State Consumer Disputes Redressal Commission
Shri Mahesh Kr. Gupta vs Kotak Securities Ltd. & Another on 25 May, 2026
STATE CONSUMER DISPUTES REDRESSAL COMMISSION
WEST BENGAL
FIRST APPEAL NO. SC/19/A/831/2019
Shri Mahesh Kr. Gupta
PRESENT ADDRESS - 563A, Rabindra Sarani, P.S.- Shyampukur, Kolkata -700 003.,WEST
BENGAL.
.......Appellant(s)
Versus
Kotak Securities Ltd. & Another
PRESENT ADDRESS - Ground, Second & Fifth Floor, 2, Brabourne Road, Govind Bhawan,
Kolkata-700 001, P.S. Hare Street.,WEST BENGAL.
Kotak Securities Ltd.
PRESENT ADDRESS - 27, B.K.C., C-27, G- Block, Bandra Kurla Complex, Bandra East, Mumbai
-400 051.,WEST BENGAL.
.......Respondent(s)
BEFORE:
HON'BLE MR. RAJES GUHA RAY , JUDICIAL MEMBER
HON'BLE MR. SANTANU SAHA , MEMBER
FOR THE APPELLANT:
Shri Mahesh Kr. Gupta, Ms. S. Roy Chowdhury, Mr. P.S.Mukherjee (Advocate)
FOR THE RESPONDENT:
Kotak Securities Ltd. & Another, Ayan Chakraborty (Advocate)
DATED: 25/05/2026
ORDER
Hon'ble Mr. Santanu Saha, Member The present Appeal under Section 15 of the Consumer Protection Act, 1986 has been preferred by the Appellant/Complainant (hereinafter referred to as the A/C) assailing the Final Order passed by the Learned District Consumer Disputes Redressal Commission, Unit-I, Kolkata in Complaint Case No.262 of 2018 whereby the complaint was dismissed principally on the grounds that the complainant was not a 'consumer' within the meaning of Section 2(1)(d) of the Consumer Protection Act, 1986 and that the complaint was barred by limitation. Genesis of the Case The facts leading to the present appeal may briefly be stated thus.
The A/C opened a demat account with Respondent/O.P. No.1 on 06.01.2005. According to the A/C, as on 06.07.2007 he held 100 shares of Omax Auto Ltd. and 1000 shares of S.M. Dychem Ltd. in the said demat account. It is the specific case of the A/C that on 06.07.2007 he submitted an application seeking closure of the demat account along with request for transfer of the aforesaid shares in favour of his brother who also maintained a demat account with the same Respondent.
The grievance of the A/C is that despite repeated visits and communications made between 31.08.2007 and 30.10.2010, the Respondents failed to act upon the said request. It is further alleged that the office of the Respondents subsequently shifted from its original location and later shifted again to another premises at Howrah without proper intimation, thereby causing inconvenience and harassment to the complainant.
According to the A/C, despite request for closure of account, the Respondents continued to keep the demat account operative and issued bills-cum-statements demanding maintenance charges. The A/C claims to have received such bills in 2015 and 2017 and continued receiving statements till 28.08.2018. A further communication dated 28.07.2018 allegedly requesting withdrawal of such demands also evoked no effective response.
Consequently, Complaint Case No.262 of 2018 was instituted before the Learned District Commission praying for directions upon the Respondents to transfer the shares, withdraw the bills, close the account and pay compensation and litigation cost.
The Learned District Commission dismissed the complaint holding that transactions relating to shares are commercial in nature and therefore the complainant does not fall within the definition of "consumer". The Learned District Commission also held the complaint to be barred by limitation.
Being aggrieved thereby, the present appeal has been preferred.
Submissions on Behalf of the Appellant/Complainant Learned Counsel for the Appellant submitted that the Learned District Commission fundamentally erred in treating the present dispute as one arising out of speculative or commercial share trading.
It was contended that the complaint does not pertain to trading loss, fluctuation of market value or investment return. The dispute concerns non-transfer of shares and non-closure of a demat account despite express instructions issued by the complainant. According to the Appellant, maintenance and operation of demat account involves rendering of service by a depository participant and deficiency therein squarely attracts jurisdiction under the Consumer Protection Act.
Learned Counsel argued that the Respondents failed to produce any material whatsoever showing that the complainant was regularly engaged in commercial share trading for profit-making purposes. Mere holding of shares or maintenance of demat account cannot by itself establish commercial purpose.
It was further argued that the cause of action was continuous and recurring in nature because the shares were never transferred and bills/statements continued to be issued till 2018. Therefore, dismissal on limitation was erroneous.
Reliance was placed on Acumen Capital Market (India) Ltd. v. K. Viswanathan, III (2013) CPJ 4A (Ker), decisions of the National Commission in Revision Petition No.3941 of 2007 and Revision Petition No.2873 of 2014, as well as other authorities to contend that consumer fora may entertain complaints against brokers or depository participants where deficiency in service is alleged.
It was additionally contended that the Learned District Commission failed to examine the true nature of the dispute and proceeded upon an overbroad assumption that every dispute connected with shares automatically becomes a commercial transaction.
Submissions on Behalf of the Respondents/Opposite Parties Learned Counsel appearing for the Respondents supported the impugned judgment.
It was argued that dealings in shares are inherently commercial and speculative in nature. According to the Respondents, persons maintaining demat accounts for trading in shares cannot claim status of "consumer" under Section 2(1)(d) of the Consumer Protection Act, 1986.
Reliance was placed on Vijay Kumar v. IndusInd Bank, II (2012) CPJ 181 (NC), Dr. V.K. Agarwal v. Infosys Technologies Ltd., I (2013) CPJ 373 (NC), Anand Prakash v. A.M. Johri & Ors., III (2000) CPJ 291, and Ramendra Nath Basu v. Sanjeed Kapoor & Anr., I (2009) CPJ 316.
The Respondents also relied on NSE Circular dated 13.07.2015 based upon communication of SEBI observing that regular trading in shares for earning profit falls within commercial transactions and disputes arising solely therefrom may not fall within the scope of the Consumer Protection Act.
It was further argued that disputes between member and constituent are governed by arbitration mechanism under the bye-laws of the Stock Exchange and also by virtue of the arbitration clause contained in the Member Client Agreement executed between the parties. Therefore, according to the Respondents, jurisdiction of consumer fora stood excluded.
The Respondents denied deficiency in service and contended that the complainant himself remained inactive and failed to comply with necessary formalities.
Points for Determination Upon hearing the parties and upon perusal of the materials on record, the following points arise for determination:
1. Whether the Appellant/Complainant falls within the definition of "consumer"
under Section 2(1)(d) of the Consumer Protection Act, 1986 and whether the dispute is excluded on the ground of commercial transaction;
2. Whether existence of arbitration clause and arbitral mechanism under Stock Exchange Regulations bars maintainability of the complaint before consumer fora;
3. Whether the complaint is barred by limitation;
4. Whether the impugned judgment warrants interference;
5. To what relief, if any, the parties are entitled.
Discussion and Findings Point Nos. 1 & 2 These points, being interconnected, are taken up together for convenience of discussion.
The Learned District Commission proceeded substantially on the premise that every dispute relating to shares or demat account ipso facto constitutes commercial transaction excluding jurisdiction under the Consumer Protection Act. This Commission holds that such broad proposition does not appear legally sustainable in the factual matrix of the present case.
There can indeed be no dispute with the legal principle that regular trading in shares for profit-making purposes amount to commercial activity. The authorities relied upon by the Respondents broadly affirm this principle.
In Anand Prakash v. A.M. Johri & Ors., III (2000) CPJ 291, the dispute directly concerned sale-purchase transactions in shares undertaken for commercial gain. Likewise, in Ramendra Nath Basu v. Sanjeed Kapoor & Anr., I (2009) CPJ 316, the controversy related to share trading transactions involving investment and profit considerations.
Similarly, in Vijay Kumar v. IndusInd Bank, II (2012) CPJ 181 (NC), the Hon'ble National Commission observed that where the dominant purpose of transactions is commercial profit through share trading, the complainant would not qualify as a consumer unless the activity falls within the narrow self-employment exception.
In Dr. V.K. Agarwal v. Infosys Technologies Ltd., I (2013) CPJ 373 (NC), the National Commission also emphasized the commercial character of investment- oriented share dealings.
However, careful scrutiny of the aforesaid decisions reveals that those arose in the context of commercial share trading or investment activity where the dominant purpose of the transactions was profit generation through securities dealings. The present dispute, however, does not directly concern speculative or trading activity in shares as such, but relates to alleged deficiency in service independent of any commercial trading operation and therefore stands on a different footing altogether.
This Commission is conscious that all disputes connected with shares or demat accounts cannot automatically be treated as consumer disputes. Where the dominant purpose of transactions is systematic commercial trading or profit-oriented investment activity, the exclusion relating to "commercial purpose" may indeed become applicable depending upon facts of the individual case.
However, the present complaint does not arise from speculative trading loss, market fluctuation or investment return. Rather, the core allegations are:
• non-transfer of already existing shares despite specific instruction; • non-closure of demat account despite request;
• continued levy of maintenance charges for years;
• and alleged failure in rendering depository/account management services.
A demat account maintained through a depository participant fundamentally involves provision of custodial, depository and account management services. Merely because such account pertains to securities does not automatically establish that every dispute arising therefrom assumes commercial character.
In the facts of the present case, the Respondents failed to produce sufficient material to conclusively establish that the complainant was engaged in regular commercial share trading activity. No material reflecting volume, frequency or systematic pattern of trading transactions was produced before the Learned District Commission.
In Acumen Capital Market (India) Ltd. v. K. Viswanathan, III (2013) CPJ 4A, the Kerala State Commission entertained a consumer complaint alleging unauthorized speculative trading and mishandling of shares by a broker/depository participant, holding on the facts of the case that the complainant had hired financial services and that the allegations disclosed deficiency in service. The decision also indicates that disputes against brokers or depository participants may, in appropriate factual circumstances, fall within consumer jurisdiction where the complaint substantially relates to deficiency in service rather than merely profit-oriented share trading.
This Commission therefore holds that the Learned District Commission erred in mechanically applying authorities concerning speculative share trading without examining the precise nature of the dispute involved herein.
The objection regarding arbitration clause is equally untenable.
The legal position now stands conclusively settled by the Hon'ble Supreme Court in Emaar MGF Land Ltd. v. Aftab Singh reported in (2019) 12 SCC 751, wherein it was held that existence of arbitration agreement does not bar maintainability of proceedings under the Consumer Protection Act.
The Hon'ble Supreme Court observed in substance that the remedy under the Consumer Protection Act is an additional statutory remedy intended for protection of consumers and is not barred merely because an arbitration agreement exists between the parties.
Further, in Secretary, Thirumurugan Cooperative Agricultural Credit Society v. M. Lalitha, the Hon'ble Supreme Court emphasized that the Consumer Protection Act is a beneficial legislation intended to provide additional remedies to consumers and deserves liberal interpretation in favour of consumer access to justice.
Reference may also be made to National Seeds Corporation Ltd. v. M. Madhusudhan Reddy wherein the Hon'ble Supreme Court reiterated that availability of alternative remedies under other statutes does not bar maintainability of proceedings before consumer fora.
Administrative circulars issued by regulatory bodies such as NSE or SEBI cannot curtail or override statutory jurisdiction expressly conferred upon consumer fora under the Consumer Protection Act.
The Consumer Protection Act thus creates remedies in addition to those available under other statutes and contractual arrangements. Consequently, neither the arbitration clause contained in the Member Client Agreement nor the arbitral mechanism under Stock Exchange bye-laws excludes jurisdiction of consumer fora.
Point Nos.1 and 2 are therefore answered in favour of the Appellant.Point No. 3
The Learned District Commission dismissed the complaint also on the ground of limitation principally observing that the request for transfer was allegedly made in 2007 whereas the complaint came to be filed in 2018.
This Commission is unable to agree with such approach.
The materials on record prima facie indicate that according to the complainant:
• the demat account was never closed;
• the shares were never transferred;
• maintenance charges continued to be levied;
• and bills/statements continued to be issued till 2018.
Where a service provider allegedly continues to maintain an account contrary to instructions and continues raising recurring demands, the grievance cannot necessarily be treated as a completed one-time cause of action confined only to the initial date of instruction.
The alleged failure to close the demat account and the continued generation of maintenance charges constitute recurring consequences of the alleged omission and therefore cannot, at this preliminary stage, be treated as a singular completed wrong confined only to the year 2007.
The concept of continuing cause of action has repeatedly been recognized where recurring wrong or continuing deficiency is alleged.
At this stage, this Commission is not finally adjudicating whether the complainant will ultimately succeed in establishing continuous deficiency. Nevertheless, dismissal of the complaint at threshold without adjudicating such aspect on evidence was not justified.
The issue of limitation in the present case is intertwined with disputed factual questions including:
• whether valid closure instructions were submitted; • whether requisite formalities stood completed; • whether the Respondents continued operating the account without authority; • and whether recurring demands were continuously raised.
Such issues required adjudication on evidence and could not have been conclusively determined merely on preliminary assumptions.
Accordingly, Point No.3 is also answered in favour of the Appellant.
Point Nos. 4 & 5 Though this Commission does not find sufficient basis to attribute institutional bias to the Learned District Commission, it does find that the Learned District Commission adopted an excessively broad interpretation of "commercial transaction" without adequately examining the actual nature of dispute pleaded in the complaint.
The Learned District Commission also failed to adequately consider:
• the distinction between speculative share trading and deficiency in depository services;
• the legal effect of continuing issuance of bills/statements; • and the settled position regarding non-exclusion of consumer jurisdiction by arbitration clauses.
Furthermore, several disputed factual issues touching upon alleged deficiency in service remain wholly unadjudicated because the complaint itself was dismissed at threshold.
Since the complaint stood dismissed on preliminary grounds without permitting comprehensive adjudication on evidence, interests of justice require restoration of the complaint for fresh trial on merits.
This Commission therefore finds that interests of justice would be best served by remanding the matter to the Learned District Commission for fresh adjudication upon appreciation of pleadings, evidence and relevant documents.
Accordingly, Point Nos.4 and 5 are answered in favour of remand.
Order In view of the discussions made hereinabove, the Appeal succeeds.
The impugned Final Order passed by the Learned District Consumer Disputes Redressal Commission, Unit-I, Kolkata in Complaint Case No.262 of 2018 is hereby set aside.
The complaint case is remanded back to the Learned District Commission for fresh adjudication on merits in accordance with law after affording adequate opportunity to both parties to adduce evidence and file relevant documents.
It is clarified that this Commission has not expressed any final opinion on the merits of the rival claims regarding alleged deficiency in service, validity of transfer instructions, legality of maintenance charges or entitlement of parties.
The Learned District Commission shall endeavour to dispose of the complaint expeditiously, preferably within six months from the date of communication of this order.
Parties shall appear before the Learned District Commission on the date to be fixed by the said Commission.
There shall be no order as to costs.
Let a copy of this Judgment be transmitted to the Learned District Commission forthwith.
Let copies of this Order be provided to the parties of Appeal Case free of cost, as per Rule.
..................
RAJES GUHA RAY JUDICIAL MEMBER ..................
SANTANU SAHA MEMBER