D.O.F. 29.07.2010
D.O.O. 30.09.2011
IN THE CONSUMER DISPUTES REDRESSAL FORUM KANNUR
Present: Sri.K.Gopalan : President
Smt. K.P.Preethakumari: Member
Dated this the 30th day of September, 2011.
C.C.No.188/2010
Kadekkara Sasindran,
S/o. Achuthan,
Chaladan House, : Complainant
Chala, Edakkad, Kannur
(Rep. by Adv. C.K. Rathnakaran)
1. The Kotak Securities
Nirlon House, 4th Floor,
Dr. Annie Beasent Road, : Opposite Parties
Mumbai – 400025.
2. Kotak Securities,
Fort Road, Kannur
O R D E R
Sri. K.P.Preethakumari, Member.
This is a complaint filed under Section 12 of Consumer Protection Act for an order directing opposite parties to pay ` 40,000 with 10,000 as compensation and cost.
The case of the complainant is that he is an NRI returned to India after giving up his job. The complainant was having dematt account and was having 50 shares of DLF Company and 100 shares of AIR Deccan. The staff of opposite party contacted the complainant and induced him to transfer the shares to opposite party’s office. Accordingly he contacted opposite party and the complainant signed all the papers demanded by the Manager of opposite party and they informed the complainant that 0.5% is the Commission of doing share trade and transferred the above shares to opposite parties and they assured that they will not sell the shares without the instructions. During December, 2007, the complainant gave written consent to sell the 50 shares of DLF and 100 shares of Deccan Airways to opposite party. The complainant has got ` 60,000 from that trade and later the complainant sent a cheque of Axis Bank for ` 6500 for investing in the Reliance Power and the company has not given any share to the complainant. So the complainant entrusted the above said amount to Vinod, the Manager of opposite party and hence the complainant was having ` 66,500 in his account with opposite party. The complainant has not given any instructions for trading since the share market was going down. But on 15.04.09, when the complainant went to the 2nd opposite party for taking a pay out of ` 50,000 since he was in need of money, the above said manager informed that the complainant was now having shares of 500 Lloyd steel, 100 Reliance Petrol and the Reliance Power and there was no money in the account of the complainant. The above said Manager represented to the opposite party that he has done several trading and loss was caused due to that trading. The 2nd opposite party done trade in the dematt account without getting any confirmation of the complainant. The opposite party had done trade with a dishonest intention to get brockerage. Eventhough the complainant contacted the opposite party several times for getting loss, the opposite party did not make a favourable approach. The complainant did not give any margin money for doing the trade in his account. The opposite party did not send any contract note for the alleged trade. All the shares with dematt account of the complainant were in the D.P. account. The opposite party can not sell the shares without the written consent and did not inform the complainant about the selling of the shares. So the act of opposite party is amounts to unfair practice. The act of opposite party caused great mental agony to the complainant and hence he assess ` 10,000 as compensation and the opposite parties are liable to compensate the complainant. Hence the complaint.
In pursuance to the notice issued by the Forum both opposite parties appeared and filed their version with the following contentions that the 1st opposite party is conducting its business through 2nd opposite party which is the branch office, Kannur and there is no claim against 2nd opposite party and hence the proceedings against 2nd opposite party has to be set asided. The complainant had filed complaint before the Kannur Town Police Station and also before National Stock Exchange and not disclosed about the fate of those complaints and hence the complaint cannot be adjudicated before the Forum. The Forum has no territorial jurisdiction to adjudicate the dispute since there is a term in the contract that, where the opposite party’s principal office is situated shall have exclusive jurisdiction. The complainant is not a consumer as per Section 2(1) (d) of Consumer Protection Act, since he had opened securities trading account with a speculative motive to earn profit and hence the complaint is liable to be dismissed.
The complainant is well aware of the stock market operations. Since the complainant had admittedly transferred shares from demat account of another depository participant. According to opposite party there are transactions executed in the scrip of Cairn India, Essar Oil, GMR Infra, IDBI Bank, IFCI, ITI, Petronet CNG, Power grid Corporation, Ranbaxy lab, sail, Smart Link network systems, TVS motors, Unitech etc. The complainant was in receipt of contract notes for all trades placed and executed in his account, and quarterly statement of account were sent to the complainant at his registered address and also in receipt of digitally signed contract notes for trades executed in his account and all transactions stand in the account of the complainant. It is not correct to say that trades were executed in derivative segment without consent in his account. As per records there is no contract notes for all trades placed and executed in his account, and quarterly statement of account were sent to the complainant at his registered address and also in receipt of digitally signed contract notes for trades executed in his account and all transactions stand in the account of the complainant. It is not correct to say that trades were executed in derivative segment without consent in his account. As per records there is no trade placed and executed in F and O segment and hence the complaint filed by the complainant is false and is liable to be dismissed. The securities were sold as per the desire and direction of the complainant and the sale proceeds were duly credited in the ledger account of the complainant and is not disputed in the complaint.
The complainant approached the opposite party to open and operate securities trading account. The opposite party accepted the request and entered into agreement. The complainant signed client Registration form, member client agreement, Risk disclosure documents all dated 28.08.07 in order to open and operate securities trading account. The complainant also availed the services of demat account and signed agreement between depository participant and beneficial owner and power of attorney in favour of opposite party and allotted unique client code : K61M9 for trade in Securities and client id :13335790 as demat account maintained within opposite party. It is not correct to say that the complainant got ` 60,000 from the sale of securities and from records it is seen that the complainant as on 11.10.07 had sold 100 shares of Deccan Aviation, 50 shares DLF Ltd and the net sale proceeds were duly credited in the ledger account of the complainant. It is false to say that during 2007, December, the complainant had sold the aforesaid securities. According to opposite party as per records, during financial year 2007-08 the complainant had issued a cheque No.71148 for an account of ` 6400 which was duly banked by the complainant and this was enter in the ledger account on 20.02.08 and also submits that the opposite party had never received any cheque amounting ` 6500. The complainant had no credit balance of ` 66,500. The complainant had been taken a pay-out of ` 5500 as per ledger account on 08.01.08 and is suppressed by the complainant. The complainant had not visited the office of the complainant on 15.04.09 for taking pay-out of ` 50,000. As on 15.04.09, the complainant was having 24 shares of Reliance Power, 500 shares of Lloyd steel and 100 shares of Reliance Petroleum which was subsequently merged with Reliance industries Ltd. The trades were executed as per the knowledge and information of the complainant and was aware of all trades placed and executed in his account. As per the records, there was no transaction executed in derivative segment and since there is no trade is executed in F and O segment, there is no question of any margin money or a separate bank account. It is not correct to say that the complainant had sustained loss. According to opposite party no margin money required as there is no transaction in F and O segment, Further no trades were executed in F and O segment accordingly no contract note or any bill was issued by the opposite party to the complainant. The opposite party has not committed any deficiency of service and hence they are not liable to compensate the complainant. There is no cause of action arised on 15.04.09 and the Forum has no jurisdiction to try the complaint. So the complaint is liable to be dismissed.
Upon the above contentions the following issues have been raised for consideration.
1. Whether the complainant is a consumer and the Forum has
jurisdiction to try the case?
2. Whether there is any deficiency of service on the part of
opposite party?
3. Whether the complainant is entitled to any relief?
4. Relief and cost.
The evidence in the above case consists of the oral testimony of PW1 and Ext.A1.
Issue No.1
The opposite party contended that the complainant cannot be treated as a consumer since the trades were executed with speculative motive to earn profit. So the complainant falls under the explanantion to the general rule and cannot be termed as a Consuemer under section 2(1) (d) of Consumer Protection Act, 1986. The complainant in this case is admittedly an NRI and returned to India after giving up his job in gulf. The section 2(1) d(ii) of Consumer Protection Act defines a consumer as a person who hires or avails of any service for 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 which has been 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 first mentioned person but does not include a person who avails of such services for any commercial purpose. Explanantion for the purpose of the clause “commercial purpose does not include use by a person of goods bought and used by him and services availed by him exclusively for the purpose of earning his livelihood by means of self-employment. Admittedly the complainant is a returned NRI having no job and he has engaged in the trade business for the purpose of earning his livelihood by means of self-employment. In Laxmi Engineering works Vs. P.SG. Industrial institute which was reported in 1995(3) SCC 5&3. The Hon’ble Supreme Court pointed out that commercial purpose shall be governed by the facts of each case while going through pleadings. It is seen that the objective of the trade business of the complainant is his livelihood. So from the above discussion we are of the opinion that the complainant is a consumer and the Forum has ample jurisdiction to try the case and hence issue No.1 is found in favour of the complainant.
The complainant’s further case is that the opposite parties misappropriated ` 40,000 by way of share trading without consent and confirmation of the complainant and hence they are liable to compensate the complainant. In order to prove the case the complainant was examined as PW1 and produced the photocopy of complaint filed before Kannur Town Police Station. The complainant contended that the opposite party had done derivative trade without informing and without his confirmation. The opposite parties admits that the complainant had transferred shares from the demat account of another depository participant to them. But denied the contention that the business was conducted without the instruction of the complainant and according to opposite party they used to send contract notes and other related document to the complainant. The very specific case of the complainant is that the complainant has not given any instruction for doing trade in his demat account. As per annexure 1(3)(5) of SEBI (Stock brockers and Sub-brockers) Regulation, 1992 the investor have an obligation to give any order for buy or sell of a security in writing or in such form or manner as may be mutually agreed, and ensure that a contract note is issued to the investor by the member which contains minute records of every transaction. Similarly as per Sect.17 of SEBI (Stock brockers and Sub-brockers) Regulation, 1992 it is obligatory on the part of the stock brocker to maintain proper books of accounts, records etc. As per section 17(1) every stock brocker shall keep and maintain the following books of accounts, records and documents namely (a) Register of transaction (sauda book), (b) client’s register (c) general ledger (d) journals (c) cash books (d) bank pass book (g) documents register containing interalia, particulars of securities received and delivered in physical form and statement of account and other records relating to receipt and deliver of securities provided by the depository participants in respect of dematerialized securities (h) members contract books showing details of all contracts entered into by him with other members of the same exchange or counterfoils or duplicates of memos of confirmation issued to other members (i) counterfoils or duplicate of contract notes issued to clients (j) written consents of clients in respect of contracts entered into as participants (k) margin deposit book, (l) Registration of accounts of sub-brockers (m) Agreement with a sub-brocker specifying the scope of authority and responsibilities of the stock-brocker and sub-brocker (n) an agreement with the sub-brocker and with the client of the sub-brocker to establish privity of contract between the stock-brocker and the client of the sub-brocker. As per Section 18, every stock-brocker shall preserve the books of accounts and other records maintained under Regulation 17 for a minimum period of five years. So it is very clear that the stock brocker is bound to maintain or preserve all relevant records for five years. Admittedly the business was during 2007. So the transaction is within the specified period. So inorder to disprove the contention of the complainant the opposite party can very well produce all these documents which are obligatory on their part to maintain for 5 years from date of transaction. The Forum has directed the opposite parties to produce instruction slip ie the documents showing the instruction given by the complainant to opposite party to sell the shares in his account, the statement showing the trade done by the opposite party in the demat account of the complainant as per the petition filed by the complainant for cause production. But the opposite parties instead of producing these documents filed an affidavit. Stating that the company has already sent the statement showing the trade done to the complainant and company is not maintaining instruction slip. But as per the above stated Regulation, opposite parties has to maintain the relevant records for five years. But the opposite parties were willfully evaded from the liability of producing documents. So even if copy of documents are issued to the complainant it is obligatory on the part of opposite parties to produce such documents. So non-production of documents helps to draw an adverse inference in favour of the complainant. So there is deficiency and unfair practice on the part of opposite party. Moreover schedule-II of the above stated regulation speaks about the code of conduct for stock-brockers. As per Regulation 7-A, a stock-brocker shall maintain high standards of integrity, promptitude and fairness in the conduct of all his business. The facts and circumstances of the case shows that the opposite parties are failed to maintain such degree of integrity, promptitude and fairness as envisaged by the above Regulation. So we are of the opinion that there is grave deficiency and unfair practice on the part of opposite parties. But regarding the amount the complainant contended that he is entitled to get ` 40,000. But he has not stated about how he had lost these amount. Moreover there is no document before us to come to the conclusion that the complainant is entitled to get ` 40,000. But it is a fact that the complainant had sustained loss due to the deficient service of opposite parties. So we assess ` 5000 as compensation for his mental as well as financial sufferings and ` 1000 as cost of this proceedings and passed order accordingly.
In the result, the complaint is allowed partly directing the opposite parties to pay ` 5000 (Rupees Five Thousand only) as compensation and ` 1000 (Rupees One Thousand only) as cost of the proceedings within 30 days of receipt of this order, failing which the complainant can execute the order as per the provisions of Consumer Protection Act.
Sd/- Sd/-
President Member
APPENDIX
Exhibits for the Complainant
A1. photocopy of complaint filed before town police station.
Exhibits for the opposite party
nil
Witness examined for the complainant
Complainant
Witness examined for the opposite party
nil
/forwarded by order/
SENIOR SUPERINTENDENT
