Mr. Bipin Vijaykant Mehta, Huf vs Sebi

Order Reserved on: 05.01.2018

Date of Decision : 31.01.2018

Appeal No. 375 of 2016

Mr. Bipin Vijaykant Mehta, HUF Through Bipin Vijaykant Mehta (Karta), B-605, Kamla Vihar, Poinsur Gymkhana Road, Kandivali (West), Mumbai - 400 067. .....Appellant

Versus

Assistant General Manager, Bombay Stock Exchange Limited, Phiroze Jeejeebhoy Towers, Dalal Street, Fort, Mumbai - 400 001. ......Respondent

Mr. Ankit Lohia, Advocate with Ms. Ashwini Pawar, Advocate i/b Akshar Laws for the Appellant.

Mr. Aditya Chitale, Advocate with Mr. Vivek Shah, Advocate for the Respondent.

CORAM : Justice J.P. Devadhar, Presiding Officer Dr. C.K.G. Nair, Member

Per : Dr. C.K.G. Nair, Member

1.

This appeal has been preferred by the appellant aggrieved by the

order of the BSE Limited ('BSE' for short) dated June 29, 2016 whereby the

claim of the appellant arising from his trading with Unicon Securities Pvt.

Ltd. ('Unicon' for short) has not been considered for payment from the

Investor Protection Fund ('IPF' for short) of BSE on account of delayed

submission of the claim by the appellant.

2

2. Appellant is a small investor who had a trading account with Unicon,

a member / broker of the BSE during relevant time. On September 10, 2014

BSE declared Unicon as a defaulter and informed the public as per usual

process and advised the investors to file Arbitration Reference with the BSE

within 120 days from the date of the public notice, failing which the claim

will not be eligible for compensation from the IPF. Further, adhering to the

procedure laid-down by the Securities and Exchange Board of India ('SEBI'

for short) circulars dated October 28, 2004 and June 16, 2011, BSE issued

public notice in the form of an advertisement dated September 15, 2014 in

two dailies to the same effect. On January 22, 2015, pursuant to the receipt

of the complaint filed by the appellant in the SEBI SCORES System, BSE

advised the appellant to file an Arbitration Reference with the BSE. The

appellant filed the Arbitration Reference against the Unicon, the defaulter

member of BSE on March 3, 2015 which was beyond the 120 days

"Specified Period" given by the public notice issued by the BSE on

September 15, 2014. The Arbitral Tribunal passed an ex parte award

(because the Unicon did not appear before the Arbitrator) dated September

24, 2015 directing the defaulter member to pay a sum of Rs. 3,18,080/- with

interest thereon to the appellant herein. On October 2, 2015 the appellant

requested the BSE to pay the amount as awarded at the earliest. On October

14, 2015 the BSE wrote to the appellant asking why the appellant failed to

submit the Arbitration Reference to the BSE within 120 days from the

public notice dated September 15, 2015. On October 31, 2015 appellant

reiterated the stand which was already informed to BSE that they were not

aware about the declaration of Unicon as a defaulter as they were privy to

neither the notice on the website of BSE nor the public notice in newspapers

/ dailies. The appellant reiterated their request to BSE for payment vide

various communications dated December 31, 2015, June 20, 2016 etc. On 3

July 4, 2016 the appellant received the impugned communication / order

whereby the claim of the appellant has been rejected by the BSE.

3. Shri Ankit Lohia, Learned Counsel appearing on behalf of the

appellant strenuously argued that the appellant was in fact not aware of

either Unicon being declared as defaulter by the BSE nor about the public

notice seeking claim from the investors to be filed within a prescribed time

limit. That is the reason why the appellant continued to correspond with

Unicon on various dates. The appellant had been repeatedly requesting and

reminding Unicon to transfer the various equity shares in their account

balance. Since no response has been received from Unicon, a letter was

issued through advocate of the appellant to Unicon to transfer the securities

lying with the Unicon to the demat account maintained by the appellant with

HDFC Bank on August 21, 2014. This letter which was sent to the Delhi

office of Unicon was returned with the postal remark 'left'. Subsequently,

on September 6, 2014 the appellant again wrote a letter through their

advocate to the registered office of Unicon at Noida which was delivered on

September 9, 2014. On January 22, 2015 BSE wrote to the appellant

referring to the SCORES complaint placed on the SEBI website stating that

"all the clients having claims against the defaulter are required to file their

claims in arbitration under Rules, By-laws and Regulations of the Exchange

and in case you have claim outstanding against defaulter Unicon for

transaction executed at BSE, you can file arbitration at BSE. The time

period to file arbitration cases will be governed by the Law of Limitation

Act, 1963 which is 3 years from the date of arising of claim." So only on

receipt of this communication the appellant came to know that Unicon was

declared as defaulter by BSE and he was not aware about the public notice.

Soon thereafter on March 3, 2015 appellant lodged their claim with the BSE 4

under Arbitration and requested the Arbitration Committee of BSE to

appoint Arbitrator etc. and finally got the award in his favour on September

24, 2015. Since then the appellant has been trying to get the amount of Rs.

3,18,080/- through the IPF of BSE without success. BSE rejected the claim

vide impugned communication dated June 29, 2016.

4. The Learned counsel for the appellant also pointed out that the

guidelines relating to IPF under "Eligible Claims" state the following:-

"Eligible Claims

13. The IPF/CPF Trust however, may, if it is satisfied that the claims could not have been filed during the specified period for reasons beyond the control of the claimant, entertain claims received even after the specified period.

Determination of Legitimate Claims

16. The IPF/CPF Trust may adopt the arbitration mechanism at the Stock Exchange to determine the legitimacy of the claims received from the claimants."

Emphasising the above guidelines the Counsel for the appellant submitted

that his claim has been undisputed and legitimate which, on account of

ignorance of the fact relating to the declaration of the broker as a defaulter

he by himself and through his Attorney has been unsuccessfully

corresponding with Unicon and thereafter with SEBI and then BSE. If he

was aware that the broker was declared as defaulter in September 2014 there

was no reason for him to engage an Attorney to correspond with Unicon

instead of following the normal procedure of claiming from the IPF.

Immediately on informing that the said broker Unicon had been declared a

defaulter by BSE, claim has been filed with BSE as per the suggested

Arbitration process. Being a small investor he was not in know of all the

developments in the market and hence missed the public notice etc. and this

is a genuine reason for condoning the delay under IPF Guidelines. 5

5. Shri Aditya Chitale, Learned Counsel appearing on behalf of the BSE

stated that the appellant can enforce the claim through the Arbitration

process. However, under the IPF Guidelines the claim had to be submitted

within 120 days as published through the website of BSE on September 10,

2014 and through public notices in newspapers on September 15, 2014.

Since the claim was not submitted within 120 days and no reliable reason

has been provided for the delay in submission of claim, the Investor

Grievances Committee has rejected the claim from IPF.

6. We do not find any merit in the argument of the Learned Counsel for

the BSE. Guideline 13 relating to the IPF, as reproduced in para 4 above,

clearly provides the power for relaxing the 120 days claim period to the IPF

Trust / Committee. The argument that no legitimate reason for delay has

been provided by the appellant is not correct in the instant case because the

basis of the appellant's argument is that he was not aware of Unicon being

declared a defaulter and hence pursuing transfer of securities from the

trading account of the appellant maintained with Unicon to his demat

account being maintained with HDFC Bank. The letters from the advocate

of the appellant issued to Unicon in their Delhi office address and registered

address in Noida are on record. Further, on January 21, 2015 the appellant

lodged a complaint in the SCORES System of SEBI. All these facts support

the argument of the appellant that he was in fact not aware of the declaration

of Unicon as defaulter by BSE nor about the public notice issued by BSE.

We do not find any reason for the appellant to adopt these time consuming

complaint routes when he could have legitimately lodged his claim with the

BSE on learning about Unicon being declared a defaulter. So in the facts

and circumstances and based on the supporting documents produced before

us we agree with the prayer of the appellant that he was in fact not aware of 6

Unicon being declared a defaulter by BSE till he got the reply from the BSE

dated January 22, 2015 asking the appellant to file the claim under the

Arbitration mechanism. We further note that the IPF Committee / Trust has

power to relax the condition of 120 days limit for filing the claim.

7. Accordingly, impugned order is set aside and appeal is allowed with

no order as to costs. BSE is directed to pay the amount payable under the

arbitral award to the appellant within a period of 30 days from the date of

this order.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Dr. C.K.G. Nair Member

31.01.2018 Prepared and compared by:msb