Bombay High Court
Dealmoney Securities Pvt.Ltd vs National Stock Exchange Of India Ltd And ... on 27 February, 2019
Author: Naresh H. Patil
Bench: Naresh H. Patil, N.M. Jamdar
1/7 wpl 548.19.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION (L) NO.548 of 2019
Dealmoney Securities Pvt. Ltd. ... Petitioner
v/s.
National Stock Exchange of India Ltd.
Through its Investor
Grievance Redressal Panel
2. Madhavrao Balashankar ... Respondents
Mr.Sharan Jagtiani a/w. Mr.Dharmesh Jumani, Mr. Anant Joshi &
Mr.Rickin Dang I/b. Ganesh & co. for the petitioners.
Dr. Birendra Saraf a/w. Mr.Ranjeev Carvelho a/w. Sachin Chandarana
a/w. Vijayendra Purohit a/w. Pranjal Krishna I/b. M/s. Manilal Kher
Ambalal & co. for respondent no.1.
CORAM :NARESH H. PATIL, C.J.
& N.M. JAMDAR, J.
27th February, 2019.
P.C. The petitioner is a trading member with the respondent-National Stock Exchange of India Ltd. Respondent No.2-investor had made a complaint to the National Stock Exchange against the petitioner. The Grievance Committee of the Stock Exchange found merit in the ::: Uploaded on - 06/03/2019 ::: Downloaded on - 22/03/2019 00:12:02 ::: 2/7 wpl 548.19.doc complaint. Apprehending that further steps would be taken by the National Stock Exchange, the petitioner has moved this petition under Article 226 of the Constitution of India.
2. On 26 September 2013, Securities and Exchange Board of India issued a circular to streamline and to make the Investor Grievance mechanism more effective. It was decided to shorten the time taken for the proceedings as well as to give monetary relief to investor during the course of the proceedings. The Stock Exchanges were advised to ensure that all complaints are resolved at the earliest. The mechanism laid down in the Circular briefly is as follows. In case the matter does not get resolved, conciliation process of the exchange would start immediately after the time lines stated. The Committee shall be allowed a time of 15 days to amicably resolve the investor complaint. In case the matter is not resolved through the conciliation process, Committee would ascertain the claim value admissible to the investor. Upon conclusion of the proceedings of the Committee i.e. in case claim is admissible to the investor, Stock Exchanges shall block the admissible claim value from the deposit of the Member. The Stock Exchange shall give a time of 7 days to the Member from th date of signing of IGRC directions as mentioned above to inform the Stock Exchange whether the Member intends to pursue the next level of resolution i.e. Arbitration. In case, the Member does not opt for ::: Uploaded on - 06/03/2019 ::: Downloaded on - 22/03/2019 00:12:02 ::: 3/7 wpl 548.19.doc arbitration, the Stock Exchange shall, release the blocked amount to the investor after the aforementioned 7 days. In case, the Member opts for arbitration and the claim value admissible to the investor is not more than Rs.10 lac, there is a further procedure to be undertaken by the Stock Exchange. The Circular has placed responsibility on the trading member to opt for arbitration after the opinion is referred by the Investor Grievance Redressal Committee.
3. The petitioner is carrying out activities of trading in shares, and is also registered stock broker. The respondent no.2 registered himself as a client of the petitioner. A client registration form was executed. The respondent no.2 started buying and selling of the shares through petitioner's Authorised Person, one Raah Financials India Pvt. Ltd. The respondent no.2 made a complaint to the National Stock Exchange against the petitioner on 8 th January 2019. The respondent no.2 stated that he has opened a trading account with the petitioner in December 2016 and had transferred shares worth Rs.12 Crores in his DEMAT account. He has stated that he is retired executive and the entire portfolio was his retirement fund. According to him, the petitioner had sold the shares worth Rs.10.67 Crores, generated a loss of Rs.9.08 Crores and assured payment of 1% was not paid. Respondent No.2 made a grievance that it was in violation of the agreement and the petitioner had breached various rules. He has ::: Uploaded on - 06/03/2019 ::: Downloaded on - 22/03/2019 00:12:02 ::: 4/7 wpl 548.19.doc stated that he was not well versed with trading and malpractices have been committed by the petitioner.
4. On 25th January 2019 the petitioner replied to the complaint of respondent no.2. The complaint was referred to Investor Grievance Redressal Committee. The Investment Grievance Redressal Committee considered the case of the complainant and explanation of the petitioner. The Committee observed that the petitioner was at fault and it's explanation could not be accepted. The Committee observed that the petitioner was aware of the arrangements between respondent no.2 and the Petitioner's Authorised Person. The Committee had observed that petitioner has violated SEBI guidelines. It concluded that there is an admissible claim of Rs.10,67,45,638.10.
5. We have heard Mr.Sharan Jagtiani, the learned Counsel appearing for the petitioner and Dr.Birendra Saraf, the learned Counsel appearing for respondent no.1.
6. Mr. Sharan Jagtiani, the learned Counsel appearing for the petitioner submitted that the order of the Committee is erroneous, arbitrary. He submitted that though it is styled as an opinion, it is an order passed upon which punitive action is being taken by the respondent no.1- National Stock Exchange. He submitted, referring to the terms of his agreement with respondent no.2 that the petitioner was ::: Uploaded on - 06/03/2019 ::: Downloaded on - 22/03/2019 00:12:02 ::: 5/7 wpl 548.19.doc clearly not responsible to any eventuality as the present one. He contended that Committee has proceeded on the assumption in most summary manner. Mr.Jagtiani submitted that based on the observations, respondent Stock Exchange has appropriated the amount of Rs.3.5 Crores. He submitted that, considering that there is a shortfall in the petitioner's account, the respondent Stock Exchange has orally informed the petitioner that it would close down the petitioner's trading terminal. Mr. Jagtiani submitted that the entire action is arbitrary and there being no forum for redressal, writ jurisdiction is invoked.
7. Dr. Saraf, the learned Counsel appearing for the Stock Exchange submitted that the action of the respondent Stock Exchange is in consonance with the Circular issued by the Securities and Exchange Board of India dated 26th September 2013. It is submitted that there is nothing special in the case of the petitioner that the Circular needs to be deviated from. He submitted that margin money is required for trading on the Stock Exchange and since the petitioner has not kept the margin money over and above the locked amount, it will not be able to trade and it is not an order passed by the Stock Exchange to shut down its terminals.
8. What is assailed before us is an observation/opinion of the Investor Grievance Redressal Committee. The question would arise ::: Uploaded on - 06/03/2019 ::: Downloaded on - 22/03/2019 00:12:02 ::: 6/7 wpl 548.19.doc whether such an opinion is amenable to be examined under the writ jurisdiction of this Court. Even assuming that it is so amenable, obviously we cannot examine it exercising appellate powers.
9. In the present case, the Committee has considered the case put up by both the petitioner as well as the respondent no.2 and has found that the trading member was aware of the arrangement. The Committee consists of experts in the trade. After giving an opportunity to both sides, the Committee has given a detail opinion based on their expertise and the material that the claim made against the petitioner is an admissible claim. They have found, based on their experience, that it is not possible that the petitioner, an experienced trader, would not know of the transaction. It is not possible for us to further dissect this opinion to hold that the opinion is incorrect. The Committee members are fully aware as to how day to day transactions are carried out on the Stock Exchange.
10. The petitioner being a member of the Stock Exchange is covered by the Circular of 2013. This methodology is operating for almost six years now. We find no special circumstances to make an exception from the procedure laid down, which is designed to secure confidence in the trading of the Stock Exchange.
11. The terminals of the petitioner would be shut down only if ::: Uploaded on - 06/03/2019 ::: Downloaded on - 22/03/2019 00:12:02 ::: 7/7 wpl 548.19.doc the petitioner does not furnish the requisite margin amount. The hearing was adjourned twice for the petitioner to inform about security for the blocked amount. The petitioner offered to give a security of a residential flat of his family members, without original title deeds. Thereafter, during the course of arguments, the petitioner stated that 50% of the amount would be generated within six weeks. Dr. Saraf is correct in pointing out that the Stock Exchange cannot sell the immovable properties, that to recover the amount payable to the Complainant. That is not the role of the Stock Exchange. Shut down of terminals is not an order passed by the SEBI, but a situation created by not securing the amount and the margin money.
12. In these circumstances, we are not inclined to exercise our extraordinary writ jurisdiction. The Writ Petition is accordingly rejected.
13. Needless to state that the petitioner is entitled to take up such remedies as may be available in law which will be decided on its own merits. Our observations made in this order are in the context as to why we are not exercising the writ jurisdiction and proceedings taken out by the petitioners would be considered on their own merits.
N.M.JAMDAR, J CHIEF JUSTICE
L.S. Panjwani, P.S.
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