State Consumer Disputes Redressal Commission
Justus Simon, Senior Dealer, vs Ramachandran Pillai G, on 25 May, 2011
Daily Order
First Appeal No. A/09/704 (Arisen out of Order Dated 29/08/2009 in Case No. CC 220/07 of District Kollam) Justus Simon Vs. Ramachandran Pillai BEFORE: HONARABLE MR. JUSTICE SHRI.K.R.UDAYABHANU PRESIDENT PRESENT: Dated : 25 May 2011 ORDER Disposed as Allowed
KERALA STATE CONSUMER DISPUTES REDRESSAL COMMISSION VAZHUTHACAUD, THIRUVANANTHAPURAM.
APPEAL No. 704/2009
JUDGMENT DATED: 25-05-2011
PRESENT:
JUSTICE SHRI. K.R. UDAYABHANU : PRESIDENT
APPELLANTS
1. Justus Simon, Senior Dealer,
2nd Floor, Amrutha Lekshmi Towers,
Vadayattukotta Road, Kollam.
2. The General Manager,
Religare Securities Ltd. (Trading and Clearing Member),
Regd. Office at 19, Nehru Palace, New Delhi - 110 019.
(Rep. by Adv. M/s Peter & Karunakar)
Vs
RESPONDENTS
1. Ramachandran Pillai G,
'Swathi', Perumpuzha P.O., Kollam.
2. Vinu Raj. V,
Relationship Manager, 2nd Floor, No/MC XVII 3620/3555 A,
Amrutha Lekshmi Towers, Vadayattukotta Road, Kollam,
Now Residing at Janaki Bhavan, Near Thrikkoyikal Temple,
Perumpuzha P.O., Kundara, Kollam.
3. Shibu .P, Branch Manager,
II Floor, Amrutha Lekshmi Towers, Vadayattukotta Road, Kollam.
4. Mini K. Thomas,
In - Charge Operation - Kerala Zone,
35/65-d, 3rd Floor, Thadikkaran Centre, Palarivattom, Cochin.
(R1 rep. by Adv. Smt. B. Ajimole & others)
(R3 rep. by Adv. Sri. R. Ram Mohan)
JUDGMENT
JUSTICE SHRI. K.R. UDAYABHANU: PRESIDENT The appellants are the opposite parties 3 and 5 in CC No. 220/2007 in the file of CDRF, Kollam. The opposite parties including the appellants are under orders to refund a sum of Rs. 1,00,000/- with interest at 12% per annum from the date of complaint and also to pay Rs. 5,000/- as compensation and Rs. 2,500/- towards costs.
2. The case of the complainant is that he deposited an amount of Rs. 1,00,000/- in the opposite party's scheme which assured that the complainant would get a monthly income for his livelihood and also share of dividend. He deposited the amount on 16-01-2007 by way of DD. He was issued with a trading user ID No. and CRN No. The complainant was also provided with daily statement of the deposit with different companies. On 22-01-2007 the complainant was intimated that he will have to deposit a further sum of Rs. 4,00,000/-. The complainant was not wiling. On 12-02-2007 he went to the office of the opposite parties and enquired the details of his deposited amount. Then he was issued with a financial balance sheet and was asked to deposit a sum of Rs. 3,315/- as mentioned in the balance sheet. He was also told that he will not be getting any amount out of the deposited amount. Deficiency in service is alleged by violating the promise. He has sought for return of the amounts with interest at 24% and Rs. 25,000/- as compensation.
3. The opposite parties have filed version disputing the alleged scheme etc. It is stated that the opposite party is carrying on business in shares and securities and portfolio management with registration under Securities and Exchange Board of India (SEBI) and is an authorized share broker with National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). As a share broker the opposite party places orders for purchase or sale of shares with NSE/BSE terminal as instructed by the clients and opposite party gets a brokerage for these transactions which are the commission for a broker. The transactions are governed by NSE/BSE Bye laws and the Regulations and directions issued by the SEBI from time to time. On executing the agreement with the broker as prescribed by SEBI the client is given a client code. All the transactions done through the opposite party by the client finds a place in the above account. The purchases and sale of shares are done by the opposite party as share broker as instructed by the clients. The client has to settle the account within a specified period of time as per the rules of SEBI which is known as settlement period. When a particular client places an order for purchase of a particular scrip/share, the exchange will deliver the same to the pool account of the authorized broker on T + 2 basis (Trading day plus 2 days) thorough whom the order was placed and these shares are being credited to the respective client's depository account by the broker. Before the delivery (ie; within settlement period), the client should pay the amount of the said shares to the exchange through the broker as per the rules and as agreed in the member- client agreement. If the client fails to pay the amount within the settlement period, the exchange debits the same from the broker's account and the broker will debit the same to the particular client's account. Similarly, when a client places an order for sale of shares, the client should give delivery of the shares which he sold within the settlement period, ie, on T + 2 (Trading plus 2 days) basis, and the amount also will be credited to his account within the settlement period. When a particular client places an order for sale of particular scrip/shares, there will be a corresponding purchase order for the same number of shares by another person in the market. It is the obligation of the exchange to effect the delivery of the shares sold and to credit the same into the account of the person who places the order of purchase of the shares. If a client places an order for sale of particular scrips/shares and the sufficient number of that particular scrips/shares are not available with the client account and on his failure to complete the transaction, the Exchange buys such number of that particular scrips/shares at the rate prevailing at the time of closing the market and will complete the transaction and the amount will be debited into the clients account. This process of purchase of short shares by the Exchange for meeting the market obligation is known as 'Auction' of shares. Under situations where shares are not available for delivery from the client's account in normal payout (within settlement period), the Exchange will conduct Auction for short deliveries on T + 3 basis (Trading plus 3 days) and the amount will be debited to the client's account. The client can also make intraday trading which is also known as speculation or margin trading. This is a mode of trading in which the client can sell the shares even without holding the same in his account, expecting that the same shares can be purchased at a lower rate in the same day and complete the transaction. In such cases, the client can place order for sale of shares even before he purchases that particular shares. The client after placing the order for purchase of shares can place the order to sell the same without waiting for the settlement period. In such case also the settlement period is T + 2 days and if any short position (shortage of shares) arises, auction will be conducted on T + 3 basis as submitted earlier. The broker issues contract note and trade confirmation statement to the client on daily basis. In the auction for short selling of shares, the bill for the auction will also be issued by the broker to the client. The client is also given the facility to do trading over and above the amount invested by him by proving additional funds from the account of the broker. Interest is payable on the said amount as per the agreement between the parties. This facility depends upon the financial capacity of the client.
4. It is the specific contention that the opposite party has transacted the shares as per the instruction of the complainant. The details of the transactions carried out on behalf of the complainant is reflected in the contract notes issued to the complainant and the same are duly acknowledged by the complainant. The complainant carried out trading through the opposite party for the period from 18-01-2007 to 26-02-2007, as per the instructions of the complainant. The opposite party has also detailed in the version the details of the purchases and sales made. It is stated that the complainant has also done futures trading. The last trading was conducted on 26-02-2007. By that time the complaint's account was showing negative balance and hence he was asked to settle the outstanding payments. The loss suffered by the complainant is a business loss and cannot be recovered from the opposite party.
5. Evidence adduced consisted of the testimony of PW1, DW1, Exts. P1 to P5, D1 and D2.
6. The Forum has held that the opposite parties have indulged in purchasing of shares on credit to the tune of Rs. 5,00,000/- without the authorization of the complainant. It was also held that the shares purchased on credit were sold without the consent of the complainant as no documents in this regard has been produced. Hence the Forum has ordered the opposite parties to repay the amount with interest and compensation.
7. It is the contention of the Counsel of the appellant that the complainant is only pretending ignorance. As per the scheme of things share broker can purchase the shares only on the instructions of the client. The broker is only facilitating the purchase and sales. Ext.P3 series of contract note contains the signature of the complainant. As per Ext.P3 series there are transactions up to 26-02-2007. Ext.P3 series are the contract notes of the transactions done on the days on which the purchase and sale of shares were made. As per the scheme of transacting shares the person can also engage in future trading which has been done by the complainant as evident from the signature of the complainant in Ext.P3 contract notes. It is specifically mentioned in each of the Ext.P3 series that the transactions are done as per the order of the client which has been countersigned by the complainant. It is the specific case that every transaction has been done only as per the instruction of the complainant and that a share broker cannot do anything else and cannot purchase shares and sell them without the instruction of the client. The standing instructions as evident from Ext.P5 show that the share broker is authorized to transact shares on the verbal instructions of the complainant or his authorized representatives. It is the case of the complainant that he has been totally misled and that the entire P3 series were provided to him at one instance and he was asked to put his signature in Ext.P3 series as evident from the testimony of PW1. We find that he was a Forest Range Officer and not a layman. He is not expected to sign on the doted line without going through the document in which he has affixed his signature. In the complaint filed the complainant has stated that he was provided with the daily statement of deposits. Ext.P3 series are self explanatory. The rates of shares purchased have gone down and in future trading the amounts could not be settled within the specified period and hence as per the prescribed procedure the amounts were settled from the account of the complainant. We find that the case of the complainant that he remitted the amount of Rs. 1,00,000/- in a scheme as per which the share broker will do the business and provide him profit only cannot be accepted as such. The complainant ought to have been vigilant while investing money, even if the version of the complainant is accepted as such. Share business involves complications and is volatile. The case of the complainant that he was totally misled appears incorrect in the light of the fact that he has signed in Ext.P3 contract notes. In the circumstances, we find that the findings of the Forum are based on a totally wrong premise. Hence the order of the Forum is set aside In the result, the appeal is allowed.
The office will forward the LCR to the Forum along with a copy of this order.
JUSTICE K.R. UDAYABHANU: PRESIDENT Sr. [HONARABLE MR. JUSTICE SHRI.K.R.UDAYABHANU] PRESIDENT