State Consumer Disputes Redressal Commission
Mrs. Maria Fernandes vs 1. National Stock Exchange Of India ... on 19 February, 2010
THE STATE CONSUMER DISPUTES REDRESSAL COMMISSION THE STATE CONSUMER DISPUTES REDRESSAL COMMISSION PANAJI GOA Present: Smt. Sandra Vaz e Correia ... Presiding Member Smt. Caroline Collasso ... Member Complaint No.8/2006 Mrs. Maria Fernandes Major of age, resident of BC/2, Gulmohar Complex, Caranzalem, Goa. Complainant v/s 1. National Stock Exchange of India Limited, Regd Office Exchange Plaza Bandra Kurla Complex, Bandra (E), Mumbai 400 051. 2. Zen Shares & Securities Ltd., 105 Rizvi, Bernard Guedes Road, Behind Vaidya Hospital, Panaji Goa 403001. Through its Branch Manager/ Director Shri Clifford Viegas. 3. Mccliff Securities Limited, Head Office, Chennai Through its Director, Mr. R. Deepak Kumar, Having its office at No.1 Ambadi Road, Kottupuran, Chennai 600 085. Opposite Parties For the Complainant Advocate D. Kapdoskar For Opposite Party No.1 ..Advocate Sapeco. For Opposite Party No.2 ..Advocate Nunes. Dated: 19-02-2010 ORDER
[Per Smt. Caroline Collasso, Member]
1. The case of the complainant is that she got into the business of trading in investments for self employment and to maintain her family.
2. Opposite Party no.2 and 3 are brokers/trading members/agent of opposite party no.1 (National Stock Exchange of India Ltd., NSEIL) the opposite party no.2 is also sub-broker of opposite party no.3. Opposite party no.2 initially was operating in the name of Zen Shares & Securities Ltd. and later changed its name to Mccliff Securities Ltd.
3. Complainant states that opposite party no.2 and 3 were in the business of buying and selling shares and boasted of their statistics, logistics and credentials which made her believe that she would be assured good returns on her investments. Opposite party no.2 who is the sub-broker of opposite party no.3 was a member of National Stock Exchange of India Ltd. and Mr. Clifford Viegas was the Branch Manager/Director of opposite party no.2 (Zen Shares and Securities Ltd.).
4. Complainant states that as a part of trading, opposite party no.2 advised her to invest in the shares of SATYAM COMPUTERS assuring her of good returns. As per the representation and the trade market which was on a high for Satyam Computers shares, complainant bought 200 shares inclusive of brokerage charges on 20th October 1999 amounting to Rs.3,38,770/- (settlement no.19999042) out of which 50 shares were sold. Brokerage charges for purchase of the 200 shares were paid to opposite party no.1, 2 and 3. The balance of 150 shares amounting to Rs.2,69,965 had to be transferred into complainants account.
5. Complainant states that it usually takes a maximum of one week to transfer the shares to any account however despite a period of 6 months only 30 shares out of the 150 shares were transferred thus a balance of 120 shares were not transferred to her account, on account of which she suffered enormous loss.
6. In the month of February 2000, the complainant intimated opposite party no.2 and 3 vide letter dated 9th February 2000 about the non-transfer of shares into her account. The opposite parties neither replied to the above letter nor did they transfer the shares into her account and gave several excuses for the same.
Vide letter dated 13th May 2000 the complainant intimated opposite party no.1 and called upon them to look into the matter.
7. The complainant states that she was entitled to bonus, dividend and benefits of shares splits as declared by the company on the shares of Satyam Computers in the year 1999 in a proportion of 1:1. Thus the complainant would have been entitled to 300 shares of Satyam Computers which was denied to her on account of non deposit by opposite party no.2 of the shares.
8. The complainant states that the share market value of Satyam Computers was very good in October 1999 to 2000 and the share price value had touched its peak to the value of 7,200 per share in the year 2000.
Further as on 29th April 2000 the complainant was entitled to 270 shares in addition which if transferred to her account would have earned her returns of Rs.19,44,000 (i.e. 270 x Rs.7200) in the year 2000 as the share market have touched its peak.
9. Due to the willful and negligent acts of opposite party no: 2 and 3, the complainant suffered loss of Rs.19,44,000/-. Complainant states that stock split took place on 31st March 2001 in the ratio 1:5 on account of which all those persons who were having one share would get five shares. Thus the complainant would have been entitled to 1350 shares (i.e.270x5=1350) of Satyam Computers.
10. Complainant also states that dividends were declared to the share holders in the year 2002 of an amount of Rs.1.20 per share in the year 2003 in an amount of Rs.3 per share, in the year 2004 in an amount of Rs.4 per share and in the year 2005 in an amount of Rs.5 per share and in the year 2006 in an amount of Rs.7 per share. Thus the complainant was denied dividends from the year 2002 and suffered a total loss of Rs.27,270 solely on account of non-receipt of her share in her account due to negligence on the part of opposite party. Furthermore, the company once again declared bonus on 9th October 2006 in the ratio of 1:1 which would entitle her to a further addition of 1350 shares thus a total of 2700 shares. As a result of the bonus, the complainant was entitled to an amount of Rs.24,03,000 (i.e. 2700 shares x 890 per equity share).
11. Complainant states the opposite party no.1 vide letter dated 30th May 2000 called upon the complainant to furnish the member constituent agreement and that they would take up the matter with opposite party no.2 and 3. Opposite party no.1 on perusing the document had issued ID no. and password which permitted her to trade with trading members i.e. opposite party no.2 and 3.
12. Vide letter dated 31st May 2000, the complainant replied to opposite party no.1 enclosing computerized sheets that were available to her. Vide letter dated 18th August 2000 the complainant brought to the notice of the Investor Grievance Cell, the non receipt of shares (120 nos.) of Satyam Computers. Since she got no reply she informed the Securities Exchanged Board of India (SEBI) vide letter dated 18-11-2002 requesting them to look into her complaint of non transferring of shares by opposite party no.2 and 3. The complainant states that vide letter dated 12th December 2002, she was informed by opposite party no.1 that opposite party no.2 and 3 were expelled from the Exchange and called upon her to furnish the claim format so that her claim could be processed. Whatever documents were in her possession were forwarded to the opposite party no.1, however for two months thereafter no action was taken by opposite party no.1 who started using delaying tactics to frustrate her claim. After almost a year vide letter dated 5th March 2004 more clarifications were sought by opposite party no.1 and finally vide letter dated 29th September 2004, opposite party no.1 informed the complainant that her claim were inadmissible for further processing and payment, for the reason that she had not provided the proof of delivery in respect of sell trades the proceeds of which had been financed to buy trades claimed for.
Complainant states that the above reason was totally unjustified when in fact she had submitted all the documents as requested for processing the claim.
13. Complainant states that opposite parties have been negligent in providing service to her and therefore all of them are jointly and severally liable to make good the loss suffered by her and to compensate her for the mental tension and harassment caused in an amount of Rs.5,00,000/-. Complainant stated that she was also entitled to simple interest at the rate of 18% per annum on Rs.2,69,965/- from the date of purchase of shares which works out to Rs.2,42,968/-. The complainant states that till date the shares were not transferred into her account which amounts to deficiency in service on the part of opposite parties.
She was also entitled to Rs.15,000 as legal expenses. Complainant had issued legal notice to the opposite parties no.1, 2 and 3 calling upon them to jointly and severally compensate them for the loss. Opposite party no.1, 2 and 3 replied to the said notice and denied responsibility/negligence on their part. Thus the complainant in total claimed the following amounts:
a) Refund of amount paid towards 120 shares Rs 2,69,965/-
b) Interest @ 18% p.a. from 21st October 1999 Rs. 2,42,968/-.
c) Amount of loss suffered.
Rs.19,44,000/-.
d) Loss on dividends Rs. 27,270/-
e) Towards mental tension harassment traveling expenses.
Rs. 5,00,000/-
f) Legal expenditure Rs. 15,000/-
------------------
Total Rs.29,99,203/-
14. Complainant appended various documents to back her averments in the complaint. There is a settlement bill dated 26.10.1999 indicating purchase of 200 shares and sale of 50 shares of Satyam Computers by opposite party no.2. There is also appended the Transaction cum holding statement indicates transfer of 30 shares to the complainant.
15. Opposite party no.1 filed their reply and affidavit through Mr. Vikram Kadam the Assistant Manager. Opposite Party No.1 admitted that complainant had approached them with a complaint about non-receipt of 120 shares however, they stated that the complainant had not submitted relevant documents to substantiate her claim.
16. The Opposite Party No.1 stated that it was mandatory for every investor who trades through a trading member of opposite party no.1 to enter into a Member Client Agreement before dealing with a trading member.
This is an important step to establish relationship between the investor and trading member. Subsequently, for every transaction entered into it is a mandatory requirement for the trading member to execute a contract note for such transaction executed on the Exchange. The Member Client Agreement and Contract Note were not produced by the complainant despite requests for the same. The opposite party no.1 stated that the member client agreement was important in order to avail of the arbitration mechanism of opposite party no.1.
17. Opposite party no.1 also submitted that the trading facility of opposite party no.3 was withdrawn and opposite party no.3 was subsequently expelled on 1st August 2002 due to its continued failure to comply with their requirements. On expulsion, all the rules and bye-laws of opposite party no.1 apply to an expelled trading member and the defaulters committee takes charge of all accounts, documents and relevant papers of defaulter. On the defaulter submitting the relevant documents to them, the National Securities and Exchange Board of India and Securities and Exchange Board of India (SEBI) provide the manner in which the assets should be applied in satisfying the claims of the investor. The defaulters Committee calls in to realize the security deposit, margin money and other amounts lying to the credit of and securities deposited by the defaulter as per their bye laws, rules and regulations on declaration of any member as a defaulter. Opposite party no.1 stated that though the complainant did lodge a claim in the required form for non receipt of 120 shares of Satyam Computers, she however, did not furnish proof as required and requested by them in order to enable the defaulters committee of opposite party no.1 to process the claim against opposite party no.3.
18. Opposite party no.1 specifically states that complainant was to show proofs such as the name of the sub-broker through whom she had purchased the 150 shares of Satyam Computers; the member client agreement; proof of payment for shares purchased whether through bank or cash and the demat transaction copy of ledger accounts in the books of expelled member; the client code/ID allotted for her trade transactions on NSE; confirmation on whether she is a broker or sub broker. The opposite party no.1 state that despite having given the complainant considerable time to furnish the above documents she did not do so and thus the committee was constrained to conclude that the claim was inadmissible for further processing and the reason was that the complainant had not provided the proof of delivery in respect of the sell trades, the proceeds of which have financed the buy trades claimed for.
19. The opposite party also submitted that the complainant was not a consumer qua them as there was no contractual nexus between complainant and them; that there was no element of hiring of service by the complainant and no rendering of service by them; that inadmissibility of the claim by the defaulters committee does not confer a cause of action to approach this Commission. Opposite Party no.1 prayed that the complaint be dismissed as being unsustainable.
20. Opposite Party No.2 (Zen Shares & Securities Ltd) was arraigned as a party through its Branch Manager/Managing Director Shri Clifford Viegas. His stand was that he was never the Branch Manager of Opposite Party No.2, however he was the director of Opposite Party No.2 and Opposite Party No.2 existed till 25-04-1999 and with effect from 26-04-1999 the name of Opposite Party No.2 was changed to Mccliff Securities Ltd. Shri Clifford Viegas stated that he resigned on 01-01-2000 and ceased to have any relations either with Opposite Party No.2 or Opposite Party No.3. He further stated that the alleged transactions of the complainant was with Zen Shares & Securities Ltd., and/or McCliff Securities Ltd., which are companies incorporated under the Companys Act and as such are independent entities. He further claims that he was an agent of Opposite Party No.2 and 3 during the period of the said transaction and as such any transaction done by him or any documents signed was in his capacity as an agent of the said companies and not in his individual capacity and thus he was falsely implicated in the complaint. Opposite party no.2 further contended that he has never obtained any signatures of the complainant on any blank forms and specifically denied that the complainant had purchased any shares of Satyam Computer from him or paid him brokerage charges. He further stated that the claim of the complainant is based on presumptions and the figures/values quoted by the complainant were exaggerated and false, frivolous and vexatious and for which the complainant was liable to pay him a sum of Rs.10,000/- in terms of section 26 of the Consumer Protection Act.
21. Opposite party no.3 was served through publication but they did not put in their appearance and have proceeded exparte.
22. We have perused the submissions and documents filed by the parties in detail.
23. The complainant has through documentary evidence clearly proved the fact that she had indeed purchased shares 200 of Satyam Computers.
She has clearly indicated that as part of the trading she had a demat account with Global Trust Bank (now Oriental Bank of Commerce) and opposite party no.2 were only providing statements indicating details of purchase and sale of shares. No other statements of ledger accounts were being given to her by opposite party no.2. The complainant has purchased 200 shares and has been allotted a settlement no.1999042. Out of these she sold 50 shares.
The complainant has produced the original copy of the settlement bill given by Zen Shares and Securities Ltd. dated 26-10-1999 (for the period 20-26th October 1999) indicating sale of 50 shares of Satyam. This bill has been signed on behalf of Zen shares and securities. The complainant has also produced the Transaction-cum- Holding Statement of the complainant which indicates the DP ID as IN300020 and the Credit of 30 shares of Satyam Computers by Zen Shares Security Ltd, Physical/2000016/0. This clearly indicates that trading was done by Opposite Party No.2 in their name and that transfer of at least 30 shares was done to the account of complainant have Customer Account No.F001. The NSE chit ID No. is 10609273.
24. The argument of opposite party no.1 on the legal issues raised that complainant is not a consumer qua them and there was no hiring of service by complainant or rendering of service by them ought to be rejected as the Honble National Commission in the case of Senior Manager, Delhi Stock Exchange v/s Ravinder Pal Singh & Anr (revision petition No.1479 of 2005) has clearly held that The Delhi Stock Exchange is a service provider as stated in the Memorandum and Articles of Association because it controls the mode manner, time and place of performance of contract between the Broker member and the investors. The DSE is also required to maintain and run a clearing house which receives shares and disburses payment to the member brokers. The margin money is also required to be deposited by the investor through the member broker with the DSE on the basis of the prescribed scale. The DSE is a profit making body since it issues tickets (membership cards) as well as bonus tickets for trading rights to the member brokers who have to pay an initial admission fee and a regular subscription fee to DSE. The member broker, in turn charges brokerage from the investor client on scale prescribed by the DSE.
25. Thus the same method of functioning would apply to the NSEIL and the argument that they are merely facilitating agency where members trade/deal in securities listed on NSEIL and thus they only provide members a forum for trading/dealing in securities, ought to be rejected.
26. On the aspect of rejection of the claim of the complainant that she did not hand over the required documents specifically the member client agreement and the contract note, besides bank statements evidencing the payments, we note that the complainant has clearly stated that opposite party no.2 has only provided her with a settlement Bill showing the details of trade such as sale and purchase of shares in question. The opposite parties have not denied that the complainant had purchased 200 shares of Satyam Computers. The demat account statements indicates that the complainant was trading via opposite party no.2 as their name figures on the transaction cum holding statement.
27. It is possible for opposite party no.1 to track down the transactions if they so desired. Instead the opposite party no.1 has sought to put the entire onus on the complainant and trying to follow the rule book to a tee instead of titling in favour of the investor. Non production of the agreement and contract note is not fatal and does not disprove the fact that the complainant did have shares in Satyam Computers. We note that the opposite party no.1 has ultimately rejected the claim on the basis that the complainant had not provided the proof of delivery in respect of the sell trades, the proceeds of which have financed the buy trades claimed for. In their affidavit in evidence the opposite party no.1 have themselves clearly admitted that they have observed that in so far as the payment of consideration for the purchase of the alleged 150 shares of Satyam Computers were concerned, the payment was not made directly by financed/funded out of the sale proceeds of the shares sold in the same settlement in which the complainant purchased 150 shares of Satyam Computers. They could have made this observation only by looking at the transactions and other data records available with them. Besides, it is to be noted that even if there is no contract note in the hands of the complainant, the settlement Bill issued by opposite party no.2 abundantly makes it clear that the complainant has entered into the transaction in question.
28. Further it is to be noted that opposite party no.1 has expelled opposite party no. 3 as on lst August 2002. Why was this done and at whose behest was not explained by opposite party no.1. Complainant has stated that opposite party no.1 has settled some claims of other investors with opposite party no.2, which statement has not been denied by opposite party no.1. Opposite party no.1 further states that they had requested opposite party no.3 to submit the various documents, books of accounts, vouchers, ledgers but they had failed to do so. If opposite party no.3 is not heeding to the request of opposite party no.1, how would the complainant get hold of such ledgers documents etc. from opposite party no.3? Opposite party no.1 is to oversee the rightful claims and protect the interest of investors. For this they have the power to call in the security deposit and other monies lying with them to satisfy the genuine claims of the investors. The opposite party no.1 has resorted to delaying tactics even though proof of the trading and non transfer of the shares by opposite party no.2 and 3 was clear and available to them. The transfer of the 30 shares would indicate the source of the transfer to backtrack the original purchase of 200 shares.
29. Opposite party no.2 and 3 cannot wash their hands off the transactions. Opposite party no.2 has clearly issued settlement Bill which indicate they were trading and the Depository Account shows a credit of 30 shares of Satyam Computers which could only relate to the trade in question.
They have in no way denied their transaction cum holding statement which indicates the transfer of the 30 shares to the account of the complainant. Shri Clifford Viegas states that he was the Director at the relevant time of the transaction in October 1999. His resignation later on in the year 2000 does not exonerate him and he is liable and responsible for the non transfer of the shares of the complainant. The Director of a company can be held liable in his personal capacity and subsequent resignation does not absolve him of this liability.
30. Thus we hold all the opposite parties i.e. opposite party no.1, 2 and 3 liable to compensate the complainant for the loss she has suffered as a result of the non transfer of 150 shares in the account.
31. Now as to the quantum of compensation claimed.
32. Opposite parties nos. 1 2 and 3 are jointly and severally directed to refund to the complainant the sum of Rs.2,69,965/- paid towards the purchase of shares alongwith simple interest @ 12% per annum from 21.10.1999 till date of payment. The amount of Rs.27,270 on account of loss on dividends can surely be granted as they are as per the dividends as announced by Satyam Computers to investors as per number of shares. The complainant is also liable to be compensated for the mental tension she underwent due to the lack of transfer of shares and moreso the lack of replies and clarification with regard to the non transfer, however, on the amount of Rs.19,44,000/- which she claims on the basis of the value which the share had peaked to of Rs.7,200/- per share in the year 2000, such amounts cannot be granted as they are illusory transactions that have not taken place. So also the amount of Rs.5,00,000/- claimed for mental agony has not been sufficiently explained or justified. The compensation of Rs.25,000/- for mental agony will be sufficient of meet the ends of justice. The complainant will also be entitled to Rs.1,500/- as costs of the complaint.
ORDER Opposite parties no.1, 2 and 3 jointly and severally are directed to refund the sum of Rs.2,69,965 alongwith interest @ 12% p.a. from 21-10-1999 till date of payment to the Complainant.
Opposite Parties No.1, 2 & 3 are directed to pay an amount of Rs.27,270/- on account of loss on dividends.
Opposite Parties Nos.1 2 & 3 jointly and severally are directed to pay to the complainant an amount of Rs.25,000/- as compensation.
Opposite Parties No.1 2 & 3 jointly and severally are directed to pay costs of Rs.15,000/-
Pronounced in the open court.] [Sandra Vaz e Correia] Member [Caroline Collasso] Member 19-02-2010 ORDER Opposite parties no.1, 2 and 3 jointly and severally are directed to refund the sum of Rs.2,69,965 alongwith interest @ 12% p.a. from 21-10-1999 till date of payment to the Complainant.
Opposite Parties No.1, 2 & 3 are directed to pay an amount of Rs.27,270/- on account of loss on dividends.
Opposite Parties Nos.1 2 & 3 jointly and severally are directed to pay to the complainant an amount of Rs.25,000/- as compensation.
Opposite Parties No.1 2 & 3 jointly and severally are directed to pay costs of Rs.15,000/-
Pronounced in the open court.] [Sandra Vaz e Correia] Member [Caroline Collasso] Member