medicare Limited for dematerialization with Respondent NO-1 office on 13-07-05 by making payment of demat charges of Rs. 58.50 Ps under Receipt No. TRN 5305 as claimed by Respondent No-1. She was informed that dematerialization would be automatically done within a week’s time as the Registrar to the said Company is their parent company who is Respondent No-3. The complainant is also having her trading account with Respondent No-2-Karvy Stock Broking Limited at their Raichur Branch bearing Account NO. 128771. During the last week of April-2006 she told the Karvy people (Respondent Company) at Raichur to sell her entire holding of 1000 shares as the market price of the scrip was about 900 plus per share. She was asked to submit the blank delivery instructions to sell on her behalf. Accordingly she submitted blank delivery instructions booklet by anticipating for the earlier sale of her entire shares. The Karvy People at Raichur who were having a DP and trading activity under one roof at Raichur, assured her for earlier disposal. In-pursuance thereof they have sold only 200 shares and for the rest of the shares they informed her that they would do it on the next day. She was anticipating the proceeds and sale information of the balance shares. <br /> It is further case of complainant that on 09-05-06 Respondents people informed her by phone that her delivery instruction has failed as the shares are not yet dematted in her account. She was shocked to hear since after lapse of more than (9) months the process of demating he has not yet been done by them. The Respondent has also raised for a bill for Rs. 18,940.93 Ps by contending that since the delivery of the sold-out shares has failed she is saddled with auction penalty by Bombay Stock Exchange on account of the auction of 200 shares and on same day in the evening they debit a sum of Rs. 18,940.93 Ps in her account and she has also not been furnished with the auction bill which she is entitled to for her Income Tax purposes. Having not heard about her shares despite of repeated demands and requests she wrote letters and make personal visits to both Bangalore & Hyderabad offices of all the Respondents. There was absolutely no communication from the Respondents about the status of demating her shares nor did they return the same as bounced or otherwise. So she deputed her representatives for personal visit to Bangalore & Hyderabad who were shocked at the further instance for inordinate delay and they asked to furnish Proof of Delivery of the shares sent by their Raichur office. On enquiry with Karvy People at Raichur she was shocked to find that Karvy People at Raichur have illegally retained her shares for more than a month to dispatch the same to Registrar or their Head office and it was only on 16-08-05 they had sent the same by courier and it was equally strange that despite of receipt of the said courier at Bangalore office they have mis-lead her by saying that they have not received. <br /> It is also her case that the officers of Respondents at Raichur went on dodging the issue on one or the other pretext and asked her to furnish one more Blank Dematerialization Request Form (DRF) since the same is required for processing her shares under painful compulsion she submitted them a blank DRF for which they did not give any acknowledgement but on the contrary pacified her to wait for few days as they would do the needful at the earliest. Despite of waiting for almost (60 months there was no fruits. On 4-11-06 for the first time she was informed by the 3rd Respondent that they appolised for the delay and inconvenience and requested her to furnish one more DRF as the earlier one submitted by her has been rejected. She was shocked at the repeated calls to submit one more DRF Form. Having no other go she once again gave DRF anticipating for an earlier demating of her shares. She made demand with Respondents to furnish the copy of Rejected Demat Form through letter so as to ascertain the reason for the alleged rejection. But the Respondents have not furnished the same nor they returned the unused blank DRFs which have been furnished by her at an earliest. On 14-11-06 she was informed by Karvy People at Raichur that her 1000 shares are demated but by that time the rates of scrip have fallen rock bottom to Rs. 399/- per share. She has trusted Karvy People but they in-turn mis used her shares and have put her to total loss. It appears that Respondents have meddled with her shares or have illegally retained to have wrongful gain to themselves. She has been under continuous mental tension right from May-2006 the day of which she was shocked that her shares are not yet demated till that day. The rates of share as per the Respondents was at Rs. 900 per share during May-2006 as on the date of sale and the rate of share as on November-2006, when the shares were demated was at Rs. 399/- per share. Therefore due to proved deficient service of the Respondents which is at writ large she has been put to loss at Rs. 5,0,1000/- on her 1000 shares. Thus the complainant has claimed in all Rs. 16,55,000/- as under:<br /> a) Difference in the price of the said shares. Rs. 5,01,000=00<br /> b) Compensation on account of mental tension and agony Rs. 9,00,000=00<br /> c) (1) Interest at the rate of 15% p.a. on Rs. 1,91,250=00<br /> Rs. 9,00,000/- from 13-07-2005 to 14-11-2006 <br /> (2) Interest at the rate of, 15% p.a. on Rs. 62,625=00<br /> Rs. 5,01,000/- from 15-11-2006 to up to date.<br /> d) Traveling and misc. expenses incurred during the personal Rs. 14,000=00<br /> visits made to Bangalore & Hyderabad<br /> e) Legal Notice charges & SPAD charges. Rs. 1,125=00<br /> --------------------------<br /> Total. Rs. 16,55,000=00<br /> -----------------------<br /> <br /> 6. The Respondents No- 1 to 4 more particularly Respondents 1 to 3 at Para-8 of their written version ( in-reply to Para-5 of the complaint) have admitted that the complainant has a demat account with them bearing demat Account No. 30529494 and DPID IN 301926 and complainant had given 1000 shares of Shilpa Antibiotics Ltd., to their office at Raichur on 13-07-05 and had paid demat charges of Rs. 58.50 Ps. In the said Para the Respondents, by stating the procedure relating to demat process, have specifically stated that the time to confirm demat would be approximately 4 to 6 weeks or approximately (30) days. So according to the Respondents themselves the time for dematerialization would be approximately about (30) days or (6) weeks.<br /> <br /> In Para-10 of the written version (which is in reply to Para-7 & 8 of the complaint) the Respondents have stated that the complainant have sold 200 shares of Shilpa Medicare for a Net value of Rs. 1,62,229.07 in her trading account with them bearing No. 128771 on 03-05-06. In this Para-10 they further contend that the complainant did not deliver the shares and the sale position was auctioned. An amount of Rs. 1,80,000/- was debited to the account of the complainant on 09-05-06. Due to failure on the part of the complainant in delivering her shares she has paid to Rs. 18,940.93 Ps towards auction penalty. As rightly pointed out by the L.C. for the complainant this contention of Respondents does not hold any water because in Para-8 of their written version they have admitted that complainant had given 1000 shares of Shilpa Antibiotics Ltd., on 13-07-05 for dematerialization with demat charges of Rs. 58.50 Ps. This means 1000 shares of the complainant were with the Respondents right from 13-07-05 itself. When according to them, the procedure for demat process would take approximately 4 to 6 weeks or approximately (30) days as detailed in Para-8 of their written version, then this contention that complainant did not deliver her shares has no meaning at all. Surprisingly enough these Respondents at another breath in Para-12 of their written version ( in reply to Para-10 of the complaint) have stated that in all probabilities, the certificate (share certificates) sent by courier might have been lost in transit. This sentence makes it clear that the share certificates were with Respondents right from 13-07-05, on which day the complainant had handed over the same to them for dematerialization by paying demat charges of Rs. 58.50 Ps, as admitted in Para-8 of their written version. It also makes clear that it is they (Respondents) who had transmitted the share certificates of complainant by courier. So their contention that the complainant did not deliver her shares appears to be improper and does not stand to reason. <br /> <br /> 7. The complainant in Para-7 of her complaint has specifically contended that in the last week of April-2006 she had asked the Respondents to sell her entire holding of 1000 shares as the market price was about Rs. 900/- plus per share and in-pursuance thereof Respondents sold only 200 shares and for the rest of shares they informed that they would do it on the next day and accordingly she was anticipating the proceeds and sale information of the balance shares. The Respondents in Para-10 of their written version (in reply to Para- 7 & 8 of the complaint) though have stated regarding sale of 200 shares as discussed above, but they have not whispered a single word about the sale or otherwise of the remaining 800 shares. Even there is no specific denial of the contention that they had informed the complainant to sell remaining 800 shares on the next day of the sale of 200 shares. Similarly in Para-12 of their written version which is reply to Para-10 of the complaint Respondents have generally stated that the certificate (share certificates) sent by courier might have been lost in the transit but they have not specifically stated as to whether these certificates are the entire share certificates or only 200 certificates. If the certificate sent by courier were only 200 certificates, then what happened to the remaining 800 shares has not been specifically explained by them. This shows that the Respondents have wisely tried to escape from the clutches of their liability.<br /> <br /> 8. In Para-17 of their written version the Respondent though have denied that the share price was about Rs. 900/- plus per share by showing the actual price, from July-2005 to September-2007 as detailed in the table. But in Para-10 of their written version (in reply to Para- 7 & 8 of the complaint) they have admitted that the 200 shares were sold for a net value of Rs. 1,62,229.07 Ps on 03-05-06. This means the price per share was Rs. 811/- and odd in the month of May-2006. From the above discussion it goes without any hesitation that the complainant had proved that she had given her 1000 shares of Shilpa Antibiotics Limited to the Respondents on 13-07-05 by paying demat charges of Rs. 58.50 Ps and that during last week of April-2006 she had asked the Respondents to sell her entire 1000 shares and that in-pursuance thereof Respondents sold only 200 shares and for the rest they informed that they would do it on the next day and thereafter on 09-05-06 the Respondents informed that her shares were not yet dematted in her account etc., and this in-turn attributes deficiency in service by the Respondents. So we hold that the complainant has proved deficiency of service by the Respondents.<br /> <br /> 9. Respondents No-4- The National Security Depositories Limited in the written statement and in the affidavit-evidence has contended that this Respondent No-4 is in no way concerned with the alleged transaction between the complainant and Respondent No-1 to 3 the grievance of complainant pertains to delay in dematerialization of her 1000 shares by the Respondents 1 to 3 and loss suffered by her. The Respondent No-4 is not a necessary party and so the complaint is bad for mis-joinder of party. However the complainant for the first time approached this Respondent No-4 vide her letter dt. 14-02-07 and on receipt of the same this Respondent took up the matter with her DP-KSBL(Respondent No-2) to enquire into the allegation of the delay in processing the Dematerialization Request Form of the complainant and the Respondent No-2 vide its letter No. KSBL/BNG/DP ID IN 310926/N/CORSP/26-dt. 12-03-06 clarified that the certificate forwarded by its Raichur branch to its Bangalore branch by courier were lost in transit and on receipt of the complainant KSBL initiating remedial measures to redress her grievance. This clarification of KSBL was communicated to the complainant vide letter dt. 02-04-07 so this Respondent No-4 did not observe any irregularity and the complaint was advised for invoking Arbitration Clause in the Agreement and so even there is no deficiency of service on the part of this Respondent No-4 as alleged.<br /> <br /> 10. The L.C. for the Respondent No-4 argued that Respondent NO-4 is not a necessary party and the complaint is bad for mis-joinder of party and submitted for dismissal of the complaint against Respondent No-4. As against this the L.C. for complainant by referring the complaint Para-3 that Respondent No-1 is a Depository Participant (demating company) engaged in the business of dematerializing the physical shares into electronic form through the Respondent No-4 M/s. National Security Depositories Limited Mumbai. Similarly the Respondent No-2 is a Stock Broking Company engaged in the business trading in shares for its client and Respondent NO-3 is the Registrar of the shares of M/s. Shilpa Health Care Limited they are all inter-related and sister concern under the flagship of Karvy. The Respondent No-4 is a sole Depository i.e, a parent demating company under whom the Respondent No-1 is working as its agent. So Respondent No-4 is a responsible for the acts of Respondent NO-1 to 3 and thereby Respondent NO-4 is a necessary party and all the Respondents 1 to 4 are jointly and severally liable for the claim made by the complainant. In-support of his argument the L.C. has relied on a decision of Hon’ble National Commission reported in II CPJ 161 at Para 11 & 12 which reads as under:<br /> Para-11<br /> <br /> Further, Section 16 of the Depositories Act, 1996, specifically provides that where the loss has occurred to the beneficial owner due to the negligence of the Participant, the Depository shall indemnify such beneficial owner. That means for the negligence in discharge of duties by the participant, the Depository, namely, the NSLD, is required to pay the amount to the beneficial owner and, thereafter recover the same from the Participant, namely, IndusInd Bank.<br /> <br /> Para-12<br /> In this view of the matter, the order passed by the State Commission holding the NSLD jointly liable, cannot be said to be erroneous on this point. Therefore, there is no substance in the appeals filed by the NSLD. <br /> <br /> Besides the L.C. has also filed Xerox copy of Depository Act 1996. The Respondent NO-4 has not (NSLD) specifically denied that the Respondent No-4 is the sole Depository ie., a parent demating company under whom Respondent No-1 is working as its agent. The very submission of the Respondent NO-4 in then written version that after the receipt of the representation of the complainant, it sought explanation from the Respondents 1 & 2 in the matter and thereafter it advised the complainant for invoking Arbitration Clause etc., itself shows roping of this Respondent NO- 4 with other Respondents. Further as observed by the Hon’ble National Commission in Para-11 & 12 of the above said decision, it cannot be said that Respondent No-4 NSLD is in no way concerned with the transaction between the complainant and Respondent NO-1 to 3. Hence Respondent NO-4 is also jointly and severally liable for the negligence and deficiency in service of Respondent NO. 1 to 3.<br /> <br /> 11. Now let us turn to Point No- 1 regarding Arbitration Clause and maintainability of the complaint. The Respondents 1 to 3 in their written version and also Respondent No-4 in his separate written version have strongly contended that the complaint is not maintainable by virtue of Arbitration Clause in the Agreement and that the complainant who was asked by the Respondent No-4 for invoking Arbitration Clause in the Agreement without heading to Respondent NO-4, has approached this Forum and thereby the complainant is not maintainable and this Forum has no jurisdiction to entertain her complaint. The Respondents 1 to 3 have reiterated the same in their written arguments. The L.C. for the Respondent No-4 has maintained this contention in his argument. As against this the L.C. for the complainant in his oral argument as well as in the written argument has submitted that Arbitration Clause in the Agreement is not a ground for ousting the jurisdiction of this Forum since section 3 of C.P. Act states that the provision of C.P. Act are in addition to and are not in derogation of any other law. Section 34 of the Arbitration Act does not confer an automatic right nor to create an automatic embargo on the exercise of power of judicial authority under the Act. So by operation of Section 3 of the C.P. Act the Consumer Forums created under the Act are at liberty to proceed with the maters in-accordance with the provisions of the Act rather than relegating the parties to an arbitration proceedings. In-support of his arguments the L.C. has relied on decision of Hon’ble Supreme Court reported in 1996 STPL (LE) 22901 SC Head Note which reads as under:<br /> Head Notes:<br /> Consumer Protection Act (68 of 1986), S.3, S.10, S.16, S.20 – Consumer Protection- National Consumer Disputes Redressal Commission-Held District forum, State Commission and National Commissions have all trappings of a Civil Court and judicial authority and proceedings before them are legal proceedings-Held further that these judicial authorities fall under Section 34 of Arbitration Act- These authorities are entitled to decide the matter under Consumer Protection Act rather than relegating the parties to arbitration proceedings as per their agreement- Act relieves consumers of cumbersome arbitration proceedings- Dispute need not be referred to arbitration- Provisions in addition to any other Act.<br /> <br /> Arbitration Act.<br /> <br /> Section 34 – Consumer Commission a judicial proceedings – Not necessary for them to relegate parties to process of arbitration.<br /> <br /> Code of Civil Procedure.<br /> Section 9- Availing of right of civil action in competent Court of Civil jurisdiction – Consumer Courts need not refer the matter to any other Court.<br /> <br /> Section 3 of C.P. Act envisages that the provisions of the Act are in addition to and not in derogation of any other law in-force. So having regard to the section 3 of the C.P. Act and the principal laid down by the Hon’ble Supreme Court in the above said decision, it shows that the Arbitration Clause in the Agreement is not a clog in entertaining this complaint and so the complaint is maintainable. Therefore this point is to be answered against the Respondents. Hence for the above said reasons and discussions we hold that the complainant has proved Point No-2 and Respondents have failed to prove Point No-1, Therefore we answer Point NO- 1 in the negative and Point No-2 in the affirmative.<br /> <br /> <br /> POINT NO.3:-<br /> 12. The complainant has sought for an award of Rs. 16,55,000/- in Para-21 of her complaint complainant has detailed her claims under different head as under:<br /> a) Difference in the price of the said shares. Rs. 5,01,000=00<br /> b) Compensation on account of mental tension and agony Rs. 9,00,000=00<br /> c) (1) Interest at the rate of 15% p.a. on Rs. 1,91,250=00<br /> Rs. 9,00,000/- from 13-07-2005 to 14-11-2006 <br /> (2) Interest at the rate of, 15% p.a. on Rs. 62,625=00<br /> Rs. 5,01,000/- from 15-11-2006 to up to date.<br /> d) Traveling and misc. expenses incurred during the personal Rs. 14,000=00<br /> visits made to Bangalore & Hyderabad<br /> e) Legal Notice charges & SPAD charges. Rs. 1,125=00<br /> --------------------------<br /> Total. Rs. 16,55,000=00<br /> -----------------------<br /> In view of our finding on Point No-2 the complainant is entitled for compensation, but as contended by the Respondents, the compensation claimed by the complainant appears to be exorbitant and excessive. However the Respondents in Para-10 of their written version have stated that 200 shares were sold for a Net value of Rs. 1,62,229.07 Ps on 03-05-06. The complainant has also produced original statement of account of auction bill issued by Respondent Company at Ex.P-5 & Ex.P-12. A perusal of which goes to show that 200 shares of complainant were sold for a Net price of Rs. 1,62,229.07 Ps on 03-05-06. Of course, the price amount of 200 shares including penalty amount of Rs. 18,940.93 Ps were subsequently debited as contended by the complainant and as reiterated by the Respondents in Para-10 of their written version. As discussed in Point No-2 on the deficiency of service by the Respondents, the complainant was deprived of enjoying the share price of her shares prevailing in the month of May-2006. Hence we find substance for the claim of Rs. 5,01,000/- as claimed by the complainant. <br /> So far as compensation of Rs. 9 Lakh towards mental tension and agony and interest thereon at 15% p.a. it shows that the complainant is blowing both hot & cold at the same time. When the complainant has claimed compensation for mental tension and agony that too exorbitantly she is not entitled for the compensation towards interest on the very said amount. Hence having regard to the facts and circumstances of the case and in the light of our above discussion, we feel it just and proper to award Rs. 75,000/- under all heads including cost of litigation. In this view of the matter we pass the following order:<br /> ORDER<br /> The complaint of the complainant is allowed in part.<br /> The Respondents 1 to 4 jointly and severally shall pay Rs. 5,01,000/- being the difference in the price of the shares along with Rs. 75,000/- towards global compensation including cost of litigation.<br /> The Respondents 1 to 4 shall comply this order within a period of two months from the date of receipt of copy of this order.<br /> Office to furnish certified copy of this order to both the parties forth with free of cost.<br /> (Dictated to the Stenographer, typed, corrected and then pronounced in the open Forum on 31-07-08)<br /> <br /> Sd/- Sd/- Sd/-<br /> Smt.Pratibha Rani Hiremath, Sri. Gururaj Sri. N.H. Savalagi,<br /> Member. Member. President, <br /> Dist.Forum-Raichur. Dist-Forum-Raichur Dist-Forum-Raichur.<br />