UNIT TRUST OF INDIA vs KAVITA GUPTA

IN this Revision Petition No. 811 of 1995 ½ Unit Trust of India, Bombay, Unit Trust of India, New Delhi and Datamatic Ltd., Bombay, are petitioners Nos. 1,2 and 3 respectively and Maj. Gen. Dayal Mohan Gupta is the respondent. The facts of this case and the two other cases viz., Revision Petition No. 809 of 1995 where Ms. Kavita Gupta and Revision Petition No. 810 of 1995 where Mrs. Sushila Dayal Mohan Gupta are the respondents being the same, all the three cases will be disposed of by this common order.

BRIEFLY the facts are that the three respondents � Maj. Gen. Dayal Mohan Gupta, his wife and his daughter applied for allotment of 5,000 units each of the Master Gain, 1992, floated by the Unit Trust of India. They gave their application forms alongwith cheques of the requisite amount of Rs. 50,000/- each at the counter of U.T.I, on 18.5.92 and the same amount was credited to the account of the U.T.I, on 15.6.92, According to the scheme of Master Gain, the certificates were to be issued to the respondents by 30.9.92 and were to be listed in the stock exchange in February, 1993. After about 10 days of the listing, the respondents contracted to sell these units, which had not been issued to them till then, at the rate of Rs. 11.34 each through a stock broker. As they could not deliver the unit certificates to the broker in time, they contend that they have not only lost Rs. 6,500/- each but also had to pay Rs. 2,000/- as cancellation charges to the broker. It is further alleged that after sometime the price of the units fell to a low of Rs. 7/- per unit. Calculating a loss at the rate of Rs. 3/- per unit, the respondents lost Rs. 15,000/-each as on the date when the price was Rs. 7/- in addition to Rs. 6,500/- each which, they claim, lost at the time of contracted sale, at the rate of Rs. 11.30 per unit. Adding Rs. 2,000/- paid as cancellation charges, according to the respondents, each of them suffered a loss of Rs. 22,250/-. Thereafter, they filed a complaint in District Forum-II of Delhi which held that they were not entitled to any compensation on account of the loss alleged to have been suffered because of their entering into a sale transaction of the units, the certificates of which were not in their possession. However, it was established that the applications were made and the application money was deposited in time. And, therefore, the opposite party should have delivered the unit certificates to them within the prescribed time limit. The District Forum directed the U.T.I, to deliver the unit certificates within 30 days of their Order or in the alternative refund Rs. 50,000/- with interest at the rate of 18% p.a. compounded annually from 15.6.92 till the date of payment to each of them, alongwith costs amounting to Rs. 5,000/-each. The respondents were not satisfied with this Order of the District Forum and filed an appeal in the State Commission, Delhi, which after going through the affidavits of the parties held that the U.T.I, shall pay Rs. 22,250/- to each of the respondents on account of the loss suffered by the respondents, as indicated earlier. The State Commission also directed the payment of interest at the rate of 18% on this amount from 25.2.93 and on Rs. 2,000/- from 10.7.93 till the date of payment. Further, they directed the payment of Rs. 5,000/- each by way of costs. The admitted facts are that the respondents had applied for Master Gain units of the U.T.I, in time, deposited the required amount, which was credited into the account of U.T.I., in time, but did not receive the unit certificates for a considerably long period. In fact, the unit certificates were delivered after the decision of the District Forum, dated 4.7.94.

WE have heard the Authorised Representative for the U.T.I., and the three respondents and gone through the records of the case. The main contention of the U.T.I., is that though there was delay in the delivery of unit certificates, ultimately they were delivered with retrospective effect i.e., with all the benefits from the dates the scheme came into force. It may be noted that though the unit certificates were despatched by the U.T.I, on 27.10.94 but by giving retrospectivity to their date of issue from 1992, all the benefits accruing after 1992 were part of them. Therefore, the respondents, according to U.T.I., have not been put to any loss or disadvantage because of delayed delivery of the unit certificates. Moreover, it was also argued, that the Master Gain scheme of the U.T.I, was a capital growth oriented scheme in which the value of the units is based on the net assets value as assessed from time to time. The market value while reflecting the net assets value, also reflects the speculative anticipation of the investors. The net assets value is determined periodically after deducting the value of liabilities from the total face value of the securities held by the trustees of the scheme and it naturally fluctuates according to the value of the securities and liabilities. The speculative element in the market value of such growth oriented units is a matter of perception of the investors at any given point time. In a capital growth oriented scheme, the money of the investor remains locked up for a period of 5 years. Though such units can be purchased and sold in the market on the prevailing price, after their listing in the stock exchange, the U.T.I, can take them back only at the repurchase price, notified by them, at different intervals of time, which, normally, would be according to their net assets value. The contention of the U.T.I., therefore, is that the sale transaction so soon as only 10 days after their listing in the stock exchange, was purely of a speculative character � more so in respect of a capital growth oriented scheme � and, hence, was of a commercial nature. That being so, the respondents were not entitled to seek any relief under the Consumer Protection Act, 1986, as the entire transaction of purchase and consequent contract of sale reflects an intent and purpose of commercial nature. On the other hand, the argument of the respondents is that after the listing of the units in the stock exchange, it was within their rights to take advantage of any increase in the price of units because they made the investment primarily for the purpose of earning profits. The U.T.I., according to them, is negligent for such a late delivery and, thus, depriving them of the benefit which they could obtain at an opportune time by selling these units.

WHILE it is true that the Master Gain Unit scheme is a capital growth oriented scheme, it is also true that the owners of such units are within their rights to enter into sale transactions of these units irrespective of the lock-in period. There is no denying the fact that the market price of such units does reflect an element of speculation and, therefore, may not be the same as their net assets value, or the repurchase price announced by the U.T.I., from time to time. In any case, there could not have been a net assets value or repurchase price, so soon as March, 1993 when the units were listed in the stock exchange only in November, 1993. Assuming that the respondents had received their unit certificates in time, and, therefore, could deliver them, according to the contract of sale they had entered into, they would have earned Rs. 6,500/- each and not more. That, in fact, is their loss because of the late delivery of unit certificates by the U.T.I. Another way of looking at the issue could be that the loss of Rs. 2,000/- each by way of cancellation charges, which according to them they had to pay for want of unit certificates was their actual loss. The unit certificates now have been delivered to them and that too with all the benefits accrued from the date of their issue. We are, therefore, unable to accept the argument that a presumptive loss on account of fall in the price of the units subsequently, should be considered as an actual loss for the purpose of compensation as claimed by the respondents. There would have been no question of any loss to the respondents if they had earned a profit of Rs. 6,500/- each by delivering the unit certificates in time after the contract of sale. Even if we add Rs. 2,000/- on account of cancellation charges, as claimed by them, the total loss comes to Rs. 8,500/- each and not more. Taking into account all the facts and circumstances of this case we are of the view that the respondents are entitled only to the loss which they suffered on account of non-delivery of unit certificates, after they had entered into a sale transaction and not for any presumptive loss based on principles of lost opportunity or any other opportunity thereafter. We accept their plea that they had to pay Rs. 2,000/- each as cancellation charges. Now as the unit certificates have been delivered to them, we consider it just and adequate that they are compensated for a sum of Rs. 8,500/- each for the loss they suffered by non-delivering the unit certificates to the broker through whom they had contracted to sell them. To this extent, this revision petition is allowed and the order of the State Commission, Delhi is modified accordingly. In the final analysis the U.T.I, is directed to pay Rs. 8,500/- only each to the three respondents in these three cases with interest at the rate of 15% p.a. from 15th March, 1993 till the date of payment.

MAJOR General Dayal Mohan Gupta gave an undertaking before us, on behalf of all the three respondents, that in the event of these Revision Petitions being allowed in favour of the petitioners, viz. the U.T.I., they will promptly refund whatever amounts are paid to them in excess by the U.T.I, in pursuance of the order of the State Commission. We direct that the respondents do so accordingly, within 30 days from the date of the receipt of this order. There is no order as to costs.