. Karvy Computer Share Private Limited,
Rep. by its Deputy Manager,
V. Ratna Babu,
Flat No.17-24,
Vitalrao Nagar, Madhapur,
Hyderabad-81.
3. The Branch Manager,
Securities and Exchange Board of India,
Post Box No.8140,
Bandhra, East Post officer, Mumbai. …opposite parties
This Complaint coming up before us for hearing on 16-05-11 in the presence of Sri C. Ravindra Babu, advocate for the complainant and of Smt I. Anuradha, advocate for opposite parties 1 and 2 and of Sri B.S.S. Prasad, advocate for 3rd opposite party, upon perusing the material on record after hearing both sides and having stood over till this day for consideration this Forum made the following:-
O R D E R
Per Sri A. Hazarath Rao, President:-
The complainant filed this complaint U/S 12 of Consumer Protection Act seeking refund of Rs.96, 750/- together with interest, Rs.25,000/- towards mental stress and strain, Rs.20,000/- towards legal expenses and Rs.15,000/- towards miscellaneous charges.
- In brief the averments of the complaint are these:
The complainant purchased demand drafts for Rs.96, 750/- on the State Bank of Hyderabad, Chilakaluripet for purchasing shares from the 1st opposite party when offered for public. The complainant was directed by the 1st opposite party to correspond with the opposite parties 2 and 3. The 3rd opposite party is also responsible to initiate the matter for allotment of shares to the complainant by the 1st opposite party. The opposite parties have admitted their liability for allotment of shares to the complainant but in vain. Thus there was deficiency on the part of the opposite parties. The opposite parties are therefore liable to refund money along with interest and other compensation caused towards the delay. The complainant wandered around the office of the opposite parties for about an year and thus underwent mental agony, hardship, loss of profit of accumulation and loss of expenditure and estimated it at Rs.25,000/-. The complainant is also entitled for Rs.20, 000/- towards legal expenses. In all the opposite parties are liable to pay Rs.2, 14,662/-.
3. The 1st opposite party filed memo adopting the version of the 2nd opposite party and their contention in brief is hereunder:
The complainant is not a consumer as his sole object of acquiring shares was for commercial purpose. There is no relationship of service provider and consumer between the complainant and the opposite parties 1 and 2. The opposite parties 1 and 2 never received any fees from the complainant. Prospective investors are not consumers and as such the complainant is not entitled to the relief under the Consumer Protection Act. This Forum has no territorial jurisdiction to entertain the complaint. Section 10 of the Companies Act prohibits the filing of a case against a company in any court other than the court within whose local jurisdiction the registered office of the company was situated. The complainant has applied for 225 shares of Reliance Power Limited IPO under an application bearing No.71575896 and sent Rs.96, 750/- by way of two demand drafts drawn for Rs.48, 750/- through SBH. The statement forwarded by the collecting banker M/s ICICI Bank of the respective investor’s investment at the 1st instance of allotment provided that no amount was realized from the complainant. The complainant was informed status of his application instantly through various sources by its letter dated 13-06-08. The 2nd opposite party requested the complainant to provide certain information as a good will gesture to resolve his grievance. The opposite parties 1 and 2 on receipt of supporting documents from the complainant have taken the matter with the collecting banker. Upon constant follow up by 2nd opposite party the collecting banker M/S ICICI bank issued the pay order bearing No.000252 for Rs.96, 750/- dated 20-03-10 and the same has been deposited to the complainant’s bank account No.52100013033 of SBH. The complainant enchased it on 03-04-10 as per records. The opposite parties did not receive the demand drafts in question as per the statement provided by the collecting banker in the 1st instance and as such the question of allotment of shares in favour of the complainant did not arise. The complainant is bad for non-joinder of M/s ICICI bank, which is a proper and necessary party to the complaint. The complaint therefore be dismissed.
4. The contention of the 3rd opposite party in brief is hereunder:
SEBI is a statutory body discharging duties for which no consideration is paid by the investors. SEBI normally takes up complaints received from the investors with the concerned entity or intermediary for redressal of grievances. SEBI had taken up the case of the complainant with the 1st opposite party. The 3rd opposite party received action taken report (ATR) from the 1st opposite party on 04-08-08. The 1st opposite party informed that the details in the complaint furnished by the investor was not sufficient and it sent a letter to the investor on 05-05-08 requesting to provide correct and complete details. Two reminders were sent by the 1st opposite party on 09-06-08 and 09-07-08. The complaint was treated as closed for want of incomplete information. SEBI is neither necessary party nor privy to the transaction between the complainant and the opposite parties 2 and 3. The complaint therefore be dismissed with exemplary costs.
5. Exs.A-1 to A-8 on behalf of the complainant, Ex.B-1 to B-6 on behalf of 3rd opposite party and Exs.B-7 to B-11 on behalf of the opposite parties 1 and 2 were marked.
6. Now the points that arose for consideration in this case are:
- Whether the complainant is a consumer?
- Whether this Forum has no territorial jurisdiction?
- Whether the complaint is bad for non-joinder of M/s ICICI Bank?
- Whether the complaint is bad for mis-joinder of 3rd opposite party?
- Whether the complainant is entitled to compensation and if so to what amount?
- Whether the complainant is entitled to interest on the amount invested by him?
- To what relief?
7. POINT No.2:- Ex.A-1 slip revealed that an agent from M/s Reliance money at Guntur acknowledged the application of the complainant of the 1st opposite party for allotment of 225 shares. Ex.A-1 belied the contention of the opposite parties 1 and 2 regarding jurisdiction. Since part of cause of action has arisen at Guntur we are of the considered view that this Forum has jurisdiction to entertain the complaint.
8. POINT No.4:- There is no privity of contract between the 3rd opposite party and the complainant. The complaint averments revealed that he contacted the opposite parties 2 and 3 at the advice of the 1st opposite party. Ex.A-7 revealed that the 3rd opposite party on 22-04-08 informed the complainant that it took up the grievance of the complainant. It is not the case of the complainant that he hired the services of 3rd opposite party.
9. In FA No.407/96 dated 28-11-96 between the Securities and Exchange Board of India, Investor grievances and guidance division, Bombay and Paky Jain Rajendra and two others APSCDRC held
“So far as the third opposite party is concerned it is merely a statutory body discharging statutory duties for which no consideration is paid by the complainant and it also cannot be said that the complainant hired the services of the third opposite party for any consideration”.
10. Ex.A-7 letter revealed that the 3rd opposite party took the cognizance of the grievance of the complainant and acted in its purview. Under those circumstances, the 3rd opposite party is not answerable to the complainant. Mere addressing letters to the 3rd opposite party did not make it liable to the investors as rightly contended by the 3rd opposite party. It can therefore be said that the 3rd opposite party is not at all proper and necessary party to decide the point involved. In view of the afore mentioned discussions, this point is answered in favour of the 3rd opposite party.
11. POINT No.1:- The complainant’s efforts to purchase shares of the 1st opposite party can be termed as an investment as the complainant is not doing business in shares. In this case no shares were allotted to the complainant by the opposite parties 1 and 2. The opposite parties 1 and 2 relied on the decision reported in Morgan Stanley Mutual Fund vs. Karthik Das (1994 (4) SCC 225). While dealing the question whether a prospective investor could be a consumer within the meaning of Consumer Protection Act it was held
“25. The definition of consumer is contained under Section
2(1)(d) of the Act which reads as under:
"(d) 'Consumer’ means any person who
(i) Buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, but does 239 not include a person who obtains such goods for resale or for any commercial purpose; or
(ii) hires any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who hires the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person;".
The meaning of goods is same as defined under Sale of Goods
Act, 1930. It is so stated in Section 2(1)(i) of the said Act.
26. The consumer as the term implies is one who consumers. As per the definition, consumer is tile one who purchases goods for private use or Consumption. The meaning of the word 'consumer' is broadly stated in the above definition so as to include anyone who consumes goods or services at the end of the chain of production. The comprehensive definition aims at covering every man who pays money as the price or cost of goods and services. The consumer deserves to get what he pays for in real quantity and true quality. In every society, consumer remains the centre of gravity of all business and industrial activity. He needs protection from the manufacturer, producer, supplier, wholesaler and retailer.
27. In the light of this, we will have to examine whether the 'shares' for which an application is made for allotment would be 'goods'. Till the allotment of shares takes place, "the shares do not exist". Therefore, they can never be called goods. Under the Sale of Goods Act, all actionable claims and money are excluded from the definition of goods since Section 2(7) of the Sale of Goods Act, 1930 is as under:
"(7) 'goods' means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale." It will be useful to refer to clause (6) of Section 2 of the Sale of Goods Act, 1930. That reads:
"(6) 'future goods' means goods to be manufactured or produced or acquired by the seller after the making of the contract of sale."
28. As to the scope of this clause, reference may be made to Maneckji Pestonji Bharuclia v. Wadilal Sarabhai & Co.2 It was observed thus:
"The Company is entitled to deal with the shareholder who is on the register, and only a person who is on the register is in the full sense of the word owner of the share. But the title to get on the register consists in the possession of a certificate together with a transfer signed by the registered holder. This-is what Bharucha had. He had the certificates and 2 AIR 1926 PC 38, 40: 53 IA 92: 28 Bom LR 777 240 blank transfers, signed by the registered holders. It would be an upset of all Stock Exchange transactions if it were suggested that a broker who sold shares by general description did not implement his bargain by supplying the buyer with the certificate and blank transfers, signed by the registered holders of the shares described. Bharucha sold what he had got. He could sell no more. He sold what in England would have been choses in action, and he delivered choses in action. But in India, by the terms of the Contract Act, these choses in action are goods. By the definition of goods as every kind of moveable property it is clear that not only registered shares, but also this class of choses in action, are goods. Hence equitable considerations not applicable to goods do not apply to shares in India."
29. Again in Madholal Sindhu of Bombay v. Official Assignee of Bombay it was held thus: "A sale according to the Sale of Goods Act (and in India goods include shares of joint stock companies) takes place when the property passes from the seller to the buyer." Therefore, at the stage of application it will not be goods. After allotment different considerations may prevail.
30. A fortiori, an application for allotment of shares cannot constitute goods. In other words, before allotment of shares whether the applicant for such shares could be called a consumer? In CIT v. Standard Vacuum Oil Co.4 while defining shares, this Court observed:
"A share is not a sum of money; it represents an interest measured by a sum of money and made up of diverse rights contained in the contract evidenced by the articles of association of the Company."
31. Therefore, it is after allotment, rights may arise as per the contract (Article of Association of Company). But certainly not before allotment. At that stage, he is only a prospective investor (sic in) future goods. The issue was yet to open on 27-4-1993. There is no purchase of goods for a consideration nor again could he be called the hirer of the services of the company for a consideration. In order to satisfy the requirement of above definition of consumer, it is clear that there must be a transaction of buying goods for consideration under Section 2(1)(d)(i) of the said Act. The definition contemplates the pre-existence of a completed transaction of a sale and purchase. If regard is had to the definition of complaint under the Act, it will be clear that no prospective investor could fall under the Act.
32. What is that he could complain of under the Act? This takes us to the definition of complaint under Section 2(1)(c) which reads as follows:
"2. (1)(c) 'complaint' means any allegation in writing made by a complainant that-
(i) as a result of any unfair trade practice adopted by any trader, the complainant has suffered loss or damage;
(ii) the goods mentioned in the complaint suffer from one or more defects;
(iii) the services mentioned in the complaint suffer from deficiency in any respect;
(iv) a trader has charged for the goods mentioned in
the complaint a price in excess of the price fixed
by or under any law for the time being in force or displayed on the goods or any package containing
such goods, with a view to obtaining any relief provided by or under this Act."
33. Certainly, clauses (iii) and (iv) of Section 2(1)(c) of the Act do not arise in this case. Therefore, what requires to be examined is, whether any unfair trade practice has been adopted. The expression 'unfair trade practice' as per rules shall have the same meaning as defined under Section 36-A of Monopolies and Restrictive Trade Practices Act, 1969.+ That again cannot apply because the company is not trading in shares. The share means a share in the capital. The object of issuing the same is for building up capital. To raise capital, means making arrangements for carrying on the trade. It is not a practice relating to the carrying of any trade. Creation of share capital without allotment of shares does not bring shares into existence. Therefore, our answer is that a prospective investor like the respondent or the association is not a consumer under the Act.
12. In this case as no shares were allotted to the complainant and as such can be termed as a prospective investor. Taking a clue from the above decision, the complainant does not come under the purview of Consumer Protection Act in our considered view. Hence, this point is answered against the complainant.
13. POINT No.3:- The opposite parties 1 and 2 in their version as well as affidavit mentioned that the collecting banker M/S ICICI Bank has issued the pay order bearing No.00252 for Rs.96,715/- on 20-03-10 and the same has been deposited to the complainant’s account number 52100013033 of SBH. It is the contention of the opposite parties 1 and 2 that they have not received any amount from the complainant through the banker and if any M/s ICICI Bank is liable.
14. During the pendency of the case the complainant filed memo mentioning that the opposite party deposited Rs.96,750/- without informing the complainant and he received without prejudice to his rights. Memo filed by the complainant on 29-04-11 did not disclose who deposited the amount into his account. The correspondence marked as Exs.B9 to B-11 revealed that the opposite parties 1 and 2 made correspondence with M/s ICICI Bank wherein it was mentioned, “however the same record has not appeared in the entire bank schedule received from ICICI Bank, Guntur. Once again please go through your records and revert on top priority basis”. It can therefore be said that the opposite parties 1 and 2 did their best at their hands. The opposite parties 1 and 2 specifically contended that M/S ICICI Bank is a proper and necessary party to the proceedings. Inspite of such contention the complainant did not take further steps. We therefore opine that M/s ICICI Bank is a proper and necessary party to this proceeding so as to arrive who is at fault. Therefore in our considered opinion the complaint is bad for non-joinder of necessary parties. Hence, this point is answered against the complainant.
15. Point No.5:- In view findings on points 1 to 4 the complainant is not entitled to any damages under any account. The remedy of the complainant is elsewhere but not in the Consumer Forum. Hence this point is answered against the complainant.
16. POINT No.6:- Regarding the rate of interest the complainant filed a paper regarding grant of interest there in it was mentioned,
“Applications have been made to the BSE and the NSE for permission for listing of the Equity Shares being issued through this Red Herring prospectus.
If the permission to deal in and for an official quotation of the Equity shares is not granted by any of the Stock Exchanges, the Company shall forthwith repay, without interest, all money received from the applicants in pursuance of this Red Herring Prospectus. If such money is not repaid within eight days after the Company will become liable to repay it (i.e., from the date of refusal or within 15 days from the date of Bid/Issue closing date, whichever is earlier), then the company along with every Director of the company who is default shall, on and from expiry of eight days, be liable to repay the money, with interest at the rate of 15% per annum on application money, as prescribed under Section 73 of the Companies Act.
The Company shall ensure that all steps for the completion of the necessary formalities for listing and commencement of trading at both the Stock Exchanges mentioned above are taken within seven working days of finalisation of the basis of allotment for the issue”.
It is the case of the opposite parties 1 and 2 that the Banker M/s ICICI did not send the name of the complainant and M/s ICICI was a necessary party in the complaint. The said contention of the opposite parties is having considerable force as the complainant kept quite after receiving his money from the Banker. It is already observed that M/S. ICICI Bank is proper and necessary party to the case. The grievance of the complainant, if any, is against M/s ICICI Bank. Under those circumstances, the above contention of the complainant is having no relevancy and is devoid of merit. In view of the afore mentioned discussion this point is answered against the complainant.
17. POINT No.7:- In view of above findings in the result the complaint is dismissed without costs.
Typed to my dictation by junior stenographer, corrected by me and pronounced in the open Forum dated this the 3rd day of June, 2011.
Sd/-XXX Sd/-XXX
MEMBER PRESIDENT
APPENDIX OF EVIDENCE
DOCUMENTS MARKED
For Complainant:
Ex.Nos. | DATE | DESCRIPTION OF DOCUMENTS |
A1 | 15-01-08 | Acknowledgment slip for investor |
A2 | 14-01-08 | Counter foils of DDs |
A3 | 14-01-08 | Xerox copies of DDs |
A4 | 29-02-08 | Confirmation letter given by SBH, Guntur |
A5 | 13-05-08 | Acknowledgment liability letter |
A6 | 13-06-08 | Reference letter with karvy |
A7 | 22-04-08 | Acknowledgment from SEBI, Mumbai |
A8 | 05-06-08 | Office copy of legal notice |
For 3rd opposite party:
Ex.Nos. | DATE | DESCRIPTION OF DOCUMENTS |
B1 to B-6 | - | Copies of citations. |
For opposite party 2:
B7 | 30-03-10 | Copy of bank challan for RS.96,750/- |
B8 | 30-03-10 | Copy of demand draft for Rs.96,750/- |
B9 to B-11 | | Copies of mail transactions between Karvy Private Limited and ICICI Bank. |
Sd/-XXX
PRESIDENT
