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BY 795405

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Arbitration Matter No.NSECRO/r6s66/rq-zo/ARBI

STOCKEXCHANGEOF INDIA

BETWEEN

ur|. G. MailigaPAN No.AQCPMSZS9JNo.tz, Muthu Rangan Salai,T. Naear. Chennai 6ooot7

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M/1. Anand Rathi Share and Stock Brokers Ltd.Express Zone A Wing, roh Floor,We$ern Express Highway,Diagonally Opposite Oberoi MallGorpgaon (E), MumbaiMaharasthra- 4ooo63

...APPLICANT

...RESPONDBNTIIt

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INDIAI

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nG ilFr{tr TAMTLNADU 2lJUL20m

ARBITRATION A\trARI)

AX 540129

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l,l. JYOTtttgELVAlls?AFI'EIDOR

LxoOcl{lllor.Pirtanaali a t ttaos.

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l.BACKGROI.]ND

r.r. National Stock Exchange of India Limited vide their letter dated z7s January zozo

" bearing Reference No. NSE/CRO/ 16556119-zo I ARB had referred the dispute raised

by the Applicant under Form I dated December 16,2otg for arbitration and I have

been appointed as the arbitrator to adjudicate the dispute betrveen the Applicant and

Respondent under the Bye-Laws, Rules and Regulations of the National Stock

Exchange of India Limited

r.z: Both parties were issued hearing notices and a hearing was held, on 19m February

.2020.

z.LPPEARANCE

APILICANT - Mrs. S. Thamizharasi appeared on behalf of the Applicant.

RESPONDENT - Mr. M.S.Amarnath, Assistant Vice President of the Respondent and

Mr. R. Selvaraj, Senior Officer- Operations and Support of theI'

Respondent appeared on behalfofthe Respondent.

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3. STATEMENTOF CASE OFAPPLICANT

The case of the Applicant according to the Statement of case filed by the Applicant is as

follows:

3.1. The Applicant had opened a trading account with the Respondent in January zorT

and she had invested a sum of Rs.3,oo,ooo/- to trade in commodities and equities. The

Respondent had stated that they will trade online on her behalf and would inform the

same to her in due course. However, they did not inform the Applicant and whenever the

Applicant visited the Respondent's ofEce at Century Plaza, Anna Salai, Chennai, one Mr.

Venkatesh who works for the Respondent, would inform her that the trade is going well.

Suddenly on one day, r5e May zorT , Mr Venkatesh informed the Applicant that the trade

was not going well and nothing remained in her account. The Applicant was shocked and

hen the Applicant asked for further details, Mr. Venkatesh informed the Applicant that

he would give her Rupees One Lakh on r6.o$.zot7 and asked the Applicant to come on

that date.

3.2 The Applicant visited the Respondent's ofEce on ;6o6.2cl7 at which time, Mr'

Venkatesh obtained the Applicant's signature on a letter dictated by him and he paid Rs.

r Lakh by way of cash to the Applicant. The Applicant was made to sign the letter due to

coercion and duress. The Applicant had saved Rs. 3 Lakhs over 3 years and since the

Applicant was in need of money, she decided to take the one lakh, however the same was

not in terms of the letter dated 16.06.2017.

3.5 In these circumstances, the present arbitral dispute has arisen whereby the Applicant

has claimed that a sum of Rs.z,oo,ooo is due to her on account of unauthorized trading

by the Respondent.

3.6 The Applicant has contended that since Mr. Venkatesh, who is an employee of the

Respondent, has conducted the transactions, the Respondent is liable for the loss caused

on account ofthe transactions. The payrnent of r lakh by the Respondent proves that the

decisions were taken by the Respondent and they are therefore liable for the remaining z

3

,T"rte*

3.3 The Applicant made a complaint to SEBI seeking action against the Respondent and

seeking compensation of Rs. S l,akhs and also therefore preferred a complaint before the

NSE Investor Grievance Redressal Panel (IGRP) which was numbered as Complaint

No.18o122o676goo87g seeking palment of Rs. z Lakhs by the Trading member (being

the remaining sum out of the 3 lakhs invested by her).

3.4 The abovesaid complaint was taken up by the IGRP on February 8, zorS and the IGRP

dismissed the claim of the Applicant.

lakhs invested by her also.

3.8 It was further contended that all the trades in her account were conducted without

her knowledge and that the mails and messages (SMS) were not seen by her. The

Applicant has contended that her email address was created by the Respondent, who was

vievr'ing the emails received. She has also contended that since her phone number was

dysfunctional since she got her phone repaired she did not confirm any action of the

Respondent. She did not receive any quarterly ledger statement or D.P. holding

statement. She did not accept any contract notes and bills and statements at any time. No

periodical statement was provided by the Respondent to the Applicant for her signature.

3.9 The Applicant filed the following documents in support of her case:

a) Letter dated r9.o8.zor7 issued by the Applicant to SEBI;

b) Complaint dated o3.or.zor8 filed by the Applicant before the NSE;

c) Complaint dated o8.o5.zor7 made by the Applicant to the Respondent;

d) Letter dated 16.o6.zo17 given by the Applicant to Mr. Venkatesh, employee of

the Respondent;

e) Response dated r5.or.zor8 filed by the Respondent in response to the

Applicant's complaint before the NSE;

0 Additional submissions dated zo.or.zor8 filed by the Applicant;

g) Letter dated o5.o2.2or8 issued by the Applicant seeking an adjournment;

h) AfEdavit dated 3o.or.zor8 executed by Mr. S. Kesavan;

i) Order passed by the IGRP Panel.

4. STATEMENT OF DEFENCE

The case of the Respondent according to the statement of defence filed by the Applicant

is as follows:

4.2 The Respondent has contended that the Applicant retained and accepted all contract

notes and bills and statements and at no point in time did she raise any dispute in respect

Jjt"*-4

3.7 The Applicant has filed the affidavit of Mr. S. Kesavan, who accompanied her on

16.06.2c17 during her visit to the Respondent's office in support ofher contention that

she was coerced to sign the letter d ated t6.o6.zot7 when she received a sum of Rs.r Lakh

from the Respondent.

4.r The claim filed by the Applicant is absolutely false, frivolous and dishonest. The

Respondent was in constant touch with the Applicant and she had knowledge ofall trades.

The case ofthe Respondent has been the Applicant was always fully aware of the trades

in her account and she have been issued electronic contract notes on regular basis by way

of email to the email address provided by the Applicant (gmallikarqzz@gmail.com) and

the trades have also been communicated through SMS to her registered mobile number,

both of which have not been objected by the Applicant. The copy ofthe electronic contract

note log and the SMS log has also been filed in support of this contention.

of the same.

4.3 The Respondent has contended that the it is the duty of the Applicant to maintain

confidentiality ofher email address and access to the same. The Respondent vehemently

denied the allegation that the Respondent was viewing her email address. It was also

contended that a one time password which is sent to the registered mobile number when

an email account is created and therefore the account could not have been created by

them.

4.4 The Respondent had contended that if her mobile phone had in fact become

dysfunctional, she ought to have made a request for modification of her mobile number

details in their system. The Respondent has contended that the Applicant has come up

with this fabricated claim that she did not receive SMS messages only to shift the burden

oflosses incurred by her due to her own trading decisions.

4.5 The claim of the Applicant that unauthorized trades were carried out in the commodity

segment is baseless and unsubstantiated as the Applicant's account was not activated in

the commodity segment and no transaction was carried out in this segment.

4.6 The Respondent has contended that at no point did the Respondent or any of its

employees force the Applicant to sign the letter dated r6.o6.zot7. On the other hand, the

Applicant had threatened to commit suicide if the Respondent did not settle her account

towards her losses. Therefore, as a goodwill gesture the branch ofEcial ofthe Respondent

gave her a sum of Rs. r lakh and the Applicant had agreed to withdraw all claims.

4.7 The Respondent filed the following documents in support of its case:

a) KYC ofthe Applicant;

b) A copy of the ledger statement for the period zr.or.zo tZ to 2o.o6.2oL7;

c) A copy of the Electronic Contract Note Log for the Applicant's transactions;

d) A copy of the SMS Log report for the Applicant's transactions;

e) The Proof of delivery details for the finance ledger/ security ledger showing

dispatch to the Applicant;

0 Order ofthe IGRP Panel dated February o8, zor8

HEARING P E'.n N(lsI

S.r During hearing on Lg.o2.2o2o the Applicant reiterated the submissions made in the

statement of case filed by her and also made the following submissions

5

a) The Respondent did not follow the rules of the NSE which requires the TM to take

signatures on periodical statements. The Applicant's counsel had stated that she

will inform the panel as to which rule requires the Respondent to obtain the

signatures of the Applicant on periodical statements.

b) The letter dated 16.o6.zo17 issued by the complainant was not in full and final

settlement of all claims. ^ , ,[i,_r i \-"

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c) The Applicant has gone around 1S-2o times to the Respondent's office. Normally,

she would go on her own. However, when the problem arose, she went with Mr. S.

Kesavan on r6.o6.2ot7.

S.2 The Respondent reiterated the submissions made in the Statement of Defence and

also made the following submissions:

a) The Applicant would sit in front of the computer, at the time of each trade and

orders would be placed only on her instruction and in her presence. She was

present at terminal for all transactions.

b) The Applicant has done many transactions and she was aware of loss. She ought to

have informed the Respondent if in fact she was not receiving the email.

c) The Applicant would receive a SMS from Central Depository Services Ltd. and NSE

also and therefore she cannot plead that she was not aware oftransactions.

S.3 After the Respondent's submissions, the Applicant also submitted the following:

a) Since her phone was not working at all she did not receive the SMS's mentioned in

the SMS log filed by the Respondent.

b) All the transactions were unauthorised and the transactions were not

communicated in writing. If the Respondent had informed the Applicant that the

transactions were not generating income, she *ould have stopped trading.

c) The Applicant stated that while the Respondent was authorised to transact on her

behalf, there was no proper communication from the Respondent regarding

profltability of transactions. Even though she sat in front of the terminal, she

thought she was going in a prosperous way.

The parties were heard in full and the documents filed by both sides were perused in

detail.

6.FINDINGS & CONCLUSION

6.r The following are the issues that arise in the present case:

a) Whether the trades executed in the Applicant's account were unauthorized trades?

b) Whether the Applicant's claim was fully settled on :r6.06.2cl7? jA-\[qUJ<"

6

Since the client registration form filed by the Respondent was incomplete, the

Respondent was given an opportunity to produce the same within a period of three days

after the hearing. The Applicant was given an opportunity to furnish case law, if any, she

wished to rely upon and cite the rule requiring the Respondent to obtain the signature of

the Applicant on the periodical statements within one week form the date of the hearing'

The Respondent furnished the copy of the client registration form. The Applicant did not

cite any case law nor did she cite the rule requiring the Respondent to obtain the signature

ofthe Applicant on the periodical statements.

Issue No.r: Whether the trades executed in the Applicant's account wereunauthorized trades?

6.2 The KYC forms and the client enrolment form discloses that the Applicant had

declared that her email address was @smail.com and she had also disclosed

her mobile number. These documents also reveal that the Applicant had specifically

authorized the Respondent to send electronic contract notes to the above email address.

The Respondent has established that the electronic contract notes and SMS messages

were sent by producing the Electronic Contract log report and the SMS log report. The

SMS Log report also shows that the messages were delivered and therefore the claim that

the Applicant that she was unaware of any ofthe trades is not sustainable.

Issue No.2: Whether the Aoolicant's Almwas fullv settled on a6.o6.2ot'7?

6.4 In so far as the events on L6.o6.2oL7 are concerned, the case of the Applicant is that

she went along with another gentleman, Mr. S. Kesavan and that she was coerced into

signing the letter acknowledging full and flnal settlement while the Respondent paid a

sum of Rs. r lakh. It does not seem believable that a person coercing a person to sign

would pay a sum of Rs. r lakh at the same time. Further, the Applicant has stated that she

took the money due to necessity as she required the money. Having received the money

and having executed the letter dated 16.o6.zo17 that the dispute had been fully settled,

the Applicant cannot attempt to disown the letter acknowledging full and final settlement

alone. The contention of the Applicant that the letter was not issued in full settlement is

contrary to the plain language in the letter. The argument that the pa)rynent of Rs. r lakh

amounted to an acknowledgement of guilt of the wrongdoing allegedly committed by t}le

Respondent cannot be accepted as parties often chose to settle disputes in order to avoid

unnecessary litigation or for commercial reasons. In the present case, the parties had fully

settled their dispute and therefore the claim for Rs. z lakhs is untenable on this ground

N.+*"-7

also.

6.3 The Applicant has admitted that she made around 1S-2o visits to the office of the

Respondent and her gdevance was that she was not aware that she was not making

profits. Since the Applicant had made so many visits during a period of less than 6

months, at the very least she would have known that transactions were being conducted

in her account. Further, during the hearing, in the presence ofher counsel, the Applicant

admitted that she was present during the execution of the trades and her grievance was

that she was not aware that she was Iosing money as she would have stopped trading in

such case. This in my view cannot make the trade an unauthorized trade. Having

specifically admitted that the trade were authorized, this issue is answered in favour of

the Respondent. Therefore, the claim ofthe Applicant that she is entitled to a sum of Rs.z

Iakhs, i.e. the remaining sum invested by her is unsustainable.

T.AWARI)

7.1. In the above circumstances, the claim of the Applicant is dismissed. The parties are

to bear their respective costs.

7.2 The Award is signed and issued in three originals, one for each of the parties and one

for the National Stock Exchange of India Ltd.

Dated at Chennai on this the z4s day of July, zozo

r (\c.dt'-, LA'

ANAI{D SASHIDTIARANSOLEARBITRATOR

8