AT HYDERABAD.

CC 76  of 2009

Between:

1. Smt. Mani Rao,

W/o. G. Satyanarayana

Age: 49 years, Flat No. 104,

The Grand Milleu Apartments

Navodaya Colony, Road No. 14

Banjara Hills, Hyderabad.

2. Smt. Curie Rao

W/o. Dr. S. Vijaya Kumar

Age: 51 years, D.No. 8-1-68/1

Gokulam-Rahulam, Peda Waltair

Doctors’ Colony

Visakapatnam-530 017.                              ***                         Complainants 

And

1.  HSBC Ltd.

Regd. Office at 52/60

M.G. Road, Fort, Mumbai

Rep. by its CEO

2.  HSBC Ltd.

Branch Office at Visakapatnam

Rep. by its Branch Manager

3.  HSBC Asset Management  (India) Pvt. Ltd.

(Portfolio Manager),

Regd. Office at 314,

D.N. Road, Fort, Mumbai

4. Ashok Dommeti

Personal Relationship Manager

HSBC Bank, Visakapatnam Branch

Uplands, Visakapatnam.

R/o. Flat  No. 104,

Satya Sai Residency, Old CBI office Road

Visakapatnam-530 017.

5. Smt. K. Uma Devi

W/o. K. V. Ravi

Branch Vice-President

HSBC Bank, Visakapatnam Branch

Uplands, Visakapatnam.

D.No. 49-53-7/14, Balayya Sastry Layout

4^th Town Police Station Backside

Visakapatnam-530 016.                              ***                         Opposite Parties   

Counsel for the :                                         M/s.  K.V. Siva Prasad

Counsel for the Resp:                                 M/s. V. Padmanabham (Ops 1 & 2)

                                                                   M/s. P. Rajender Reddy (Op3)

                                                                    Op4- PIP.

                                                                   Mr. C. Guna Raja (Op5)                             

CORAM:

                    HON’BLE SRI JUSTICE D. APPA RAO, PRESIDENT 

&

                                        SMT. M. SHREESHA, MEMBER

MONDAY, TWENTY SIXTH DAY OF MARCH TWO THOUSAND TWELVE

Oral Order: (Per Hon’ble Justice D. Appa Rao, President)

                                                          ***

1)                  This is a complaint filed under Consumer Protection Act u/s 17(a) (i) of the Consumer Protection Act to  pay  an amount of Rs.  65.00 lakhs with interest from the respective dates of transfer of amounts from S.B. account to PMS account,  compensation of Rs. 25 lakhs,  and costs of Rs. 3 lakhs. 

2)                The case of the complainants in brief is that they have individual S.B. accounts  with Op2 branch of Op1 bank.    In the month  of  April, 2008   Ops 4 & 5 in the capacity of  Manager   and  Vice-President of  Op2 informed that they floated a financial product  called “Portfolio Management  Services  for short (PMS)  and the same would be managed by  experts and that the investment would yield a minimum return of 25%  over a period of 15 to 18 months.     Having found that the bank had worldwide experts in PMS and would give good service being backed up by scientific analysis of market conditions and it was risk free even in bad times invested Rs.  1.30 crores in April, 2008.  However, the opposite parties never informed about the investments   and its implications.    Contrarily on 20.10.2008 Op4 sent a statement of account mentioning that out of Rs. 1.30 crores of capital which was transferred for making investments in equities/securities on several occasions,   a total sum of Rs. 65.00 lakhs was eroded away i.e., 50% of the principal amount.   The explanation was that it was due to bad market conditions.    They were never briefed on the PMS package by any officers.   Equally they did not inform about the investments made by them in order to question their prudency in investing their amounts in the stocks which were constantly dipping.    Whenever the market was falling they have been luring them to transfer more money for better gains.  By 15.7.2008 the investment was increased to Rs. 1.27 crores and the portfolio was down by -27%.    Further investments were made though there was constant fall of BSE, Midcap, BSE Sensex and NIFTY.    There was no rationale either in buying the stocks nor timing of the purchases.    They were   made ignoring the market conditions.    They have sold profit making stocks in a very short span and invested in the shares where the share value of the company has been falling.   When the BSE Sensex was tumbled down the bank had invested without following the due procedure and guidelines as prescribed by the SEBI from time to time.   The opposite parties have invested the monies in an un-professional and un-ethical manner causing huge loss.   The officers did not exercise prudence while investing their monies amounting to deficiency in service.   While discharging their duties in fiduciary capacity with regard to their accounts they did not even exercise the discretion to mitigate the loss by purchasing the stocks which yield higher returns.   They did not send statements of accounts as required under rules  in order to enable them to act at right time to see that their amounts were not further invested  thereby they could  have reduced the loss.   All this amounts to unfair trade practise.    Alleging that a capital sum of Rs. 65.00 lakhs was eroded because of their negligence by investing in non-profit stocks,  and in not exercising due care they filed the complaint claiming Rs. 65.00 lakhs with interest @ 24% p.a., from the respective date of transfer of amount from their S.B. accounts to PMS account besides compensation of Rs. 25 lakhs towards mental agony and   Rs. 3 lakhs towards costs. 

3)                Ops 1 & 2 HSBC bank resisted the case.    While admitting that they are  engaged in the business of banking and other allied banking related activities are  governed by   regulations of Banking  Regulation Act and also  R.B.I. guidelines, and that Ops  4 & 5 are their employees and that Op3 is a private limited company  involved in the management of assets of its clients.    It denied the allegation that there was  deficiency in service on their part nor there was any un-fair trade practise.   The complainants have admittedly signed the Discretionary Portfolio Management Agreement (DPM) on 25.4.2008 with Op3.   The grievance of the complainants is   with respect to said agreement with Op3 and management by them.  It has nothing to do with Ops 1 & 2 or its agents.   They are only facilitators.  They were un-necessarily impleaded.   The complainants themselves approached the bank for the services required by them.   They were given all the brochures, PMS client registration form and DPM agreement.  Knowing full well as to the services being provided they signed the DPM agreement.   The allegation that Ops 4 & 5 compelled them to enter into the contract in a hasty and casual manner is absolutely false and baseless.    Op4 was never in-charge of investment made by Op3.  When a complaint was made they directed them to approach Op3.    An amount of Rs. 1.3 crores were transferred in accordance with  mandate given by the complainants.    They have no role in the investments made by Op3.   There was no cause of action against them.   There was clause of arbitration, and that the Commission has no jurisdiction.  Therefore it prayed for dismissal of the complaint with costs. 

4)                 Op3 equally resisted the case.   The complainants had discussions with the officials of Ops 1 & 2 bank about the Portfolio Management Services (PMS) products.  They never represented that they would get return of 25% over a period of 15-18 months.    In fact they told them that they can enter and exit out of products at any time if he/she wishes.    Superior results during the bad market conditions were never mentioned or committed during the conversations.    The complainants had expressed their willingness after the product features were discussed in detail; more over after Key Features Documents (KFD) were handed over.    Detailed discussions were made between 10.4.2008 and 25.4.2008 with regard to product features, asset allocation, risk factors etc.   The documents were signed by the complainants after carefully considering approximately taking two weeks period.  There was no force or pressure on them to execute these documents.  They never informed that the last date for subscription was 30.4.2008.  Copies of PMS agreement were sent to them along with Welcome Kit on 2.5.2008.     Rs. 50 lakhs is  the minimum amount required to invest in PMS.    They  also informed that PMS services rendered by Portfolio Managers are discretionary in nature.    All the investment decisions  taken   by Op3  were  in accordance with the investment objectives and restrictions set out under the client agreement/disclosure agreement and  after proper analysis in a diligent and prudent manner.   The complainants themselves provided e-mail addresses viz.,      to which all the information and statements were sent.    All the official communications as well as fortnightly and monthly reports were sent to the complainants’  e-mails addresses on timely basis with a copy to Mr. Ashok Dommeti, HSBC  Bank Relationship Manager at Vizag.   When the complainants  expressed their concern on the performance of the PMS  on  20.10.2008  they were informed about rationale behind the Portfolio  Manager’s investment  methodology and approach.   They  were up-set on loss of principal,   even after explaining the rationale behind the approach for the stocks and the then prevailing market conditions.   They  signed  the documents  after going through the KFD and discussing  it in detail.   They could not plead ignorance  on the  process and rationale  behind the approach  for the stocks  and the then prevailing market conditions.    It was  diligent  and  made prudent investments.   The performance of the signature portfolio  as on 31.12.2009 vis-à-vis  the bench mark  is considered.    While 2008  was extremely challenging  for equity investors and 2009 was equally  rewarding .   The approach of staying  focused on the long term  and carrying relatively low levels  helped significantly in  capturing the equity rally of 2009 for its investors.    The equity  as an asset class is known  to carry  a degree of risk management  with its return potential since the asset class  has the potential to generate  relatively  better returns  as compared  to debt/Government bonds.    The Portfolio Managers do not work  under any pre-decided system driven stop loss take gain filters.    The process entails  evaluating  the intrinsic worth of business  and change in fundamentals  through active discussions with the company management and  internal discussions.   An investment in  an equity product is a mandate from the investor who has knowingly assumed the  associated risks in lieu of higher return expectations.    The intention of the portfolio manager is to generate  returns over a long term perspective.   No promise of  minimum return  of 25%  has been made by the  Portfolio Manager and made the client aware  of the risks associated with the investing in equity markets  prior to investment.    The risk factors  have also been provided  in all client documentation which had been provided to the complainants prior to account opening.    Though  HSBC PMS’s  strategy is to buy  and hold, the fund manager  keeps on evaluating  the fundamentals of the stocks and in the event of any  deviation due to change in  market conditions it might prefer to come out of the stock and reinvest into some other opportunity.   The Portfolio Manager  acted  in a prudent manner and in the interests of complainants and that the loss of principal amount  has not occurred due to any non-compliance or negligence  and breach of obligations.   The Portfolio Manager has  made investments  in stocks only after proper research and the process followed by him has been explained.   The SEBI Regulations do not mandate furnishing reports to the clients.  The Portfolio Manager  has acted in a fiduciary capacity and has exercised his discretion in a manner, which is in the interests of the complainants in the long term.   All the investments  have been made as per the agreement  and the complainants  had not given any specific instructions  in writing  which the  Portfolio Manager had not adhered to.    There has been no violation of any act or law and  he was not liable to pay any loss or  damage caused to the complainants.   The fund manager followed   the model portfolio  which is applicable to all  clients.  The Portfolio Manager has provided  monthly reports  in respect of the purchase price and the sale price  of  various investments made.    The funds were  not invested in any instrument barred by SEBI.    The client agreement or the sales literature  never mentioned or claimed that there would be no erosion  of the capital invested.    It is common knowledge  that equity investments are prone to market volatility  and the same has been highlighted to the complainants.   The Portfolio Manager has not  indulged in any speculative transactions and traded on delivery basis in accordance with  SEBI Portfolio Managers Regulations, 1993.    The investments made by the Portfolio Manager were from a long term perspective.   However, the complainants  had been hasty in the decision to redeem the portfolio. 

                   There has been  no deficiency  of service  on the part of HSBC  and the Portfolio Manager has  acted in a prudent  manner and in the interests of  complainants,   in compliance with all applicable laws, rules and regulations and SEBI (Portfolio Managers) Regulations, 1993.           The Portfolio Manager  has acted  in diligent manner and exercised  all reasonable duty and care.  HSBC has an investment  philosophy and process in  place  as per HSBC global standards  with regard to due diligence  before any financial investment is made  in any of  portfolio companies.  All investment decisions  were  taken after proper analysis  and prudent manner.    Further the clauses referred to by the complainants are  contained in the client agreement. 

                    SEBI (Portfolio Managers)  Regulations dt. 11.8.2008  mandates  a statement  in the Disclosure Document  to the effect that  “securities investments are subject to market risks and there is no assurance or guarantee that the objective of investments will be achieved.   The past performance  of the portfolio manager  does not  indicate its future performance.”   SEBI  (Mutual Fund Regulations, 1986)  is a separate regulation for the mutual funds  while the SEBI (Portfolio  Managers) Regulations  governs the  Portfolio  Managers.    The Mutual Fund  Advertisement code  is not applicable in case of Portfolio Managers.  The Portfolio Manager is required to adhere to the PMS Code of conduct  as given in the said regulations and SEBI circular dt. 20.10.1993 on guidelines for  registered portfolio managers.    Op3 has  adhered to both the said requirements.     In the light of  arbitration clause  the State Commission has no territorial jurisdiction,  and therefore prayed for dismissal of the complaint with costs. 

5)                 Op4 did not choose to contest the matter.

6)                Op5  filed a separate counter  almost reiterating  the facts mentioned by Ops 1 to 3 above.   In fact first complainant is a post-graduate  in Home Science,  and the second complainant  is a post-graduate in Commerce.   They have been investing  the amounts in  mutual funds for the last couple of years and  made profits through  the instrumentality of the bank.    They could not plead  ignorance  of stock market, market conditions, industry growth rate etc.   They could not blindly believe  the so called assurances  given by them that  minimum return of 25%  would be ensured.    They know full well that their founds would be managed by Portfolio Manager (Op3).    The allegation that they were forced to sign the documents  without explaining the product etc.  were  introduced  only for the purpose of this case.   In fact,    they had taken two weeks’ time before signing the documents.    Only after going through thoroughly and understanding them, they signed  the documents.   The transfer of funds was made in  accordance with the mandate of the complainants.   The allegation of non-disclosure of material facts is baseless.    The allegation that they had managed the funds without meeting mandatory requirements of  PMS and that same amounts to fraud and cheating  is false.     Op3  alone  had taken all the  investment decisions and they have nothing to do with  it.    They never made any false, exaggerated or misleading statements or representations. They have nothing to do with  the management of funds of the complainants by Op3.   They were un-necessarily impleaded in the matter, and therefore prayed for dismissal of the complaint with costs. 

7)                The complainants in proof of their case filed their affidavit evidence  and additional  affidavit and got Exs. A1 to A25 marked while the  opposite parties 1 to 3 and 5 filed their affidavit evidence.  Op3 also filed additional affidavit  and   got Exs. B1 to B6 marked.    

8)                The points that arise for consideration are :

1. Whether there is any  deficiency in service on the part of  opposite parties? 
2. Whether the complainants are entitled to recover loss sustained by them?
3. Whether the complainants are entitled  to any compensation?  If so to what amount? and
4. To what relief?

9)                It is an undisputed fact that  the first complainant is a post-graduate  in Home Science and the second complainant  is a post-graduate in Commerce.    They have been operating  the  S.B. accounts with Op2 bank for the last several years.   Ops 4 & 5 were employees of Op1 working with Op2 branch at Visakapatnam.   Ops 1 & 2 are governed by   regulations of Banking  Regulation Act,  and also  guidelines issued by  R.B.I. from time to time.    Op3 is a private limited company incorporated under the Companies Act  for managing the assets of its clients whereby they agreed  to invest in shares as stocks under the name and style of  Portfolio Management Services (PMS) vide Ex. A1 dt. 27.4.2008.    The complainants allege that Op3 promised that their investment would yield  minimum return of 25% over a period of 15-18 months since it was handled by  experts.   They make research of the market and invest prudently so as to see that the investors are benefitted.   Contrarily  a sum of Rs. 1.30 crores  from individual accounts of the complainants were transferred for investments, however,   resulting in loss of Rs. 65.00 lakhs. 

10)              The complainants’ plea is that  Op3 did not manage  the investments prudently,   and it had invested in losing concerns  whereby they  had sustained loss of Rs. 65.00 lakhs.   They contended that a perusal of statement of account shows that within three days of executing the above documents  the opposite parties have invested Rs. 33 lakhs , Rs. 44,53,128/-  in about  18 days and  nearly Rs. 1.10 crores  in about 45 days leaving a cash position of  2.52% in PMS  account.    The allegation is though the original investments were agreed as Rs. 55 lakhs, Ops 4 & 5 lured the complainants to transfer more funds into the account for better gains.   By 15.7.2008 the  investment was increased to Rs. 1.27 crores against  the falling market and the portfolio was down by -27%.    The investments were increased from August, 2008 till 15.10.2008 while the market was continuously  falling and even the portfolio was constantly eroding.    This is evident from constant fall of BSE, Midcap, BSE Sensex and NIFTY.    They contended that Ops ought to have invested in stocks  in some other companies  instead of losing concerns whereby they had sustained huge loss.    In fact the fundamental aspect of portfolio management is  ‘maximize  returns and minimize losses’.    The complainants have mentioned various methodologies  of investments to be followed  which according to them  the bank did not follow.  For example when the BSE Sensex  index tumbled down 20,000 levels  to 17,287   by the  time these investments were made.  We may state that the complainants themselves  have given reasons where losses could be mitigated.  They allege that they were  under blind belief that the opposite parties would review  the specific  company performances viewed through  earnings growth, had  potential to ultimately  drive stock performance over  long term before making investments.    They ought to have exercised all this before investing their  monies  in the stocks.   Had they been prudent  and did this exercise they would not have sustained loss.   In the light of enormity of evidence they raised the following  queries (hypothetical?) to be answered:

a)    Whether the Ops  acted in accordance with the terms of  agreement entered into  with the complainants and whether causing  erosion  of substantial part of the capital of  the complainants is purely  on account of negligence, wilful default and lack of professional skills?

b)    Whether  the power of discretionary has any limitations under common law and discretionary power exercised  by the Ops is in accordance with the regular trade practise and is there any doubt  beyond reasonable thinking?

c)    Whether the discretionary portfolio management  agreement is one sided and arbitrary and terms thereof  are enforceable  under law?

d)    Whether clause 13.6 of the agreement would come to the rescue of the complainant, when there is apparent  wilful default  and gross negligence  on the part of Ops?

e)    Whether the transactions  undertaken by the Ops are  prima-facie?  Not in the interest of the complainants and whether  there has been any application of mind in managing the funds of the complainants?

f)     Whether the act of Ops amounts to deficiency in service as defund u/s 2(1)(g) of  the C.P. Act, 1986?

g)    Whether non-furnishing of statement of accounts till the disaster is taken  place by the Ops can be attributable  to the fact that  Ops have  not acted in the manner which they ought to have acted? 

11)               They have also mentioned some of the provisions under  Discretionary Portfolio Management Agreement, and contended that  it casted  an obligation  on the  opposite parties to act in a fiduciary capacity in respect of their  investments,  and if not done it amounts to deficiency in service, negligence and unfair trade practise etc. 

12)               The opposite parties  equally relying  on the very same documents contended that the very   Portfolio Management Services rendered by the Portfolio Managers  are  discretionary  in nature.    Picking of stocks entirely lie  with the fund management.    The investment decisions were taken  after proper analysis.    They have acted in diligent and prudent manner.    They were in accordance  with the investment objectives and restrictions  set out under the client agreement/disclosure  document.   

13)              Evidently the complainants did not dispute  that official communications and fortnightly and monthly reports were sent to their e-mail addresses  which were marked as Ex. B6.    Equally the complainants never  specified as to how the investments have to be made. 

14)              The opposite parties contended that the performance of the signature portfolio  as on 31.12.2009 vis-à-vis  the bench mark table shows good performance of  the signature portfolio  over a three year period.    The investments were made from a long term perspective.   There was neither negligence nor deficiency in rendering the service while making investment strategies.  To prove it they filed the following statement:

15)              As  could be seen from the above there were  sudden fluctuations in the market.    Importantly the  Disclosure Document  dt. 25.4.2008  contains  a statement to the effect that securities investments are subject to market risk and there is no assurance or guarantee that  the objectives of the scheme  will be achieved, and that the performance of the portfolio manager does not indicate the future performance of the same scheme in future  or any other future schemes  of the portfolio manager.    This   in consonance with  SEBI (Portfolio Managers) Regulations dt. 11.8.2008  which prescribe that the disclosure document should contain a statement to the effect that ‘securities investments are subject to market risks and there is no assurance or guarantee that the objective of investments will be achieved.  Equally  the past performance of the portfolio manager  does not indicate its future performance. 

16)               Ex. A1 Discretionary Portfolio Management Agreement entered into between the complainants and  HSBC  Asset Management (India) Pvt. Ltd.  No doubt  the  terms are almost one sided  and give  an edge to the Portfolio Managers.   They are entrusted  to  make investments.   Admittedly  equity investing  is a high risk, high return game.  The risk comes down if you hold  for the long term, but does not vanish altogether.   Timing the market is very difficult even for the experts.    It is said that the investors  have been trading in equities for the past 20 years are in the same boat.   The BSE sensex  was quoting at 4,285 nearly 20 years ago.  It is  now  at 17,404  an annualised return of a paltry  7.26% which is well below  the current high inflation rate.    This does not mean  that investors should  steer clear of equities.   There is a clause  in their favour  for  acts done in good faith which reads as follows :

29.0 Protection of Act done in good faith

The Portfolio Manager shall not be under any liability on account of anything done or omitted to be done or suffered by the Client in good faith in accordance with or in pursuance of any request or advice of the investments made by the Portfolio Manager or any agents.

Except a fleeting allegation that they did not act in good faith, no evidence is filed by submitting  comparative statement of other  investors at the same period.  They could not show that they were discriminated in investing the amounts in other companies.        The complainants have admittedly invoked  clause 14.4.  and terminated the agreement which reads as   follows :

“The client has the right to terminate the Agreement after giving a minimum notice of thirty days to the Portfolio Manager, in the prescribed form, subject to the minimum period, if any, as may be stipulated by SEBI from time to time.”

They took whatever amount left with Op3 and filed complaint  alleging deficiency in service. 

17)              From the above, it is beyond doubt that the services are discretionary.    Basically if there is any fluctuation in the market  undoubtedly the complainants have to bear the losses.   If the complainants  were  of the opinion that  they were duped  and  that  they were assured of higher returns without any risk, in the teeth of agreement and the contents therein  (voluminous documentary evidence)  the State Commission may not be able to  consider all these questions.     It requires elaborate evidence, oral as well as documentary. 

18)               The learned counsel for the  complainant relied various decisions pertaining to foreign judgements as well as  Hon’ble Supreme Court of India to explain as to what exactly constitutes negligence.    We  intend to note those decisions here  however, we do not see how  they are relevant to unravel the dispute between the parties in cases of this nature. 

• Wu Siew Ying Vs.  Guntung Tunggal Quarry & Construction SDN BHD reported in  (2012) 1 SCC (FJ) 1.

• Aero Traders P. Ltd. Vs. Ravinder Kumar  Suri reported in (2004) 8 SCC 307.
• National Insurance Company  Ltd. Vs. Keshav Bahadur reported in (2004) 2 SCC 370.
• National  Seeds Corporation Ltd.  Vs. M. Madhusudhan Reddy reported in 2012 STPL (WEB) 35 SC
• Kumaon Mandal Vikas Nigam Ltd. Vs. Girja Shankar Pant reported in (2001) 1 SCC 182.

• Jacob Mathew Vs.  State of Punjab reported in (2005) 6 SCC 1.
• Damodar Pd. Vs.  Byopar Sahayat Bank reported in AIR 1957 ALLAHABAD 353 ( V 44 C 110 June).

• Rajkot Municipal Corporation Vs. Manjulben Jayantilal Nakum
• Mirza  Mahboob Ali Baig Aslam Vs. Union of India reported in  1995 (1) ALT 239.
• Gurmukh Singh Vs. Amar Singh reported in (1991) 3 SCC 79.
• State of Tamil Nadu Vs. St. Joseph Teachers’ Training Institute reported in  (1991) 3 SCC 87.  

Importantly the decision of  Delhi State Commission in   Shashi Kapoor Vs.  Times Guaranty Financials Ltd. in C.C. No. 98/1995  decided on 28.9.2006.  It was held that:

“Since sale and purchase of the shares is a speculative game and value of the shares of every company changes on day to day basis and it is not task of the consumer to act like an agency governing sale and purchase of shares i.e. like stock brokers and the investments made by the consumer by way of purchase and sale of shares or portfolio management scheme etc., complainants not only suffered loss on account of illegal act of the OP but the OP also charged Rs. 90,000/- as their commission causing loss to the complainants.”  

However that was a case where  they purchased  the shares of their own company on behalf of the complainants at much lower rate than to dispose of their shares when their value had dipped to the lowest.   In that context it was held that this conduct not only amounts to unfair trade practice but also to deficiency in service.  Malafides  were not attributed against Op3.  They could not point out that investment in a particular company is ex-facie bad.

19)              The learned counsel  relied some of the quotations of   investor Mr. Warren Buffet on investing in stock markets. 

·         “He advised the investors always to invest for the long terms.  

·         He also advised that unless you can watch your stock holding decline by 50%  without becoming  panic-stricken, you should not be in the stock market.

·         Look at market fluctuations as your  friend rather than your enemy, profit from folly rather than  participate in it.

·         If you don’t feel comfortable owning something for 10 years, then don’t  own it for 10 minutes. 

·         He also relied the quotes of  Henry  Ford.

·         When everything seems to be going against you, remember that the airplane takes off against the wind, not with it. 

·         Peter Lynch one of the  investment Gurus  quotes  “ Although it is easy to  forget sometimes, a share is not a lottery ticket.  It’s part  ownership of a business.

·         You get recession, you get stock market declines.  If you don’t understand  that’s going to happen, then you are not ready, and you will do well in the markets.”

All this is against the case of the complainants.   May be by entrusting the matter  with  Op3  they thought that  risk would be minimal.   Since investments are made at  a very short time, when the stock markets had declined cannot readily conclude that they  were the outcome of in-discretionary, carelessness amounting to deficiency in service. Considering the nature of transactions, it is very difficult  more so  in summary proceedings, , in the light of volatility nature of transactions, to say that Op3 had invested without using any discretion.    

20)              The Hon’ble Supreme Court in Synco Industries vs State Bank Of Bikaner & Jaipur  reported in AIR 2002 SC 568  held that:

“Given the nature of the claim in the complaint and the prayer for damages in the sum of Rupees fifteen crores and for an additional sum of Rupees sixty lakhs for covering the cost of travelling and other expenses incurred by the appellant, it is obvious that very detailed evidence would have to be led, both to prove the claim and thereafter to prove the damages and expenses. It is, therefore, in any event, not an appropriate case to be heard and disposed of in a summary fashion. The National Commission was right in giving to the appellant liberty to move the Civil Court. This is an appropriate claim for a Civil Court to decide and, obviously, was not filed before a Civil Court to start with because, before the Consumer Forum, any figure in damages can be claimed without having to pay court fees. This, in that sense, is an abuse of the process of the Consumer Forum. ”

However, from the evidence placed on record, we may not be able to conclude that there was in-discretion on the part of portfolio manager  in investing the amounts in various companies.  The complainants ought to have  verified their accounts submitted to them every month  and if really they were suspicious of the investments made by the portfolio manager ought to have opted to exist from the investments.    They entered into the agreement on 27.4.2008  and terminated the agreement  in November, 2008 within 7 months vide  Ex. A10  having sustained losses according to them within a short period. 

21)              In one of the letters  the very complainants  while addressing a  letter stated that  “We have been investing previously in the mutual funds at your bank (Vizag Branch) for more than 2-1/2 years knowing full well that the choices and risk are  solely ours.  OK.  We played with our money (since we made the choice of funds, time of entry/exit  and was only guided by the fund managers in building a high/low risk profile and giving us  advise), and were wholly responsible for our profits and losses…….”   Now they turn round and contend that losses were due to indiscretion   on the part of opposite parties. 

22)              No doubt the complainants  have invested their hard earned money  and we may not be able to bail out by awarding amounts which the complainants had sustained losses, in the light of very nature of transactions or business of shares.    As it is said to guard against losses,  investors also need  to monitor  their portfolio at longer intervals, the equity investor  must do it  at least once in a month.   We do not see any merits in the complaint.

23)              In the result the complaint is dismissed.  No costs. 

1)      _______________________________

PRESIDENT                 

2)      ________________________________

 MEMBER           

                                                                                      26/03/2012

*pnr

APPENDIX OF EVIDENCE

WITNESSES EXAMINED FOR

COMPLAINANTS:                                                 OPPOSITE PARTIES

          None                                                                     None.

Documents marked for complainant:

Ex  A-1           Portfolio Management services agreement executed between the                                                     complainants and opp.parties dt : 27.4.2008

Ex A-2                        offer /brochure issued by the opp.parties.

Ex A-3                        performance chart of the opp.parties

Ex A-4                        Letter addressed by HSBC Portfolio Management services to                                                           Smt. Mani Rao dt : 2.5.2008

Ex A-5                        E-mail sent by complainants to the Chief Executive officer /Group general                                     manager and country head, HSBC Group, India.

Ex A-6                        E-Mail sent by the complainants to Senior Vice President, HSBC,                                                   Regional office, Chennai. Dt : 22.10.2008

Ex A-7                        Letter addressed by Asst. Vice President , Customer Service to the                                                             complainants dt : 29.10.2008

Ex A-8                        Letter addressed by the complainnts to branch Manager  & Vice Preisent /                                      Relationship Manager, HSBC,VSP. Dt : 10.11.2008

Ex A-9                        Letter addressed by complainants to Manager, HSBC Ltd, VSP/Hyd                                             branches and HSBC Asset Management (I) Pvt Ltd Port folio                                                         management services, fort, Mumbai dt : 16.11.2008

Ex A-10          Letter addressed by the complainants  to HSBC Asset Management (I) Pvt                                                Ltd, Portfolio Management services Fort, Mumbai for redemption of funds                                                dt 17.11.2008.

Ex A-11          E-Mail exchanged between the opp.parties dt : 20.10.2008

Ex A-12          Queries raised by the complainants calling for explanation on various                                              issues.

Ex A-13          E-mail addressed to the complainants by the opp.parties dt : 22.10.2008,

Ex A-14          Reply E-mail addressed by the complainants to the opp.parties and reply                                        to reply thereof dt. 22. 10. 2008.

Ex A-15          Securities and exchange board of India (portfolio managers) Regulations,                                       1993.

Ex A-16          A bunch of Historical stock chart of different financial institutions.

Ex A-17          Visitors Register maintained by opp.party bank dt : 27.4.2008

Ex A-18          copy of the letter issued by the opp.parties no.3 dt : 1.1.2009

Ex A-19          copy of the chapter 5 of the mutual funds

Ex A-20          copy of the chapter 6 of the mutual funds.

Ex A-21          copy of the definition given to the term fiduciary responsibility.

Ex A-22          Details of the complaints lodged before the SEBI and consumer services.

Ex A-23          Dates of withdrawal of funds from complainants account for trading                                              Dt : 16.10.2008

Ex A-24          copy of the risk profile of the complainants prepared by the opp.parties.

Ex A-25          copy of the code of banks commitment. May 2008

DOCUMENTS MARKED FOR OPPOSITE PARTIES :

Ex B-1             Authorization given by OP 3 to Denny Thomas dt : 28.9.2010

ExB-2              Account opening form of complainant no.1 & 2 along with Risk                                                      Tolerance questionnaire, the Discretionary Portfolio agreement                                                        dt : 29.4.2008

Ex B-3             System generated mail Log issued.

Ex B-4             Level of BSE SENSEX and NIFTY  as on the date of opening and                                                            closing of the portfolio account of the complainant

Ex B-5             Signature Model portfolio performance vis-a –vis Benchmark index                                                and other market indices from 30-4-2008 i.e. account activation                                                 date for complainant.

Ex B-6             Monthly and fortnightly reports sent to the complainants via email

1)      _______________________________

PRESIDENT                 

2)      ________________________________

 MEMBER           

                                                                                      26/03/2012

*pnr