State Consumer Disputes Redressal Commission
M/S.Karvy Computershare Pvt. Ltd., ... vs Praveen Kumar Rumalla, And 2 Others ... on 18 March, 2009
BEFORE THE A BEFORE THE A.P.STATE CONSUMER DISPUTES REDRESSAL COMMISSION: HYDERABAD. F.A.No.1270/2006 against C.D.No. 289/2006, Dist. Forum-III, Hyderabad . Between: M/s.Karvy Computershare Pvt. Ltd., Karvy House No.-46, Avenue -4, St. No.1, Banjara Hills, Hyderabad. Appellant/ Opp.party no.2 And 1.Praveen Kumar Rumalla, 3-2-205, Rajamudaliar street, Secunderabad. 2. Rumalla Madhusudan Rao, 3-2-205, Rajamudaliar Street, Secunderabad. Respondents/ Complainants 3. ING Vysya Bank Ltd., A Company Regd. under The Banking Companies Act with its Regd. Office at ING Vysya House , No.22 M.G.Road, Bangalore -1. Format Respondent/ Opp.party no.1 Counsel for the appellant : M/s Counsel for the respondents : Sri G.Bharath Kumar R1& R2 M/s.V.Padmanabhan-R-3 CORAM : THE HONBLE JUSTICE SRI.D.APPA RAO , PRESIDENT, AND SRI SYED ABDULLAH, HONBLE MEMBER
WEDNESDAY, THE EIGHTEENTH DAY OF MARCH, TWO THOUSAND NINE.
Oral Order : (Per Sri Syed Abdullah, Hon ble Member. ) *** The appellant is the unsuccessful opposite party no.2 in C.C.No.289/2006 on the file of Dist. Forum-III, Hyderabad in which the complaint was allowed directing the opposite parties 1 and 2 to pay a sum of Rs.60,000/- towards compensation within a period of two months from the date of order and to pay costs of Rs.500/- .
Aggrieved by the impugned order this appeal is filed by the appellant/opp.party no.2 raising the contention that the impugned order suffers from factual and legal infirmities.
The facts of the case are that the first complainant was holding 304 equity shares of Vysya Bank Ltd . which later merged into ING Vysya Bank Ltd. (Opp.party no.1) who had floated Right Issue in the year 2005 to all its shareholders and accordingly offered rights shares in the ratio of 1.3 with respect to the equity holding of the share holder. The first complainant originally eligible for 912 shares of the face value of Rs.10/- each at a premium of Rs.35/- per share and he had opted for the same by applying through two split forms for 305 and 607 right shares respectively. The 2nd opposite party is the Registrar for the said Rights Issue and 305 rights shares were applied by the 1st complainant which were allotted to him duly by accepting his signature on the option form. The remaining 607 right shares were renounced in favour of the complainant no.2 after taking consideration from him. So the second complainant had applied for 607 right shares along with 93 additional shares paying a sum of Rs.31,500/- . The renounced application for 700 shares applied for by the 2nd complainant was rejected by the opp.party no.2 on the ground that the signature of the 1st complainant was not matching with the specimen signature available with them. The signature of the 1st complainant was accepted by the opposite parties 1 & 2 for sending split forms against the requisition letter and for allotment of 305 rights shares. The application for 700 shares was rejected arbitrarily on the ground that there was mis-match of signatures. The rejection of second application form amounts to deficiency in service on the part of the opposite parties. The opposite parties have returned an amount of Rs.31,500/- by refund order which was encashed by the 2nd complainant without prejudice to the right of the complainants. Hence the complainants sought direction against the opposite parties to allot 607 shares of ING Vysya Bank Ltd. in favour of the complainant no.2 against payment of Rs.27,315/- or to award Rs.60,700/- being the difference in price with interest @ 18% p.a. w.e.f. 12.4.2005 till the date of actual payment by the opp.party , to award compensation of Rs.10,000/- along with costs of Rs.5000/- to the 2nd complainant .
The opposite party no.1 in its version while admitting that a right issue of Rs.10/- each at a premium of Rs.35/- per share was floated for subscription by the equity shareholders of the bank on the right basis in the ratio of 3 rights shares for every equity share held as on February 28, 2005. The 1st complainant is one of the shareholders holding 2 folios , one in physical and other in demat mode. . It is also admitted that opposite party no.2 had offered 912 rights in two split forms i.e. for 305 and 607 rights shares. It was further admitted that the application for 305 shares was processed and the shares duly allotted to him. The second split form for 607 shares was rejected as the signature of the 1st complainant did not tally. The entire process of verification is to be done by opposite party no.2 and opposite party no.1 allots the shares based on the details forwarded by the opposite party no.2 . The complainants are not consumers within the definition of C.P.Act 1986 as no shares have been allotted and as such the complainant does not acquire the status of Consumer and there is no contractual relationship between the complainants and opposite parties. The difference in market price and issue price cannot be treated as profit as claimed by the complainants as the factors guiding the quantum of price have different parameters and cannot be compared. and there is no cause of action .
The opposite party no.2 reiterated the maintainability of the complaint and taken the same defence of opposite party no.1. The opposite party no.2 stated that they are Registrar to the rights issue and CAF along with letter of offer was dispatched to all share holders to enable them to participate in the rights offer and rights issue form can be renounced by a shareholder who is entitled to rights. However it is stated that two signatures were made on the said renunciation form and one of the signature appeared to be tentative making them to see that an attempt was strenuously made to reproduce the signature of the actual holder.
Therefore the application was rejected out of caution to prevent any fraudulent transaction. Shareholder must sign the CAF as per the specimen signature recorded with the Bank.
` On the respective conclusions the District Forum framed following points:
1.
Are the complainants Consumers?
2. Whether the shares meant for commercial purpose?
3. Was the complainant entitled for the rights shares ?
4. Was the opp.party no.2 justified in rejecting the application ?
5. Are the opp.parties 1 and 2 jointly liable.?
During the enquiry the complainant filed Ex.A1 & A2 xerox copies of C.A.F. , Ex.A3 letter dt.13.5.2005 , Exs.A4 & A5 letters from opp.party no.2 to the complainant dt. 17.5.2005 and 27.7.2005 along with evidence affidavit. On the side of opp.parties Ex.B1 copy of C.A.F. and Ex.B2 copy of guidelines along with evidence affidavit are filed.
Considering the factual aspects and evidence on record the District Forum arrived at a finding that the opposite party no.1 having offered rights shares to the complainant no.1 to which he is eligible for 912 shares and the same were applied by him in two split forms , 305 of which were allotted and 607 were renounced in favour of the second complainant on the ground that the signature of the 1st complainant did not tally with the specimen signature provided to them which amounts to deficiency in service and thereby held that the opposite party no.1 and 2 are liable and thereby granted reliefs.
We have gone through the factual aspects and evidence on record . The entire dispute in controversy rests on a question of non allotment or rejection of shares by the opposite party. no.1 basing on verification report submitted by opposite party no.2 stating that signature of 1st complainant in the split form which was renounced in favour of the second complainant was not tallied. The District Forums finding is that since the first complainants entitlement to 912 rights shares is not in dispute so also renouncing it being a share holder he exercised the rights conferred on him so he is entitled to 912 shares which he had split into two applications renouncing 305 shares in favour of his mother under Ex.A2 and 607 shares in favour of his father under Ex.A1. Both the opposite parties have resisted the impugned order relying on the various decisions referred to there in written arguments as to the maintainability of the complaint and the findings arrived at by the District Forum. .
The 1st opposite partys main contention is that intention of the complainant was to sell the shares by hinting at the net benefit which indicates a desire to profit out of issue which excludes him as a Consumer as it indicates a commercial purpose of the transaction. . While so the opposite party no.2s contention is that valuation of shares is not a sale and it is only a prospective investors even though existing shares holders to apply for shares which does not amount to sale attracting its ingredients . Lastly it is contended that sending rights application form and split form would ensure only right to apply to only rights shares which has not come into existence . It is vehemently argued that when there is no allotment applicants which merely prospective investors and the provisions of C.P. Act are not attracted as has been laid down by Honble Supreme Court in a judgement MORGAN STANLEY MUTUAL FUND vs. KARTHICK DAS (1994) 2 CPJ 385 (Supreme Court) (CP).
To resolve the controversy of the present complaint the principles laid down in the decision cited supra will be helpful to decide whether the dispute falls within the scope of Section 2(1)(d) of Consumer Protection Act or not.
Apex court also laid down that a prospective investor is not a consumer under Section 2(1)(d) of the Consumer Protection Act. In para 16 of the afore said judgement it reads as follows:
The share means a share in the capital . The objects of issuing the same is for building up capital. To raise capital, means making arrangements for carrying on the trade. It is not a practice relating to the carrying of any trade. Creation of share capital without allotment of shares does not bring shares into existence. Therefore, our answer is that a prospective investor like the respondent or the association is not a consumer under the Act .
It was held that the Forum has no jurisdiction in the matters of this kind. Basing on the said principles it can be easily decided whether the shares in which application Ex.A1 was made for allotment would be goods as per Section
2 (d) of Sale of Goods 1930 or not. It is clear from the principles laid down in the above section that till the allotment of shares takes place shares do not exist as such not called as goods. Though the complainant as a share holder of 304 equity shares as per the register and offered rights shares and by renouncement in favour of the 2nd complainant he cannot become a member until the shares are transferred especially when the allotment of shares could not take place on account of mis match of signatures. So it cannot be said that 2nd complainant was allotted with shares. It is very clear from the afore said decision that Section 2(1) and clauses 2,3 and 4 of the Act are not attracted . When the company is not trading in the shares it cannot be said that unfair trade practice was adopted . The shares means a share in the capital. The evidence on record itself is very clear that an application was filed by the 1st complainant for splitting 605 shares in favour of the 2nd complainant which was rejected on the ground of mis match of signatures and thereby 2nd complainant was not allotted any shares at all. Infact no shares were in existence at all and in the absence of allotment of shares they are only prospective investors. The findings of the District Forum that since the 1st complainant being an owner of 912 shares he was eligible to apply in two split forms and non allotment of shares would amounts to deficiency in service and the said finding is not sustainable . In the light of decision of Honble Supreme Court and for the afore said discussion and reasons given the impugned order is not sustainable and it is liable to be set aside.
In the result appeal is allowed setting aside the order of the District Forum-III, Hyderabad dt.14.8.2006 in C.D.No. 289/2006 by dismissing the complaint . In the circumstances of the case each party to bear their own costs.
PRESIDENT MALE MEMBER DT. 18.3.2009