ORDER
BEFORE A.P STATE CONSUMER DISPUTES REDRESSAL COMMISSION AT HYDERABAD
F.A.No.416 OF 2010 AGAINST C.C.NO.223 OF 2009 DISTRICT FORUM-II VIJAYAWADA AT
KRISHNA
Between:
Mohd Sadiq Ali Khan S/o Siddiquie Ali Khan Dr.No.28-17-32, Rammandiram Road Arundalpet, Vijayawada
Appellant/complainant
A N D
1. Motilal Oswal Securities Ltd., Uttam Towers, 2ndFloor, besides Hero Honda Show Room Bandar Road, Vijayawada
1
2. Karvy Computer Share Pvt Ltd., Karvy House, 46, Avenue 4, Street NO.1, Banjara Hills, Hyderabad-034
Appellant/opposite parties Counsel for the Appellant M/s A.P.Venugopal Counsel for the Respondents Served (R1) Party in Person(R2)
QUORUM: SRI R.LAKSHMINARASIMHA RAO, HON'BLE MEMBER
AND
SRI THOTA ASHOK KUMAR, HON'BLE MEMBER
WEDNESDAY THE FOURTH DAY OF JULY
TWO THOUSAND TWELVE
Oral Order (As per Sri R.Lakshminarasimha Rao, Hon'ble Member) ***
1. The unsuccessful complainant is the appellant.
2. The complainant filed the complaint seeking for the relief of compensation of `1,00,000/- and towards appreciation of shares a sum of `63,000/- besides costs.
3. The complainant is an investor in Marketable Securities. The complainant purchased 45 shares of Reliance Industries Limited Mumbai and he was allotted bonus of two shares of Reliance Capital and three shares of Reliance Infra and 45 shares of RNRL in physical form along with 45 nos of RIL shares with Regd.Folio No.110756979.
2
4. As per the directions of the Financial Regulatory Securities Exchange Board of India the shares have to be converted into electronic form to be sold in open market. Converting the shares from physical form into electronic form is dematerialization. The complainant has a share trading account with the opposite party no.1 and he lodged the shares for dematerialization. Two shares of the Reliance Capital, three shares of Reliance Infra 45 shares of RNRL under folio NO.110756979 were dematerialized except 45 numbers of RIL Limited which were not dematerialized due to the objections "signature mismatch". The second opposite party after receiving the shares from the first opposite party rejected 45 nos of RIL shares for dematerialization on the premise that the shareholders signature differ from the specimen recorded with the company. The share certificate was returned to the first opposite party who in turn returned it to the complainant.
5. The complainant addressed letter to the second opposite party and the second opposite party replied on 19.5.2008 informing that the complainant should execute and send an affidavit as per format forwarded by them on `100/- non-judicial stamp paper attested by Bank Manager or Special Executive Magistrate or First Class Magistrate. The complainant was required to submit attested copy of PAN card also. The complainant submitted his affidavit along with the PAN card.
6. The second opposite party addressed letter dated 9.6.2008 to the first opposite party company giving intimation that Reliance Industry shares lodged for dematerialization were rejected and the same information was passed on to the complainant by the first opposite party through letter dated 18.6.2008. The second opposite party addressed letter dated 19.6.2008 to the complainant and informed that his affidavit was returned since he has enclosed his proof of residence. The complainant got issued notice through his advocate on 14.9.2009 to the second opposite party for which a reply was given on 16.9.2009.
7. The complainant has pleaded that the demand by the second opposite party at the fag-end for submission of an attested document in proof of residence amounts to deficiency in service. The complainant contends that had the shares were dematerialized and the amount is invested in Reliance or other securities it would have fetched him Rs.1.53 lakh. He is entitled to 70% of the appreciation of shares amounting to `63,000/-.
3
8. The first opposite party made its appearance and failed to contest to the claim before the District Forum. The second opposite party has not chosen to contest the claim.
9. In support of his case, the complainant has filed his affidavit and the documents marked as Exs.A1 to A12.
10. The District Forum has dismissed the complaint on the premise that the shares could not be dematerialized due to the objection which was not within the control of the opposite parties and that the loss claimed by the complainant is imaginary as also that the complainant has not offered for sale nor requested the opposite parties to sell the shares except making a request for dematerialization of the shares.
11. The complainant has filed the appeal contending that the complainant had mentioned his address in all the correspondence and share certificate as also in the affidavit sent to the opposite parties and that the opposite parties had not returned the affidavit to the complainant and they had intentionally delayed the dematerialization of the shares by returning the affidavit to the complainant. It is contended that the loss alleged by the complainant is not imaginary and is substantiated by the documents Exs.A1 to A12.
12. The point for consideration is whether the order of the District Forum suffers from misappreciation of facts of law?
13. It is beyond dispute that the complainant entered into trading agreement with the first opposite party company. The trading account and Demat account held by the complainant with the first opposite party-company are not disputed. All the shares of the complainant were dematerialized except 45 nos. of shares of Reliance Industries Limited shares. These shares were not dematerialized for the reason that the complainant signature deferred from the specimen recorded with the first opposite party.
14. The contention of the complainant is that in view of acceptance of the two shares of Reliance Capital, three shares of Reliance Infra and 45 shares of RNRL and dematerialized, the second opposite party should not return the 45 shares of Reliance Industries Limited. The complainant has not placed material on record to show why the shares of Reliance Capital and Reliance Infra were dematerialized and the shares of Reliance Industries Limited could not be dematerialized. He addressed letter to the second opposite party and in reply the second opposite party on 19.5.2008 intimated him that he should execute
4
and send an affidavit in format on Rs.100/- non-judicial stamp paper attested by the Bank Manager or Special Executive Magistrate or JMS who should also fill up the name, address and telephone number and affix official seal.
15. The complainant had sent his affidavit attested by the authority concerned and the second opposite party company returned the affidavit and on enquiry by the complainant, the second opposite party informed him that the affidavit was returned for not sending along with it the document showing proof of residence.
16. The District Forum held that the complainant has not offered the shares for sale and what he had done was requesting the opposite parties for the dematerialization of the shares. It is an admitted fact that unless the shares are dematerialized they cannot be put to sale. The complainant here has been seeking for the compensation in regard to the appreciation of shares, `63,000/- on the premise that Reliance Industries shares were appreciated by 70% during September 2009 and conservatively he valued the shares at `90,000/- during June 2008. He contends that had the shares been dematerialized and the amount invested in Reliance or other securities it would have fetched him `1.53 lakh and he claims `63,000/- being amount of appreciation as on the date.
17. The learned counsel for the appellant has vehemently argued that the transaction of dematerialization does not amount to trading business and the shares would be in a form that cannot be sold nor any business can be done. The learned counsel has contended that the decision of the Hon'ble National Commission between "Vijay Kumar vs Indussind Bank" reported in II(2012)CPJ 391(NC)cannot be made applicable to the facts of the case for the reason that trading business can be considered as commercial transaction when the actual sale and purchase of the shares takes place and until and unless the shares are dematerialized the shares in dormant stage cannot be put to sale or no transaction in any manner whatsoever can be performed.
18. 'Goods' have been defined in the Sale of Goods Act, 1930 to mean :
"every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of
5
sale." The expression 'goods' was defined in Section 2(e) of the M.R.T.P. Act to mean :
"'goods' includes goods produced in India, and, in relation to any goods, supplied, distributed or controlled in India also includes goods imported into India."
The aforesaid definition underwent an amendment in 1984 and again in 1991. Now it reads thus :
"'goods' means goods as defined in the Sale of Goods Act, 1930 (3 of 1930), and includes,—
(i) Products manufactured, processed or mined in India;
(ii) Shares and stocks including issue of shares before allotment;
(iii) In relation to goods supplied, distributed or controlled in India, goods imported into India;"
Section 2(s) of the MRTP Act defines the term 'trade' to mean—
"any trade, business, industry, profession or occupation relating to the production, supply distribution, or control of goods and includes the provision of any services;"
Section 2(u) defines the expression "trade practice" as under:
"any practice relating to the carrying on of any trade, and includes—
(i) anything done by any person which controls or affects the price charged by, or the method of trading of, any trader or any class of traders,
(ii) a single or isolated action of any person in relation to any trade."
Sale according to the Sale of Goods Act (and in India goods include shares of joint stock
6
companies) takes place when the property passes from the seller to the buyer.'
19. We are unable to agree with the contention of the learned counsel as the National Commission in no certain terms held that trading business particularly the business that is regularly done is commercial transaction with an exception as to the trading activity done to eke out one's livelihood. The appellant has nowhere in the complaint mentioned that he has been doing the trading business to eke out his livelihood for the purpose of self-employment.
20. The National Commission in Vijaya Kumar's case held that:
Petitioner has nowhere pleaded in its entire complaint that he is doing share trading business as "self-employment for livelihood". Nor it has been alleged that the services provided by the respondent, were being availed of exclusively for the purpose of earning of his livelihood by means of self-employment by the petitioner. Dispute between the parties relating to commercial purposes are excluded under the Act.
Since, petitioner has been trading regularly in the shares which is a commercial transaction and for which he has also availed the "over draft facility" from the respondent, as such he would not be a consumer as per Section 2(1)(d)(ii) of the Act. Moreover, regular trading in the purchase and sale of the shares is a commercial transaction and the only notice is to earn profit. Thus, this activity is purely commercial one and is not covered under the Act. There are concurrent findings of facts also with regard to the service of the notice upon the petitioner.
21. The object of purchasing the shares is to sell them at the time where in the share market the price of the shares is high and the ultimate result of the transaction is to earn profit. The primacy of any transaction made with an intention to earn profit constitutes commercial purpose. The disputes involving commercial transactions do not attain the status of consumer dispute as provided for, by Section 2(1) of the Consumer Protection Act. In order to maintain complaint on the premise of deficiency in service by the broker or the trading company under the provisions of the Consumer Protection Act, the person should meet the requirement of Section 2(1)(d) read with Section 2(1)(o) of the Consumer Protection Act. Trading business involves the opening of "Trading Account", "Demat Account", "permission to be given to the broker for purchase and sale of shares" etc.,
22. Hence, we are not inclined to accept the contention of the learned counsel for the appellant that
7
the part of the trading business till the shares are dematerialized is amenable to the jurisdiction of Consumer Forum. We are dismissing the appeal for the aforementioned reasons different from those reasons arrayed by the District Forum.
12. In the result, the appeal is dismissed .The order of the District Forum is confirmed. There shall be no order as to costs.
MEMBER
MEMBER
KMK*
Dt.04.07.2012
[HONABLE MR. SRI R. LAXMI NARASIMHA RAO]
PRESIDING MEMBER
8