State Consumer Disputes Redressal Commission
1.The Manager Sbi Cap Securities, vs A.Nagarjuna Reddy, on 26 September, 2024
1
BEFORE THE TELANGANA STATE CONSUMER DISPUTES
REDRESSAL COMMISSION: HYDERABAD.
FA.NO.41 OF 2021
AGAINST ORDERS IN CC.NO.295 OF 2018, ON THE FILE OF
DISTRICT CONSUMER COMMISSION-III, HYDERABAD
Between:
1.The Manager, SBI CAP Securities, Bank Street, Koti, Hyderabad.
2. SBI CAP Securities Ltd., Marathon Futurex, A & B Wing, 12th Floor, N.M.Joshi Marg, Lower Parel (E), Mumbai - 400 013.
....Appellants/Opp.Parties And A.Nagarjuna Reddy, Hindu Private Company Employee, Aged 35 years, House No.3-5-82/52, Raj Mohalla, Narayanguda, Hyderabad - 500 029.
....Respondent/Complainant Counsel for the Appellants/Opp.Parties : M/s. MRB Manikandan Counsel for the Respondent/Complainant : M/s.T.S.Vasanthakesavulu QUORAM:
HON'BLE SMT.MEENA RAMANATHAN...IN-CHARGE PRESIDENT & HON'BLE SRI V.V.SESHUBABU....MEMBER-JUDICIAL THURSDAY, THE TWENTY SIXTH DAY OF SEPTEMBER TWO THOUSAND TWENTY FOUR ******* Order : (Per Smt.Meena Ramanathan, Hon'ble I/c President)
1. This appeal is filed by the Appellants/Opposite Parties under Section 41 of Consumer Protection Act, 2019, praying this Commission to allow the appeal by setting aside the order dated 10.12.2020 in CC.No.295 of 2018 passed by District Consumer Disputes Redressal Commission-III, Hyderabad, in the interest of justice and pass such other order or orders as this Commission 2 deems fit and proper in the interest of justice and in the circumstances of the case.
2. For the sake of convenience, the parties are referred to as arrayed in the complaint. The Appellants are the Opposite Parties and the Respondent is the Complainant in CC.No.295/2018.
3. The brief facts of the complaint are that - the Complainant submits that to avail more income for himself and his family he opened a Trading A/c. No.75843828 along with Demat A/c.12047200-0778801 with SBI CAP Securities Ltd., Koti, Hyderabad, on 28.10.2015. Admittedly, he has been trading regularly and on 02.02.2018 he placed an order for purchasing 1300 DLF shares @ 234/- with Opposite Party No.1 and it was executed at 9 A.M. for a sum of Rs.38,166.55 ps. At that time, the Complainant was having Rs.22,300/- as his credit balance with Opposite Party No.1.
4. On 17.01.2018, the Complainant also purchased the derivatives of Reliance Capital and wished to sell at a higher price.
Three days is the time given to appraise and sell the derivatives. It is his contention that Opposite Party No.1 sold it in early hours of 19.01.2019 before 11 A.M. on their own, below the purchase price causing a loss of Rs.35,975/-.
5. On 02.02.2018, the Complainant purchased shares at 10.32 A.M. for the purpose of intraday business and he is watching the price of shares as there is time from 10.32 A.M to 3.30 P.M. when the stock exchange closes. The act of the Opposite Parties in selling the shares within one hour of purchase without intimation or advice from the Complainant is unfair and amounts to deficiency in service. The present complaint is filed for the aforesaid reasons and to direct the Opposite Parties to compensate the loss suffered by him.
6. The Opposite Party No.1 filed written version stating that the Complainant is a regular trader on NSE & BSE Cash and F&O 3 Segment and they have filed Ex.B8-the statement of account since inception.
The Complainant has raised two issues:
(1) Selling 1300 DLF shares on 02.02.2018 (2) Squaring off 1 lot of Reliance Capital (Futures and Options) on 19.01.2018 Alleging that both transactions were without intimation and consent.
7. With regard to the first issue, the Complainant's position in DLF Shares was squared off on 02.02.2018 since the intraday MTM loss had exceeded 70% of the total margin.
With reference to the second issue, there was a margin short fall on 19.01.2018 due to which Risk Management Team of the Opposite Parties had squared off the Complainant's open position of one lot of reliance capital.
8. They claim to have addressed an email to the Complainant to cover the total shortfall but since he failed to cover the shortfall within the stipulated time, their Risk Management Team had squared off the open position. The matter was referred to IGRP of NSE and the same was duly rejected. They further submit that the Complainant does not fall under the purview of the Consumer Protection Act and therefore, the complaint is not maintainable and seek its dismissal.
9. During the course of enquiry the Complainant filed evidence affidavit and got marked Ex.A1 to A6. The Opposite Parties filed evidence affidavit and Ex.B1 to B8 are marked on their behalf.
10. The District Commission after hearing and considering the material on record, allowed the complaint and made the Opposite Parties liable to make good for the monetary loss suffered by the Complainant and accordingly, the Opposite Parties are directed (i) to pay an amount of Rs.73,975/- towards monetary loss incurred by the Complainant in selling derivatives without his consent; (ii) to pay 4 an amount of Rs.10,000/- towards compensation and (iii) to pay an amount of Rs.1,000/- towards legal expenses.
The order be complied with by the Opposite Parties, within 45 days from the date of receipt of the order, failing which the amounts mentioned in (i) and (ii) above shall carry interest @ 9% per annum from the date of the order till actual payment.
11. Aggrieved by the order of the District Commission, the Appellants/Opposite Parties preferred this appeal with the following grounds:
The Appellants submit that the Respondent is a regular trader on NSE and BSE Cash as well as F&O Segment. The Respondent had been trading in his account since January 14, 2016 and continued to trade regularly in his account at least till May, 2019. The Respondent is an online client of the Appellants.
The Appellants filed their reply to the complaint before the NSE and substantiated that the allegations and issues raised by the Respondent are baseless and without any substance. The Appellants filed a detailed written statement and firstly raised a preliminary objection with respect to maintainability of the Respondent's complaint for want of jurisdiction and without prejudice to the said preliminary objection. The Appellants specifically placed on record that the Respondent had already explored a remedy by filing a complaint before the IGRP of NSE and the same was duly rejected.
12. The point that arises for consideration is whether the impugned order as passed by the District Forum suffers from any error or irregularity or whether it is liable to be set aside, modified or interfered with, in any manner? To what relief?
13. Admittedly the Respondent/Complainant has been trading in his account since 15.01.2016 and claims that he is doing so to supplement his income. The present complaint was filed on 5 14.02.2018 with SEBI which was forwarded to the Appellants/Opposite Parties by NSE.
14. The issues raised by the Respondent/Complainant relate to his trading activity on -
February 2, 2018 when he placed an order for purchase of 1300 DLF shares for intraday trading.
On January 17, 2018 he had purchased derivatives in Reliance Capital and intended to sell at a higher price. The Appellant/Opposite Parties squared off the above purchases without his knowledge or consent.
15. It is important to understand the meaning of Derivative Trading - this enables an investor to buy or sell an asset at a specified future date. A large part of derivative trading follows a system of assumptions and is highly speculative. For derivative trading, the client/Complainant needs a Demat Account and an online trading account. There must be sufficient margin money to buy or sell derivatives in the share market. Derivative trading is highly technical and speculative. It is highly volatile and comes with certain disadvantages.
16. In this case, the Respondent/Complainant placed an order for 1300 DLF Shares for intraday trading, which in effect offers opportunities for quick profit but also involves high risk.
17. An investor needs extensive knowledge about the intricate workings of the stock market to generate capital profits. Since capital appreciation is the primary target and to maximize return, this complaint cannot be classified as a Consumer Complaint because of its speculative background.
18. The Commission below failed to advert to this aspect and concluded that the Respondent/Complainant was a Consumer who was augmenting his income to support his family. This view cannot be endorsed as the activity of buying and selling shares on 6 the same day without taking delivery is implementing a commercial activity. Since the Respondent/Complainant is not a Consumer, the case cannot be entertained by this Commission and the Commission below failed to distinguish that trading involves frequent transactions while investors expect annual returns. Traders have a short term in mind while executing the possibility of risk and big profits.
19. While having discussed this aspect in detail, we further emphasize the point by referring to the judgment cited in M/s.Steel City Securities Ltd., Vs. G.P.Ramesh 1 (2014) CPJ 576 N.C. and the Hon'ble Apex Court's decision in Morgan Stanley Mutual Funds Vs. Kartick Das, (1994) 4 SCC 224 which holds good.
20. With these aforesaid discussion, we are of the considered view that the impugned order warrants interference and the same is liable to be set aside.
21. In the result, the appeal is allowed by setting aside the order of the District Commission-III, Hyderabad passed in CC.No.295/2018 dated 10.12.2020.
The Appellants/Opposite Parties are permitted to withdraw the statutory deposit made to the credit of this appeal together with accrued interest thereon.
Sd/- Sd/-
I/C PRESIDENT MEMBER-J
DT: 26.09.2024
UC*