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The factual matrix of this case are that in the month of June, 2003, first respondent had issued an advertisement offering equity shares of the Maruthi Udyog Ltd. (which name has since been changed to Maruti Suzuki India Ltd.) by way of public offer under disinvestment process of this public sector undertaking by Government of India on the basis of bid-cum-offer sale. To compensate the petitioner/complainant in respect of the lesser allotment of 300 shares by paying an amount which shall be equal to the difference in the closing market price of the company shares at the National Stock Exchange on the day of the allotment in question and the fixed allotment price of Rs.125/-. In addition, interest @ 6% shall be paid on this amount of compensation calculated on 300 shares w.e.f. the date of allotment till actual payment to the complainant. (ii) After notionally adjusting the fixed allotment price @ Rs.125 per share for 350 shares i.e. Rs.43,750/-, the complainant would have been entitled for a refund of Rs.71,250/-. Since she received a refund cheque of Rs.5,250/-, the Bank i.e. respondents No.3 & 4 with whom the amount of refund is reported to be lying, shall refund remaining amount of Rs.66,000/- to the complainant alongwith interest @ 6% from the date of allotment till actual payment.

NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION

The old logo of Maruti Suzuki India Limited. L...

The old logo of Maruti Suzuki India Limited. Later the logo of Suzuki Motor Corp. was also added to it (Photo credit: Wikipedia)

NEW DELHI

 

REVISION PETITION NO. 2702 OF 2006

(From the order dated 8.6.2006 in First Appeal No.1215 & 1216 of 2004 of the

State Consumer Disputes Redressal Commission Karnataka)

 

Dr. (Mrs.) B.P. Gayathri

R/o Door No.1413, 6th Cross,

K.M. Puram, Mysore– 570 004                                    …  Petitioner
Versus

 

1.    Maruti Suzuki India Ltd.

2nd Floor, Jeevan Prakash,

Kasturba Marg,

New Delhi – 110 001

 

 

2.    M.C.S. Ltd.

Sri Padmavathi Bhavan,

Plot No.93, Road No.16,

M.I.D.C. Andheri (East)

Mumbai – 400 093

 

 

3.    ICICI Bank Ltd.

2950, Aishwarya Arcade,

9th Cross, Kalidasa Road,

V.V. Mohalla,

Mysore- 570 002

 

 

4.    ICICI Bank Ltd.

Corporate Office

ICICI Bank Towers,

Bandra Kurla Complex,

Mumbai- 400 653                                                     …  Respondents

 

 

 

REVISION PETITION NO. 3921 OF 2006

(From the order dated 8.6.2006 in First Appeal No.1215 & 1216 of 2004 of the

State Consumer Disputes Redressal Commission Karnataka)

 

Maruti Suzuki India Ltd.

2nd Floor, Jeevan Prakash,

Kasturba Marg,

New Delhi – 110 001                                                   …  Petitioner
Versus

1.      Dr. (Mrs.) B.P. Gayathri

R/o Door No.1413, 6th Cross,

K.M. Puram, Mysore- 570 004

 

2.    M.C.S. Ltd.

Sri Padmavathi Bhavan,

Plot No.93, Road No.16,

M.I.D.C. Andheri (East)

Mumbai – 400 093

 

3.    Branch Manager, ICICI Bank Ltd.

2950, Aishwarya Arcade,

9th Cross, Kalidasa Road,

V.V. Mohalla,

Mysore- 570 002

 

4.    General Manager, ICICI Bank Ltd.

Corporate Office

ICICI Bank Towers,

Bandra Kurla Complex,

Mumbai- 400 653

Represented by its General Manager                   …  Respondents

 

BEFORE:                                                       

HON’BLE MR. ANUPAM DASGUPTA, PRESIDING MEMBER

HON’BLE MR. SURESH CHANDRA, MEMBER

 

For the Petitioners:

In RP 2702/2006                            :   Ms. Vaijayanthi Girish, Advocate

In RP 3921/2006                            :   Mr. K.P.S. Rao, Advocate

 

 

For the Respondent

In RP 2702/2006                             :  Mr. K.P.S. Rao, Advocate for R-1

Ms. Vandana Sharma, Adv. for R-2

Mr. Abhinav Tandon, Adv. for R-3 & 4

In RP 3921/2006                            :  Ms. Vaijayanthi Girish, Advocate for R-1

Ms. Vandana Sharma, Advocate for R-2

Mr. Abhinav Tandon, Adv. for R-3 & 4

 

PRONOUNCED ON:   7TH AUGUST,  2012

ORDER

PER SURESH CHANDRA, MEMBER

This order shall dispose of both the revision petitions filed against the common impugned order dated 8th June, 2006 passed by the Karnataka State Consumer Disputes Redressal Commission, Bangalore (‘State Commission’ for short) in respect of consumer complaint bearing No.CD/313/2003 filed by the petitioner Dr. (Mrs.) B.P. Gayathri. Respondents herein were OPs 1, 2, 3 & 4 respectively before the District Forum. The parties in this order have been referred to according to their status in revision petition No.2702/2006.

2.       The factual matrix of this case are that in the month of June, 2003, first respondent had issued an advertisement offering equity shares of the Maruthi Udyog Ltd. (which name has since been changed to Maruti Suzuki India Ltd.) by way of public offer under disinvestment process of this public sector undertaking by Government of India on the basis of bid-cum-offer sale. The Government of India appointed respondent No.2 as Registrar to the issue/offer and respondents 3 & 4 as Book Running Lead Managers/Co-Book Running Lead Managers. The 3rd & 4threspondents, therefore, were bankers through whom the applications were to be forwarded to the 2nd respondent. The investors were required to submit their applications alongwith the money @ Rs.115/- per share. The final price of the shares and the number of shares to be allotted to the applicants, were to be decided by the Lead Managers. The petitioner had applied for 1000 shares by depositing a cheque for Rs.1,15,000/- During August, 2003, the petitioner was allotted 50 shares and got refund of Rs.5,250/- through a pay order. The shares were allotted at the price of Rs.125/- per share. As the total amount according to this way came to only Rs.11,500/- whereas the petitioner had paid Rs.1,15,000/- alongwith her application for 1000 shares, she made several attempts to get the clarification as to why this short payment was made to her. After several enquiries/letters, finally she was informed by respondent No.2 that due to an error in the bank schedule sent by respondent No.3, she had been allotted only 50 shares and refunded Rs.5,250/- (totaling to Rs.11,500/-) whereas another investor who had applied for 100 shares and had remitted only Rs.11,500/- was allotted 50 shares but refunded Rs.1,08,750 /-. After some further correspondence, the petitioner was able to obtain a copy of the bank statement sent by respondent No.3 to respondent No.2. From this statement, it was seen that respondent No.3 had shown only Rs.11,500/- as the amount paid by the petitioner and in the column showing the number of shares applied for, such number applied for was shown as 100 shares. In the case of the other investor, Chandrahas, the amount paid was shown as Rs.1,15,000/- and the number of shares applied for were shown as 100. Because of the occurrence of this mistake on the part of respondent No.3, the application money of the petitioner was wrongly shown as Rs.11,500/- instead of Rs.1,15,000/- and that of the other investor, Chandrahas was shown as Rs.1,15,000/- instead of Rs.11,500/-. The grievance of the petitioner/complainant was that this negligent act of respondent No.3 amounted to deficiency in service on account of which the petitioner lost the chance of being in possession of 350 shares and refund of Rs.71,250/- out of which she could have purchased another 300 shares from the share market @ Rs.215/- prevalent in August, 2003. According to the petitioner, respondent No.2 who was the Registrar of the issue and who had received the bank statement and share applications from the banker to the issue i.e. respondent No.3, was required to render service as per the SEBI guidelines and hence while acting as the Registrar to the issue it ought to have verified the applications as to the number of shares applied for and the amount as mentioned in the applications. Its negligence in not discharging the obligations of the Registrar to the issue, had not only resulted in allotment of only 50 shares to the petitioner against her entitlement to allotment of 350 shares and refund of Rs.71,250/- but also excess refund of Rs.1,08,750/- to 3rd party, namely, Chandrahas, who had applied for 100 shares for which  he remitted only Rs.11,500/- alongwith his application.

3.       Alleging deficiency in service on the part of the respondents 2 & 3, she lodged her complaint before the District Forum praying for allotment of shares, compensation, cost etc.

4.       The District Forum vide its detailed order dated 30.6.2004 has considered the guidelines issued by SEBI regarding the duties and responsibilities of the Registrars as well as bankers to the issue and held that both respondents 2 & 3 played an important role in the allotment of shares. It came to the conclusion that because of the negligence on the part of the bank, hard-earned money of the petitioner was tossed between the respondents because of which the money which was required to be refunded to the petitioner was wrongly refunded to 3rd party, namely, Chandrahas. The District Forum, therefore, vide its order accepted the complaint and gave the following directions: –

 

“a.    Complaint is partly allowed against OPs 2 & 3 only.

 b.      Complaint is dismissed against OP1.

 c.      OPs 2 & 3 are directed to place the complainant in possession of 300 shares of the first OP Company.

 

 d.      OPs 2 & 3 are directed to refund the complainant Rs.66,000/- as per the following calculation:

 

(i)                Amount of refund complainant

should have received after

allotment of 50 shares                         Rs.1,08,750/-

(ii)             Cost of 300 shares at Rs.125 shares     Rs.   37,500/-

——————-

          Amount receivable by the complainant Rs.   71,250/-

          Refund already received

          by the complainant                                      Rs.      5,250/-

          Net amount receivable

          by the complainant                                      Rs.    66,000/-

                                                                   ——————-

         

e.       OPs are directed to reimburse to the complainant all the benefits given by the first O.P. Company to its shareholders since the date of allotment in the form of dividend etc.

 

f.        OPs 2 & 3 are directed to pay the complainant compensation of Rs.20,000/- for rendering deficient service.

 

g.       OPs 2 & 3 are directed to pay the complainant cost of Rs.5,000/-

 

h.       Order under (c) above to be complied within two months from today, failing which the 2nd and 3rd OPs  shall in addition pay the complainant Rs.27,000/- together with interest at the rate of 12% p.a. from the date of order till the date of payment. Rs.27,000/- has been arrived at by taking the value of shares at Rs.215.85 per share (as it was on 20.8.2003) and the difference between offer price and market price is Rs.90/-. Hence for 300 shares the amount comes to Rs.27,000/-, 50 shares having been allotted  already is not taken into account.

 

  1. i.                   If orders under (d), (e) and (f) are not complied within two months from today, the amount shall carry interest @ 12% p.a. after two months.”

 

5.       Aggrieved by the aforesaid order of the District Forum, respondents 3& 4 i.e. the bank preferred an appeal before the State Commission. The petitioner/complainant also filed an appeal against the order of the District Forum which dismissed the complaint against respondent No.1. Respondent No.2 did not challenge the order of the District Forum and hence the same became final against respondent No.2. The State Commission vide its impugned order held all the three respondents/OPs as jointly and severally liable in terms of the following order which modified the order of the District Forum as follows: –

(1)    The complaint filed by the complainant is allowed in part.

(2)     OPs 1 to 3 are jointly and severally liable to pay Rs.50,000/- (rupees fifty thousand only) to the complainant with interest at 6% per annum from the date of the complaint till realization.

(3)     OPs 1 and 2 are also directed to pay Rs.2,000/- to the complainant towards the costs of these proceedings.”

 

6.       Aggrieved by the aforesaid order of the State Commission, as stated above, the two revision petitions have been filed by the complainant Dr. (Mrs.) B.P. Gayathri and OP No.1 i.e. Maruti Suzuki India Ltd. respectively.

7.       We have heard Mrs. Vaijayanthi Girish, Advocate for the complainant Dr. (Mrs.) B.P. Gayathri, Mr. K.P.S. Rao, Advocate for Maruti Suzuki India Ltd., Mrs. Vandana Sharma, Advocate for the M.C.S. Ltd. and Mr. Abhinav Tandon, Advocate for the Bank. Written arguments have also been filed on behalf of the complainant, respondent No.2 and respondents No.3 & 4. It has been submitted that a cheque for Rs.1,02,980/- was sent during the pendency of the proceedings by respondent bank to the complainant but the complainant returned the cheque since the matter was pending and it is now submitted by the complainant/petitioner that the money is still lying with the bank although money paid initially by the complainant alongwith her application was credited by the OP Bank to the account of OP-1/R-1 Company.

8.       The main contention of learned counsel for the complainant/petitioner is that the relief sought by the complainant was not for non-allotment of shares as made out by the respondents but for a direction to be issued to the OPs to put her in possession of 625 shares of which she had been deprived for the reasons stated in her complaint and submissions made before the Fora below. Learned counsel submitted that the State Commission failed to appreciate the submissions while wrongly applying the judgments in the cases of Morgan Stanley Mutual Fund vs. Kartick Das [II (1994) CPJ 7 (SC)] and Om Prakash Sahni and another vs. State Bank of India and another [II (2003) CPJ 100 (NC)] pertaining to non-allotment of shares thereby holding in its impugned order that the complainant cannot maintain a complaint under the Consumer  Protection Act since she was not a consumer as defined under the said Act. On this wrong appreciation of facts, it was submitted that the State Commission  modified the order of the District Forum by holding that respondents 1 to 3 are jointly and severally liable to pay a compensation of Rs.50,000/- and cost of Rs.2,000/- to the complainant/petitioner. She submitted that the theory of prospective allottee not being a consumer, cannot be made applicable to the present case because the allotment in this case was to be done as per well-defined criteria wherein she was to get 350 shares without fail but because of the negligence of OPs/respondents she got only 50 shares. Maruti Suzuki India Ltd. being one of the joint account holders of the Escrow Account is also responsible to compensate the complainant. In view of this, she submitted that there is contributory negligence on the part of the OPs/respondents.

9.       Learned counsel for respondent No.1/OP 1 company has submitted that the company had no role in the allotment of shares in respect of which the complaint came to be lodged by the petitioner/complainant. It was the responsibility of the Lead Managers, bankers and Registrars to the issue. He also submitted that the offer/issue of shares of the company in question was done at the instance of the Government of India as part of disinvestment process of its holding in the company and the guidelines issued by the SEBI indicate that the bankers, Lead Managers and the Registrars to the issue are responsible for the allotment of shares. Lastly, he pointed out that the money in question did not come to the account of the company and hence there was no deficiency on the part of the R-1/OP 1 company in the matter. The impugned order to that extent holding the company jointly and severally responsible alongwtih the other respondents is bad in law and hence liable to be set aside.

10.     Respondent No.2 in its written arguments has submitted that the collecting banks were required to collect the cheque proceeds and credit in the issuers account (Escrow Account of Maruti Public Offer), prepare a schedule mentioning therein application number, name of the applicant, amount deposited by them, shares applied, amount deposited and bank details and to forward the collected application alongwith bank schedule to the Registrar to the issue i.e. R-2/OP-2. The bank schedule being very important document, the Registrars go strictly by the money realized by the bank against each application collected by them and based on which, the procedure of basis of allotment and the allocation of the shares to the successful allottees were carried out. The respondent No.2 has tried to wash off its hands from the responsibility in the matter by saying that it was not practically possible for it to check each and every application (totaling 2.88 lakhs) with the bank schedule provided by the Co-Book Running Lead Managers from all over the country. It was responsibility and duty of the collective bank to be careful and diligent while forwarding the details of the applicants to the Registrar of the issue i.e. R-2 who were to act upon the information provided to them.

11.     We have carefully considered the rival contentions and perused the record. It is to be noted that the basic facts leading to the filing of the present complaint are not in dispute. The mistake did occur on account of which the complainant/petitioner suffered and the alleged deficiency in the matter on the part of the respondents involved denying her allotment of shares to which she was entitled and also refunding less than entitled amount resulting in loss of interest to her. Keeping in view the nature of the public issue of shares in question, we have no manner of doubt that the criteria of allotment was pre-fixed and well-known and hence the theory of prospective allottee cannot be applied to the complainant and as such we hold that the complainant Dr. (Mrs.) B.P. Gayathri is a consumer and her complaint is maintainable under the Consumer Protection Act.  We also hold that in the given facts and circumstances and keeping in view the guidelines of SEBI regarding the role and responsibility of the respondents 2, 3 & 4, there was no deficiency on the part of the respondent No.1 Company even though the company was one of the joint account holders of the escrow account. The complaint against R-1 company, therefore, is dismissed.

12.     As regards respondents No.2, 3 & 4, in our considered opinion, both are liable for negligence and deficiency in service while processing the application of the complainant for allotment of shares. In fact, the initial and most crucial mistake was made by the bankers of the collecting bank while recording the amount of application money as Rs.11,500/- instead of Rs.1,15,000/- deposited by the complainant. Another mistake which they committed was in respect of indicating the amount of application money of another investor Chandrahas as Rs.1,15,000/- even though he had deposited only Rs.11,500/-. These mistakes led to the later mistakes committed by the Registrars i.e. R-2 while making the faulty allotment to the complainant in reducing the number of shares allotted from 350 to 50 only. However, it cannot be denied that the Registrars to the Issue/R-2 were also quite negligent in not properly scrutinizing the application forms. Even on the face of it, it was clear that there could not be a valid application for 1000 shares with only Rs.11,500/- because the application amount was much less than the minimum amount required to be deposited for 1000 shares and on this basis, the application was liable for rejection or at least a cross check from the bankers as to how such an application was accepted. Not only this, the simultaneous mistake in respect of other investor Chandrahas also went unnoticed because of inadequate or no scrutiny and hence the negligence on the part of the bankers. The combined result of the negligence on the part of these two agencies, i.e. respondents 2 and 3 resulted into allotment of lesser shares and lesser refund to the complainant/petitioner and much higher refund to the other investor. We, therefore, hold both respondent No.2 i.e. Registrar to the issue and the ICICI Bank Ltd. i.e. respondents No.3 & 4 as jointly and severally responsible to compensate the complainant/petitioner Dr. (Mrs.) B.P. Gayathri in terms of the following reliefs: –

 

(i)      To compensate the petitioner/complainant in respect of the lesser allotment of 300 shares by paying an amount which shall be equal to the difference in the closing market price of the company shares at the National Stock Exchange on the day of the allotment in question and the fixed allotment price of Rs.125/-. In addition, interest @ 6% shall be paid on this amount of compensation calculated on 300 shares w.e.f. the date of allotment till actual payment to the complainant.

 

(ii)     After notionally adjusting the fixed allotment price @ Rs.125 per share for 350 shares i.e. Rs.43,750/-, the complainant would have been entitled for a refund of Rs.71,250/-. Since she received a refund cheque of Rs.5,250/-, the Bank i.e. respondents No.3 & 4 with whom the amount of refund is reported to be  lying, shall refund remaining amount of Rs.66,000/- to the complainant alongwith interest @ 6% from the date of allotment till actual payment.

 

(iii)    To pay Rs.10,000/- by way of litigation cost to the complainant.

 

13.     The revision petitions are disposed of in terms of the aforesaid directions.

 

…………………………..

(ANUPAM DASGUPTA)

PRESIDING MEMBER

 

 

…………………………..

(SURESH CHANDRA)

                  MEMBER

Raj/

 

 

 

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