BEFORE THE DISTRICT CONSUMER DISPUTES REDRESSAL FORUM-II, U.T. CHANDIGARH

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Complaint  Case No  :  36 of 2009

Date of Institution :  12.01.2009

Date of  Decision   :  13.04.2010

Rajeshwar Sharma s/o Late Sh. J.D. Sharma, H.No. 584, Phase-IV, SAS Nagar Mohali.

 ……Complainant

V E R S U S

(1)  M/s Sharekhan Ltd., SCF No. 7, Madhya Marg, Sector 26, Chandigarh, through Sh. Yuvraj Gupta, its Branch Incharge/ Head of Office.

(2)  M/s Sharekhan Ltd., A-206, 2^nd Floor, Phoenix House, Senapati Bapat Marg, Lower Parel, Mumbai –400 013.

.…..Opposite Parties

CORAM:     SH. LAKSHMAN SHARMA         PRESIDENT

          SH. ASHOK RAJ BHANDARI       MEMBER

PRESENT: Sh.Vinod Mahendru, Adv. for the Complainant.

         Sh. K.P.S. Dhillon, Adv. for OPs.

PER ASHOK RAJ BHANDARI, MEMBER

        Concisely put, by virtue of his being in the managerial cadre in M/s Ranbaxy Laboratories Ltd. (for brevity hereinafter to be referred as “RLL”), the Complainant was allocated 765 equity shares in ‘employee quota’ by the said employer. It was averred that the major shareholders/ management of RLL in August, 2008, entered into an Agreement for sale of their majority shareholdings with M/s Daichi Sankyo of Japan, as international giant in Pharmaceutical discipline.  As per one of the terms & conditions of the said agreement, the said M/s Daichi Sankyo gave an “Open Offer” [opened on 16.08.2008 and closed on 4.9.2008] to take over the equity shares of RLL, under “Employee Quota” from its employees at the price consideration of Rs.737/- payable in cash, for each equity share of RLL and appointed M/s Karvy Computershare Pvt. Ltd. as their Agent/Consultant to do all such acts/deeds including acceptance/ processing of documents in this regard. Accordingly, the Complainant opted for sale of his 765 equity shares and entrusted the said assignment to OPs, which in turn issued duly signed & stamped Transfer Instruction for Delivery (for brevity hereinafter to be referred as “TIFD”) No.10508286, dated 14.8.2008, interalia, incorporating the names and ID Nos. of the Seller/ Agent. Thereafter, the Complainant handed over the original TIFD document to one Mr. Arun of OP No.1 on 14.8.2008, who after retaining its photocopy, returned back the original TIFD document. It was alleged that on 23.9.2008, the Complainant learnt that all his colleagues had received intimation from their respective broker regarding transfer of 46% of their offered shares to the prospective purchaser i.e. M/s Daichi Sankyo of Japan. He, immediately, enquired about the status of transfer of his shares from the said Mr. Arun of OP No.1, who revealed that transfer of shares could not take place. He also wrote e-mail dated 29.9.2008 to the OP No.2 to know the reasons for non-transfer of his shares, in response thereto, it wrote to its Chandigarh Office to look into the matter and do the needful, but no action was seemingly taken upto 13.10.2008, when an e-mail from Team Sharekhan, Mumbai was received, informing that they did not receive any TIFD Slip in original and no instructions were there from the Complainant to surrender the shares, hence, the Complainant was not made eligible for the said offer. Accordingly, the Complainant took up the matter with the OPs vide e-mail dated 14.10.2008, sending along all the relevant documents, to compensate him for the resultant financial loss, in response to which, OPs vide e-mail dated 20.10.2008, informed that no Delivery Instruction Slip (DIS) was received as confirmed by them from their concerned Department and therefore, shares could not be got transferred. Thereafter, there were continuous exchange of e-mails and telephonic calls between the Complainant and the OPs, with a view to resolve the issue, but nothing positive could come out. Hence, this complaint, alleging that the aforesaid acts of the OPs amount to deficiency in service and unfair trade practice. In the end, the Complainant has prayed for the following reliefs:-

a)  Rs.2,59,424/- in terms of loss of 352 shares (46% of the offered 765 shares) @ Rs.737/- per share as on 23.9.2008.

b)  Rs.1.00 lac as damages for their non-responsive and non-cooperative attitude as also the Complainant to avoidable and undue harassment, anxiety, mental tension and loss due to non-availability of liquid cash.

c)  Rs.10,000/- towards legal consultancy charges

d)  Rs.5,000/- towards local conveyance charges

e)  Interest @18% p.a. on Rs.2,59,424/- towards interest being due and hence payable, to be calculated w.e.f. 23.9.2008 i.e. the date on which the payment was to be made by M/s Daichi to the Complainant upto the date when the payment of entire Claim is actually made by OPs to the Complainant.

2]      Notice of the complaint was sent to OPs seeking their version of the case. 

3]      OP No. 1 & 2 in their joint written statement, while admitting the factual matrix of the case/reply, pleaded that Complainant never issued Transfer Instruction for Delivery (TIFD) No.10508286, dated 14.8.2008 to the OPs for transferring the alleged shares into his account. It was denied that Complainant’s shares were not transferred into his account and were in the custody of the OPs. It is stated that they had replied and informed the Complainant vide mail dated 20.10.2008 that they have confirmed with their concerned Department that they have not received the original DIS slip at their end because of which the shares could not be delivered/ transferred into Complainant’s account. It was asserted that the Complainant was very well aware of the fact that for selling shares, his signatures were also required on the Depository Slip and without his signatures/knowledge, the transfer was not possible. The Complainant had created a false and bogus story that on submission of Depository slip, the OPs had retained the photocopy of the Depository Slip and returned the original back to him. All other material contentions of the Complainant were controverted. Pleading that there was no deficiency in service on their part, a prayer has been made for dismissal of the complaint with exemplary costs.

4]      Parties led evidence in support of their contentions.

5]      We have carefully gone through the entire case thoroughly, including the complaint and the relevant documents tendered by the complainant / OPs. We also heard the arguments put forth by the learned counsels for the Complainant and OPs. As a result of the detailed analysis of the entire case, the following points/issues have clearly emerged and certain conclusions/arrived at, accordingly.

6]      The basic facts of the case in respect of the complainant holding a total of 765 equity shares under “Employee quota” allocated to him by his employer M/s Ranbaxy Laboratories Ltd. (RLL) and that the same were to be transferred in the name of M/s Daichi Sankyo of Japan who had taken over the management of RLL, have been admitted. M/s Daichi Sankyo had offered to take over 46% of the shares held by the employees of the said company at the purchase price of Rs.737/- per share payable in cash and had appointed M/s Karvy Computershare Pvt. Ltd. as their agent/consultant for accepting and processing of documents for the transfer of such shares in its name. The complainant, in the present case, had opted for the sale of his 352 shares and entrusted the same to the OPs for carrying out the transfer of the said shares in the Demat format. The OPs in accordance with the procedure of transfer of shares also issued an “Acceptance cum acknowledgement form” and also the Transfer Instructions For Delivery (TIFD).  As such, the complainant was assured that the transfer of share will take place in due course and that he will receive the consideration price on the same @ Rs.737/- per share for total of 352 shares.

7]      In course of time, the complainant was regularly checking with the OPs to ascertain as to whether the shares in question which were entrusted by him to the OPs had actually been transferred in the name of M/s Daichi Sankyo company or not.  Despite his best efforts, the complainant could not know the exact status of the transfer of shares and as such could not receive the consideration price of the same.  Finally it was on 13.10.2008 that he received an email from Team Sharekhan, Mumbai informing him that they did not receive any TIFD slip in original and that there are no instructions from the complainant to surrender the shares and, therefore, the complainant was not made eligible for the said offer of transfer.  Thereafter the complainant again took up the case with the OPs, asking them to pay compensation for the loss that he had suffered on account of non transfer of shares in the name of new company. Since no compensation was paid by the OPs to the complainant, he filed the present complaint case.

8]      OPs 1 & 2 have controverted all the allegations made by the complainant against them stating that the complainant at no point of time surrendered TIFD No.10508286 dated 14.8.2008 in original to the OPs for transferring the alleged shares into his account.  It has been further denied that the complainant’s shares were not transferred into his account and were in the custody of the OPs.  The OPs, however, say that they have not received the original DIS slip and had only a photocopy of the same at their end because of which the shares could not be finally delivered/transferred into the complainant’s account.  In respect of the depository slip, the OPs say that the original slip was lying with the complainant.  On these grounds the OPs have denied any deficiency in service on their part and prayed for dismissal of the complaint.

9]      The detailed analysis of the entire case shows that the only point of dispute between the parties is in respect of non-transfer of 352 shares of RLL company held by the complainant to M/s Daichi Sankyo which had taken over RLL whose shares the complainant was holding under “Employee quota”.  Whereas the contention of the complainant is that he had completed all the formalities, submitted the requisite documents and complied with all the requirements for transfer of shares as advised by the OPs, on the contrary the contention of the OPs is that the complainant had retained with him the original TIFD slip and only handed over the photocopy to them and on the basis of photocopy alone they were not able to carry out the transfer of shares in the name of the Daichi Sankyo company which had taken over RLL earlier.  The actual transfer of shares was to be done by M/s Karvy Computershare Pvt. Ltd. who was the agent and consultant of Daichi Sankyo Company for processing the documents but in the absence of the original TIFD slip the actual transfer could not take place.  During this period, the share price of RLL fell sharply resulting into huge loss to the complainant. The contention of the complainant is that had the OPs taken all necessary steps to ensure the transfer of shares in the name of M/s Daichi Sankyo, he would have obtained the consideration price of Rs.737/- per share for 352  equity shares held by him in the said company.  Therefore, it is only on account of the negligence and carelessness  on the part of the OPs that he has suffered financial loss besides harassment, mental agony and pain.

10]     From all the documents placed on record by the complainant as well as the OPs, it is quite clear that the complainant had hired the services of the OPs taking them to be experts and well conversant with share trading process. It is also a fact that the complainant on his part had given full cooperation to the OPs and provided them all documents which were demanded from him by the OPs.  The only objection raised by the OPs by saying that the complainant had just given a photocopy of TIFD slip and did not give the original document to them carries no weight.  As  a matter of fact it was entirely for the OPs to advise and guide the complainant as to the exact documents which were required for effecting the transfer of the shares. For the service rendered by the share brokers like OPs, they are entitled to a specific commission, which is the consideration for rendering efficient and effective service to their clients.  Therefore, in our opinion the OPs have not rendered proper service with due care and diligence towards the complainant resulting in huge financial loss to him in terms of depreciation of share price in due course of time.  So far as the maintainability of the complaint is concerned to which the OPs have raised preliminary objections, the Hon'ble National Commission in the case reported as Delhi Stock Exchange Vs. Ravinder Pal Singh and Anr.-2008 (1) CPC 537 has clearly stated that the share broker renders service in the purchase and sale of listed securities and in addition the stock exchange is also required to render service to the investors and the relevant headnote reads as under :-

“…….. As per provisions of law Stock Exchange is a service provider for sale and purchase of share – It controls performance of contract including mode, manner, time and place between broker members and investors – In the present case member of the Delhi Stock Exchange was declared defaulter and trusty of fund stepped into his shoes – D.S.E. held liable to pay compensation to Rs.1 lac to the investor – Complaint for recovery of invested amount is maintainable under CP Act – Petition for claiming for more amount is rejected as maximum limit for re-imbursement has been fixed.”

Further it is also observed that the complainant is not a professional trader in the purchase and sale of shares and is not indulging in any speculative activity.  He was only interested in disposing of 46% of the 765 shares allotted to him by his employer as an incentive being a part of wage compensation as per company policy under Employees Participation in Management. This practice is quite common and prevalent amongst several well managed and profit making companies.  Thus the complainant is certainly not a share trader indulging in speculative share transactions of purchase and sale of shares on a large scale. Therefore, he is fully a consumer under the Consumer Protection Act, 1986 and is entitled to file this complaint. 

11]     All said and done, in our considered view, the present complaint has a lot of weight, merit and substance and deserves acceptance. We, therefore, allow the complaint in favour of the complainant and against the OPs and pass the directions accordingly.  The OPs shall do the following :-

a)       The OPs shall jointly and severally pay to the complainant the difference of price, if any, of 352 shares of RLL as on the date of passing of this order as compared to the value of the shares at the time of offer made by M/s Daichi Sankyo i.e. the difference between Rs.737/- per share as on 23.9.2008 and the price of the said share as on 13.4.2010 being the loss suffered by him on account of deficiency in service on their part.

b)       The OPs shall further pay a sum of Rs.25,000/- to the complainant as compensation for causing mental agony, physical harassment and pain to him on account of rendering deficient services by not transferring the shares of the complainant in the name of M/s Daichi Sankyo at the appropriate time i.e. during the time the offer was open.

c)       The OPs shall pay Rs.5,000/- as costs of litigation.

12]     The aforesaid order be complied with by the OPs within a period of six weeks from the date of receipt of certified copy of this order failing which they shall jointly and severally pay the sum of Rs.25,000/- plus the amount as enumerated as at (a) above alongwith interest @ 18% per annum from the date of filing of this complaint i.e. 12.1.2009 till the date of realization besides paying the litigation costs of Rs.5,000/-.

13]      Certified copy of this order be communicated to the parties, free of charge. After compliance file be consigned to record room.

Announced

13.4.2010                                    Sd/-                              

(LAKSHMAN SHARMA)

PRESIDENT

                                   Sd/-

(ASHOK RAJ BHANDARI)

MEMBER

 ‘Dutt’