BEFORE JUSTICE (Retd) MAHMOOD ALI KHAN SOLE ARBITRATOR. Arbitration No. D-020/ Versus AWARD

Transcription

1 IN THE MATTER OF: BEFORE JUSTICE (Retd) MAHMOOD ALI KHAN SOLE ARBITRATOR Arbitration No. D-020/ 2010 Ms. Kunti Saxena (Constituent) Flat No Arunodava Apartments F-Block. Vikas Puri New Delhi Applicant Versus Relegare Securities Ltd. (Trading Member) I 9. Nehru Place New Delhi Respondent AWARD 1. The applicant has filed this arbitration application claiming Rs. 1,24.805/- as loss suffered by her from unauthorized trading carried out by the respondent Trading Member in her account. 2. In the statement of claim, it is submitted that on the respondent made a call to the applicant after 2.40 p.m. and demanded payment of the debit balance in her account on the same day while they had already sold away her securities, i.e.. Suzlon Energy, without her consent which amounted to harassment. She had purchased 500 shares of Suzlon Rs. 98/- per share on and the respondent sold it on ll @ Rs p. per share causing loss of more than Rs. 7,000/- to her. It is alleged that Shri Sunil Saharan was the applicant dedicated Relationship Manager and that he alone was dealing with the applicant s in all mailers relating to her account On she tried to contact him (Shri Sunil Saharan) but he did not attend to the call and when he took it her security had already been sold off. Shri Sunil Saharan had earlier told her that she could be NBFC client and could buy and sell the securities within the limit of their exposure given by the respondent on the basis of the value of stock portfolio by paying 18% per annum without actually paying for the stock bought. The respondent denied any liability saying that there was no written agreement in this regard. The Relationship Manager or the respondent never asked them to enter into any written agreement for NBFC arrangement The applicant is also aggrieved that the Janakpuri branch of

2 the respondent did not pick up her calls on time and sometimes calls were not picked up at all. She had also not been provided account ledger and stock holding statement on time. Most of the times she had to visit the branch office to get these documents. Earlier a complaint for the irregularities committed in another trading account of the family was made on when three stocks were disposed of on II to recover the debit balance. Her complaint is basically against the respondent s inappropriate business practices. The respondent has also not provided risk disclosure document, copy of the Member Client Agreement, copy of Know Your Client and copy of the Annexure regarding Investor s Right & Obligation. In her account as on there was a debit balance of Rs 5,602.71p. She did not carry out any transaction during the financial year The final debit.balance after adjusting the dividends and DP charges was Rs. 5,383.6lp. It was cleared on The respondent did not sell off any of the securities to recover this amount for a period of more than one year but they carried out unauthorized trade on to recover the debit balance while giving just 30 minutes notice and that too when he was paying interest on delayed payment. The applicant also disputed the allegations of the respondent that no dedicated Relationship Manager was provided to the client. She also narrated as to how the Relationship Manager Shri Sunil Saharan did not give correct information to her that written agreement in the form of NBFC will be required to be executed Had the agreement been executed, her transaction would have got financed by a third party and she was required to pay interest. The respondent did not have control over its employees. She was initially given incorrect ID. She is claiming Rs. 7,455.07p. towards loss suffered in the sale of Suzlon Energy. printing, courier and other miscellaneous charges Rs /-; difference in the rates of securities between and Rs /-. non-release of profit actually earned Rs /- and notional profit Rs /- per month for six moths, ic.. Rs The total claim is Rs.1,24805/-. 3. The respondent filed reply to the arbitration application and contested the claim. It is submitted that in the claim petition she has specified her loss at Rs. 7,455/- but whimsically inflated it by raising notional claim which has no basis. Her shares / securities were squared off/ liquidated in terms of Member Client Agreement since she had failed to fulfill her obligations and pay the debit balance in her trading account despite repeated requests. She was sent contract notes regularly for all her tradings / dealings as and when due but she did not raise any dispute immediately and continued to trade. There had been no mismanagement by any of their employees or unauthorized trade in the account of the applicant. She is unnecessarily referring to the account of another client which is not subject matter of this arbitration application. Traversing the allegations that its employees were deficient in providing services, the respondent asserted that all due service and attention were provided to the applicant. The respondent further alleged that applicant was contacted through her mobile number which was provided in the Member Client Agreement to inform her that her account was in debit and if the money was not paid her shares would be liquidated. The client

3 requested two days time to issue cheque for the required amount but she was told that the money should be paid immediately on which she sought time and the same was granted but when she was called back to request for payment she willfully and wantonly refused to come on line and calls were attended by her daughter and son. Their conversations have been recorded. Her allegation that only half an hour was given to her for making payment is false. rather she had no intention for making payment so the respondent had no option but to liquidate her share as per terms of the Member Client Agreement. Even otherwise, the applicant was well-aware of the trades executed in her account and she knew as to what payment was to be made to clear the debit balance and she also knew the consequences of non-payment of the amount due. All these statements were provided to her and she had also facility to view her account on line. There had been no binding contract regarding the Relationship Manager to be appointed in a dedicated manner. Otherwise also, resignation and transfers were common phenomenon and they could not be held against the Trading Member. The respondent is a registered stock broker and does not undertake activity of NBFC so the applicant undertakes activity of NBFC so the applicant could not have entered into NBFC - agreement with the respondent. The respondent has dedicated the Customer Care Executive sitting at separate location who was looking after the redressal of any grievance of the client. Additional dedicated E- mail ID is provided in the website of the respondent for lodging any grievance. Other allegations were also denied have heard the representatives of the applicant and the respondent. 5. During arguments Ms. Seema Saxena daughter of the applicant, who was her authorized representative, submitted that the applicant was about 70 years old woman and that she (daughter) was looking after the applicant s dealings with the respondent and was talking to Shri Sunil Saharan. Relationship Manager of the respondent. She stated that Shri Sunil Saharan also knew her telephone number and he was also making calls to her in relation to the trade carried out in the applicant s account. It was submitted that in the account opening form the telephone number of her elder brother was given. She stated that on she was in NOIDA when a call was received at 2p.m. from one Shri Sumit of the respondent and she was told that there was shortage of margin in the applicant s account and that at least a sum of Rs. 10,000/- be deposited in the account to avoid squaring off the applicant s shares to clear the debit balance. According to her she was asked to make the payment by 2.40p.m.,i.e.. within just 30 minutes. She further stated that she told the caller that she was in NOIDA and the applicant was not at home and that the cheque would be issued only under her signatures and that she would deliver the cheque within two days but she was asked to make payment immediately and she had expressed her inability to comply with the demand within such a short span of time when she was in NOIDA. The representative of the respondent vehemently denied the allegations of the applicant and asserted that she was informed about the shortage in the margin / debit balance and was asked to deposit the money and that she was

4 given sufficient and adequate time to make the payment He stated that he would try to retrieve the conversation of the employee of the respondent and the representative of the applicant which had taken place on At the adjourned hearing he had filed a CD containing, as per his submission, recording of nine calls made by the desk office of the respondent to the telephone number which was provided in the account opening form and the mobile-number of the representative of the applicant. He stated that no other recording could be retrieved because of paucity of time and further because the record of the recording is voluminous. According to the representative of the respondent. the shares of the applicant were squared off at about 235p.m. and that the CD produced by him contained recording of nine calls which seemed to have been made sometime between 12 noon ad 2.30p.m. 6. The representative of the respondent had played the CD. It is recording of calls made from the office of the respondent to the telephone number of Ms. Seema. the daughter of the applicant, and to the telephone number which was provided in the account opening form which happened to be of Shri Adesh Saxena son of the applicant. 7. The recorded conversation between the employee of the respondent and Ms. Seema Saxena does not support applicant s contention that she was given only half an hour time to deposit the money in the account of the applicant. Conversely, it shows that the employee of the respondent repeatedly made it clear that the account was in debit and that -he was under tremendous pressure and that the money should be deposited that day itself, i.e. on by 2.30p.m.. Ms. Seema Saxema expressed her inability to do so firstly because she was in NOIDA and secondly because the applicant was not at home. The employee of the respondent suggested that cheques could be delivered thai day promising that it would be encashed only after two days. He even suggested that the cheque of could be collected from her residence in the evening or in the next morning. Ms. Seema Saxena, however, seemed to be reluctant in agreeing to any of the suggestions and wanted to speak to the Relationship Manager Shri Sunil Saharan. The calls were made to the telephone number provided in the account opening form. Some calls were not attended to but one call was received by Shri Adesh Saxena, son of the applicant, (who was present at the hearing). From the conversation it appears that the employee of the respondent insisted on talking to the applicant and that he told Mr. Adesh that the debit balance had to be cleared that day itself and he was under tremendous pressure. Shri Adesh. however. also expressed inability to send the cheque immediately as the applicant was in NOIDA and that she was likely to return by night. From the conversations in the CD it is clear that the respondent wanted some money (i.e.. R. l0.000/-)to be deposited to complete the margin requirement on itself He repeatedly insisted upon Ms. Seema as well as Mr. Adesh that he was under pressure and the money has to be deposited that day but both of them seemed to be reluctant to comply with this demand.

5 8. During the hearing the representative of the respondent submitted that the respondent had sold the applicant s shares causing her loss of over Rs. 7,000/- not because of some urgency but because one of the sons of the applicant who had another trading account with the respondent had made a complaint against the respondent on against unauthorized trading in his account. It is submitted that in the past also the applicant was in debit balance of about Rs.5,000/- for a year and the respondent never bothered to demand money, to clear the debit balance or to square off the balance by selling the shares of the applicant. In fact, it is stated that at the time of the opening of the account Shri Sunil Saharan. Relationship Managers who was designated to deal with the applicant had told them that the applicant s shares would not be sold to liquidate the debit balance and if there was debit balance in her account she would be required to pay 18% per annum which, in fact, the respondent had been charging and debiting in her account. During the hearing the representative of the applicant lamented that Shri Sunil Saharan and other officers of the respondent had painted a very rosy picture of the stock market and their company s dealing with their clients and he had promised that on delayed payment she would be required to pay only interest and would not suffer any loss. It was submitted that at that time Shri Sunil Saharan also referred to NBFC arrangement but never advised the applicant to execute a written agreement for taking benefit of this arrangement. But after the episode of the representative of the applicant was told that she had not executed any written agreement for NBFC facility. Had they advised them properly she would, certainly have executed such an agreement. She also complained that on she repeatedly tried to contact Shri Sunil Saharan but he refused to take their calls. According to the representative of the applicant Shri Sunil Saharan was very much present in the office and their impression during conversation was that Shri Sunil Saharan was sitting with Shri Sumit but he avoided to talk to the applicant. Though, it was admitted that contract note was received by the applicant but it was denied that monthly financial statement or stock statements were supplied to the applicant on regular basis. From the contention of the applicant in the arbitration application as well as during the course of arguments. it appears that the applicant was aggrieved because she was not given complete copy of the Member Client Agreement: she was not apprised of the complete risk associated with the dealings in the stock market; Shri Sunil Saharan, who was the Relationship Manager, had given some verbal assurances that the applicant would not be allowed to suffer loss and that the debit balance in her account would be taken care of by charging of interest at the rate of 18% per annum which interest was being charged and that the Relationship Manager had assured that NBFC arrangement will safe-guard her interest. It was submitted on behalf of the applicant that at the time of signing of Member Client Agreement she did not read whole of the agreement as it was having small print and the applicant had signed it in good faith. On when all of a sudden the respondent demanded Rs /- to be deposited in the account to make good short fall in the margin, she wanted to talk to Shri Sunil Saharan but he avoided to take her call. She complained that on the

6 respondent by passed Shri Sunil Saharan and talked to the applicant through some other employee while Shri Saharan had been. dealing with the applicant and he had also given certain assurances to her which she had believed, on their face value. Shri Sunil Saharan had. therefore, ditched her and avoided to talk to her till her shares were sold. 9. The representative of the respondent has denied that there was any deficiency in service on the part of the employees of the respondent. The representative of the respondent has also denied.hat there wäs any dedicated Relationship Manager assigned to the applicant. It was also denied that there was any sort of arrangement for financing the transaction of the applicant by NBFC. He submitted that the respondent is an incorporated company and was not connected with NBFC. However, he admitted that for delayed payment the applicant was charged I 8%interest in her account. Other allegations about nonsupply of the complete copy of the agreement or the financial statement / stock statement etc. were also denied. It is submitted that the applicant has admitted receipt of contract notes and she had also been carrying on transactions, admittedly. in the account, as such. she was well aware that her shares would be liquidated to clear the debit balance. which happened on According to him in case the applicant was dissatisfied with an) of his transactions or any of the dealings of the staff of the respondent, she would not have waited but would have promptly lodged the complaint with the respondent or with the Exchange for its redressal. It is submitted that the contention of the representative of the applicant that she was asked to make deposit within half an hour has been proved to be false from the record of the conversations between the employee of the respondent and t1e daughter and son of the applicant who spoke on behalf of the applicant. 10. Some of the contentions raised by the applicant about the tall promises made to her or rosy picture painted by the employee of the respondent including SM Sunil Saharan at the time of opening of the account may possibly be true. It is also believable that the applicant did not read the fine print in the Member Client Agreement carefully before making her signatures but for all this she herself has to be blamed. The stock market is a volatile and risky market. The applicant belongs to an educated family. Both her daughter and son, who were present. are well educated persons. They knew the risk which is associated with the stock market The applicant may have executed the agreement without reading it would not absolve the applicant from the terms and conditions of the agreement. Jn case Relationship Manager. assigned to the applicant, had given some verbal assurances or failed to give advice to her to execute agreement with NBFC to avail of funding that will not absolve the applicant from consequences of violation of the terms and conditions of terms and conditions of the written agreement. 11. Anyhow, the subject matter of this arbitration application is the sale of the shares / securities of the applicant on II to square off the debit balance in her account. The allegations of the applicant in the arbitration application that she

7 was asked to deposit money to make good the short-fall in the margin in 30 minutes time is belied by the recording of the conversation. Even if the conversation is considered to be -not the recording of whole of the conversation which had taken place between the employee of the respondent on the one hand and the son and daughter of the applicant on the other on the fact remains that the employee of the respondent had repeatedly made it clear that he was under tremendous pressure that the short-fall in the margin money should be made good immediately and that he was even willing to collect cheque dated from the residence of the applicant in the evening or on the following morning and promised to deposit it only after two days. The conversation did not show that the daughter or the son of the applicant who attended to the call had showed their willingness to deposit the money or to deliver the cheque even on the next day morning. May be the respondent allowed debit balance of Rs. 5,000/- in the account of the applicant for over one year in the past but here the debit balance was of over Rs /-. It does not mean that the respondent could not enforce the terms and conditions of the Member Client Agreement to safe-guard its interest and to square off the debit balance in the account of the applicant after prior intimation. 12. Much ado has been made on the question whether a dedicated Relationship Manager (SM Sunil Saharan) was provided to the applicant to deal with the respondent or not. The respondent has denied that any dedicated Relationship Manager is assigned to the clients. It does not seem true. The respondent has itself admitted in the reply that the applicant knew the names of the employees who were to be contacted. It. however, did not disclose their names. It was also not denied that Shri Sunil Saharan was one of those employees. On the other hand, the applicant has produced the copy of the respondent s letter sent to the applicant soon after the account was opened to get confirmation of trading and CRN details mentioned in the letter. The letter clearly mentioned the name of Shri Sunil Saharan as Dealer. Trading Members always provide a dedicated employee to the client to deal with whether he is called Dealer or Relationship Manager is immaterial. Anyway. the controversy is relevant only to the extent that Shri Sunil Saharan, who was applicant s dealer / Relationship Manager. and had always been dealing with the, applicant, made himself scare and avoided to take the calls of the representative the applicant when she needed to consult him after the demand call was received. Though the applicant could not insist upon receiving calls from the respondent only through Shri Sunil Saharan. yet the conduct of Shri Sunil Saharan in avoiding her calls cannot be appreciated at all. 13. As regards the contention of the applicant that she was not supplied some statements timely or regularly. her complaint is too stale to be of any consequence in these proceedings. She ought to have complaint to the Trading Member or Exchange about it promptly.

8 14. From the above discussion. I find that so far as subject matter of this arbitration application is concerned the applicant, has not been able to prove that there was some unauthorized transaction in her account on which caused loss of Rs /- to her. The other claims are mostly notional or estimated and have no sound basis. If the sale of the shares / securities of the applicant is authorized by the terms and conditions ol the Member Client Agreement. it cannot be said to be unauthorized trading. The resultant loss cannot be received from the respondent. 15. The result of the above discussion is that the arbitration application fails and is dismissed, but I award Rs /- as cost to the applicant as this litigation could have been avoided, had Shri Sunil Saharan taken the applicant s calls and answered her queries. Award announced on 28 th June (M.A. KHAN) Sole Arbitrator