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 ...Applicant

Vs

Share Khan Ltd.

( Trading Member)

A - 206, Phoenix House,

Phoenix Mills Compound,

Senapati Bapat Marg,

Lower Parel,

Mumbai - 400013

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 1-

in 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