Applicant (Constituent ) and Respondent (Trading Member) 4 th Floor, Silver Metropolis

Transcription

1 Before the Sole Arbitrator N.S. Srinivasan In the matter of Arbitration under the Bye-laws and Rules and Regulations of the National Stock Exchange of India Ltd. Arbitration Matter No. (A.M.) No: CM / C / 2011 Between Applicant (Constituent ) and Respondent (Trading Member) Ms. V. Santhanalakshmi M/s Anandrathi Stock Brokers Ltd (PAN NO: BLDPS9515B) 4 th Floor, Silver Metropolis 5119, H Block, First Street Jai Coach Compound 12 th Main Road, Opp: Bimbisar Nagar AnnaNagar Goregaon ( East ) Chennai Mumbai

2 Award dated July 19, 2011 Claim as per the Application for Arbitration. The Applicant, Mrs. V. Santhanalakshmi, has claimed an amount of Rs.1,40,000 /- ( Rupees One lakh forty thousand rupees ) from the Respondent, as per the Arbitration Application. The Applicant s complaint had earlier been referred to the Investor Grievance Redressal Cell of the NSE, Chennai office. It is stated in the Minutes of the Meeting held on January 18, 2011, that the Exchange officials explored the possibility of an amicable settlement. The representatives of the Respondent expressed their reluctance to settle the matter amicably, since according to them, the transactions were executed with the knowledge of the complainant (the Applicant) only, and the Applicant therefore intimated her desire to file arbitration against the trading member for resolution of the dispute. The Applicant has enclosed a letter dated addressed to the Arbitration Department, NSE. This letter is in response to letter dated of the NSE, Chennai, presumably in connection with the complaint lodged by the Applicant with the Investor Grievance Redressal Cell. The Applicant has stated as under: 1. First of all I am not an online trader. Therefore I am not concerned with the communication through the . I gave my ID not for business purpose. I simply filled the column what was required. I have also sent a letter to stop sending mail to my ID on itself. 2. It is a deliberate attempt by M/s Anandrathi Share and Stock brokers Ltd to divert my attention of all my allegations what I have mentioned in my previous replies. The replies given by M/s Anandrathi Share and Stock Brokers Ltd is purely evasive and escape from the huge loss occurred to me. 3. It is pertinent to say that the application form filled by me at the time of opening the account in Anandrathi Shares and Stock brokers Ltd was not given to me. As per the regulations and guidelines of SEBI the member has to provide a copy of MCA duly filled and executed to the client and provide contract notes periodically for the trade executed and the statement of account informing the position on every quarter or when and where an issue is arised. Whereas member has not issued the above documents as stipulated in the guidelines of SEBI. 4. MY key point what I have raised in my letter is that the business of transactions carried out by M/s Anandrathi Shares and Stock Brokers Ltd was not brought to my notice and my consent was not obtained by them before proceeding this loss business. 5. M/s Anandrathi Share and Stock Brokers Ltd is repeatedly stating the false information and I am totally harassed by these answers. Therefore suitable action shall be initiated against this bad company to save the genuine customer. Otherwise I will be forced to take action under the provision of the law. The Applicant has also enclosed copy of a letter dated , addressed to the Regional Manager, Securities and Exchange Board of India, Chennai office, along with the Arbitration Application, wherein the following has been stated : The Applicant, Mrs. V. Santhanalakshmi, opened a Demat Account and Trading Account in March 2010 at the Adyar, Chennai, branch of M/s Anandrathi Share and Stock Brokers Ltd. Her trading code No. is MDR3S078. On she deposited Rs.1, 40,000 /- for equity trading on different dates. This amount was deposited in the

3 Branch Office of Adyar which is maintained by the Branch Manager Mr. P. Srinivasan. Her business dealing regarding this matter was carried out by Mr. B. Rajesh, who is an employee of the same concern. After her deposit in the equity trading she went on 27 th July 2010 to the Adyar branch. She came to know that the under mentioned shares were brought by B. Rajesh (Dealer) under the supervision of the branch manager P.Srinivasan. This was not informed to her according to the rules: The details are as follows: 1) GAEL Bought 2) Wekcorp Bought 3) Unitech Bought 4) Sterlite Bought 5) HMVL Bought She was surprised to note that the share bought by B.Rajesh is exceeding her total deposit. On 28 th July 2010 Mr. P. Srinivasan, Branch Manager, called her over phone around 2.30 p.m. and requested her to come over to the office to discuss the business transaction held on the same day. According to the phone call she went to the office immediately. Branch Manager Mr. P. Srinivasan and dealer Mr. B. Rajesh informed her that her shares were sold out at a huge loss. On both of them nevertheless have sold 33,500 shares on her behalf from a new IPO company (1) Aster Silicate, which was newly introduced in the share market and (2) Jet Airways- 100 (3) Edu Comp Solutions 300 (4) VIP INDUSTRIES- 300 since there was insufficient amount in her account they got exposure from head office. This is also gross violation of statutory provisions of the Rules and Regulations. This act had created abnormal loss for her. The above mentioned para 1 and 2 first of all they have not received any consent from me, without her knowledge the business transaction was done only with ulterior motivation of brokerage charge for their selfish end. Also it was shocking to note that this limited concern says that there is a loss to the tune of 3 lakhs 34 thousand and 137 rupees in her account and without issuing her any written letter they orally say through phone calls in threatening manner to incur the loss after adjusting her deposit amount of Rs.1,40,000/. After her persistent request the statement was furnished by the concern which is not containing the proper account. The total intention of the concern is to confuse her by furnishing such undetailed statement. The statements are not showing how much shares are sold out, at what rate, the brokerage, whether loss or profit only with the motivation of evading their misdoings. It is pertinent to say that the application form filled by her at the time of opening the account in Anandrathi Shares & Stock Brokers Ltd, usually a Xerox copy of the filled in application form supplied to the account holder. But in her case this was not given. Also she is informing that this kind of bad act happened to her by those people but also to 4 more clients in the same branch on the same day. Therefore she is at a conclusion all these things are happening only to gain brokerage and they never bother about the deposit amount of the account holder. This attitude shall be dealt with severe punishment. Mr. P. Srinivasan, Branch Manager of the above concern is very often calling through cell phone to her husband, son and herself and insisting on them to repay the loss, in a violent manner. Also he is threatening her family that they will bring the police in this issue. For all the above reasons, she prays that the authority that suitable action shall be taken on both of the officials namely P. Srinivasan, Br. Manager and P. Rajesh Dealer

4 and arrange to return her deposited amount of Rs.1,40,000/- without any loss of time. It is important to say the above business transaction was carried out without her knowledge and consent. This transition (perhaps transaction ) was only with the interior motivation of gaining brokerage by these two persons. The care of account holders was not taken by the company. Apart from this they have started giving trouble to her which has created mental agony. In the circumstance, once again she requests the authority to return her deposit at an early date possible if this is not done within a month s time she has no other option except to render justice under the provisions of the Court of Law. The Applicant has in addition to the above letters, also enclosed a letter dated addressed to the Arbitration Department of the NSE, Chennai office, in reply to their letter dated , perhaps from the Investor Grievance Redressal Cell, wherein she has stated as under : With reference to your letter no cited above, I am submitting my explanation that the Anand Rathi share & stock brokers Ltd. Adyar branch is falsely laying information and misleading the business transaction in my Demat Account MDR 3 SO78. The above mentioned stock brokers Ltd has said that I have not made any complaint till the end of the month of July 2010 is absolutely wrong. The alleged transaction came to my knowledge only on to lodge the complaint only in the month of August 2010, after gathering more information about this alleged transaction. Also this is Himalayan lie that the transaction particularly on was executed with my instruction. Neither was I informed over phone about this transaction nor was my consent obtained by this concern in any other manner. As stated by this limited concern in the reply letter addressed to National Stock Exchange of India Ltd on that all the transaction was given to my id is unfair. Any such transaction shall be approved by me, but in the last transaction everything was carried out for their selfish end and simply the concern is trying to escape from the bad deal. I have not at all executed any transaction as stated in the letter to the loss of Rs.3, 32,000 /-. I am not aware of the exposure, also I have not opted to short selling of shares of ASTER SILICATE above 40% of opening price. All this transaction was carried out arbitrarily by the Branch Manager P. Srinivasan and Dealer B. Rajesh with ulterior motivation of gaining brokerage charge. Their attitude towards the client is lethargically and aimed to cheat the genuine client. I strongly deny that I have ill intention to get rid of the trading losses stated in the reply. No client will come forward to do any sort of transaction at a huge and abnormal loss. This alone will establish that this loss business is not carried out by me. In their reply letter one point they have stated that I have made payment of Rs.50, 000 /- and Rs.10, 000/- on and respectively is another blunder lie. In fact two cheques were issued by me for a sum of Rs.50, 000 /- and Rs.10, 000/- on after knowing this bad transaction I stopped the payment on with INDIAN BANK where I am holding the account. This is evident from my passbook. No cheque was issued on as stated in the reply. I believe the share broking company is bluffing such matters which are convenient for their side. The other points mentioned in their reply are technically written version applicable to all clients who are at the loss of money. At the outset I am to state 1. On 27 th July Dealer B. Rajesh and Branch Manager P. Srinivasan have bought the following shares : 1) GAEL Bought ) Welscorp Bought ) Unitech Bought 1000@ ) Sterlite Bought ) HMVL Bought

5 In other words this is called the holding position. Since my deposit amount of Rs /- was insufficient to buy the above shares the Branch Manager got exposure from head office for this dealing. Next day without my knowledge and consent both of them sold out my holdings at a huge loss in a surprising manner i. Jet Airways 100 shares ii. Edu comp solutions 300 shares iii. VIP industries 300 shares for those companies my shares were bought and sold out at a huge loss without my knowledge. Another company ASTER SILICATE which was newly introduced in the share market they sold out and bought shares which ended at a huge loss. This is also not carried out with my consent. 2. It is significant to point out that the profit and loss account statement and balance sheet are not sent to me. The account statement in their own format is not up to this mark to understand the business dealings. Instead of submitting the clear statement, the statement which are given by them are utter confusion and make the client to group in the dark. 3. Whenever the sales are carried out it is must to get the acknowledgement of the client. This is not only obligatory but also the natural justice. 4. No transaction I have made through phone. 5. letters are sent to my mail ID are only the record of their mistakes. Therefore conclusively, I am obliged to state that the transactions were not carried out with my knowledge. Both of the employees of the Anand Rathi share and stock brokers Ltd meticulously cheated me as I am not having knowledge in trading account. I once again request you to arrange to repay the deposited amount of Rs.1, 40,000 /- by me without any further loss of time. Also I request suitable action shall be initiated against the erring officials Mr. P. Srinivasan the Branch Manager and the Dealer Mr. B. Rajesh. If this is not done this will be a wrong precedent to further business. If my amount is not returned in reasonable time I will have to render justice through court of law. Thanking you for your kind co-operation Yours sincerely Sd V. Santhanalakshmi Response by the Respondent by their letter dated March 28, The Respondents, under cover of their letter dated March 28, 2011 have submitted the following reply: At the outset, the Respondent submits that the present reference filed by the Applicant before the Hon ble Arbitration Tribunal is wholly misconceived, frivolous and misleading in nature, not tenable in the eyes of law and in facts, the same is therefore liable to be rejected with cost. The Applicant had approached the Respondent for opening a Trading Account and had executed the necessary documents, including Member-Client agreement and ITORS agreement as well as Risk Disclosure Document. The Applicant was given online portal viz. at the time of opening the account itself, wherein the Applicant can access his Ledger account, share holding, contract notes and margin requirement online and was given the User ID and Password.

6 Even though she was an online client, the Applicant also used the facility of call and trade and used to frequently trade in person by visiting the Respondent s office. All the trades executed in the Applicant s account was as per instructions and the same had been confirmed to her by sending contract notes to the id SHAN4Y1532YAHOO.IN as well as SMS alerts to her registered mobile no Thus the Applicant was fully aware and responsible for the trades in her trading account. The Respondent also stated that as per Clause 7 of the Member-Client agreement, where the client has opted for placing orders through telephone, fax, , internet chatting or any other reasonable mode, other than online trading, the client shall be solely responsible for the orders placed by the trading member on his behalf. The Applicant used to trade intra-day and on a few occasions even followed a BTST (Buy Today Sell Tomorrow) pattern. There is an outstanding debit balance of Rs. 2, 18, p (Rs. Two lacs eighteen thousand nine hundred and sixty four and fifty eight paise) lying in the Applicant s trading account, which she is under obligation to pay to the Respondent. Further, vide Advocate notice dated 11 th October 2010, Respondent called upon the Applicant to clear her outstanding liability. However Applicant has failed and neglected to respond to the same. The Respondent agrees that the Applicant had opened a Demat and Trading Account and deposited Rs.1, 40,000 /- (Rupees One lakh forty thousand) with an intent to deal in equity segment of NSE/BSE. However she has paid this amount on different dates and had executed several transactions, and hence is fully aware of the trades / transactions carried out in her account. Thus the allegations made by the Applicant are false and fabricated. The Respondent denies of carrying out any uninstructed trades in the account of the Applicant. The Respondent reiterates that the contract notes were sent to her id i.e. SHAN4Y1532YAHOO.CO.IN.The Respondent further states that the Applicant herself has issued a Cheque of Rs.50, 000 /- and Rs.10, 000/- against the trades carried out on or after , which is a tacit admission by the Applicant to have instructed trades in her account and later on deliberately got dishonoured due to the reason being payment stopped by the drawer as she desired to avoid her liability. On the Applicant visited the Respondent s Adyar branch office and request to give an exposure to trade further in her trading account. Respondent as per her request and on the basis of shares purchased by her in previous days granted her an exposure and allowed her to trade further in her account. On Applicant opted to short sell in the IPO, Aster Silicate irrespective of the fact that the prevalent rate of the said IPO on that time was 40% over and above the opening price. Due to high level of volatility in the price of the said scrip the Applicant incurred a heavy loss of Rs.3, 34,137. The Applicant has raised the dispute for trades / transactions that took place in her trading account only four scrips i.e. ASTER SILICATE, JET AIRWAYS, EDU COMP SOLUTIONS and VIP INDUSTRIES irrespective of the fact that on the same day there were numerous trades in other scrips also, however she did not have any complaint about the other trades. From this it can be known that Applicant is disputing about the trades in which she incurred a loss, thus arbitrary acts of the Applicant to accept the contracts in choose and pick manner is not tenable and reflect a malicious intention to shift the burden of loss to the Respondent.. The Respondent further states that the Respondent is aghast that a prudent man could issue the cheques for Rs.50, 000 /- and Rs.10, 000/- under impression of profits. Further the allegation of the Applicant that she has not receiving proper statement of accounts is misleading, as the same have been sent by , as per SEBI regulations.

7 The Applicant had the facility to download the statement of account etc and is under obligation to intimate the Respondent in case of any discrepancy, as per Clause 4 of the Member Client agreement. With reference to the para no. 6 and 7 of the Application, the Respondent denies all the allegations and puts the Applicant to strict proof thereof. The Respondent denies that any amount is due and payable by the Respondent to the Applicant as alleged in the said para and therefore the alleged claim of the Applicant be dismissed by the Hon ble Arbitrator in the preliminary stage itself. Respondent further requests the Ld. Arbitrator to order the Applicant to make payment of the full due amount of Rs.2, 18, (Rs. Two Lacs eighteen thousand nine hundred sixty four and paise fifty eight only) which is overdue to the Respondent. The Respondent has prayed that: i. The alleged claim of the Applicant be dismissed. ii. Pass a counter claim of Rs.2, 18,964.58, in favour of the Respondent. iii. Legal fees, cost and expenses incidental to this reference be provided for, and iv. Such other and further relief as the nature and circumstances of the reference shall deem fit and proper. Personal hearings. The initial hearing was fixed for April 4, While the Respondent was represented by Mr. Punit. M. Sethia, Cluster Head, Chennai, the Applicant requested for an adjournment as her advocate could not come due to unforeseen circumstance. The adjourned hearing was fixed for May 9 th, 2011, while advising the Applicant that no further adjournment will be granted. At the adjourned hearing on May 9, 2011, the Applicant appeared along with her Counsel Mr. A.S. Kaiser, Advocate, while the Respondent was represented by Mr. Punit Sethia. Applicant said she has not received the reply dated March 28, 2011 given by the Respondent, sent to her under cover of NSE letter dated The NSE was advised to send another copy of the above letter together with the documents submitted, to the residential address of the Applicant s advocate ( as requested by the Applicant ), and the copy of the covering letter to be sent to the Applicant for information. The Adjourned hearing was fixed for May 25, At the adjourned hearing on May 25 th 2011 the Applicant appeared along with her close relative, who was authorized by her. The Respondent was represented by Mr. Punit. M. Sethia. The Applicant had not submitted written reply to the Respondent s reply dated , but denied all the statements made by the Respondent. Regarding the transactions from till , Applicant said she had not given instructions for the same. However the Applicant s staff used to inform her at the

8 end of every trading day regarding the net profit /loss, and would assure to make up the loss in the next day s trading. The Applicant said on evening, she had asked the staff of the Respondent to hold the shares in her account till the prices increased. However the staff had sold the shares on morning, to have margin for the transactions in Aster Silicate IPO. The entire transaction in ASTER SILICATE IPO on was done without her consent and she was informed of the huge loss only at around 3.30 p.m. when she was called from their office. The Respondent s representative said that the shares of Aster Silicate were not sold at one go but there were intra day transactions of sale and purchase as per the price movements, which is normal behavior in IPO trades. He also said that the Applicant used to trade online in commodities, incurring a loss of above Rs.1.0 lakh. Applicant having traded online in commodities, her stating that it was done by one of the staff members is not convincing. Applicant denied having traded online in commodities and said that the transactions were done through a staff member other than Mr. Srinivasan and Mr. Rajesh. Since the Applicant had denied having received SMS messages from the Respondent, the Respondent was directed to obtain Certificate from their Service Provider regarding dispatch of the SMS messages, as per the SMS log submitted by them. Though it was recorded in the hearing held on 25 th May 2011 that no further hearings need be held, on going through the papers and documents, it was felt that some clarifications are required from both the parties, and hence an adjourned hearing was fixed for June 17, The Respondents meanwhile, under cover of their letter dated June 8, 2011, had submitted the Certificate from their service provider, Messrs. Ravience Digital Pvt Ltd, Andheri East, Mumbai , confirming dispatch of the SMS messages. The Applicant attended the hearing. The Respondents, however, by their letter dated sent to the NSE by Fax, at p.m. said they had received NSE s letter dated only on that day ( the date of the hearing ) and hence could not depute their representative. They requested postponement of the hearing to another convenient date. Since letters are sent by NSE by Speed Post, the NSE was asked to ascertain the date of delivery of the letter. The adjourned hearing was fixed for July 4, The Applicant submitted a Memo, which she said consolidated her earlier submissions. Respondent s representative, in response to a query as to the time of the visit of the Applicant, to their office, on , after talking to the Branch Manager Mr. Srinivasan, said he was informed by Mr. Srinivasan that the Applicant was in their office from 11 a.m. to 4 p.m. that day. The Applicant, denying this, stated that she was working as a lecturer in a college, and had been called to the Respondent s office at 2.30 p.m. and reached there at 3.30 p.m. after taking permission from her college. She said she would produce a letter from her college confirming this.

9 Issue for consideration: Whether or i. there is merit in the Applicant s claim for return of Rs.140,000 /- invested by her ii. Whether the Respondent is entitled to their counter claim of Rs.2, 18, being the debit balance in the Applicant s account with them. Conclusions and findings. The Respondent has filed the following documents in support of their claim: i. Client Registration Form including Member Client Agreement for ITORS Trading (Trading through Internet based Order Routing System). ii. Welcome letter and proof of delivery iii. Contract notes iv. ECN log report v. Ledger Statement and its proof of delivery vi. Legal notice dated with proof of delivery. vii.certificate from their Service Provider for dispatch of the SMS messages. The Applicant has submitted letters to SEBI, NSE investor grievance redressal cell, and to the Arbitration cell of the NSE / the Arbitrator, strongly denying having given instructions for carrying out the trades, having received contract notes/ statement of accounts in electronic or physical format, SMS messages etc. She also states that she signed the documents under impression that it was for office procedures only. However, her oral submissions at the adjourned hearings, in response to queries, seem to be at variance with the written denials. The Respondent has contended that the Applicant was aware of the transactions and the trades have been executed as per her instructions and contract notes, and SMS messages have been sent to her. The Applicant, in her written submissions, had denied the above. During one of the adjourned hearings, the Applicant was asked why she had opened her trading account with the Adyar branch of the Respondent, when she was residing in Anna Nagar. She said that the branch manager of the Respondent, Mr. Srinivasan, was earlier with M/s Geojit Financial Services Ltd, where she had a trading account, and had incurred a loss of over Rs.1 lakh. Mr. Srinivasan one day telephoned to her that he had joined the Respondent company as Branch Manager of their Adyar branch and requested her to open her account with them. He said her opening the account with his branch would be auspicious ( raasi in Tamil) for him, and also said that this would enable her to make up the loss of over Rs.1 lakh sustained by her earlier. Accordingly she had opened the trading account, and had invested Rs.1.40,000/- for purchase of shares. She has not received any contract notes. When asked as to why she did not object to the trades on to , she said that she had not received any contract notes, but the staff of the Respondent

10 ( Mr. Srinivasan / Mr.Rajesh) used to inform her by phone, at the end of each trading day, the net loss / profit which used to be in a few hundreds (or thousands) stating that, if it is a loss, it would be made up the next day. She said that as for the shares purchased on , (as per her written submission dated ) she had asked them to hold till the price went up, but they had sold the same to have the margin for the transactions on She was called to the Respondent s office by Mr. Srinivasan and Mr. Rajesh at 2.30 p.m. on and she reached their office by 3.30 p.m. when she was informed of the loss. She said she was shocked to hear the news. She said that during the discussion she was informed that even at about 11 a.m. the loss had touched Rs.70,000/- and if she had been informed of the same even at that time, she would have asked them to stop. When asked how she would have reacted if the trades had resulted in a profit, she said naturally she would have accepted it. When it was suggested that perhaps the course of dealing in allowing staff to apprise her of the position at the end of each day and agreeing to it, on their assuring to make good the loss the next day, would have led them to presume that they can do the transactions and inform her later on, she said she had not authorized them to enter into transactions which would incur such huge loss. She also said that since she was being kept apprised of the net profit / loss SMS messages were not relevant. There appears to be a disconnect between the Applicant s total denial of knowledge of the state of affairs with reference to her trading account, and her statement as above. Apparently, she has invested the money with the Respondent, based on the assurances of the Branch Manager, in an attempt to recoup her losses in earlier share market trading through another firm. The Applicant has stated, in her written submission dated , on page 6 para 12, that it is the general opinion that anyone is signed in the particular document of any sort is binding on them. But in this case, she thought the relevant papers given by the Respondent to sign in them is only for office procedures, and that she signed the documents in the belief that they till not do any harm to her. The Applicant is a well- educated person and hence the above defence appears to be simplistic. The presumption, when the documents are signed, is that the person who has signed the documents has understood the contents. The principle is Whenever a person of full age and understanding puts his / her signature to a legal document without taking the trouble of reading it or without asking the document to be read and explained to him / her but signs it relying on the word of another as to its character, contract or effect, he / she cannot be heard to say that it is not his / her document [ See Madhavakrishnan vs Sami ( 1980 ) II MLJ 398 ) ]. The House of Lords in Sauders vs Anglia Building Society [(1971)AC 1004] has held that no matter what class of document was in question, negligence or carelessness on the part of the person signing the document would exclude the defence of non est factum. Notwithstanding the above, it is to be examined whether her claim that she has been subjected to a claim for loss of over Rs.3.34 lakhs on account of the trades carried out on in the newly listed IPO of Aster Silicate Ltd, without her knowledge and consent, is tenable.

11 While the Applicant claims that she was called to the Respondent s office at 2.30 p.m. on and reached there at 3.30 p.m. when she was informed of the loss, the Respondent states that she was in their office from 11 a.m. to 4 p.m. It is not within the purview of this forum to go into this aspect. A perusal of the contract notes on shows that the trades in the shares of ASTER SILICATE LTD have commenced from 09.10:44 a.m. and have taken place almost continuously throughout the day till 15:14:43 hours with the following breaks - from 9.15:40 to 9.46:19, 10.02:31 to 10.20:54, 10.48:03 to 11.04:45, 11.04:55 to 11.28: :26 to 12.46:49, 13.27:51 to 14.44:33, 14.48:03 to 15.11:25, the total amount of shares traded being purchased and sold. The pattern of trading, starting at 9.15 a.m. and continuing till 3.11 p.m, on the day of listing of an IPO ( which was not in the news like some of the IPOs of well known corporate or PSUs ), does not appear to be part of normal investor behavior, that too in short selling for intra day trade, and the total number of shares traded on a single day. The continuous execution of the trades, except for the breaks as above, the exposures allowed, seems to suggest a dealer keying in orders on his own. If they were to consult the client and do it usually there would be some time gap between the order placement and execution. Even if the client was present in the member s office, there would generally be some time lag between the client giving his instructions and the dealer carrying out them, as perhaps there would be other clients present for whom also the dealer would have to execute instructions. Hence there is merit in the contention of the Applicant that the employees of the Respondent has unauthorisedly traded in her account, and caused loss of the amount invested by her. However, this may be said to be only with reference to the transaction in the shares of ASTER SILICATE LTD, on Regarding transactions in shares of other companies, from till , the Applicant, by her course of dealing with them, in implicitly ratifying their transactions when they apprised her of the net profit / loss at the end of each trading day, as per the oral submissions made by her in the personal hearings, might have given them the impression that they could transact first and apprise her later. It is observed from the contract notes from till , that on some days,the net amount due by the Applicant was much more than the amount paid-in by her. Even as regards , where the Applicant has alleged that the amount of shares bought by them was much more than the amount deposited by her, alleging that it is a violation of rules by the Respondent, she has not asked them to immediately sell the shares, but had advised them to hold the same and not to sell them at a loss.

12 Therefore the profit / loss arising from the transactions in the shares other than that of ASTER SILICATE LTD on , and the transactions costs, would be to the Applicant s account. The Respondent company would be vicariously liable for the acts of its staff members with reference to the transactions in the shares of ASTER SILICATE LTD on As regards vicarious liability of the employer for wrongdoing on the part of the employee, the Supreme Court of India, in their judgment on in State Bank of India ( Petitioner ) v Shyama Devi ( Respondent ) [ Citation 1978 AIR 1263, 1978 SCR (3) 1009, 1978 SCC ( )] have laid down the legal principles regarding vicarious liability of an employer for the loss caused to a client through the misdemeanor or negligence of an employee, as under : The legal principles which govern the vicarious liability of an employer for the loss caused to a customer through the misdemeanor or negligence of an employee are: a) The employer is not liable for the act of the servant if the cause of the loss or damage arose without his actual fault or privity or without the fault or neglect of his agents or servants in the course of employment. b) The damage complained of must be shown to have been caused by any wrongful act of his servant or agent done within the scope or course of the servant or agent s employment even if the wrongful act amounted to a crime; and c) A master is liable for his servant s fraud perpetrated in the course of the master s business whether the fraud was for the master s benefit or not, if it was committed by the servant in the course of his employment. There is no difference in the liability of the master for wrongs whether for fraud or any other wrong committed by a servant in the course of his employment and it is a question of fact in each case whether it was committed in the course of the employment. The Supreme Court referred to the judgments in Leesh River Tea Co. Ltd & Others v British India Steam Navigation Co Ltd (1966) A 3 All E.R. 593, Lloyd v Grace Smith & Co [1912] A 636 and United Africa Co Ltd v Saka Owoada [1955] A.C ( In Lloyd v Grace Smith & Co [1912]A.C.716,727 the House of Lords held that so long as a servant is acting within the scope of his employment entrusted to him, his employer is liable for all frauds committed by that servant whether for the benefit of the employer or for his own behalf. ) In the instant case, going by the circumstances of the case, the Respondent s staff has carried out their actions in the course of their employment as Branch Manager and Dealer of the Respondent Company s Adyar branch Hence the Respondent company is vicariously liable for the loss caused on account of the transactions in the shares of ASTER SILICATE LTD on , amounting to Rs.3, 34, The amount claimed by the Respondent, as per their counter claim is Rs.2,18, as due from the Applicant. After crediting back the amount of loss of Rs. 3, 34, on account of the transactions in shares of ASTER SILICATE LTD on , the Applicant s account would be in credit by Rs. 1,15, The Applicant would be entitled to get back this amount.

13 Award The Respondent to pay the sum of Rs.1,15, (Rupees One lakh fifteen thousand one hundred and seventy two and paise sixty two) to the Applicant, with interest at 12% p.a. from ( the date of filing the Arbitration application ) till date of payment. The Respondent s counter - claim for payment of Rs.2,18, (Rupees Two lakhs eighteen thousand nine hundred and sixty four and paise fifty eight) stands dismissed. This Award is made at Chennai on this 19 th day of July N.S. Srinivasan Sole Arbitrator Reply dated by the Applicant. Reply dated by the Respondent, in response to letter dated addressed to the Arbitrator by the Applicant.. Applicant s response to the above letter, by their letter dated Reply dated by the Applicant. Rejoinder dated by the Respondent. Letter dated from the Applicant..Letter dated from the Respondent. Issue for consideration Findings and conclusion Award

14 N.S. Srinivasan Sole Arbitrator.

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