State Consumer Disputes Redressal Commission
S.X.J. Vasan vs Indian Overseas Bank, The Managing ... on 13 January, 2022
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IN THE TAMIL NADU STATE CONSUMER DISPUTES
REDRESSAL COMMISSION, CHENNAI.
Present: Hon'ble Thiru Justice R.SUBBIAH ... PRESIDENT
Tmt. Dr. S.M.LATHA MAHESWARI ... MEMBER
C.C. No.175 of 2017
Orders pronounced on: 13.01.2022
Mr.S.X.J. Vasan, I.R.S.,
Former Commissioner of Customs and
Central Excise,
11, Ayyavu Street, Ayyavu Colony,
Aminjikarai, Chennai 600 029. ... Complainant
Vs.
1. The Managing Director and CEO,
Indian Overseas Bank,
Central Office,
763, Anna Salai,
Chennai 600 002.
2. The Assistant General Manager,
Indian Overseas Bank,
Nungambakkam Branch,
Uthamar Gandhi Salai,
Chennai 600 034. ...Opposite Parties
Counsel for Complainant : Mr.K.Sukumaran
Counsel for Opposite Parties: Mr.A.Sermaraj
This complaint taken up for final hearing on
27.12.2021 and, after hearing the arguments of both sides
and perusing the materials on record and having stood over
for consideration till this day, this Commission passes the
following:-
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ORDER
R.Subbiah, J. - President.
The complainant has come up with the present complaint under Section 17 of the Consumer Protection Act, 1986, as against Opposite Party Nos.1 and 2 / Indian Overseas Bank, Chennai, seeking this Commission to direct the Opposite Parties to,
i) pay a sum of Rs.48.77 lakh to the complainant as compensation for the loss incurred by him due to the deficiency of service and negligence committed by the opposite parties;
ii) pay a sum of Rs.25 lakh as compensation for the damage caused to the reputation and causing mental anguish and agony suffered by the complainant due to the deficient service of the opposite parties;
iii) pay a sum of Rs.25 lakh as compensation to the complainant for the consequential damage caused due to the deficient service of the opposite parties by driving away the complainant from his business activity run for his livelihood and sealing his future; and 3
iv) pay a sum of Rs.25,000/- as costs of the complaint.
2. The case of the complainant, as reflected from the Complaint, in brief, is as follows:-
Being a customer of the Opposite Parties/Bank since 1974, for the past 10 years, the complainant has been operating a Savings Bank (SB) Account at the Nungambakkam Branch/2nd Opposite Party. His wife Mrs.Prema Malini Vasan is also maintaining an SB Account for the same period as that of the complainant with the same Branch. Both of them had invested part of their retirement benefits in Fixed Deposits (FD) with the said Branch and those Amounts had been shifted and invested in shares (Stock Market) from the year 2014 onwards for the livelihood of the complainant and his wife and the share market operations were done through the Banking channel of the Opposite Parties.
Everything went on smoothly till 19.01.2016 and an act of negligence on the part of the Opposite Parties/Bank had brought down the complainant's investment, which was 4 so well established after putting in lot of time and efforts, to the level of scratch. The complainant, for his livelihood, had invested about 1.5 crores by January 2016, and he was reduced to almost a pauper in the same month due to the act of negligence on the part of the Bank.
The complainant was operating S.B. A/c. No.018301000050000 with the Second Opposite Party as
Liquiflo Account with a special feature that the Amounts, over a specified time, lying in the S.B. Account of the complainant, will be automatically transferred to Term Deposit for better rate of interest and whenever situation requires, the Bank, on its own, will bring back funds from such term deposit account to the SB Account to honour the cheques issued by the complainant and for taking Demand Draft, etc. While so, in the course of stock trading, the complainant has been issuing cheques in favour of his Stock Broker - M/s.Angel Broking Private Limited, Mumbai, and received payments by RTGS to the credit of the aforesaid SB Account of the complainant. The complainant used to be allowed for higher exposure in the market on the basis of the 5 collaterals/margin available by the said Stock Broker and the complainant used to pay them interest for the same. In stock trade, the investors have to maintain a percentage of the value of the purchased shares with the broker as margin for each share and if the value of the purchased shares goes below certain level, the brokers are free to call the investors to make good the shortfall in margin. If the client fails, the brokers are free to square off the shares of the investor, enough to make good the margin shortfall at the prevailing rates to safeguard their interest and avoid risk. This option is left to the brokers because they invest their money for the investors like the complainant to certain limit keeping the investors shares as collateral.
It is common knowledge that, in the course of share market trading, time element of payment for the shares bought is crucial and any delay would attract heavy delayed payment charges. January, 2016, was named as 'wild January' in the stock market world because of crash in the stock market in India. As a result of this, value of the shares came down drastically. At that time, the share 6 market was crashing day by day and the amount of margin to be maintained was also fluctuating. In such scenario, the complainant was of no exception and to make good the shortfall in margin in his portfolio of shares held, the Broker insisted upon the complainant to pay the margin shortfall. As the outstanding amount due by the complainant to the said share broker both in NSE (National Stock Exchange) and BSE (Bombay Stock Exchange), put together, was Rs.4,95,18,199/- as on 18.01.2016, the complainant was asked to pay Rs.5 Lakh initially and the complainant also responded to that call by paying the said sum vide cheque No.284208 drawn on the 2nd Opposite Party Bank's Branch. Again, the complainant was asked to pay Rs.20 lakh and the complainant paid the same through cheque No.284209, dated 18.01.2016. Though the complainant was having sufficient balance of Rs.28,40,180.40, in total, both from SB Account and Liquiflo Deposit, so as to honour the above said cheque, unfortunately, the same was erroneously returned on 19.01.2016 by the 2nd Opposite Party/Bank. Due to such erroneous return of the cheque, the margin shortfall 7 swelled to Rs.44,78,899/-. In view of this extraordinary situation, the Broker squared off 8 Nos. of the complainant's Blue Chip (shares) at a very low price as compared to buying price, to make good the shortfall in margin, resulting in a loss of Rs.48.77 lakh. Had the aforesaid Cheque bearing No.284209, dated 18.01.2016, been honoured by 2 nd Opposite Party/Bank, the Broker would not have squared off the complainant's shares and the complainant would not have suffered heavy loss.
In fact, the 2nd Opposite Party/Bank has no reason to return the said cheque. Reference is made to a copy of the letter, dated 06.01.2017, issued by the Opposite Parties/Bank to the complainant, indicating Rs.27,14,000/- as balance in the liquiflo deposit and Rs.1,26,180/- in the normal balance, as on 18.01.2016. While so, the cheque in question was returned for the reason 'refer to drawer-drawee bank-Please present again'. Such act of the Bank would no doubt amount to negligence and deficiency of service, as envisaged in the Consumer Protection Act. Now, the complainant cannot approach the Broker for extending the 8 credit facility as previously enjoyed by him. The complainant is 68 year old and he cannot build up a new avenue of income at this time of his life. No amount of monetary compensation would restore his credit-worthiness nor put him back in the same wheel. Hence, on the ground of negligence and deficiency of service by the Opposite Parties/Bank which resulted in huge monetary loss to the complainant, he seeks for the relief as stated supra.
3. The Bank/Opposite Parties have resisted the case and claim of the complainant by filing their Version. It is stated therein that the complainant, who is holding SB Account No.0183101000050000 with the 2nd Opposite Party Branch, had issued the Cheque bearing No.284209, dated 18.01.2016, for a sum of Rs.20,00,000/- from his Account in favour Angel Broking Private Limited and the said cheque was presented for clearance by the said Broker with their Banker/ICICI Bank on 19.01.2016. The said cheque was returned on 20.01.2016 with an endorsement 'refer to drawer', due to a technical error that arose out of software 9 migration from Crown to Finacle in the system of the Second Opposite Party Bank. The return made by the Broker's Banker/ICICI through a Return Slip Memo, dated 20.01.2016, was with an endorsement 'Contact drawer/drawee Bank present again'. The complainant, after a period of about 10 months from the date of return of the cheque, issued a letter dated 14.11.2016, to the 2nd Opposite Party/Branch, asking the reason for return of the cheque and the said letter was received on 29.11.2016. The 2nd Opposite Party had replied to the said letter on 17.12.2016, stating the above said reason.
In the complaint, the complainant expressed that he incurred huge loss in his share business due to the return of the cheque in question. If he had really suffered such loss due to return of the cheque, he would have contacted the 2nd Opposite Party Branch immediately in writing in the month of January, 2016, itself. In that case, the Bank would have taken immediate action to sort out the issue. Thus, the attitude of the complainant would show that he is shifting the blame on the Bank for the loss 10 incurred by him in the course of business. The Bank carries on its day-to-day business activities based on the system information and the cheque in question was returned based on the information shown in the System at that time and not due to any negligence on the part of the Second Opposite Party/Bank. Hence, the Opposite Parties have not committed any deficiency of service to the complainant and, as such, they are not liable to pay any amount towards compensation or damage whatsoever to the complainant. Accordingly, the Opposite Parties seek for dismissal of the Complaint as devoid of any merit.
4. In order to substantiate his case, the complainant has filed proof affidavit and marked 13 documents as Exs.A1 to A13. No document has been marked on the side of the Opposite Parties/Bank.
5. Learned counsel for the complainant, by pointing out that the complainant, who is an SB Account Holder with the Opposite Parties/bank, had a DMAT Account with M/s.Angel Broking Pvt. Limited, who provided him the 11 facility of Rs.4 to 5 crores in share trading, would submit that, in the said share business of the complainant with the Broker, maintaining a margin as per the Broker's formula being crucial, as per the demand made by the Broker, to meet out the margin shortfall, the complainant had issued cheque No.284209, dated 18.01.2016, for Rs.20,00,000/- in favour of the Broker. It is further pointed out that, while the complainant was having sufficient balance both in his SB Account and Liquiflo Deposits to the tune of Rs.28,40,180.40, the 2nd Opposite Party Bank had erroneously returned the Cheque, when presented for clearance by the Broker's Banker/ICICI, with an endorsement 'refer to drawer-drawee bank-please present again'. By referring to Ex.A1, he would add that, as a result thereof, the shortfall in margin came down to Rs.-35,62,758 and, after dishonour of the cheque, it further came down to Rs.-11,94,351, compelling the Broker to sell the complainant's shares to safeguard their interest as per the terms and conditions agreed upon; otherwise, the Broker would not have squared off the shares held by the 12 complainant. According to him, the act of the Bank in wrongly and erroneously returning the cheque despite availability of sufficient funds in the Account would undoubtedly amount to negligence and deficiency of service.
6. As regards the stand taken by the Bank that dishonour of the cheque was not due to any negligence but it was a result of technical error that arose out of software migration from Crown to Finacle in the System of the Bank, it is stated that such reason is only an afterthought. From Ex.A9/Email correspondence, learned counsel would refer to the explanation given by the Bank, viz., "It appears that the cheque was presented for payment for account No.5000 instead of 50000 hence, it might have been returned. We kindly request you not to initiate action against the Bank."
The said correspondence containing the request not to initiate action against bank, according to the learned counsel, would disclose that the endeavour of the Bank was 13 to always hide away from the blame of negligence. Drawing this Commission's attention to a Division Bench Decision of the Madras High Court reported in New Central Hall v. United Commercial Bank Limited, Madurai (72-LW-131), learned counsel would rely upon the dictum laid down therein to the effect that a plea of mistake in cases by a Bank is no excuse at all as it ought not to have been made by any Bank, and if made, the Bank has to bear its consequences when it wrongfully dishonours a cheque of one of its constituents who has got enough money of his in the Bank to meet the cheque.
7. Learned counsel, after referring to Section 31 of the Negotiable Instruments Act, which runs to following effect -
"The Drawee of a cheque having sufficient funds of the drawer in his hands properly applicable to the payment of such cheque must pay the cheque when duly required so to do, and, in default of such payment, 14 must compensate the drawer for any loss or damage caused by such default.", would, in parallel, rely upon a decision rendered by the Madras High Court in Canara Bank Limited rep. by its Branch Manager vs. V.Rajagopal (1975) 1 MLJ 420, to highlight the observation made therein to the effect that the word "compensate' used in Section 31 has special signification in the context in which it is used and that the well-understood proposition in law is that damages are awardable if a sufficient nexus is established between the wrongful-act and the resultant loss to the injured. The passage below quoted from the said decision has been much emphasised upon by the learned counsel, "11. As between a banker and a customer, statute law itself makes it mandatory that the injured customer should be compensated for the wrongful act of the banker. We have seen this in Section 31 of the Negotiable Instruments Act. But in all such cases a distinction has been made, between compensation which has to be paid to a trader 15 and that which to be paid to a non-trader in cases of proved injury caused at the instance of the banker. The banker's failure to honour his customer's cheques and drafts when he has moneys of the customer to meet them, is a peculiar type of breach of contract which has certain significations attached to it."
According to the learned counsel, the said decision makes it clear that even a trader can recover substantial damages for injury to his credit without proof of actual damage; while so, in the case on hand, the injury to the credit of the complainant was due to the negligence in the service of the Bank. Further, the complainant, who suffered injury to his credit, has a good case here to connect the injury with the act of malfeasance/misfeasance/negligence on the part of the Bank. Therefore, since the complainant has suffered resultant huge loss in the share trade to the tune of Rs.48.77 Lakh and consequently, had also lost his reputation with the Broker, who thereafter suspended the trading account of the complainant, resulting in great mental agony, the prayer of the complainant is well-founded 16 and deserves acceptance. Accordingly, the relief sought for may be granted.
8. Countering the same, learned counsel appearing for the Opposite Parties/Bank has made two-fold submissions.
Firstly, by pointing out that, in all of its transactions, the Bank exercises utmost diligence and that the entire day-to-day business activities of all Banks are based on the data available in the System, it is submitted that the complainant's Cheque bearing No.284209, dated 18.01.2016, for Rs.20 Lakh, was returned with an endorsement 'refer to drawer', purely due to a technical error that arose out of Software Migration from Crown to Finacle in the 2nd Opposite Party/Bank; as such, when the return was due to technical error and not because of any apparent negligence or deficiency in service, the Bank cannot be sued extraordinarily to an extent of claiming huge compensation and damages to the complainant, who, seemingly availed the brokerage facilities not for livelihood but for commercial 17 purpose involving sale and purchase of shares. In other words, when share trading transaction do not come under the purview of the Consumer Protection Act, the complainant, who does not even fall within the ambit and definition of 'consumer', has no locus standi to maintain the present proceedings. To fortify his submission, learned counsel referred to a decision of the National Commission in Ganapathi Parmeswar Kashi & Anr. vs. Bank of India & Anr. (FA No.362/2011), wherein, the National Commission upheld the view of the State Commission that the complainants therein were not consumers as the dispute was related to loss and profit from the share business of the appellants. When the said decision came to be challenged by way of Special Leave to Appeal (Civil) No.5401 of 2013, the Hon'ble Apex Court dismissed the SLP on 14.01.2013 by holding thus:-
" ii). The concurrent finding recorded by the State Consumer Disputes Redressal Commission, Maharashtra and the National Commission that the petitioners cannot be treated as consumer within the meaning of 18 Section 2(d) of the Consumer Protection Act, 1986, is based on analysis of the pleadings filed by the parties. The DMAT account was opened by the petitioners purely for commercial transactions. Therefore, they were rightly not treated as consumer so as to entitle them to claim compensation by filing complaint under the 1986 Act."
For the very same proposition, learned counsel also relied upon some other case laws viz., Bijay Agarwal vs. Nirmal Bang Security Pvt. Ltd. (2011 CTJ 688), Shashikant S. Timmappur vs. Karvy Stock Broking Ltd. (R.P. No.2752/11, 2013 (2) CCC 906 (Orders, dated 24.07.2013), Ramendra Nath Basu vs. Sanjeev Kapoor & Anr. (2009-CPJ-316), etc. Secondly, by referring to the Return Slip Memo with the endorsement 'Contact drawer/Drawee Bank - present again', learned counsel would submit that, while the said Memo was, dated 20.01.2016, the complainant, who is said to have suffered huge loss at that point of time, kept quiet not for a couple of weeks but for 10 long months and, only 19 in November, 2016, he became vigilant enough to write the letter dated 14.11.2016, seeking reason from the Bank for return of the cheque and, on 29.11.2016, the Bank had received the said letter, for which, by reply dated 17.12.2016, the complainant was duly apprised about the software error. Had the Bank been intimated immediately after dishonour of the cheque in January, 2016 itself, it would have taken earnest measures to sort out the issue. But, the attitude of the complainant in sleeping over the matter for about 10 months and now building up a superfluous claim against the Bank much later would only exhibit that his endeavour is only to shift the blame on the Bank for the loss incurred by him in share trading. As such, he has not come up before this Commission with clean hands.
Ultimately, by stating that neither was there any negligence nor any deficiency of service to the complainant at the hands of the Bank and that the prayer is highly farfetched, learned counsel seeks for dismissal of the complaint at the threshold.
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9. This Commission has carefully considered the rival submissions advanced on either side and meticulously perused the materials available on record. Inasmuch as facts of the case have been discussed above elaborately, we refrain from re-stating the same except those that are necessary to answer the following issues that arise for consideration here -
a) Was there any deficiency of service by the Bank/Opposite Parties to the complainant, warranting a direction by this Commission to award compensation?
b) Whether the prayer, in its entirety, claiming huge compensation/damages under different heads, for the alleged loss sustained by the complainant in the course of share business with the Broker, who is not a party to these proceedings, can be prima facie maintained in summary proceedings between the complainant and the Bank ?
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c) Whether the complaint is bad for non-joinder of necessary party viz., M/s.Angel Broking Private Limited, Mumbai?
10. Since all these three issues are interconnected to each other, it would be apt to answer the same together, hereunder.
11. In summary proceedings, in order to appreciate the case and claim, the materials placed by the complainant should be ex facie convincing and no necessary party should be left out. It is the case of the complainant that the Bank had committed gross negligence in wrongly dishonouring the cheque in question which resulted in adverse effect upon the shares of the complainant at the hands of the Broker. But, the said Broker, who is said to have squared off the shares, has not been impleaded by the complainant. It seems from the specific contents at para No.5 of the complaint that, only after the squaring off shares by the Broker, the complainant came to know from them that the cheque got bounced. 22 Even according to the complainant, initially, he took a confident stand against the Broker that the cheque was never presented by them to the Bank. That being so, it is not known as to why the complainant did not choose to implead the Broker as a party to the proceedings. Definitely, non- joinder of the said necessary party is detrimental to the case of the complainant. To put it otherwise, although the present complaint is filed against the Bank, the contents thereof also shows that initially, the action of the Broker was doubted, for, it is the stand of the complainant that he was fighting a losing battle with the Broker believing the words of the Bank. On the face of it, it is glaring and apparent that the complainant, just to maintain the present proceedings before this Commission, has sued only the Bank so as to retain his characteristic as a 'consumer', and conveniently omitted to implead the Broker. In other words, if the lis is in between a share trader like the complainant and a share market broker like the one failed to be impleaded, the complainant would have lost the trait of 'consumer', because, the law is well settled that a complainant engaged 23 in sale or purchase of shares does not fall within the purview of 'consumer' as those transactions are commercial in nature. The decision in Ganapathi Parmeshwar Kashi (cited supra) rendered by the National Commission is quite categoric that where the disputes are related to loss and profit from the share business, the complainant cannot be termed as 'consumer'. Such decision came to be upheld by the Hon'ble Apex Court in Special Leave to Appeal (Civil) No.5401 of 2013, decided on 14.01.2013, by ruling that DMAT account was opened by the petitioners therein purely for commercial transactions, therefore, they were rightly not treated as consumers so as to entitle them to claim compensation by filing complaint under the 1986 Act. That being so, the endeavor of the present complainant, who admittedly operated DMAT account for commercial transactions/share trading with the Stock Broker, to assume dual characters viz., as a consumer on the one hand and as a trader on the other hand, in summary proceedings before this Commission, must be deprecated. For the sake of argument, even to prima facie examine the alleged huge loss 24 resulted in share trading after the wrongful dishonour of cheque, the Broker must have been impleaded as party. By not doing so, the suit is bad for non-joinder of necessary party. Thus, at best, the complainant can only seek redressal for his grievance as a consumer in regard to wrongful dishonour of the cheque in question and, for any big remedy beyond that, the course open for him is to approach the civil court concerned where he can very well establish his case and claim against all necessary parties by adducing elaborate oral and documentary evidence.
12. Coming to the cheque in question, of course, it is the admitted case of both sides that the cheque was dishonoured while there were sufficient funds in the Accounts of the complainant. Even though it is heavily contended by the opposite parties/Bank that the wrongful dishonour was not an act of negligence, rather, it was a software error, for which, the Bank cannot be faulted with, such reason does not weigh with us. When Section 31 of the Negotiable Instrument is Act is explicit that the Banker must 25 compensate the drawer for any loss or damage caused by wrongful dishonour, the Bank cannot hide away from the implications arising there-from under the garb of technical fault; for, a wrongful dishonor would have multiple adverse effects upon the customer not only monetary-wise but also in terms of his/her reputation. Since admittedly the cheque in question was dishonoured despite sufficient funds in the Account, such act of the Bank undoubtedly amounts to deficiency of service, for which, in our considered opinion, the Bank shall have to pay a compensation of Rs.5,00,000/- (Rupees five lakh only) to the complainant, which would meet the interests of justice; accordingly, a direction is issued.
13. In fine, though we hold that the complaint is bad for non-joinder of necessary party/Stock Broker, the same is allowed in part to the extent of awarding Rs.5,00,000/- (Rupees five lakh only) as compensation to the complainant, payable by the Bank/Opposite parties, only for the reason of wrongful/negligent dishonor of the 26 cheque, within a period of two months from the date of the order, failing which, to pay interest thereon @ 7.5% p.a from the date of complaint till the date of payment. No costs.
S.M.LATHA MAHESWARI, R.SUBBIAH, J. MEMBER. PRESIDENT.
LIST OF DOCUMENTS MARKED ON THE SIDE OF THE COMPLAINANT.
Ex. No. Date Description Ex.A1 - Copy of the Margin Table issued by Angel Broking P.Ltd. Ex.A2 - Copy of the terms & conditions of Angel Broking P.Ltd. Ex.A3 Statement reflecting loss suffered by the complainant
Ex.A4 06.01.2017 Copy of the letter issued by the Opposite Parties to the complainant showing balance statement in the S.B. A/c. of the complainant.
Ex.A5 18.01.2016 Copy of the Cheque issued to Angel Broking P. Ltd. Ex.A6 20.01.2016 Copy of the Return Memo and letter from the Banker Namely ICICI Bank of Angel Broking Ltd.
Ex.A7 14.11.2016 Copy of the letter sent by the complainant to the 1st Opposite Party.
Ex.A8 25.11.2016 Copy of the postal receipts for the letter dt.14.11.2016 Sent by the complainant to the Opposite Party. Ex.A9 17.08.2016 Email Correspondences between the complainant and the Opposite Parties.
Ex.A10 Quantum of Loss worked out being the difference between the buy price and price at which they were 27 Squared off by the Broker Ex.A11 List of Shares squared off by the Broker as intimated by them by Mail. Also the Authenticated Statement of Shares sold on 21.01.2016.
Ex.A12 The authenticated profit and loss report issued by the Broker for the Whole FY 2015-2016 & 9 months from 01.04.2015 to 31.12.2015.
Ex.A13 Copy of IT Returns for FY 2014-15 & 2015-16. LIST OF DOCUMENTS MARKED ON THE SIDE OF THE OPP. PARTIES.
NIL.
S.M.LATHA MAHESWARI, R.SUBBIAH, J. MEMBER. PRESIDENT. Index : Yes / No. ISM/SCDRC/Chennai/Orders/Jan/2022.