COMPLAINT FILED ON: 27.07.2009

DISPOSED ON:18.11.2011

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

18^th DAY OF NOVEMBER-2011

       PRESENT:- SRI. B.S.REDDY                PRESIDENT                        

                         SMT. M. YASHODHAMMA         MEMBER    

                         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 OPs) to pay sum of Rs.5,04,047/- with interest at 24% per annum and to pay compensation of Rs.5,00,000/- towards pain and suffering and  mental agony on the allegations of deficiency in service on the part of the OPs.

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

OP-3 is the branch office at Bangalore of OP-1 company registered under Companies Act being a stock broker of NSE. The complainant is holding demat account in OP-3 for the last two years. The complainant started to trade in F and O segment for the first time in the month of February – 2008. As per the terms and conditions of an agreement entered into between the complainant and OPs. OP-3 has the right of doing share trading with the consent of the complainant and her clear instructions. OP-3 has the right to purchase and sell the share with clear permission of the complainant. The transactions in BSE and NSE in equity segment went smoothly, but several transactions in F and O segment were done without the complainant’s instructions and authorization. The complainant was funding OP-3 as and when they demanded. When the complainant asked Mr. Rahul Bansal dealing in F and O segment to explain the details of fund utilization he has been postponing on some pretext or other. The contract notes were not sent to the complainant and also statements of accounts. In the month of June – 2008, the complainant received a contract note showing sale of GMR Infra, which was not instructed by the complainant. On questioning OP-3 represented by Rahul Bansal, has apologized for not informing about the shortfall of price. In the month of August – 2008, the complainant received contract note dated 13.08.2008 showing the transaction relating to purchase Chambal Fertilizers stock in F and O segment which she has never instructed to OP-3 to purchase. The complainant personally went and gave instructions not to buy or sell in her account without her knowledge and instructions. OP-3 represented by Rahul Bansal has admitted the said mistake and also agreed to give the profits to the complainant. The complainant reposed at most faith in OP-3 and went on funding as and when funds were demanded by OP-3 and OP-3 never explained details of the account despite repeated requests by the complainant, contract notes were never sent regularly and never reached the complainant. In the month of October – 2008 the complainant started receiving several contract notes for which she has never given instructions / authorization to the OP-3 when the complainant questioned him as to why he is selling and purchasing without her instructions OP reacted violently and said that the complainant has to fund him as she was holding the unitech stocks for long. Since huge funds have been arranged by borrowing, the complainant got worried and decided to close the F and O segment immediately. The complainant accordingly instructed OP-3 to close the F and O segment on 24.10.2008 by about 9.56 a.m. by selling the two lots of unitech. This also he has not acted immediately and sold it somewhere in the afternoon at 3.00 p.m. for about Rs.45/- per share, causing greater loss to the complainant. The 2^nd lot of unitech was not sold on that day, the same sold on 27.10.2008 at further price of Rs.36/-. This clearly shows that OP-1 has not followed even single instruction of the complainant. Hence OP-3 has committed deficiency in service and also played a fraud on the complainant by doing transactions without her instruction, causing huge loss to the complainant. When the complainant demanded OP-3 to give the account details, after about a week, the complainant was given the Sauda Summary / Ledger report and F and O bill report for the first time on 29.10.2008, though she was transacting with OP-3 from February – 2008 against the interest of the investor. The complainant has shocked to see that there are several transactions say about 36 transactions in her Sauda summary whereas the complainant has actually made only a few transactions i.e. say only 8 transactions which are detailed hereinafter. Overall the complainant has bought only 3 lots of unitech, 3 lots of GMR Infrastructure, 1 lot of TTML and 1 lot of Canara Bank in F and O segments. Out of above 1 lot of unitech, 2 lots of GMR, 1 lot of TTML and 1 lot of Canara Bank are sold as per the instructions of the complainant either booking profit or loss. 2 lots of unitech were sold without informing the complainant and that too only after closure of the account. Under the guise of holding 2 lots of unitech, OP-3 has traded on their and managed to receive funds from the complainant giving the impression of rolling over the stocks. All the other transactions are done without her authorization / instructions whatsoever. OP-3 went on buying and selling as per their whims and fancies causing heavy loss to the complainant. Since OP-3 has been buying and selling at their whims and fancies, consequently though sufficient funds were there unduly some shortfalls developed and positions of other stocks were cut for which the complainant suffered further loss for which OP-3 is accountable. When 1^st lot of GMR sold 06.06.2008, the complainant questioned about the same and OP-3 told that position is cut because of short fall. Till complainant enquired, OP-3 had not informed about the same and there also OP-3 had acted without complainant’s authorization. On 30.06.2008 the complainant bought one lot of GMR at Rs.88.95 and in that transaction a contract note was issued to complainant. But, when she got Sauda Summary after going through that, to her shock and surprise it showed that GMR was bought at 91.75, which clearly indicates manipulation. OP-3 has neither chosen to send the contract notes nor sent any telephonic messages to the complainant. For the first time the complainant came to know the unauthorized transactions only on seeing the Sauda Summary, given on 29.10.2008 that too after the closure of F and O segment. OP-3 has not furnished the account statement from the beginning. When the complainant approached OP-3 to discuss the matter, the Manager Mr. Anandarao, Mr. Rahul started to misinterpret even the contents of the Souda Summary. To reach the target of OP-3 made several transactions with a malafide intention by purchasing and selling shares without authorization from the complainant. Due to the negligent, fraudulent act of OP-3, the complainant suffered loss to the tune of Rs.4,71,072/-. Legal notice was sent on 10.02.2009, OP-3 has replied the said notice denying all the averments. OP-3 has misappropriated the complainant’s funds; it caused lot of mental tension and mental agony to the complainant. OPs-1 to 4 are jointly and severally liable to pay a sum of Rs.11,04,047/-. Hence the complaint. 

3. On appearance, OPs-1 to 3 filed version contending that the complaint is not maintainable, as the complainant is not a “consumer” within the meaning of the definition prescribed under section 2(d)(i) of the Consumer Protection Act, as such there is no consumer dispute as alleged to be adjudicated by this Forum. There is no deficiency of service. It is stated that the complainant had maintained trading account bearing No.1004101 with OP branch Bangalore. The complainant was buying and selling shares with OP. OP branch was buying and selling shares on the instructions and consent of the complainant. The complainant had also executed the necessary documents. During the period of transaction made by the complainant, OP carried on her instruction and with her consent only purchased and sold the shares and as a result she had incurred loss and as such the complainant account possessed debit balance. For the notice of the complainant dated 10.02.2009, a reply was given on 19.02.2009 reiterating that all the transactions were done at the instructions and behest of the complainant and further denying the claim made by her and also on the contrary claiming to make the payment towards the debit balances in the trading account of the complainant due to the debit balance in NSE capital account and NSC futures account. It is admitted that the complainant is having trading account and demat account and that she is trading in F and O segments from February–2008. It is denied that the transactions in F and O segments are unauthorized. It is denied that the complainant was funding her trading account. In fact she crediting her trading account as and when the same become debit as per the contract notes which were curried to her residential address giving full details of the transactions made in her trading account. It is denied that during the month of June – 2008 the sale of GMR Infra was done without her instructions and Mr.Rahul Bansal is dealing in F and O segment has apologized for not informing about short fall in the price. Further it is denied that in the month of August – 2008 the purchase of Chambal Fertilizer stock was without her instructions and that she personally visited and gave instructions not to buy or sell in her account without her knowledge and instructions. In fact relating to Chambal Fertilizers the complainant earned a profit of Rs.8,000/-. Regarding the transactions pertaining to unitech shares, OP had bought 2 lots of unitech shares at a very high price. Due to market fall she kept on rolling over the position when the contract was getting expired, OP called on her for funding of short fall. The complainant did telephone on 24.10.2008 at about 9.56 a.m. and asked her to hold on the shares till evening hoping for improvement in the rates of the unitech shares. She also instructed orally to sell the shares in case down word trend continues. There was no time limit set by the complainant to sell the shares. Since there was no further instructions thereafter and to square off the position to reduce the loss to the complainant 1 lot of the unitech shares were sold at about 3 p.m. and informed her accordingly over phone. The second lot was sold at her instructions only when she visited the office of the OP on 27.10.2008. OPs have curried the contract notes for each of the days transactions and complainant cannot claim that she is not aware of the transactions done in her trading account. It is denied that the OP has not furnished statement of trading account. The entire transactions were done at the instructions of the complainant. It is denied that the complainant has suffered loss of Rs.4,71,072/-. On 24.10.2008 the complainant had instructed the OPs to hold the stocks till the market price gets improved. It is denied that she instructed to close the F and O segments immediately. Hence it is prayed to dismiss the complaint

4. On behalf of OP-4 Senior Executive Officer filed affidavit by way of version contending that the complaint is not maintainable, not a single averment or contention alleging any deficiency has been made against OP-4. OP-4 carried on its activities in accordance with its Rules and Byelaws. OP-4 has not rendered any service and complainant is not a “consumer”. There is no cause of action against OP-4, complainant is not a trading member and she does not have any privity of contract with OP-4. The complainant vide her letter dated 07.07.2009 OP send the claim form and related papers for referring of matter to arbitration. OP-4 has provided the details in respect of the procedure to be followed for filling of the arbitration application. The complainant however, has not availed of the arbitration mechanism. The complainant submitted her complaint on 03.03.2009 to OP-4. OP -2 by its letter dated 05.03.2009 requested OP-4 to provide time to furnish the documents and clarifications. Vide letter dated 15.04.2009 OP-2 submitted documents. The complainant vide her letter dated 07.07.2009 replied to OP-4 letter dated 29.06.2009 and requested to send the claim form and related papers for referring matter to arbitration. However the complainant has not availed of the arbitration mechanism. Hence it is prayed to dismiss the complaint with costs.           

5. In order to substantiate the complaint averments, the complainant filed her affidavit evidence. The Assistant General Manager working in OP3 company filed affidavit evidence in support of defence version. The Senior Executive Officer Sri.Sheetal G.Pawar filed affidavit evidence in support of on behalf of OP4.

6. Both the parties filed written arguments and reply arguments.

7.  Arguments on both sides heard.

8. The main defence of the OPs is that the complainant is not a ‘consumer’ as defined Under Section-2(1)(d) of the Act and complaint is not maintainable. In view of this preliminary objection regarding maintainability of the complaint.

9. Point that arises for our consideration is:-

Whether the complainant is a Consumer as defined Under Section-2(1)(d)(ii) of the Consumer Protection Act 1986 and complaint is maintainable?

10.We record our findings on the above point in negative:-

R E A S O N S

11. The undisputed facts are that the complainant holding demat account with OP3 was initially doing share business in equity segment and she started to trade in F and O segment for the first time in the month of February-2008. She had entered into an agreement dt.23.04.2007 stipulating the terms and conditions with OP regarding the share transactions to be carried by OP3. The complainant claims that as per the terms and conditions of the agreement entered into OP3 has to carryon share trading with her consent with clear instructions, OP3 has to purchase and sell the share with her permission only. It is contended that in spite of such terms and conditions OP3 has carried out several transactions in F and O segment without her instructions and authorization. The contract notes were not sent to her at any time during the transaction. Only in the month of June-2008, she received a contract note showing the sale of GMR Infra, which was not instructed by her. In the month of August-2008 she received contract note dt.13.08.2008, showing the transaction relating to purchase and sale of Chambal Fertilizers stock in F and O segment which she has never instructed to OP3 to purchase. In the month of October-2008 the complainant started receiving several contract notes for which she has never given instructions/authorization to OP3. She instructed OP3 to close the F and O Segment on 24.10.2008 in the morning hours i.e., by about 9.56 a.m. by selling the two lots of unitech. But OP3 has not acted immediately and sold it somewhere in the afternoon at 3.00 p.m. for about Rs.45/- per share, causing greater loss to the complainant. The 2^nd lot of unitech was not sold on that day, but the same was sold on 27.10.2008 at down price of Rs.36/-. Thus it is stated that OP3 committed deficiency in service and also played fraud on the complainant by doing transactions without her instruction, causing huge loss to the complainant. Further it is claimed that when she was given the Sauda Summary/Ledger report and F and O bill report for the first time on 29.10.2008, she came to know that several transactions say about 36 transactions in her Sauda Summary, whereas the complainant has actually made only 8 transactions. She bought only 3 lots of unitech, 3 lots of GMR Infrastructure, 1 lot of TTML and 1 lot of Canara Bank in F and O segments. Out of these 1 lot of unitech, 2 lots of GMR, 1 lot of TTML and 1 lot of Canara Bank are sold as per the instructions, 2 lots of unitech were sold without informing her. Under the guise of 2 lots of unitech, OP3 has traded on their and managed to receive the funds from the complainant giving the impression of rolling over the stocks. All the other transactions are done without her authorization/instructions whatsoever. OP3 went on buying and selling as per their whims and fancies causing heavy loss to the complainant. OP3 in order to reach the target made several transaction with malafide intention by purchasing and selling shares without authorization from the complainant. Thus due to the negligent, fraudulent act of OP3 the complainant suffered heavy loss to the tune of Rs.4,71,072/-. The complainant made payment by means of cheque and the Bank Statement of Accounts are produced. OP3 has misappropriated the complainant’s funds and has caused mental tension and mental agony. Thus the compensation of Rs.5,00,000/- is claimed towards pain and suffering and mental agony.

12.The learned counsel for the OPs contended that complainant was dealing in the sale and purchase of shares in futures and option segment wherein the shares are purchased in large volumes which amounts to the trade for commercial purpose. The services of OP3 were engaged by the complainant for sale and purchase of the shares on payment of Commission by way of brokerage. The complainant is an employee of a public sector undertaking holding a very responsible and sensitive post, she is getting salary and other emoluments from her employer. Hence the dealings in the stock markets is not by way of self-employment. The investments made by the complainant is not towards earning exclusively for livelihood by means of self-employment. Thus the complainant is not a ‘Consumer’ as defined under the Act and complaint is not maintainable. In support of this reliance was placed on the principles laid down in 2010 CTJ 1194(CP) (SCDRC) Anand Rathi Securities Ltd and others V/s Smt.Rajshri Verman and another wherein it was held that:

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

Further reliance was placed on the principles laid down in 2010 CTJ 1092 (CP) (SCDRC) Raghubhir Singh V/s India Bulls Securities Ltd and others wherein it was held that:

        “Large scale of sale and purchase of shares through the account for earning huge profits. Definitely a commercial activity-complainant held to be not a consumer under the Act. 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 settle law”.

We have gone through the copies of contract notes and bills produced by OP relating to the share transactions for the period from 06.12.2007 to 27.10.2008, copy of the DP Statement, copy of the Equity and derivatives transaction statement, copy of the sauda summary, copy of the ledger report. As per these records it is clear that the complainant has carried on large scale trading in shares through OP3 in her account for earning huge profits. Thus the share trading is a commercial activity and the services of OP3 availed for that purpose, the complainant cannot be considered to be a consumer as defined Under Section-2(1)(d)(ii) of the CPA. A Person who avails services for any commercial purposes has been excluded from the definition as per amendment added by Act 62/2002 with effect from 15.03.2003. The complainant has not pleaded in the complaint that the services of OP3 were availed exclusively for the purpose of earning her livelihood by means of self-employment as provided under explanation to Section(2)(1)(d) of the Act. The principles laid down in the above two decision are applicable to the facts of the case. Hence we are of the view that complainant is not a consumer as defined under the act and complaint is not maintainable.

13. In the written arguments of the complainant, it is stated that the complainant has transacted only 8 transactions in all from her savings and the rest all transactions are done unauthorizedly by OP3 and Op3 is trying to take advantage of their own mistake. In our view, all transactions are carried on in the account of the complainant, it cannot be said that only 8 transactions are authorized transactions and the remaining are unauthorized transactions.

14.In AIR-1995 SC 1428 Laxmi engineering Works V/s P.S.G., Industrial Institute it is held that commercial purpose would mean “profit making on a large scale”. On the basis of the same it is contended that the complainant is only an individual and there is no commercial activity on a large scale or for any business purpose. In our view, the very fact of large scale trading in shares is only for earning huge profits, merely because complainant is an individual it cannot be said that share trading in a large scale is not a commercial activity. The principle laid down in 1980-121 ITR 1 SC Additional Commissioner of Income Tax, Gujarat V/s Surat Art Silks Manufacturers Association and 1981-130 ITR 186 Commissioner of Income Tax, New Delhi V/s Federation of Indian Chamber of Commerce and Industries cannot be made applicable to the facts of the case. In principles laid down in IV(2004) CPJ 16(NC) T Appa Rao V/s Marfin (India) Limited and another cannot be made applicable to the facts of the case as in the said case the question regarding commercial activity was not involved. The principles laid in other case III (1995) CPJ 366 V.S.Manilal V/s T.D.Baskar relates to the case in respect of transaction earlier to the amendment of Section-2(1)(d) of the Act. The principles laid down in IV(2005) CPJ 72 Canara Bank V/s Gajjala Venkatesh cannot be made applicable to the facts of the case as in that case the complainant authorized the Bank to sell all shares available with them which were pledged for obtaining OD, but the bank not sold the shares in time, due to which complainant sustain losses, it was held deficiency in service proved. The facts of that case are quite different from the facts of the present case. Under these circumstances, we are of the view that the complaint is not maintainable the same is liable to be dismissed. Accordingly we proceed to pass the following:

O R D E R

The complaint filed by the complainant is dismissed as not maintainable.  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 18^th day of November-2011.)

MEMBER                            MEMBER                          PRESIDENT

Cs.