DISTRICT CONSUMER DISPUTES REDRESSAL FORUM PALAKKAD

Dated this the 16^th day of February 2011

Present : Smt.Seena H, President

: Smt. Preetha.G. Nair, Member

: Smt. Bhanumathi.A.K, Member Date of filing: 17/12/2007

(C.C.No. 145/2007)

K.Viswanathan

Sudharma

Neduvakadu

Kannadi (P.O)

Palakkad - 678701 - Complainant

( Adv. K.K.Menon)

Vs

1. M/s. Peninsular Capital market Ltd

Trading Member, National Stock Exchange

and Depository Participant, National Securities

Depository Limited)

Rep. By its Chairman

S T Reddiar & Sons Building

Veekshanam Road

Ernakulam

Cochin – 682 035.

(Adv.U.K. Ramakrishnan) - Opposite parties

O R D E R

By Smt.SEENA H, PRESIDENT

In a nut shell the case of the complainant is as follows :

Complainant and opposite parties entered into an agreement on 7^th January 2000 for the purpose of holding shares in dematerialized form and also for the purpose of buying and selling shares on specific instructions. Complainant authorized opposite party to sell few shares and sale proceedings of Rs.54521.70 was received by way of cheque. Thereafter complainant authorized the opposite party to sell a few shares viz

a) Henkel Spic	300 Shares
b) Sterling Holiday Resort	100 Shares
c) Jindal Iron and Steel	200 Shares
d)Reliance Capital	100 Shares
e) Nagarjuna Fertilizers	800 Shares
f) Kirloskar Ferrous	500 Shares

as per 'delivery instruction slips' handed over to their franchisee at Palakkad and acknowledged by them on 28/8/2003. Though opposite party sold the slips, complainant was not given the sale proceeds. Complainant made repeated request to opposite party demanding the sale proceeds but opposite party made lame excuses. On 12/3/2004 when the complainant visited the opposite party to enquire about the non receipt of sale proceeds, three bundles of contract notes evidencing transactions running in to lakhs and lakhs of rupees were handed over to complainant. It was a total surprise to the complainant as he had never authorized opposite party to indulge in speculative trade and also no margin money was collected from him. He was also not intimated about the transactions by supplying contract notes and account statements, immediately after or next day of the sale or purchase as per SEBI guidelines governing stock trading. Complainant issued a stop memo directing the opposite party to stop transactions and also a letter was addressed to the General Manager of the opposite party seeking arrangement of the payment of sale proceeds. Opposite party assured that the amount will be paid at the earliest but has not responded so far. Subsequent to that complainant was ailing from many diseases. When the complainant's health showed little improvement he again addressed a letter on 31/12/2004 to General Manager as well as the Head Office of the opposite party. The reply sent by opposite party was shocking to the complainant. Opposite party in their reply stated that the scrips entrusted for sale were sold by them for a total sum of Rs.89,531/- and there was a loss of Rs.66,150.62/ on Speculative trading during the period 2003-2004 and 2004-2005. It is also stated that after adjusting the said loss and other debit amount such as DD charges, penal charges etc. a payment of Rs.16,669/- to complainant was made on 24/9/2004 by way of cheque. Complainant preferred a complaint to National Securities Depository Ltd. as per letter dated 25/1/2005. Though NSDL initially took some action calling for explanation from the opposite party, no follow up action was initiated by them after receiving explanation from the opposite party. Complainant again preferred a complaint to SEBI. SEBI forwarded the complaint addressing the NSE to examine the matter and to take steps to expedite the redressal of the grievance. NSE invited comments from the opposite party who filed their objections. There was many anomalies in the documents produced by the opposite parties. NSE directed complainant to apply for arbitration. 0n 26/10/2006 complainant preferred application before the Regional Arbitration Centre and arbitrator was also appointed. Arbitrator closed the proceedings without going into merits of the case stating that the complaint is barred by limitation as per bye-laws governing NSE. At the time of the proceedings before the Arbitrator, opposite party produced certain agreements alleged to be executed by the complainant. The act of opposite parties amounts to clear deficiency of service. Complainant has been trying to redress his grievance through various authorities. Complainant also filed by an application to condone delay for filing of the complaint before the Forum.

The contentions of opposite party is as follows :

The main contention of the opposite party is that complainant is not a consumer as defined under the Consumer Protection Act. Further the arbitrator appointed by NSE has already passed an award and without preferring an appeal against the award, complainant has approached the Consumer Forum. Moreover the reliefs sought for by the complainant are with respect to settlement of accounts which is not maintainable before the Forum. Another contention is that the complaint is barred by limitation.

Regarding the merits of the case, opposite party admits that complainant is a client of opposite party as per the agreement executed between them on 31/7/2003. Complainant has been provided with a trading code as PP158 and he was allowed to conduct trading at Palakkad branch. The say of the complainant that he opened an account on 7/1/2000 for the purpose of buying and selling shares is denied by opposite party. It is stated that on 24/1/2000 complainant had opened a demat account with opposite party in order to keep his delivery share in Demat form. Since the complainant had got no trading account at that point of time he was not in a position to conduct any trading on shares. In order to overcome this difficulty, complainant has opened his trading account after executing agreement on 31/7/2003. Opposite party also denies the say of the complainant that the complainant has disposed of the share listed in the complaint on 28/8/2003. According to opposite party delivery intimation slip No.33606 showing the issue date was executed on 1/12/2003. DIS NO.33607 issued on 10/12/2003 was executed on 11/12/2003. DIS No.33609 issued on 17/12/2003 was executed on the same day. DIS No.33610 was issued on 22/12/2003 was executed on 24/12/2003. Opposite party also denies the say of the complainant that 3 bundles of contract notes were handed over to the complainant on 12/3/2004 when he had never authorized the opposite party to indulge in speculative trading and also no margin money was collected from him. According to opposite party margin deposit may be either in cash or delivery shares kept in Demat account or in the margin account. There is also an enabling provision to this effect in the agreement. As there was enough Demat Shares in the DP Account of the complainant, opposite party did not insist for any separate margin deposit. It is submitted that even after disposal of the shares by the complainant, the sale proceeds were retained by the opposite party in margin account so as to enable complainant to conduct daily trading as per the instructions of the complainant. Complainant has also signed a consent letter for keeping his delivery shares / credit of funds in the margin account and to treat it as his margin with the company. The said consent letter is part of agreement dated 31/7/2003. Opposite party submits that there was no lapse on the part of opposite party in issuing contract notes to complainant. The office of opposite party used to issue contract notes to all the clients one or two days after the transaction was completed since all the clients at the branch office of the opposite party are local residents, they used to collect the contracts notes, pay out etc., directly from the office in person. It is also submitted that the opposite party office would sent the contract notes to the clients by post only in cases where the clients insists so. Complainant had at no point of time requested to sent it by post.

The further contention of the opposite party is that complainant has issued a stop memo dated 12/3/2004 to opposite party. But it does not state that reasons for closing the business. Further the said memo does not state anything regarding any amount due to the complainant from the opposite party. So its clear that no amount is due at the time of the issuance of the memo. Opposite party has not received any letter stated to be submitted alongwith stop memo. Further perusal of the financial statement for the period 01/04/2003 to 31/3/2005 reveals that no amount was due to the complainant and on the contrary an amount of Rs.10,108.21 was due from the complainant to opposite party.

Opposite party submits that on receipt of letter dated 31/12/2004 from the complainant, opposite party had sent a letter dated 18/1/2005 whereby complainant had been informed that a payment of Rs.16669.14 had been effected to the complainant on 24/5/2004 after adjusting all the amount due from him to opposite party.

After issuance of stop memo also, he had disposed of shares on 19/4/2004 and 9/9/2004 as per bill No.NN-2004-070/493 and N/NM-172/555 complainant also made a pay in for Rs.6500/- to opposite party by cheque dated 11/9/2004. Complainant has made this pay in when there was a credit balance of Rs.8590.64. It is stated when Rs.16,669.14 was issued by way of cheque, his trading account was nil balance. If the complainant had any claim or dispute against opposite party he would not have made this pay in. Complainant would not have restarted trading without settling a pending dispute if any. According to opposite party there is no deficiency in service or unfair trade practice on the side of the opposite party.

The evidence led by the parties consists of their respective affidavits. Ext.A1 to Ext.A.23 except Ext.A21 marked on the side of the complainant and Ext.B1 to Ext.B.3 marked on the side of the opposite parties.

Issues that arise for our consideration are

1. Whether complaint is barred by limitation ?

2. Whether complainant is a consumer as defined in the C.P.Act ?

3. Whether there is any deficiency in service on the part of opposite party ?

4. If so, what is the reliefs and cost complainant is entitled to ?

Issue No.1

The issue is found in favour of the complainant as per the order in IA 163A/07

Issue No.2

Opposite party has raised a contention that complainant is not a consumer as defined in the C.P.Act. Section 2(1)(0) of C.P.Act defineservice. “Service” means service of any description which is made available to potential [users and includes, but not limited to, the provision of] facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, board or lodging or both [housing construction] entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service.

From the definition it is clear that service provided with respect to financial transaction comes within the purview of the Consumer Protection Act and opposite party is a service provider. Hence complainant is a consumer.

Issue 3

The sum of the allegation of the complainant is as follows:

1. That the complainant authorized opposite party to sell a few shares of various companies by way of delivery scrips handed over to opposite party and acknowledged by them on 28^th August 2003. Though opposite party sold the same, the sale proceeds were not handed over to complainant

   That without any authorization and without collecting any margin money from the complainant, opposite party has indulged in speculative trading

   When complainant demanded the sale proceeds opposite party has stated that scrips were sold for a total sum of Rs.89531 and after adjusting loss of Rs.66,150.62 on speculative trading during the period 2003-04 and 2004-05 and DP charges, penal charges etc., payment of Rs.16669.14 was made to complainant by way of cheque on 24/9/2004. According to the complainant, he has never authorized opposite party for speculative trading.

2. Complainant has taken recourse to various authorities and finally before an Arbitrator as directed by NSE. Arbitrator without going into the merits of the case closed the proceedings stating that the complaint is barred by limitation.

Opposite party resisted the allegations of the complainant with the following contentions.

1. Regarding the first allegation opposite party submits that on receipt of letter dated 31/12/2004 form the complainant opposite party had sent letter dated 18/1/2005 whereby complainant was informed that a payment of Rs.16,669.14 had been effected to the complainant on 24/5/2004 after adjusting all the amount due from him to opposite party.

   Opposite party submits that on 24/1/2000 complainant had opened a demat account with opposite party in order to keep his delivery shares in Demat form. Complainant has further opened a trading amount after executing agreement on 31/7/2003. Further according to opposite party margin deposit may either be in cash or delivery shares kept in Demat Account. As there were enough Demat Shares in the DP Account, opposite party did not insist for any separate margin deposit.

On going through the several submissions and evidence or record it is understood that sale of share and receipt of Rs.89531/- as sales proceed is admitted by the opposite party. But according to opposite party there is a loss of Rs.66150.52 on speculative trading for the period 2003-04 and 2004-05. Opposite party has not produced any concrete evidence to show the said loss. Ext.B3 which is the copy of the financial statement for the year 2003-05 also does not clearly reveal loss of Rs.66150.52 as calculated by opposite party. It is relevant to note that receipt of stop memo dated 12/3/2004 is admitted by opposite party. As per the version of opposite party itself trading has been conducted for the period beyond the receipt of stop memo. The said conduct on the part of opposite party amounts to clear deficiency in service. Cl.18 of B1 agreement specifically provides for termination of agreement at the will of either party after giving 30 days prior notice.

Several anomalies has been noted in the date of sale of the shares as contented by opposite party and as per the contract notes. As per Ext.A6 DIS NO.33606 was sold on 2/12/03, DIS No.33607 executed on 11/12/2003, DIS No.33610 executed on 24/12/03. But as per contracts notes it was on 28/11/2003, 10/12/03 and 22/11/2003 respectively. So the version of opposite party and their own document is contradictory which raises doubt as to the truth of their contentions.

In view of the above stated facts and circumstances of the case, we are of the view that without any solid evidence as to the loss of Rs.66150.22 we are not in a position to accept the said contention of opposite party.

In the result complaint is allowed. Opposite party is directed to pay consolidated amount of Rs.89531/- alongwith Rs.20,000/ as compensation and Rs.2000/ as cost of the proceedings within one month from the date of receipt of order failing which the whole amount carry 9% interest from the date of order till realization.

Pronounced in the open court on the 16^th day of February 2011.

Sd/-

Smt.Seena H

President

Sd/-

Smt.Preetha.G.Nair Member

Sd/-

Smt.Bhanumathi.A.K

Member

APPENDIX

Exhibits marked on the side of the complainant

Ext.A1 – Copy of the agreement

Ext.A2 series – Copies of delivery instruction slips

Ext.A3 series – copy Contract notes

Ext.A4 series – copy of stop memo and letter

Ext.A5 – Copy of letter addressed to GM, Penisular Capital Market Ltd. Cochi

Ext.A6 – Copy of the reply letter to complainant from Peninsular Ltd. Alongwith financial statement

Ext.A7 – Copy of complainant's letter to NSD Ltd. Mumbai

Ext.A8 – Copy of explanation of opposite party to NSD Ltd.

Ext.A9 – Copy of ledge extract and global net position

Ext.A10 – Copy of letter addressed to Vice President, NSD Ltd., by the complainant

Ext.A11 - Copy of the complaint to SEBI

Ext.A12 – Copy of the forwarding letter to Asst.Vice President, NSE, Mumbai

Ext.A13 – Copy of letter addressed to complainant by NSE Ltd dtd.9/11/05

Ext.A14 – Copy of letter dated 21/11/05 addressed to NSE, Chennai by OP

Ext.A15 – Copy of Letter to Sivakumar, Manager, NSE, Chennai dtd.2/12/05 by the complainant

Ext.A16 – Copy of reply letter from Sivakumar, Manager, NSE. Chennai dt.16/1/06 to the complainant

Ext.A17 – Copy of Letter to Sivakumar, Manager, NSE, Chennai dtd.3/2/06 by the complainant

Ext.A18 – Copy of letter to Sivakumar, Manager, NSE, Chennai by Peninsular Capital market Ltd. Dated 6/3/2006.

Ext.A19 – Copy of Letter to Sivakumar, Manager, NSE, Chennai dtd.15/3/06 by the complainant

Ext.A20 - Copy of reply letter from Sivakumar, Manager, NSE. Chennai dt.17/3/06 to the complainant

Ext.A21 – Not marked

Ext.A22 – Copy of Arbitration Award by NSE Ltd. Chennai dated 27/7/07 (subject to objection)

Ext.A23 series – Medical treatment records of the complainant

Exhibits marked on the side of the opposite party

Ext.B1 – Copy of the agreement dated 31/7/2003 alongwith the consent letter of the complainant

Ext.B2 – Copy of the stop memo dated 12/3/2004 submitted by the complainant

Ext.B3 – Copy of the financial statement for the period 01/4/2003 till 31/3/2005

Cost Allowed

Rs.2,000/ allowed as cost of proceedings.