State Consumer Disputes Redressal Commission
1.M/S. Godavari Securites vs D.Satyanarayana on 31 July, 2023
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BEFORE THE TELANGANA STATE CONSUMER DISPUTES
REDRESSAL COMMISSION:HYDERABAD
(ADDITIONAL BENCH)
F.A.No.511/2018 against C.C.No.40/2010,
District Commission, Adilabad.
Between :
1.M/s.Godavari Securities, Rep. by its Proprietor, Vijay Kumar Agarwal, S/o.Late Sri Jugal Kishore Agarwal, Aged 45 years, Occ: Business, R/o.D.No.4-3-74/4A, Street No.04, Dwarakanagar, Adilabad.
2. M/s.Motilal Oswal Securities Limited, Rep. by its Authorized Signatory, Vijay Kumar Agarwal, S/o.Jugal Kishore Agarwal, R/o.Palm Spring Centre, Link Road, Mumbai. ... Appellants/ Opposite parties And D.Satyanaranaya, S/o.D.Raja Narsaiah, Aged 40 years, Occ:Employee, R/o.Hanumannagar, Dasnpur, Adilabad. ... Respondent/ Complainant Counsel for the Appellant : Mr.Pratap Narayan Singh.
Counsel for the Respondents : M/s.KR.R.Associates.
CORAM : Hon'ble Sri V.V.Seshubabu, M ember (J), And Hon'ble Smt.R.S.Rajeshree, M ember (NJ).
M ONDAY, THE THIRTY FIRST DAY OF JULY, TW O THOUSAND TW ENTY THREE.
Oral Order : (Per Hon'ble Sri V.V.Seshubabu, M ember (J) ****
01). This appeal is filed against the order in C.C.No.40/2010 dt.10.9.2018 by the District Consumer Commission at Adilabad directing the opposite party to pay Rs.4,66,000/- with joint and several liability with interest @ 7% p.a. from the date of the complaint till the date of realization with costs of Rs.5,000/- and 2 compensation of Rs.50,000/- within 4 weeks from the date of order, failing which interest will be enhanced to 9% on all the amounts.
02). The brief averments of the complaint in C.C.No.40/2010 are that the opposite party no.2 is having license to open D.Mat account and to do trading in National Stock exchange of India Ltd. and it opened branches all over India including the opposite party no.1 branch; that the complainant opened D.Mat account in the opposite party no.1 branch vide account no.WADLDO-12 to purchase equities and to trade shares for holding and also intraday; that the complainant deposited Rs.4,66,000/- by way of 6 cheques on different dates in his account with opposite party no.1; that the complainant purchased the shares i.e. Suzlone - 1000, IFCI-1000, IB Real -500, TTML 1000, Unitech 1000 with an intention for long term holding; that the opposite party no.1 operated the account of the complainant without his consent and knowledge, thereby made the transactions in intraday for their own benefit and due to the same, the funds were exhausted in the account for fund share balance, to do intraday non progressive shares which caused great loss; that on 27.12.2009, the complainant received a call from opposite party no.2 that his account transaction being operated with over confidential transactions and informed that the entire holding funds have been exhausted and balance was only Rs.21,660/-; that immediately complainant approached opposite party no.1 for detailed balance sheet, but they postponed to give the same on one pretext or the other and after repeated efforts, the complainant got the same and found defects in the operation of account and misuse of funds; that the complainant called opposite party no.2 for clarification and they revealed the fund balance at Rs.17,587/-; that one Kamal Pasha who is an employee in opposite party no.1 admitted that he made the business transactions in the account of the complainant without the permission or consent and it was a mistake and owned the responsibility for the loss and promised to adjust the loss without knowledge of anybody in a period of 6 months; that the conversation was recorded by the complainant in the cell phone in audio and video and it shows negligence on the part of the opposite parties 1 & 2 and deficiency in service and they are liable for mis appropriation of funds; hence, the complaint.
303). The brief averments of the written version of opposite party no.1 as adopted by opposite party no.2 are that the opposite party no.1 is the sub-broker of the 2nd opposite party; that the complaint is neither maintainable under law nor on facts and is liable for dismissal; that the complaint is vexatiously filed with sole intention of causing hardship to the opposite parties; that the complainant is put to strict proof of all the averments made in the complaint except those that are admitted; that there is no deficiency in service and opposite parties have not committed any mis-appropriation; that as per the agreement entered by the complainant, all the dispute differences or claims arising from the contract must be referred to Arbitration and so, the complaint is not maintainable; that the opposite party no.2 is a well diversified financial services group having business in securities, commodities, investment banking and venture capital and is a SEBI registered stock broker at National Stock Exchange of India ( NSE) and Bombay Stock Exchange (BSE); that the opposite party no.1 execute, orders for any buying or selling of shares only on the instructions of the client and it is a policy decision and no exception is permitted; that all the transactions that were reflected in the contract notes were dispatched to the complainant periodically and also sent by SMS to his registered mobile no.9247110662 till 5.11.2009 and thereafter to his another mobile no.9666612661 and the contract notes also duly posted on the website of the opposite party no.2 viz. WWW.Motilaloswal.com; that the complainant due to his ignorance and reckless trading incurred huge loss and unable to digest the same , filed the complaint with frivolous allegations; that if there was any semblance of truth in the statement of the complainant that the opposite party no.1 conducted the transactions without his consent and knowledge, he should have reacted immediately and taken up the issue with opposite parties and for obvious reasons did not take any such action; that the complainant has been making payments continuously for more than a year from 14.1.2008 to 31.8.2009 and if no instructions were given, it is for him to explain why continuously made the payments; that the alleged admissions of Mr.Kamal A.Pasha are hereby denied and they have no knowledge about the relationship between the complainant and Kamal A.Pasha; that the recordings alleged to 4 have been made by the complainant with regard to the admissions are fabricated to suit the needs of his case; that the complainant not approached the Commission with clean hands and so requested for dismissal of the complaint with exemplary costs.
04). Before the Commission below, the complainant filed evidence affidavit and got marked Exs.A1 & A2. Mr.Vijay Kumar Agarwal, Proprietor of opposite party no.1 filed evidence affidavit and got marked Exs.B1 to B11. Previously without evidence affidavits on either side, and basing on the documents i.e. Exs.A1 and A2 for the complainant and Exs.B1 to B11 for the opposite parties, the District Commission passed an order on 23.3.2011 by directing the opposite parties 1 & 2 to pay a sum of Rs.4 lakhs, compensation of Rs.1000/- and to reimburse the court fee of Rs.500/-. As against the same opposite parties filed W.P.No.8622/2011 before the Hon'ble High Court at Hyderabad (for the States of TS & AP) and it was disposed of on 15.12.2014 with a direction to the Commission below, to decide whether the complainant is a consumer within the meaning of C.P.Act and also to decide whether the transaction between the parties is a commercial one and with that observation, the earlier order was set aside and the matter was remanded to the District Commission. Thereafter, the present impugned order was delivered on 10.9.2018.
05). Aggrieved by the same, the appeal is filed with the following grounds:
i. The order of the Commission below is not maintainable as admittedly, the contract between the parties is for trading and transactions were traded to the tune of 14 crores and it is for commercial purpose;
ii. The Commission below not appreciated Exs.B1 to B11 in a proper perspective, thereunder everything was communicated to the complainant;
iii. The Commission below failed to appreciate that suppression of facts and documents amounts to fraud and they vitiate the legal proceedings;
5iv. The Commission below failed to appreciate that in view of the voluminous record, the complaint cannot be decided in a summary manner;
v. The Commission below failed to give any reasons for allowing the complaint and there was no adjudication regarding the liability of the opposite party at all; vi. The Commission below failed to appreciate that out of Rs.4,66,000/- a sum of Rs.3,20,000/- is already been transferred to his sister's account on the request of the complainant;
vii. The Commission below failed to appreciate that the complainant being a government servant cannot enter into any type of agreements which run on day to day basis which amounts to criminal activity.
With these grounds and others that will be urged at the time of arguments, requested to allow the appeal by setting aside the order of the Commission below.
06). Now the points for determination are:
i. Whether the complainant is a Consumer within the
meaning of C.P.Act,1986;
ii. Whether the contract between the complainant and
opposite parties is a trading activity? If so, is it for a commercial purpose?
iii. Whether there is any deficiency in service or negligence on the part of the opposite parties in extending services to the complainant?
iv. Whether the complainant is entitled for the reliefs as prayed for?
07). Nobody is examined and no document is marked before this Commission.
Heard the arguments of both sides.
08). The main contention of the appellants/opposite parties is that the respondent/complainant invested money with the appellant/opposite party no.1 for purchase and sale shares by opening a D.Mat account and transacted nearly 14 crore volume of the turnover eversince the date of opening D.Mat account in 2006 and so, he is not a Consumer within the meaning of Section 2(1) (d) of the C.P.Act,1986 since transactions are for a commercial purpose.
609). Points i & ii : The complainant is aged 40 years by the time of filing the complaint. He deposited the amounts with the opposite party no.1 in the year 2008 and 2009 probably by that time his age would be about 38 years. Admittedly, PW.1 is a regular employee in the Telangana Electricity Department. He opened D.Mat account and made purchases and sales in that account with opposite party no.1 for which brokerage was being given. It is the contention of opposite party that as per Ex.B3, the transactions were done by PW.1 running into corores. He opened a trading account with opposite party no.1 under Ex.B1 by submitting an application and clearly mentioned that he is in Government Service. It is not in dispute that Ex.B2 is the statement which goes to show that whenever transactions are made in the account of PW.1, SMS alerts were sent to him, so the contention of PW.1 that without his knowledge, opposite party no.1 operated D.Mat account cannot be appreciated for the reason, that when proof of SMS alerts were sent to him and the transactions were done without his knowledge, he should have approached opposite party no.1 expressing his displeasure with a demand to stop them in doing so. As per the statement, the transactions were done nearly for two years. Never it is contended by PW.1 that he has not received any SMS alerts.
10). Ex.B4 - Agreement between PW.1 and opposite parties 1 & 2 goes to show that, power of attorney was also executed by PW.1 in favour of opposite party no.2. In view of the said contract, opposite party no.1 which is the branch office of opposite party no.2 conducted transactions in the D.Mat account of PW.1.
There is no whisper in the complaint that PW.1 conducted the trading activity under D.Mat account with opposite party, for his "livelihood by earning money to utilize the same after his retirement". In view of age of PW.1, by the date of opening account and as he was in government service by then, the age of superannuation is nearly 2 decades thereafter or at the age of 58 years. When PW.1 is regularly drawing the salary under any stretch of imagination it cannot be presumed that, he conducted transactions in shares for livelihood, even if it is admitted without 7 conceding for a moment, that the account was opened for livelihood.
11). The complainant counsel relied upon citation reported in F.A.no.543/2011 by the Hon'ble NCDRC dt.2.4.2012 between Indiabulls Financial Services Ltd. vs. Mr.Varghese Skaria, Koyikkal House, Ernakulam. It is not applicable to the facts of the present case and on the other hand the complainants in the said case are retired employees.
The other case relied upon by the complainant is, order of the Hon'ble NCDRC in Revision Petition no.4193/2011 dt.28.2.2013. In the cited case, the complainant herein is also the complainant therein. It is between Reliance Power Limited vs. Sri D.Satyanarayan. It is also not applicable to the facts of the case.
12). The following case laws are to be observed to appreciate the contention of the appellants:
2022 SCC Online NCDRC 62 between Baidyanatha Mondal vs. Kanahayalal Rathi .
The facts in the case goes to show that the complainant therein purchased the shares of 3 companies and without his notice 200 shares of Reliance Power Ltd. were transferred by the broker without intimation to the complainant and filed complaint for the loss sustained by him. The District Forum partly allowed the complaint and thereupon the complainant approached the State Commission which remanded at first, and then the Forum dismissed the complaint as barred by limitation. Then again appeal preferred to the State Commission, this time the delay was condoned but the appeal was dismissed stating that the complainant is not a Consumer, by relying upon the judgment in Steel City Securities Ltd. vs. G.P.Ramesh in Revision Petition no.3060/2011. It also relied upon the judgment of the Supreme Court in Morgan Stanley Mutual Funds vs. Kartick Das, reported in 1994 4 SCC 224. The Hon'ble Supreme Court in para 33 of its decision made the following observation :
" certainly, clauses iii & iv Sec.2(1)© of the Act do not arise in this case. Therefore what requires to be examined is whether any unfair trade practice has been adopted. The expression unfair trade practice as 8 per the rules was have the same meaning as defined under Section 36 A of Monopolies and Restricted Trade Practices,1969; that again cannot apply Gas Company is not trading in shares. A share means, a share in the capital. The object of issuing the same is for building up the capital. To raise capital means making arrangement for carrying on trade. It is not a practice relating to carrying of any trade. Creation of share capital without allotment of shares does not bring shares into existence.
Therefore, our answer is that prospective investor like respondent or association is not a Consumer under the Act. In view of the categorical observation of Hon' ble Supreme Court made in para 33 of the Morgan Stanley case coupled with the fact that in the absence of any whisper in the complaint that PW.1 opened D.Mat account for his livelihood after the retirement, he cannot be considered as a Consumer within four corners of Section 2(1)(d) of the C.P.Act. Added to the same as he opened the trading account and he conducted intraday trading, the total transactions can be considered only for commercial purpose. The Consumer Protection Act purposefully discouraged to entertain the commercial transactions under the purview of the Act.
13). Here, the complainant counsel relied upon a citation reported in AIR Online 2022 SC 184 between Shrikant G.Mantri vs. Punjab National Bank in head note B, the Hon'ble Supreme Court in para 47 observed that :
" The relations between the appellant and the respondent is purely "business to business"
relationship. As such, the transactions would clearly come within the ambit of 'commercial purpose'. It cannot be said that the services were availed "exclusively for the purposes of earning his livelihood"
" by means of self employment". If the interpretation as sought to be placed by the appellant is to be accepted, then the 'business to business' disputes would also have to be construed as consumer disputes., thereby defeating the very purpose of providing speedy and simple redressal to consumer disputes".
In the case on hand the magnitude of transactions that went on between PW.1 and appellant/opposite party no.1 clearly goes to 9 show that the account was opened only for business purpose. So, both the points are answered in favour of the appellants/opposite parties.
14). Points 3 & 4 : Ex.A2 is the compact disk and it clearly goes to show that employee of opposite party no.1 without knowledge of PW.1 conducted the transactions in his account, and he even accepted his guilt and expressed willingness to pay back the amount of loss sustained by PW.1 in a period of 6 months. It is to be observed that an employee in an organization can be considered as an agent of the organization and the organization can be considered as the principal. The principal is vicariously liable for the negligent acts of employee. The opposite party nos.1 & 2 cannot wash off their hands by contending that they does not know anything, and everything went on smoothly. It is also the contention of the appellants/opposite parties that the version put forth by the employee as recorded under Ex.A2 is not that of said employee or the said employee won over by PW.1 to somehow get the money from the appellants/opposite parties. Even though PW.1 was not vigilant after receiving the SMSs, the appellants/opposite parties cannot absolve their liability simply by disowning the acts of the employee. So, we are of the view that the actions of the appellants/opposite parties amounts to deficiency in service. In view of the points 1 & 2 are answered against the complainant, the appeal is to be allowed by setting aside the order of the Commission below.
15). In the result, appeal is allowed without costs by holding that the respondent/complainant is not a consumer within the meaning of Section 2(1)(d) of the C.P.Act since the transactions conducted in his account with the appellant/opposite party no.1 are for the commercial purpose; that the impugned order in C.C.No.40/2010 dt.10.9.2018 is set aside. The amount deposited by the appellants/opposite parties while preferring the appeal shall be returned after appeal time.
(Dictated to steno, transcribed and typed by her, pron ounced by us in the open Court on this 31st day of July, 2023).
MEMBER(J) MEMBER(J)
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Dated: 31.7.2023.
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