State Consumer Disputes Redressal Commission
C-231/2000 vs Satyam Computer Services Limited on 14 July, 2008
IN THE STATE COMMISSION: DELHI IN THE STATE COMMISSION: DELHI (Constituted under section 9 clause (b) of the Consumer Protection Act, 1986) Date of Decision: 14-07-2008 Complaint No.C-231/2000 Ms. Ankeeta Baheti, R/o. 62/12, IInd Floor, Old Rajender Nagar, New Delhi-110060 Complainant Versus 1. M/s Satyam Computer Services Limited, Regd. Office: 1st Foloor, Mayfair Trade Centre, 1-8-303/36, S.P Road, Secunderabad-500 003 IInd Address: Amrit House, 2nd Floor, 17, Sant Nagar, East of Kailash, New Delhi-110065 . Opposite Party No.1 2. M/s Karvy Consultants Limited, 46, Avenue 4, Street No.1, Banjara Hills, Hyderabad 500 034 . Opposite Party No.2 3. James Caple Batliwala and Karani Securities Pvt. Limited, Construction House, 5, Walchand Hirachand Marg, Bellard Estates, Bombay 400 038 . Opposite Party No.3 CORAM: Mr. Justice J.D. Kapoor, President Ms. Rumnita Mittal, Member
1. Whether reporters of local newspapers be allowed to see the judgment?
2. To be referred to the Reporter or not?
Justice J.D. Kapoor (Oral)
1. The instant complaint has been filed by the complainant against the Opposite Parties (in short O.P) for non-transfer of 100 shares allotted by it and sent to the O.P. for transfer in her name which was refused on the ground that the same were fake. As such the complainant has sought the following reliefs:-
i) O.Ps be directed to give 1000 equity shares of the company of face value of Rs. 2/- (including equity shares allotted as bonus shares by the O.Ps); or in the alternative, compensate for the monetary loss being the current market value of 1000 equity shares of the O.P. company, which as per the trades executed at National Stock Exchange on 17-08-2000 is Rs. 488/- per share aggregating to Rs. 4,88,000/-
along with interest at the rate of 18% p.a. from the date of commitment till actual date of payment.
ii) The O.Ps be directed to pay to the complainant a sum of Rs. 9,66,990/- being the difference of the highest traded price and the current market price of the shares of the respondent company.
iii) Award a compensation of Rs. 1,00,000/- to the complainant for the mental agony, pain and torture caused by the respondents to the complainant.
iv) Award the cost of litigation.
2. Facts of the case lie in a narrow compass. The complainant had purchased 400 shares of OP No.1- Company through M/s M.R Investment on 10.07.1997 and 14.07.1997 vide contract Note No. N1-C/9728/00001 dated 10.07.1997 and 14.07.1997. Complainant sent those shares for transfer at the registered office of OP No.1 on 9.9.97 through speed post. Out of 400 shares only 300 shares were duly transferred in the name of the complainant and her representatives. In respect of the balance 100 shares no intimation was given. Repeated letters and reminders were sent to the company and since there was no response from the OP, the Secretarial Circle was contacted on 07.09.98 to find out the status of shares but complainant was shocked to learn on telephone from Shri Ramesh Pai, in the Shares Transfer Department that the said shares had already been transferred in the name of Ms. Neha Sharma on 09.09.97 on the same date when our 300 balance shares were transferred in the name of the Complainant/Relatives.
3. The complainants representative visited the OP- Company and met the Company Secretary on 21.09.98 who issued a letter dated 21.09.98 intimating that the share certificate in question was fake.
This was for the first time after more than a year the alleged fact was brought to the knowledge of the Complainant in spite of numerous correspondences though the said memo was never received by complainant.
4. Contradictory statements are made by Mr. Ramesh Pai and Mr. A.K. Rao.
Mr. Pai stated that the shares were transferred in the name of Ms. Neha while on the other hand Mr. A.K. Rao claims that the shares were fake.
5. The factum of certificate being fake was intimated to the complainant after such a long time and the fake certificate in original, as claimed by the OP was never returned to the complainant as per the rule of Stock Exchange, the complainant also could not contact his broker for the replacement of said shares. This amounts to Negligence and Deficiency of services on the part of the Ops. The complainant is also perturbed to note that the share certificate in question is declared to be fake at the time of 2nd transfer. Certificate alleged to be fake, were first introduced by James Caple Batliwala and Karani Securities Pvt. Ltd. Code #06070 SEBI registered No.INB.2306033 who is also impleaded as OP No.3, hence are duty bound to replace the fake shares with the genuine one.
6. OP-Company came out with the Bonus Shares in the ratio of one share of every one share held. The complainant has been deprived of her lawful right. Because of the negligence and deficiency of services of the Ops, the complainant had been deprived of its right to sell off the shares at the relevant time and consequently suffered a loss of Rs.9,66,990/-.
7. OP No.2 was the share transfer agent of the OP company and the letter of OP No.1 dated 21.9.1998, already states that the matter is being taken up with OP No.2, it indicates that something wrong has been done at the office of OP No.2 for which OP No.2 is liable, jointly and severally, with OP No.1.
8. O.P.1 has controverted the version of the complainant by pleading that the equity shares of OP-Company are traded in Stock Exchanges and is listed in HSE, BSE and NSE. It is false to state that the Complainant had bought subject shares (Share Certificate No.119538) from M/s MR Investment vide the referred contract note. The OP-company was in receipt of subject Share Certificate No.119538 from the complainant for transfer in her name but the same were returned under Objection. Since the share certificate was fake and forged, same was confiscated and retained by the OP- Company. Again OP company vide its letter dated 21.09.1998 had informed the Complainant as to the reasons for bad Delivery of subject shares and also stated that company would take up the matter with OP No.2 and find out whether the claim of the complainant was/is genuine.
9. O.P.1 further denied that the complainant was informed about the transfer of subject shares in favour of Ms. Neha Sharma in the year 1992 had applied for allotment of 200 shares vide her application No.08096332. Against her said Share Application, she was allotted 100 shares vide Allotment No.205804 (Folio No.45041) and the share certificate number allotted to her is 119538. Question of complainant being informed that the same were transferred in favour of Ms. Sharma in the year 1997 does not arise at all.
10. Since it was informed to the company that subject fake certificate was once transferred in favour of M/s Canara Bank (Trustee Canbank Mutual Fund) it was stated by the OP company vide its letter that the matter would be taken up with Karvy Consultants and find out the facts of the issue. After thorough investigation, it was noticed that no transfer has been effected and the endorsements on the Fake Share Certificate were all fabricated and forged.
11. There are no contradictory statements made by the officials of the OP Company and all the allegations made in this regard are baseless. Subject fake share certificate was never introduced by any share broker (registered) and the allegation that OP No.3 herein M/s James Caple Batliwala and Karani Securities Pvt. Ltd., had introduced subject shares is also far from truth. There is no negligence or deficiency of services on the part of this OP Company. Genuine share certificate No.119638 was not allotted to any Mr. Paramjeet Singh nor did at any point of time M/s Canara Bank lodge subject fake shares for transfer in its favour. The endorsements made on the fake certificate are all forged and fabricated
12. It is further contended that the OP-1 Company had issued Bonus Shares @ 1:1 to all its existing registered share holders as on the record date for issue of Bonus Shares. Since the complainant was not the registered holder of share certificate No.119538 (Genuine shares) she was not allotted any Bonus Shares. It is also true that the OP Company had split in equity shares having face value of Rs.10/- into 5 equity shares of face value of Rs.2/- each. She is not entitled for any reliefs, much less an amount of Rs.9,66,990/- or any amount towards alleged mental agony.
13. O.P.1 has also raised the objection that this Commission has no jurisdiction to entertain or adjudicate the matter and on this ground itself, the complaint of the complainant deserved to be dismissed.
The Registered office of Satyam Computer Services Ltd. (SCSL) is situated at Secunderabad and it has no branch office in the state of Delhi and no cause of action arose in Delhi and also that the complaint was barred by limitation.
14. The endorsement on the back side of the fake share certificate is forged and the same does not appear in the records of the OP-Company.
Since the lodgment of fake share certificate is bad in law and since the same is not permitted to be transferred or transacted, the question of effecting transfer of subject shares in favour of the complainant does not arise at all and if effected, it would have amounted to contravention of applicable law.
15. It is further contended by O.P-1 that the Legal Notice dated 06.07.2000 sent by the complainant was duly replied to by it vide its reply dated 25.09.2000. After thorough verification of records and minutes of Transfer, it came to light that subject shares were transferred in favour of M/s Canara Bank and it also came to light that the contents of the Share Certificate and the Transfer Deed are rank forgery.
16. O.P.2 was proceeded ex-parte as it failed to appear or file written version despite proper service.
17. O.P.3 has totally denied that it has any connection whatsoever with the sale or transfer or dealings in respect of the shares the sale or transfer or dealings in respect of the shares bearing Distinctive Nos.11953701 to 11953800 under Share Certificate allegedly bearing No.119538.
The rubber stamp affixed on the Share Transfer Form relied upon by the Complainant is not the rubber stamp of OP No.3. The signature appearing above the rubber stamp on the share transfer form is not of Deponent. Code number of OP No.3 at the relevant time was 06070 and SEBI Registration number of OP No.3 at the relevant time was INB 230607033 and not INB 2306033 as mentioned on the reverse of the Share Transfer Form relied upon by the Complainant.
18. In her rejoinder to the reply/written statement of O.P.1, the complainant has reiterated the fact that the OP-Company has its Development Centre at Amrit House, Second Foor, 17, Sant Nagar, East of Kailash, New Delhi. It is contradictory statement when the O.P.1 says that the Share Certificate had been returned under objections in the same breath says that the share certificate being fake was confiscated by the company, as the share certificate cannot be returned under objection and be confiscated simultaneously. The OP has not placed on record any document to prove that the share certificate No.119538 was allotted to Ms. Neha Sharma, vide allotment No.205804 in 1997 itself. In the absence of any documentary proof the contentions of the OPs are liable to be rejected.
19. Complainant came to know about the subject share certificate being fake for the first time only on 21st September, 1998. The OP No.1 has not placed on record any document to show that the intimation with regard to the said share certificate alleged to have been fake had been sent to the complainant by OP No.1.
20. The complainant has also denied that the complaint is devoid of merit or that this Commission has no jurisdiction to adjudicate upon the complaint or that the complaint is barred by limitation.
21. In her rejoinder to the reply/written version of O.P.3, the complainant has controverted the stand of O.P.3 by stating that the correct spellings of the name Batliwala is appearing on the share transfer form bearing the stamp of M/s James Capel Batliwalla and Karani Securities Pvt. Ltd. She has also denied that the SEBI registration number of the OP No.3 at the relevant time was INB 230607033.
22. Keeping in view the above conspectus of facts that the complainant had purchased 400 shares and had sent the same for transfer to O.P.1 on 09-09-1997 out of which 300 shares were duly transferred in her as well as in the names of her representatives, whereas no intimation was given regarding the balance 100 shares; the stand of the O.P is that the said shares were fake and as such were returned under objection and, on the other hand, has taken the contradictory stand that the same were confiscated and retained by the Company and that it had informed the complainant vide letter dated 21-09-1998 as to the reasons for bad delivery of subject shares and also that it would take up the matter with O.P.2 as to whether the claim of the complainant was genuine or not. However, despite the lapse of one year or more, the complainant was made to run from pillar to post and despite various communications sent by the complainant, no cogent reply was forthcoming. It was only as late as 21-09-1998 the fact that the share certificates in question alleged to be fake by O.P.1 was issued and also traded on the floor of the stock exchange. It was the responsibility of the O.P.1 Company to ensure that none of its share certificates which are valuable documents in the capital market is duplicated by dubious persons and traded in the market so as to cause undue financial loss to any person.
It was also the obligatory duty of O.P.2 to comply with the statutory responsibility of intimating the factum of the share certificate in question being fake as by the time the O.P.1 informed the complainant about the said fact in 1998 the broker from whom the shares had been purchased had already ceased to be in business and thus the bad delivery could not be lodged by the complainant through the said broker and had to bear huge financial loss.
23. As per Section 111-A of the Companies Act, the company is bound to transfer the share lodged by a person within a period of two months from the date of lodgment or intimate the reasons for not transferring the same. Further, as per requirement of the Listing Agreement executed with the stock exchanges the shares which are traded on the floor of stock exchange are compulsorily required to be transferred in the name of the transferee within a period of one month from the date of its lodgment. As such if the shares in question were found to be fake and bad delivery and could not have been transferred due to whatever reasons, intimation in that respect was bound to be given to the complainant during the said stipulated period of one month. Having failed to do so, O.P. 1 and 2 are jointly and severally liable to compensate the complainant for the financial loss as well as harassment and mental agony suffered by her.
24. So far as O.P.3 is concerned, it has categorically stated in its affidavit that the rubberstamp affixed on the share transfer form relied upon by the complainant is not that of O.P.3 nor the signatures appearing above the stamp belong to the authorized signatory.
It has also been reiterated that the code number of O.P.3 at the relevant time was 06070 and SEBI Registration number at the relevant time was INB 230607033 and not INB 2306033 as mentioned on the reverse of the share transfer form relied upon by the complainant. The said fact has not been controverted effectively by the complainant. As such O.P.3 cannot be held liable for any deficiency in service to the complainant.
Even otherwise, there is no privity of contract between the complainant and O.P.3 as the complainant had purchased the alleged shares from M/s. M.R. Investments which have not been made a party to the complaint as it is stated that the said broker has wound up its business and no longer exists.
25. Therefore, under the circumstances of the case, O.P. 1 and 2 are directed to pay to the complainant Rs. 1.00 Lakh (One Lakh) as lump sum compensation for the loss of 100 shares though the purchase value of each share has not been mentioned.
26. However, the notional loss claimed by the complainant amounting to Rs. 9,66,990/- cannot be granted as the very genuineness of the shares purchased by the complainant is in doubt , nor is the complainant entitled to allotment of 1000 equity shares of the O.P.1 Company on the premise that the O.Ps had come out with the scheme offering bonus shares at the rate of 1:1 to all existing registered share holders and that the complainant was deprived of the said benefit being not registered holder of share certificate No. 119538.
27. The complaint disposed of in above terms.
28. Copy of order as per statutory requirement be forwarded to the parties free of cost and thereafter the file be consigned to record.
(Justice J.D. Kapoor) President (Rumnita Mittal) Member HK