Uttarakhand

StateCommission

A/13/179

SMC Global Securities Ltd. & another - Complainant(s)

Versus

Smt. Bimla Adhikari - Opp.Party(s)

Mr. S.D. Sudhi

24 Feb 2015

ORDER

State Consumer Disputes Redressal Commission Uttarakhand
176 Ajabpur Kalan
Mothrowala Road Near Spring Hills School Dehradun
Final Order
 
First Appeal No. A/13/179
(Arisen out of Order Dated 03/06/2013 in Case No. 104/2008 of District Nainital)
 
1. SMC Global Securities Ltd. & another
17 Netaji Subhash Marg,Darya Ganj, New Delhi.
New Delhi
New Delhi
...........Appellant(s)
Versus
1. Smt. Bimla Adhikari
w/o M.C. Adhikari r/o M.C. Vivekanand Enclave Talii Bammori Mukhani Road,Haldwani, Nainital
Nainital
Uttarakhand
...........Respondent(s)
 
BEFORE: 
 HON'BLE MR. D. K. Tyagi, H.J.S. PRESIDING MEMBER
 HON'BLE MRS. Veena Sharma MEMBER
 
For the Appellant:
For the Respondent:
ORDER

(Per: Mr. D.K. Tyagi, Member):

 

This is an appeal under Section 15 of the Consumer Protection Act, 1986, against the order dated 03.06.2013 passed by the District Forum, Nainital in consumer complaint No. 104 of 2008.  By the impugned order, the District Forum has partly allowed the consumer complaint and directed the opposite parties to pay to the complainant a sum of Rs. 4,50,000/- as compensation and interest @ 6% per annum on the said amount, jointly or separately, pendent lite and in future and Rs. 5,000/- towards cost of litigation, within a period of one month from the date of order.

 

2.      Briefly stated the facts of the case, as mentioned in the consumer complaint, are that the complainant-Smt. Bimla Adhikari is a client of the opposite parties since a long time, who is doing trading of shares through opposite parties and the opposite parties allotted her a Customer Code No. PHDB-07, because the complainant is doing sale and purchase of shares as small investor.  The opposite party No. 1 namely SMC Global Securities Ltd. is a company, registered under Companies Act, 1956 and a member of National Stock Exchange of India Ltd., who is doing a business in Capital Market and Future & Option Segments (CM and F&O) Rendering and Broking services.  In other words the opposite party No. 1 is doing share trading, for which it takes remuneration as commission from the members.  The complainant has also paid commission to the opposite party Nos. 1 & 2, therefore, she is a consumer of the opposite parties.  The complainant purchased two lots of share on 21.01.2008 through opposite parties and issued a cheque No. 783001 of Punjab National Bank, Nainital Road, Haldwani for a sum of Rs. 1,50,000/- to maintain the margin of her previous shares as well as new lot of shares and also requested to the opposite parties not to sale her shares, as there is a slump in the market.  Even then, the opposite parties have sold complainant’s share lot on 23.01.2008, knowing that there was slump in the market.  The complainant had also requested to opposite party No. 2, who is doing business at Haldwani, not to sale her share lot but all went in vain.  Therefore, in these circumstances she requested the bank to stop the payment of cheque No. 783001 dated 21.01.2008.  By selling the complainant’s share lots, by the opposite parties, she suffered a loss of Rs. 4,50,000/- for which she sent a notice through her counsel to the opposite parties, but the opposite parties did not reply to her notice rather sent an unsigned threat-full letter to the complainant.  The complainant wrote a letter to National Stock Exchange of India Ltd. for the act of opposite parties.  The National Stock Exchange had directed the opposite parties to solve the problem of the complainant, even then the opposite parties did nothing.  The opposite parties caused her mental agony and monetary loss.  The complainant filed a consumer complaint before the District Forum, Nainital with a prayer to direct the opposite parties to pay Rs. 4,50,000/- with interest @ 18% per annum and also Rs. 10,000/- for monetary loss and Rs. 20,000/- towards litigation expenses.

 

 3.     The opposite party No. 1 filed its written statement before the District Forum and pleaded that the present consumer complaint is not maintainable before the Forum reason being there is arbitration clause in the agreement executed between the parties.  The Byelaws of the National Stock Exchange of India Ltd. is also binding on both the parties.  That the complainant is not an investor, but a trader in shares.  A very first sentence of the complaint is “That the Applicant is in business with the Defendants since very long time and has been trading in shares/securities through the defendants”.  She has been dealing in futures of shares regularly for the last over three years regularly buying and selling and dealing in differences.  The complainant is a trader and is not a consumer by any stretch of argument or interpretation of the Act.  The answering opposite party is a Company registered under the relevant provisions of the Companies Act, 1956 and is one of the leading and experienced brokerage houses of India, and is a member of the National Stock Exchange of India (NSEIL) in both Capital Market and Future & Option Segment of the NSEIL and settling the trades on behalf of approx. 25 Trading Members in the NSEIL.  The opposite party is a third largest broking house of India in terms of number of trading terminals and it has fifth largest sub-broker network in India.  The complainant is a registered client of the Opposite Party No. 1’s company since 22.04.2005 and has been allotted client code No. PHBD07 and the same was uploaded with exchange.  The complainant has been regularly executing trades (cash and F&O) through the answering opposite party No. 1 since opening her account and there was no problem as such before we asked to clear the debit balance outstanding in her account.  The number of transactions in her account are several hundred and the transactions are in futures that is dealing in difference in prices without any investment in shares themselves.  That despite several reminders and requests to clear the debit balance outstanding in her account, she issued a cheque No. 783001 dated 21.01.2008 of Rs. 1,50,000/-, but the same got bounced.  The banker returned the said cheque with return memo marked with payment “Stopped By Drawer”.  The complainant stopped the payment with mala fide intention to evade payment of her due liabilities on the transactions entered into by her.  The answering opposite party sent a legal notice dated 15.04.2008 to the complainant in respect of the said cheque, but she did not bother to answer the same.  The answering opposite party filed the complaint under Section 138 of N.I. Act, which is pending before the Metropolitan Magistrate, Tis Hazari Court, Delhi.  The complainant instead of clearing the debit balance pending in her account and honouring her cheque chose the option to file false case before the Consumer Forum with intention to escape from her liability.  The complainant was very much aware about all the transactions in trade of shares & securities in her account. As a matter of law and practice, according to the Exchange Rules and Regulations and the Member Client Agreement executed by the complainant, she was to provide margin from time to time and on her failure to provide adequate margin, the pending transactions were liable to be squared off immediately.  The complainant does not disclose any deficiency of service.  The complainant’s account showed a debit balance of Rs. 3,19,460.17 ps. on 21.01.2008.  Since there was slump in the market and the complainant had contracted to purchase, the loss was growing and the complainant was bound to provide additional margin to cover up the market loss.  Not only that the complainant failed to provide margin, but also she managed to get the cheque of Rs. 1,50,000/- issued to the opposite party bounced by the bank.  On failure of the complainant to provide adequate margin the answering opposite party was not only legally and contractually entitled, but also duty bound to square off the transactions by making a sale.  The complainant used to trade in F&O segment and the grievance arose from the side of the complainant in the month of January, 2008, when the market became unexpectedly volatile and consequent thereto the complainant was either to provide sufficient margin or to suffer losses due to this volatility.  It is pertinent to mention that at the time of registration of clients they are duly informed of the risk which they will carry while trading in the market as movements of this market are unpredictable and beyond one’s control.  The opposite party has no control over the situation of the same.  The complainant was expressly agreed to provide sufficient margin as and when required to continue her transactions.  The complainant not only failed in her commitment, but also got the cheque of Rs. 1,50,000/- bounced.  It is expressly denied that the answering opposite party sold position without her instruction.  The opposite party was legally and contractually authorized and rather bound to do so for insufficiency of margin.  The complainant has admitted that she had issued instructions to her Banker to “Stop Payment”. The opposite party has no possible gain or benefited by executing the trades in the account of the complainant.  The opposite party was not legally and contractually authorized but also duty bound to square off all or some of the open positions for maintaining due margin.  The complainant is not entitled for any compensation as alleged or otherwise. 

 

4.      The District Forum on an appreciation of the material on record, allowed the consumer complaint vide order dated 03.06.2013 in the above manner.  Aggrieved by the said order, the opposite parties/appellants have filed the present appeal.

 

5.      We have heard learned counsel for the parties and have also gone through the record.

 

6.      There is no dispute with regard to the fact that the respondent-complainant Smt. Bimla Adhikari is a registered client of the opposite party-appellant No. 1 since 22.04.2005 and has been allotted client code No. PHDB07.  There is also no dispute that the respondent has been regularly executing trades in buying and sale of the shares through the appellants.  

 

7.      Learned counsel for the appellants has submitted that the respondent was involved in the future and option trading for earning the huge profits within the span of very short duration apart from the capital market.  The future and option trading (Derivative market trading is highly risky and the market may fluctuate at any time).  This was explained to the respondent at the time of signing of the Member Constituent Agreement in the form of Risk Disclosure Document. Learned counsel also submitted that the respondent was providing the details of each and every transactions executed by her through the appellant No. 1 and had supplied her all the relevant documents like Contract Notes, Bills Summary, Statement of Account etc.  The respondent had been received the payment time to time.  From the perusal of the statement of account, it is observed that the complainant had made the payment of approx. Rs. 9.70 lacs to the appellant No. 1 and received from the appellant No. 1 the sum of approx. Rs. 8.80 lacs.  Learned counsel argued that the respondent is not an investor, but a trader in shares.  She has been dealing in futures of shares regularly for the last over three years regularly buying and selling and dealing in differences.  The respondent is a trader and is not a consumer by any stretch of argument or interpretation of the Act.  Further argued that the respondent was involved in trading of futures that is dealing in differences in prices without any investment in shares themselves and with a view to make investment.  The appellant No. 1 has submitted that everything was carrying on smoothly and there was no problem since opening her account, i.e. 22.04.2005 till the period of squaring of her sauda on 23.01.2008 due to the heavy crash and down fall in the securities market.  The dispute had been arisen first time when the appellant No. 1 demanded the respondent to clear the debit balances existed in her account of Rs. 3,19,460.17 ps. on 21.01.2008 and to provide an addition margin of approx. Rs. 6.00 lacs to cover up the position standing on 21.01.2008 and in furtherance of the same, the respondent had provided the cheque of Rs. 1,50,000/- to the appellant No. 1, which was made stopped payment by the respondent.  The respondent was required to deposit the margin of approx. Rs. 6.00 lacs on 21.01.2008 and more than Rs. 7.50 lacs on 22.01.2008 after considering the value of the shares provided as margin in order to maintain her outstanding positions, but the respondent had failed to provide the same and thereafter the appellant No. 1 was compelled to square off her transactions after her due consent on

23.01.2008 in compliance.  It is submitted that in compliance of the Byelaws of NSEIL, all the agreements of the stock brokers companies are having mandatorily binding arbitration clause to be signed by any client for dealings in share market.  If any broker is not resolving the grievances, then the investor can invoke the statutory arbitration proceedings of the exchange.  The respondent instead of invoking the arbitration has find the easiest mode to approach to the District Forum on the false and fabricated grounds.  Learned counsel has also argued that the appellant No. 1 had filed criminal complaint under Section 138 of Negotiable Instrument Act, 1881 against the respondent for bouncing of cheque of Rs. 1,50,000/-.  Persons involved in share trading for earning profits and not for investment purpose are outside the purview of the Consumer Protection Act, 1986 and comes under the commercial transactions. In the year 2008, there was huge down fall in the securities market and every trades required huge margin and the respondent was not providing the margin and the appellant was compelled to square off the trades of the respondent after her due consent. It is right of the broker/appellant to square of the trades due to short margin, as mentioned in clause 22 of Model Triparte Agreement dated 22.04.2005.  Learned counsel has argued that the learned District Forum has failed to appreciate the purview and ambit of the definition of consumer, consumer disputes, deficiency in service, commercial transactions and unfair trade practice and ignored the facts of speculative nature of share transactions.  Learned District Forum has to decide the matter in a summary manner after having satisfied itself of the cogent and credible evidence.  Trading in shares is speculative transactions and the dispute arising out of the same is not consumer disputes and beyond the purview of the Consumer Protection Act, 1986.  Learned District Forum has not even bothered to verify the imaginary calculation of loss of Rs. 4.50 lacs and solely believed on the averments made by the respondent.  The complainant is not a consumer and the appellant has not done deficiency in service or any unfair trade practices.  Learned District Forum has failed to appreciate that the respondent is a registered client of the appellant No. 1 since 22.04.2005 and was involved in speculative transactions and executed intraday day trading, i.e. buying and selling of the securities on the same day (in the Cash and F&O Derivative Segments) for earning huge profits and not intended for investment purpose.  The derivative market trading is highly risky and the market may fluctuate any time and the same was explained to the respondent at the signing of the agreement in the form of Risk Disclosure Document.  The District Forum has failed to appreciate the basic ingredients of trading made for investment purpose and trading made for commercial purpose. The respondent was commercially associated with the appellants and not for investment purpose. The appellant has made transparent business dealings with the respondent and provided the details of each and every transactions executed by her.  The respondent is not an investor, but a trader in shares.  A very first sentence of the complaint is “That the Applicant is in business with the Defendants since very long time and has been trading in shares/securities through the defendants”.  She has been dealing in futures of shares regularly for the last over three years regularly buying and selling and dealing in differences.  Learned District Forum has failed to appreciate the fact that everything was carrying on smoothly and there was no problem since opening the respondent’s account, i.e. 22.04.2005 till the period of squaring of her sauda on 23.01.2008 due to the heavy crash and down fall in the securities market.  The dispute had been arisen first time when the appellant No. 1 demanded the respondent to clear the debit balances existed in her account of Rs. 3,19,460.17 ps. on 21.01.2008 and to provide an addition margin of approx. Rs. 6.00 lacs to cover up the position standing on 21.01.2008 and in furtherance of the same, the respondent had provided the cheque of Rs. 1,50,000/- to the appellant No. 1, which was made stopped payment by the respondent.  The learned District Forum has failed to appreciate the fact that the respondent instead of invoking the arbitration has find the easiest mode to approach to the District Forum on the false and fabricated grounds.  Learned District Forum has failed to appreciate the definition of consumer. The respondent is commercially associated with the appellant company.  The respondent does not come under the ambit and purview of definition of consumer as defined under Section 2(1)(d) in as much as the share trading is a commercial activity and, therefore, the services availed for that purpose are obviously to be considered to have been availed for the commercial purpose.

 

8.      Per contra, the learned counsel for the respondent has submitted that the appellants are doing business of share broker and charge brokerage on the transaction on buying of selling of shares to their client.  Therefore, as the appellants provide services to their client, therefore, respondent is a consumer of appellants. Learned counsel also submitted that the respondent is a lady and is a small investor trader to maintain her status in society. Appellants have never informed the respondent that her matter shall be send to the arbitration.  The respondent has never permitted to the appellants for sell of her shares worth Rs. 11.00 lacs.  The appellants sold her shares without her permission and she was never informed by the appellant company.

 

9.       The District Forum while deciding the consumer complaint has observed that in the light of case I (2009) CPJ 99 (NC) National Seeds Corp. Ltd. vs. P.V. Krishan Reddy, there is no bar for adjudication of complaint by Fora, even there is existence of arbitration clause in agreement.  Therefore, we are convinced that even there is arbitration clause in agreement between the appellants and the respondent even then Fora has right to hear and decide the matter.  Learned counsel has also placed reliance on a case II (2012) CPJ 382 (NC); India Bulls Financial Services Ltd. & Anr. vs.Varghese Skaria & Anr.  In this case the Hon’ble National Commission has observed that investment made for purchasing and trading shares – shares sold without consent when market value very low – additional debt loss suffered – unfair trade practice – alleged deficiency in service –State Commission partly allowed complaint-Hence Revision –respondent is a retired employee of Public Limited  Company and respondent No. 2 is his wife – they invested their hard earned money with appellants for purchasing and trading shares – purpose of investing money in shares is not for commercial gain but to earn their livelihood after their retirement – respondents are consumer as per Act- Deficiency in service proved.  

 

10.     Learned counsel for the appellants has relied on Revision Petition No. 3060 of 2011; M/s Steel City Securities Ltd. vs. G.P. Ramesh and Anr.(NC).  In this case the Hon’ble National Commission has observed that since the respondents are trading regularly in the share business which is commercial activity. Under these circumstances, the respondents would not fall under the definition of “consumer” as per the Act.  Moreover, regular trading in the sale and purchase of shares is a purely commercial activity and the only motive is to earn profits.  Therefore, this activity being purely commercial one, is not covered under the provisions of the Act. Since respondents are not the “Consumers” as per provisions of the Act.  The Hon’ble National Commission allowed the Revision Petition and set aside   the impugned order passed by the State Commission.  Learned counsel for the appellants has also placed reliance on First Appeal No. 1430 of 2014; Sanjay Chandra Agarwal vs. India Bulls Securities Ltd. and Anr.  In this case, the Hon’ble National Commission has observed that even if any deficiency can be imputed on the basis of Regulation 3.10 of National Stock Exchange of India, the complainant’s transactions were purely commercial transactions and the aforesaid services were taken for commercial purposes and in such circumstances complaint was not maintainable before State Commission. Learned State Commission rightly dismissed the complaint and allowed complainant to approach appropriate forum for redressal of his grievances. Learned counsel also placed reliance on First Appeal No. 06 of 2011; Krishan Lal Kalra vs. M/s Religare Security Ltd. and Others. In this case, the Hon’ble National Commission has observed that since the appellant had been trading regularly in the share business and the same being a commercial activity, therefore, appellant would not fall under the definition of “Consumer” as per the Act. Thus, the present appeal is not maintainable and same is hereby dismissed with cost. Learned counsel also placed reliance on Revision Petition No. 2821 of 2012(NC) Chandra Shekhar Mishra vs. India Bulls Securities Ltd. and Others.  In this case, the Hon’ble National Commission has expressed its view that the complainant was engaged in trading of shares, i.e. engaged in speculative transactions.  Therefore, referring the similar complaint No. 30 of 2010 decided by this Commission Gautam Das vs. Sun Pharmaceutical Industries Ltd.; 2010 (4) CPR I, (NC), a shareholder   cannot be the consumer of respondent India Bulls Securities Ltd. within the meaning of Section 2(1)(d)(ii) of the Consumer Protection Act, 1986 and the present complaint is therefore not legally maintainable under the Act.   Learned counsel also placed reliance on Revision Petition No. 2256 of 2012; R.R. Equity Brokers Pvt. Ltd. vs. Dinesh Kumar Jaiswal (NC) decided on 13.05.2014. In this case, the Hon’ble National Commission has held that since respondent is trading regularly in the share business which is commercial activity, under these circumstances, he would not fall under the definition of “Consumer” as per the Act.  Moreover, regular trading in the sale and purchase of shares is a purely commercial activity and the only motive is to earn profits. Since, the respondent is not a consumer as per provisions of the Act.  The Hon’ble National Commission has allowed the Revision Petition and set aside the impugned order passed by the State Commission as well as the order of the District Forum and the consumer complaint filed by the respondent before the District Forum was dismissed. 

 

11.     In recent decision, this Commission, in consumer complaint No. 15 of 2013; Rakesh Chandra Kaushik vs. Sukesh Jain and Others has expressed its view that the complainant does not fall under the definition of “consumer” as provided under Section 2(1)(d) of Consumer Protection Act, 1986 and hence the present consumer complaint filed by complainant is not maintainable before the Consumer Fora and the consumer complaint is liable to be dismissed.  In this case citation V.K. Agarwal (Dr.) vs. Infosys Technologies Ltd. and others; I (2013) CPJ 373 (NC), citation Pahlaj Manamal Nichani vs. Mis Process and Customer Complaints and another; II (2013) CPJ 105, citation Vijay Kumar vs. Indusind Bank; II (2012) CPJ 181 (NC), citation Ramendra Nath Basu vs. Sanjeev Kapoor and another; I (2009) CPJ 316, citation Som Nath Jain vs. R.C. Goenka and another; I (1994) CPJ 27 (NC) were also discussed.  In the above noted citations the Hon’ble National Commission has held that the sale and purchase of the share are commercial transactions and, therefore, the complainant is not a consumer, a person who purchased share in bulk, cannot be considered as consumer and the dispute arose in that regard cannot be considered as consumer dispute.  Regular trading in purchase and sale of shares is a commercial transaction and only motive of the same is to earn profit.  Investor invest money in share trading for earning profit are also undertake huge risk of loss and for which, no one could be held responsible. These citations as well as citations submitted by the learned counsel for the appellants are applicable in this case also.  The respondent has stated in the very first sentence of the complaint is “That the Applicant is in business with the opposite parties since very long time and has been trading in shares/securities through the opposite parties” and she is the client of the opposite parties who have allotted her customer No. PHDB07, therefore, she does not come under the purview and ambit of the definition of ‘consumer’.  The appellant have filed futures sauda details of respondent on the record, clearly indicates that respondent Smt. Bimla Adhikari was doing business of share trading by buying and selling of shares through the appellants for earning huge profits.  As National Commission has expressed in several judgments that sale and purchase of shares is a purely commercial transaction and, therefore, the services were taken for commercial purpose and in such circumstances the complaint is not maintainable.  The respondent has been trading regularly in the share business which is commercial activity, therefore, respondent does not fall under the definition of consumer as per Act.  This activity being purely commercial in nature and does not cover under the provisions of Act.

 

11.     The District Forum has not properly considered all the facts and circumstances of the case and has wrongly allowed the consumer complaint per impugned order which cannot legally be sustained and is liable to be set aside and the consumer complaint is liable to be dismissed, as such the appeal is fit to be allowed. 

 

12.     For the reasons aforesaid, the appeal is allowed.  The impugned judgment and order dated 03.06.2013 passed by the District Forum, Nainital is set aside and the consumer complaint No. 104 of 2008 is dismissed.  No order as to costs. 

 

 

(MRS. VEENA SHARMA)                                                               (D.K. TYAGI)

 
 
[HON'BLE MR. D. K. Tyagi, H.J.S.]
PRESIDING MEMBER
 
[HON'BLE MRS. Veena Sharma]
MEMBER

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