Before the Sole Arbitrator Mr.

Sarweshwar Jha

In the matter of AM No. F & 0 / D - 050 /2010

Chedi Lal Sharma (Constituent), S/o Sh. Mathura Prasad Sharma, 73, Gaj Singh Ji Ki Badi, Saliangarh Road, Opp Power House, Udaipur, Rajasthan - 313001 Vs Share Khan Ltd. ( Trading Member) A - 206, Phoenix House, Phoenix Mills Compound, Senapati Bapat Marg, Lower Parel,
Mumbai - 400013

...Applicant

Respondent

AWARD

The applicant, a constituent of the respondent, has claimed Rs. 6,83,580 1against the latter for having traded unauthorizedly in his account. 2. The applicant's demat account was opened with the respondent on 3.10.2009. With this, he transferred his stocks in his as well as in his wife's names, from Indiabulls Securities Ltd to Sharekhan Securities Ltd as per the list enclosed with his application. He did not visit the respondent's office after opening the account nor did he place any order for purchase or sale of shares nor did he receive any contract note from them till date. It was only on 27.01.2010 that he received an account statement from the respondent's office in Mumbai and he came to know that they were showing a debit of Rs. 4,95,844.27 against him. He immediately rushed to their Udaipur office where he met Shri. Jitendra Inani, RM and enquired from him as to why a debit of the said amount was being shown in his account. He tried to console him by saying that such things did keep happening and he need not worry. As the applicant had not traded in his account, he need not worry about the debit.

3. The applicant has mentioned that he asked for his latest account statement and the same was not given despite his repeated requests and pursuits. Finally, when he accessed the ATM of ICICI Bank on 3.2.2010, he saw a credit of Rs. 95,881 1in his account. On enquiry from the bank, he learnt that the amount had been transferred to his account online by the respondent, who on visit to them came to know that there was a debit of Rs. 5,35,158.38 in his account which the respondent cleared by disposing of his stocks and the balance remitted to his bank account. He was shocked to learn this development, as he had never placed any order for purchase or sale of any stock over telephone nor

had he ever visited them nor received any contract note for any such transaction. But the respondent maintained that these tradings had been done by him only.

4. The applicant's lawyer sent a notice to the respondent in the matter, to which the latter said that these tradings had been done by him only. He also complained to the NSE and informed all concerned about this fraud committed by the respondent. He filed an FIR with Hathipol Police Station of Udaipur; enquiry in the matter has been going on. According to him, the whole incident has taken place at the instance of RM Jitendra Inani and the Manager to earn brokerage for them. He has requested action against them apart from seeking refund of the value of his stocks. 5. The respondent in their reply have, however, stressed that the applicant himself had approached them for opening an account and executed the member client agreement on 23.09.2009. They have confirmed that after opening the account, he transferred all his holdings from his demat account with Indiabulls Securities Ltd BO Account No. 1202990005573031 to Sharekhan demat BO Account 18359357. According to them, he traded in his account on different occasions, and contract notes were sent to him to his email account. Debits arose because of these tradings by him. He gave his shares in the pool account of the respondent to meet his obligations and to maintain his positions in the F&O.

6. All tradings in his account were executed by the respondent at the applicant's instructions and were reflected in the statement of account, and the same were acknowledged by him, as stated by the respondent. They have also submitted that a payout of Rs. 95,881.06 was taken by the applicant on the 2nd February, 2010. The applicant himself was responsible for continuing to trade and for incurring losses. They have given a statement showing trades at NSE.

7. In subsequent submissions and hearings, the applicant has emphasized that the respondent's Jitendra Inani came to his house to get a blank member client agreement form signed by him. He got all authority slips signed by the applicant at the same time. He never went to their office for placing orders nor for obtaining statement of accounts or contract notes. He never traded in F & 0 which, according to him, he did not understand. He had no email account nor did he know computer operation. His signatures on the transfer orders or on ledger statements are fake. He has referred to an authority produced by the respondent in the SSE, accepting the trades in his account; however, he has submitted that he had no knowledge of this authority. 8. On closer scrutiny of the documents and submissions of both the parties, it is observed that: the applicant had already a demat account with Indiabulls Securities Ltd and the stocks in this account were transferred to the demat account with the respondent ; a question arises as to why a person would go in for opening an account with a trading member by closing down his demat account with another trading member unless the latter approaches the person and puts forward attractions and benefits for doing so ; in other words, it can be inferred that the account was opened by the respondent at their initiative; the applicant signs in Hindi whereas the member client agreement ( MCA ) including the instructions and transfer slips are in English, and so was the authority ; the applicant needed to be explained the contents of these documents and his consent taken ; instead, the applicant has alleged that his signatures were obtained on a blank form of MCA ; it is quite possible that in both the situations, namely, if the contents had not been explained to him or if a blank form had been supplied to him and his signatures obtained thereon, he was not aware of the provisions of the agreement

and other documents and, therefore, tradings in and transfer from his account took place without his knowledge ; the matter gets further compounded when it is observed that the applicant, who is a Hindi knowing person, has an email account to which contract notes or statements of accounts, etc., all in English, are sent; the respondent have not given any further proof for the applicant having given instructions to them for carrying out trades in his account; there is also no definite denial of the allegation of the applicant that his signatures on the transfer slips and other papers were fake, and could be matched with his genuine signature to prove his point; the most disturbing element in the entire case is that the respondent disposed of the applicant's stocks to square off the debits on their own without seeking his authorization and paid out the balance to his bank account, which the applicant came to know only when he checked the position, first with the ATM, and then, with the Bank themselves; it is perplexing that the respondent have shown it as a normal payout, as if it is a part of some kind of profit or benefit arising out of investment; but the fact of the matter was that the applicant lost his stocks worth Rs. 5,35,158.38 in the process of the respondent squaring off the debits by disposing of the applicant's stocks unilaterally; this case had been brought before the Hon'ble Arbitrator of the BSE also, with same facts and materials, for seeking relief for the BSE portion of the alleged unauthorized transactions in the applicant's account. The Hon'ble Arbitrator has directed the respondent' to pay a sum of Rs. 76,710.19 (Rs. 53,235.09 on account of loss incurred by him due to unauthorized trade conducted in his account and Rs. 23,475.10 of the delayed payment

charges ).' The respondent has been further directed . to pay simple
interest @ 12 % from the date of his order to the actual date of settlement.

, . ,
the respondent have given a statement showing the transactions, which are mainly transfers from his account with Indiabulls Securities Ltd to his

account with the respondent ; they themselves have shown the value of these
shares as Rs. 6,83,580.00 and the total debit amount of Rs. 5,35,521.65, leaving a balance of Rs. 1,48,058.35. They have also separately shown the sale value of individual shares. It looks as if this account of the applicant was operated only for transfer of shares I stocks from one account to another and disposing of the debits ; it is not clear why only an amount of Rs. 95,881.06 has been shown as payout in his account atter disposing of his stocks, and not Rs. 1,48,058.35 ; the whole exercise appears to be devoid of any rationale or a meaningful logic ; the fact remains that it is unilateral and done by some individual officials of the respondents with a motive to benefit themselves ; as already there is a direction of the Hon'ble Arbitrator of the SSE to pay the applicant Rs. 53,235.09 from out of unauthorized transactions in his account, it would be appropriate if he is compensated for the loss of the balance amount of the value of the total stocks transferred to the applicant's account, and further to the pool account of the respondent, without his consent ; this amount would be the difference between Rs. 6,83,580.00 and Rs. 53,235.09 ; that is, the applicant would need to be further paid Rs. 6,30,344.91 ; and it will be for the respondent to take appropriate action against their erring officials causing loss and harassment to the applicant, and also in a way, to them. Keeping the above in view, this matter is disposed of with a direction to the respondent to pay to the applicant a sum of Rs. 6,30,344.91 within one month. In the event of their failing to adhere to this timeframe, they will be obliged to pay interest on this amount at the rate of 12 % from the date of expiry of one month of the receipt of this order by them till the date of settlement. Sarweshwar Jha (Sole Arbitrator) 9th June 2011