P.J.Joseph vs LAKSHMI And CO.

THIS is a complaint under Sec. 17 read with Sec. 12 of the Consumer Protection Act.

THE first opposite party filed a writ before the High Court, Madras in W.P. 2173/93 and obtained a stay of further proceedings in the above O.P. Subsequently the High Court by its order dated 15-12-93 allowed this Commission to proceed with the petition and pass final orders. However, the implementation of the final order shall not be undertaken without permission from the High Court. Accordingly, this matter is taken up for hearing. THE execution of the order in this O.P. shall be subject to the final order of the High Court in W.P. 2173/93. The brief facts of the complainant are these : The second opposite party is the Madras Stock Exchange and the first opposite party is a Stock and Share Broker and is a member of the second opposite party. According to the complainant he is a client of the first opposite party and has been having regular business in the purchase and sale of shares with the first opposite party and paying him brokerage and commission. The complaint is in respect of two transactions. In September 1990, the complainant delivered to the first opposite party through Mr. R. Govindaraj Chartered Accountant, 100 shares of M/s. U.B. Petroproducts Limited and 100 Shares of M/s. T.V.S. Electronics Limited for sale. There was no response from the first opposite party and when contacted, the first opposite party told the complainant that the shares certificates were misplaced or stolen from his office. The complainant contacted M/s. T.V.S. Electronics Limited and U.B. Petro Products Limited, M/s. Harita Finance Limited who is a Share Registrar of M/s. T.V.S. Electronics Limited informed the complainant by its letter dated 16-8-91 that the shares have already been transferred in the name of one R. Madhavan and requested the complainant to contact the first opposite party. Similarly, M/s. Data Software Research Co. Ltd., who is the Share Registrar of M/s. U.B. Petroproducts Ltd., informed the complainant by its letter dated 17-1190 that the shares have been transferred in favour of one S. Bhattacharya. When the matter was brought to the first opposite party''s notice, the first opposite party in order to cover-up its misdeed agreed to replace the shares and issued a contract delivery letter dated 20-9-91 in favour of the complainant. But the replacement share certificates have not yet been issued. The other transaction relates to the purchase of 500 shares of M/s. Shyam Vinyl Limited. The complainant paid a sum of Rs. 7,335/- to the first opposite party by cheque on 10-10-91 for the share value stamps and service charges and the cheque was realized by the first opposite party on 12-10-91. The first opposite party failed to deliver the share certificates to the complainant. The complainant was subsequently intimated by M/s. Shyam Vinyl Limited by their letter dated 15-2-92 that the share certificates were sent to the first opposite party on 14-1-92, but the opposite party No. 1 had not delivered the share certificates to the complainant. The complainant wrote to the first opposite party on 18-2-92, but there was no response. The complainant wrote to the second opposite party giving details about the above transactions and requesting the second opposite party to intervene and settle the matter. There was a meeting at the office of the second opposite party but nothing came out of it. The second opposite party expressed its helplessness/inability to convince the first opposite party in this matter. According to the complainant, there was deficiency of service on the part of both the opposite parries and the claim is made for a sum of Rs. 2,01,425/- on various heads.

The relevant contentions of the first opposite party are these : The complainant is not a consumer and the complaint is not maintainable. The complainant is not known to the first opposite party and the first opposite party never rendered any service to the complainant or collected any service charge from the complainant. It was only Mr. R. Govindaraj, Chartered Accountant who transacted business with this opposite party in the name of the complainant. The complainant has therefore no locus standi to file the complaint. It is admitted that Mr. R. Govindaraj gave 100 TVS Electronics and 100 UB Petro Products shares for sale. As the documents were misplaced in the office of the first opposite party, the first opposite party delivered 100 shares of TVS Electronics and 100 UB Petro Products shares on 20-9-91 to Mr. Govindaraj under delivery bill No. 7471. As per the instructions of Mr. R. Govindaraj, the said shares were sent for transfer to the complainant. This opposite party did not receive any service charge or stamp charges. As regards other transaction, the case of this opposite party is that on 9-1-91 Mr. Govindaraj purchased 500 shares of Shyam Vinyl Ltd., at Rs. 14.25 in the name of the complainant. The documents for the said shares were delivered to Mr. Govindaraj on 21-6-91. But no payment was made. After several reminders, he paid Rs. 7,325/-on 10-10-91 which included Rs. 7,125/- towards the cost of 500 Shyam Vinyl Ltd., shares and Rs. 210/- towards stamp charges and postage charges. It is the further case of the first opposite party that Mr. Govindaraj gave 600 Indo-Gulf Fertilizers shares standing in the name of the complainant for sale. The complainant signed in the transfer deed. But out of 600 shares, 100 shares were returned as ''Bad delivery'' because of the difference in signature. The complainant gave a fresh transfer deed. According to this opposite party, fearing bad delivery in respect of other 500 shares of Indo Gulf Fertilizers Mr. Govindaraj instructed this opposite pary to retain the said document i.e. 100 TVS Electronics and 100 UB Petro products shares and 500 Shyam Vinyl Ltd. shares. There was a meeting in the office of the second opposite party in which he wanted an undertaking from the complainant in respect of 500 Indo Gulf Fertilizers shares but no undertaking was given by the complainant. It is asserted by this opposite party that these transactions were effected only by Mr. Govindaraj and the complainant is not a consumer.

SECOND opposite party is the Madras Stock Exchange which is the creature of statute namely the Securities Contracts (Regulation) Act of 1956 of which the first opposite party is a Member. The SECOND opposite party denies knowledge of all the allegations and averments made against the first opposite party. When the dispute was brought to its notice, this opposite party tried its level best to bring about a mutually satisfactory agreement and it was with this end in view that a meeting was held, but without success. The matter was not submitted to the arbitration of this opposite party and hence this opposite party could do nothing in this matter. It is not correct to say that this opposite party erred in not discharging its duties by washing its hands and insisting on the complainant to submit to arbitration. There was no deficiency of service on the part of this opposite party and the complainant is not a consumer as regards the SECOND opposite party. S. Al to A25 and Bl to B3 are marked by conSent. Proof affidavit iS filed by the complainant. The oppoSite party haS not filed any proof affidavit.

THE points that arises for determination are : (1) Whether the complainant is a consumer in respect of the opposite parties 1 & 2 or any of them ? (2) Whether there has been any deficiency of service or negligence on the part of the opposite parties or any of them ? (3) To what relief, if any, is the complainant entitled and against whom ?

Point No. 1 : The first opposite party is a share broker, and the second opposite party is the Madras Stock Exchange. The business of a share broker is to buy and sell shares for others, for which the share broker receives a brokerage/ commission of 1.5% on the price. This is undoubtedly a service within the meaning of Sec. 2 (l)(o) of the Consumer Protection Act which is very exhaustive. According to the complainant, he was having dealings with the first opposite party in the purchase and sale of shares and the first opposite party was introduced to him by Mr. R. Govindaraj, a Chartered Accountant. The case of the first opposite party is that he never knew the complainant and it was Mr. Govindaraj who was dealing with the first opposite party in the sale and purchase of shares for the complainant and his wife and hence the complainant is not his client and is not a consumer. Exhs. A6 and A8 communications are from the first opposite party directly to the complainant and there are several letters written by the complainant directly to the first opposite party. There is therefore no doubt that the complainant was having direct dealings with the first opposite party. Even assuming that the complainant was having dealings with the first opposite party through Mr. R. Govindaraj, the said Govindaraj was acting only as the agent of the complainant. The complainant as the principal is in law, the person who was hired or availed of the services of the first opposite party. There is therefore little doubt that the complainant is the client of the first opposite party and has been having dealings with the first opposite party directly or through Mr. R. Govindaraj.

IT is then contended by the first opposite party that in respect of the two transactions which are the subject matter of the complaint namely (1) Sale of 100 TVS Electronics Ltd., and 100 shares of U.B. Petroproducts Limited and (2) Purchase of 500 shares of M/s. Shyam Vinyl Limited, the first opposite party has not received any commission or brokerage and hence the complainant is not a consumer. The share broker is, as a matter of right, entitled to claim brokerage from the party for whom he sells or buys shares. Under Sec. 2(1)(d) (ii) of the Consumer Protection Act, the consideration for hiring or availing of the services, need not actually be paid, it may be promised or partly paid and partly promised or under any system of deferred payment. When a person hires or avails of the services of a share broker for the purchase or sale of shares, there is an implied promise to pay the brokerage. IT is not the case of the first opposite party that it rendered services in these transaction to the complainant free of charge, so as to take it away from the scope of service as defined in Sec. 2(1)(o) of the Act. This is a case where the services of the first opposite party have been availed of by the complainant on promise of payment of the required consideration i.e. brokerage or commission. Further in respect of the second transaction, the complainant has paid a sum of Rs. 7,335/- by cheque to the 1st opposite party on 10-10-91 and the same has been realized by the 1st opposite party on 12-10-91 and there is no dispute on this aspect. The 1st opposite party has purchased 500 shares of Shyam Vinyl Ltd., at Rs. 14-25 per share and the total price comes to Rs. 7,125/-. The stamp duty Rs. 5/- is for Rs. 1,000/-. IT will come to less than Rs. 36/-, even allowing Rs. 20/- for postal charges, the balance in the hands of the 1st opposite party is Rs. 117/- which has to be adjusted towards his commission. We hold therefore that the complainant is a consumer as regards the 1st opposite party and has availed of the services of 1st opposite party for the sale of 100 shares of TVS Electronics Ltd., and 100 UB Petroproducts Ltd., and for the purchase of 500 shares of Shyam Vinyl Ltd. for consideration.

THE second opposite party is the Madras Stock Exchange which is a creature of the statute namely the Securities Contracts (Regulation) Act of 1956. Its main duty is to regulate the sale and purchase of shares through the share brokers of that organization. THE second opposite party has not rendered any service to the complainant for any consideration and hence the complainant cannot claim to be a consumer qua the second opposite party. THE point No. 1 is answered accordingly. Point No. 2 : The complainant has delivered l00 shares of TVS Electronics Ltd., and l00 shares of UB Petro Products Ltd., to the 1st opposite party for sale. As there was no response, the complainant has written Exh. A2 letter to the 1st opposite party asking the 1st opposite party to inform the complainant about the current position. There was no response. The first opposite party has stated that the share certificates had been misplaced or stolen in its office and has promised to issue replacement shares. Exh. A 6 is the replacement contract note issued by the first opposite party to the complainant on 20-9-91. The complainant has made enquiries with M/s. TVS Electronics Limited and UB Petro products Limited about these shares. Exh. A3 dated 16-8-91 is the letter to the complainant''s wife by M/s. Haritha Finance Limited which is the Share Registrar of M/s. TVS Electronics Limited informing the addressee that the share certificates have already been transferred in the name of R. Madhavan. Exh. A5 is the letter addressed to the complainant by M/s. Data Software Research Company which is the Share Registrar of U.B. Petroproducts Ltd., informing the complainant that his 100 equity shares have been transferred in the name of Sankara Narayana Bhattacharya and Exh. A4 is the share transfer form dated 19-12-90 which bears the seal of the first opposite party. It is evident therefore that the first opposite party had already sold and transferred these shares in these two companies and has come forward with the false claim that the shares certificates have been lost and tried to replace the shares. The replaced shares have not also been received by the complainant so far. In his counter statement the first opposite party would averred that the replacement shares have been handed over to Mr. R. Govindaraj on 20-9-91 and that R. Govindaraj asked the first opposite party to transfer the same in the name of the complainant and his wife. Evidently, the complainant has not got the replacement shares or the value of the shares sold by the first opposite party. The first opposite party has therefore not only committed gross deficiency of service but also acted dishonestly. It is bound to refund the price of these shares to the complainant with interest thereon from date of the sales. The second transaction is for purchase of 500 shares of M/s. Shyam Vinyl Ltd. A sum of Rs. 7,335/- has been paid by the complainant to the first opposite party by cheque through Mr. R. Govindaraj under Exh. A8 letter dated 10-10-91. The cheque has been drawn in favour of the first opposite party and according to the complainant it has been realized by the first opposite party on 12-10-91. The share certificates were not received by the complainant. He therefore contacted M/s. Shyam Vinyl Ltd., who by their letter dated 15-2-92 under Exh. A9 informed the complainant that 500 share certificates with distinctive numbers which are given in that letter were sent to the first opposite party on 14-1-92 after effecting the transfer. In the counter statement, the first opposite party has stated that the documents for the said shares were delivered to Mr, Govindaraj on 21-6-91 (vide para 7 of the counter statement) and they have been subsequently sent to M/s. Shyam Vinyl Ltd., for transfer in the name of the complainant, but nothing is heard thereof. As already pointed out that the share certificates have been transferred in the name of the complainant and sent to the first opposite party on 14-1-92 as is evident from Exh. A9 letter dated 15-2-92 by M/s. Shyam Viny Ltd. It is the further contention of the first opposite party that in another transaction involving the sale of 600 shares of Indo-Gulf Fertilizers in the name of the complainant, 100 shares were returned for bad delivery on account of difference in signature of the complainant and the complainant gave a fresh transfer deed. Fearing bad delivery in respect of other 500 shares, the first opposite party retained with that the instance of Mr. R. Govindaraj, the 100 TVS Electronics Ltd., shares and 100 UB Petroproducts Ltd., shares and the 500 Shyam Vinyl Ltd., shares. It is also further alleged that the first opposite party wanted the complainant to give any indemnity bond, in respect of 500 Indo Gulf Fertilizers shares and as the inability demand has not been given, the shares were not returned to the complainant. All these allegations are totally irrelevant for the purpose of this case and there is absolutely nothing to substantiate the same. The opposite party has not even chosen to produce the affidavit from Mr. R. Govindaraj in support of its allegation. We have no hesitation in holding that the first opposite party has purchased 500 shares of Shyam Viny Ltd., and has failed to deliver the same to the complainant and has thus committed gross deficiency of service. It is therefore bound to refund the sum of Rs. 7,335/- received from the complainant with interest thereon from 12-10-91 when the amount has been realised by encashment of the cheque.

We have already held that the complainant is not a consumer as regards the second opposite party, the Madras Stock Exchange. Further there is nothing to show that there was deficiency of sendee on the part of the second opposite party. The dispute between the complainant and the first opposite party share broker has been taken to the second opposite party for settlement and the second opposite party has suggested an arbitration to which the complainant was not available. The second opposite party is not therefore guilty of deficiency of service or any negligence.

POINT No. 3. We have already found the first opposite party guilty of gross deficiency of service and negligence in respect of both these transactions. It is bound to refund to the complainant the price of 100 TVS Electronics shares and 100 UB Petro products shares sold by it. Exh. A4 shows that 100 UB Petroproducts shares have been sold for Rs. 3,200/- to Mr. Sankaranarayana Bhattacharya on 19-12-90 for Rs. 3,200/-.The first opposite party is bound to repay the sum of Rs. 3,000/- to the complainant with interest thereon at 24% p.a. from 19-12-90 rill payment. The first opposite party has also sold 100 TVS Electronics shares to R. Madhavan as is seen from Exh. A3. The date of the sale and the price amount are not cleared. But we can safely presumed that the sale must have been effected in December 1990, as in the case of the shares of UB Petro products. The learned Counsel for the second opposite party stated that the share of U.B. Petro products was also selling at Rs. 32/- at that time. We accept this amount and held that the first opposite party is bound to pay to the complainant the sum of Rs. 3,200/- being the price of 100 U.B. Petroproducts shares with interest thereon at 24% p.a. from 31-12-90 till payment.

THE first opposite party has to refund the sum of Rs. 7,335/- received from the complainant for purchase of 500 Shyam Vinyl Ltd., shares with interest thereon at 24% p.a. from 12-10-91 on which date the cheque has been encashed. THE complainant has claimed damages on various heads but there is no evidence to substantiate the same. But the complainant must certainly have suffered much mental pain and agony and we are awarding compensation in the sum of Rs. 10,000/- for the damages. In the result, we order as follows : (1) The first opposite party shall pay to the complainant Rs. 3,200/- with interest thereon at 24% p.a. from 19-12-90 till payment. (2) The first opposite party shall pay to the complainant Rs. 3,200/- with interest thereon at 24% p.a. from 31-12-90 till payment. (3) The first opposite party shall refund to the complainant the sum of Rs. 7,335/- with interest thereon at 247.. p.a. from 12-10-90 till payment. (4) The first opposite party shall pay to the complainant the sum of Rs. 10,000/- towards compensation for pain and agony. (5) The first opposite party shall also pay costs of Rs. 2,000/- to the complainant. (6) All these payments shall be made within one month from the date of this order. (7) The complaint fails and is dismissed but without costs, as against the second opposite party.

Before parting with this case, we would like to point out that the second opposite party which is the Madras Stock Exchange and which is expected to regularize the share transactions will do well to take appropriate action against the first opposite party who has acted dishonestly in an unethical manner, in order to ensure the proper functioning of the Stock Exchange and to build the confidence of the public. Complaint allowed against O.P.1. Complaint dismissed against O.P. 2. without costs. ______________