STOCK HOLDING CORPORATION OF INDIA LTD vs V.S. PANDEY, & ORS.

This revision petition has been filed under section 21(b) of the Consumer Protection Act, 1986 against the order dated 31.07.2007, passed by the UT Chandigarh State Consumer Disputes Redressal Commission (hereinafter referred to as ''the State Commission'') in First Appeal No. 121/2007, "V.S. Pandey versus Stock Holding Corporation of India Limited & Ors.", vide which, while allowing the appeal, the order dated 22.02.2007, passed by the District Forum Chandigarh in consumer complaint No. 56/2006, filed by V.S. Pandey, the present respondent-1, dismissing the said complaint, was set aside.

Briefly stated, the facts of the case are that the complainant V.S. Pandey is the holder of a demat account with the petitioner, Stock Holding Corporation of India Limited (hereinafter referred to as SHCIL), which is registered as a depository participant (D.P.) with the National Securities Depository Limited (hereinafter referred to as NSDL). The complainant was the holder of 62 shares of OP-2 Sterlite Industries Limited, which were kept in demat form with the petitioner. It is stated that the OP-2 Sterlite Industries Limited announced a scheme of arrangement with its shareholders dated 20.05.2002, according to which, they were to make offer to the shareholders to buy-back their shares and in lieu of that, to make payment to them @100/- per share and also to provide 5 debentures of 10/- each in lieu of each share purchased. The cheque towards compensation under the scheme was to be sent directly by OP-2 or its Record and Transfer (R&T) Agent, OP-3 M/s. Sharepro Services. It was stipulated that the shareholders who did not respond to the notice sent by OP-2/OP-3 shall be deemed to have accepted the offer of buy-back of shares. The record date for the buy-back was 20.05.2002 and the shares were purchased by the company on 06.08.2002. The OP-2 filed a petition before the Hon''ble High Court of Judicature at Bombay under section 39 of the Companies Act, and the Hon''ble Court duly approved the scheme of arrangement on 19.04.2002. It is stated that the complainant was given option for buy-back by the OP-2 Sterlite Industries Limited in pursuance of the scheme approved by the Hon''ble High Court. However, the complainant denies having received, the letter of option saying that he had shifted his residence from Ghaziabad to Chandigarh. The case of the petitioner SHCIL is that on the basis of the instructions received from the NSDL, which in turn was intimated by OP-2, they debited the account of the complainant for 62 shares, as apparently, the complainant had not exercised his option to retain the said shares by giving intimation in writing to OP-2 or OP-3. The petitioner also stated that intimation about the change of address had been given by the complainant to them quite late, i.e., on 08.03.2014, almost 2 years after the record date.

In the consumer complaint No. 56/2006 filed before the District Forum, the complainant stated that they learnt from the statement of account issued by the OP-1, SHCIL, that 62 shares of the OP-2 Company had not been reflected in the account statement. The complainant also stated that no choice or option had been given to him and the same was forced upon him by OP-1 in collaboration with OP-2, stating that the complainant had suffered loss to the extent of market value of the shares. The complainant sought compensation of 7.5 lakh from the OPs alongwith litigation cost of 10,000/-.

In their reply filed before the District Forum, the petitioner/OP-1 SHCIL stated that their job as Depository Participant was to keep an account of the shares held by their client. They were simply an instrument in between the client, the bearer of shares and the Depository (NSDL). There was, therefore, no cause of action against them and hence, the complaint against them should be dismissed. The OP-1 also stated that the complaint having been filed on 06.02.2006, was barred by limitation, as the episode had taken place in May, 2002.

The OP-2 & OP-3 were duly served during proceedings before the District Forum, but they did not appear before them to contest the case. The District Forum after taking into account the averments before them, dismissed the complaint as being without merit. The District Forum observed that the remedy open to the complainant was to approach the Hon''ble Bombay High Court, or to challenge their order before any other higher court. The complainant had not been able to establish that the OP-2 had not acted in accordance with the scheme duly approved by the High Court. Being aggrieved against the order of the District Forum, the complainant challenged the same by way of an appeal before the State Commission. Vide impugned order, the State Commission allowed the complaint and directed that a sum of 3,80,030/- on account of loss with regard to shares, alongwith compensation of 50,000/- for mental agony and 10,000/- as cost of litigation should be paid jointly and severally to the complainants. Being aggrieved against the said order of the State Commission, the OP-1 SHCIL is before this Commission by way of the present revision petition.

It was averred during arguments before us, by the learned counsel for the petitioner that the petitioner was simply performing their job as a depository participant (DP) under the Depository Act, 1996, as per which the petitioner was acting merely as an agent of the NSDL. Any grievance of the investor had to be forwarded by them to the NSDL, which is the relevant agency under the Act. However, the complainant had not even impleaded the NSDL as a necessary party in the consumer complaint. Further, the State Commission had gravely erred in presuming that it was the duty of the petitioner/OP-1 to send the letter of option, under the Scheme of buy-back, to the complainant, whereas the matter was between the OP-2 Company or their agent and the shareholder. The petitioner had simply acted on the instructions of NSDL and deleted 62 shares of the OP-2, based on these instructions. The learned counsel further stated that the buy-back had taken place in the year 2002, but the complaint had been filed in 2006, meaning thereby that it was barred by limitation as per section 24A of the Consumer Protection Act, 1986.

The learned counsel for the complainant/respondent averred that any transfer to and from the accounts of the client had to be made by the depository participant on the basis of suitable instructions/mandate, duly authorised by the client, as per the agreement between the client and the DP. The petitioner was, therefore, deficient in service towards them, as they had deleted the shares of Sterlite Industries Limited, without any mandate from them. The learned counsel also stated that they were never informed about the buy-back scheme by the OPs.

We have examined the entire material on record and given a thoughtful consideration to the arguments advanced before us.

The main issue that merits consideration in the matter is whether the petitioner/OP which is depository participant, has shown any deficiency in service towards the complainant in the whole episode of buy-back of shares. As per the material available on record, the scheme for buy-back of shares was duly made by the OP-2 Company and got approved from the High Court of Judicature at Bombay. In pursuance of the said scheme, the OP-2 Company or their agent OP-3 was supposed to make correspondence with the shareholders in order to obtain their options etc. Based on such option, the instructions were required to be issued by the company to the NSDL, following which, the necessary entries were to be made in the account statement held by the D.P., i.e., the petitioner. It is abundantly clear from the factual position on record that the process for buy-back of shares or to obtain options of the shareholders was to be handled by the OP-2 Company or their agent OP-3. In case, the OP-2/OP-3 failed to send the option form at the appropriate address of the shareholder, the complainant is at liberty to take appropriate action against them as per law. In so far as the petitioner is concerned, their job under the scheme of things is to maintain the account based on the instructions received from the clients or the NSDL. It has been stated by them that based on the intimation received from the OP-2 Company, the NSDL asked them to make entries in the account statement, regarding the buy-back of 62 shares of Sterlite Industries Limited and they had acted accordingly. The observation made by the State Commission in the impugned order that the letter of option to the complainant was to be sent by the petitioner/OP-1 to the shareholder is completely erroneous. The conclusion made by the State Commission, therefore, that the petitioner/OP-1 was deficient in service by not sending the option form to the shareholder is without any logic. We, therefore, have no reason to disagree with the contention of the petitioner that they have acted strictly in accordance with the instructions of the NSDL and they cannot be held liable, if the complainant has faced with any loss etc. on account of the action/inaction on the part of the OP-2 or OP-3.

From the foregoing discussion, it is held that there is merit in this revision petition and the same is allowed. The order passed by the State Commission is modified to say that the petitioner/OP-1 shall not be liable to pay any compensation to the complainant. There shall be no order as to costs.