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Judgment
A. P. Sahi, President Member
This is an appeal against the order of the State Consumer Disputes Redressal Commission, Maharashtra dated 27.07.2012, rejecting the claim of the appellant in respect of losses suffered in stock trading.
Heard learned counsel for the appellant at length, who urged that the Insurance Company without supplying a copy of the surveyors report and without considering any of the legal or factual issues involved, invoking the exclusion clause proceeded to straightway repudiate the claim of the complainant, which was in respect of the certain loss of shares, which according to the complainant was covered under the Stock Brokers Insurance Policy issued by the respondent/ Insurance Company.
The Insurance company has through two communications indicated the repudiation, the first on 22.11.2000 by relying on the exclusion clause and then on a representation by the appellant proceeded to finally close the issue by the letter dated 18.12.2000. Both the letters are extracted hereinunder for ready reference:
112700.SRK: 99 22nd November, 2000
M/s. VNS Finance & Capital Services Ltd.,
7B, 2nd Floor, Old Oriental Bldg.,
65, M.G. Road, Opp. Hongkong Bank,
Fort, Mumbai-400001
Dear Sir,
Re:Your Claim under Stock Brokers Policy No. 112700/46/99/00132
Claim No. 112700/46/99/00141
The above claim preferred by you under NSE Policy under Errors & Omissions clause of the Policy has been scrutinized processed by us. The Survey Report from the Surveyors has also been received by us.
Based on the Survey Report, out observations are as under:
Trading by Insured or his employees in his own name or any other name and liability thereunder, if any, stands excluded under General Exclusions mentioned in Para (A) 6 of NSE Policy.
The loss amount you have debited to your own Account Code V
It is quite evident from the above that the transaction was done in and for your own account, which does not fall within the scope of policy.
Under the circumstances as explained above, your claim is not tenable as per NSE Policy terms & conditions. Hence, we close the file treating your claim as No Claim.
Thanking You,
Yours faithfully,
Sd/-
S.K. Rout
Sr. Div. Manager
112700.SRK: 00 18th December, 2000
M/s. VNS Finance & Capital Services Ltd.,
7B, 2nd Floor, Old Oriental Bldg.,
65, M.G. Road, Opp. Hongkong Bank,
Fort, Mumbai-400001
Dear Sir,
Re: Claim No. 112700/46/99/00141
Policy No. 112700/46/99/00132
This refers to your letter dt. 11th inst. On the above.
We have gone through the contents of your letter and our observations on the same are as under:
As per the documents submitted to us, the client code V belongs to your own account. As in the trade list client code V appears for the transaction the same has been taken as a trade done in your own account and, accordingly, the same stands as exclusion in Para A-6 of the Policy.
We place on record that the above case was also discussed in person with your Director in our Office and some processing time was extended for the said meeting.
We do not have anything more to add to our previous letter set to you on 22.11.00.
Thanking You,
Yours faithfully,
Sd/-
S.K. Rout
Sr. Div. Manager
The said letters were examined along with the evidence on record in the complaint filed before the State Commission and the State Commission came to the conclusion that the mistake and errors stand admitted on record.
This Commission also finds the aforesaid conclusion drawn by the State Commission to be correct, keeping in view the recital contained in the paragraph 3 (a) of the complaint, which is as follows:
(a) On 14th February 2000 at about 9.58 a.m. on telephonic instructions from on Shri S.K. Gupta, client of the complainant, who instructed to buy 2,000 share of zenith Exports, immediately on the opening of the market (which used to open at 10.00 a.m.) instead of buying 2,000 Zenith Exports, then quoted at Rs.65/- per share, by mistake and inadvertently 2,000 shares of Zenith Infotech was punched to be purchased at market rate. On 14th February 2000, the share of Zenith Infotech were stated for the first time. Since it was the first day of listing, as per provisions of NSE, Opposite Party No. 3 (OP No. 3) there was no price band. Since the order was put at the market rate, the same was executed at a price upto as high as rs.1,999/- per share against the market price of Rs.300/- to Rs.400/- per share. As the share were being purchased, in breakups of 5-100 shares at a time in not readable of 15 second. On realizing the error thereof, attempt was made to cancel the entire transaction. The facility is available on the NEAT trading system, but by the time 1,700 Zenith Infotech shares were already purchased. The time was 10:00:53 a.m. The order pertaining to the balance 300 shares stood cancelled and terminated. The Complainant was able to at least cancel the transaction for 300 shares. The price of the shares of Zenith Exports and Zenith Infotech is annexed hereto and marked Exhibit-B.
It is on this factual foundation as admitted in the complaint that it was found that the exclusion was attracted, more so when the transaction was carried out through the own account of the complainant .
In order to illustrate it further, clause 6 of the exclusion clause is extracted herein under:
(6) Trading by Insured in his own name or any other name (s): Any liability or loss directly or indirectly arising out of or resulting from trading by or on behalf of any of the Insured in documents actual or fictitious whether or not within the knowledge of the Insured and whether or not acting within the scope of authority given by the Insured.
It is agreed however, that this exclusion will not apply to any loss or liability in respect of physical loss/ fake/forged/ stolen securities actually delivered/ received even on account of the transaction (s) of the insured provided insured and its employees are not involved in the same.
Learned counsel for the appellant, however, heavily relied on the provision under chapter 5 of the claims procedure, which prescribes the avoiding of errors and omissions. It is extracted herein under:
CHAPTER V
ERRORS AND OMISSIONS:
It is expected generally that NSE will make it compulsory for member to enter client cove ate the time of deal, but checks and limits to avoid errors of high magnitude such as limits per terminal, security-margin rules, provision for cancellation of order placed on the system at least for the remaining quantity under execution will be introduced immediately.
Terminal should be operated by experienced staff only, Order received for sale/ purchase should be recorded before execution and major orders should be reconfirmed by calling back the client.
NSE/ NSCCL should make all possible efforts to persuade other members to reverse the deals.
To use good offices and contact other broker colleagues to have the deals reversed.
To approach Arbitration Committee to cancel the deals due to error where ever possible.
To inform Insurance Co. without losing any time.
To take all possible steps to minimize the loss depending upon the circumstances leading to loss which can vary from case to case.
Additional documents required:
· Evidence to prove the loss and the legal liability.
· Analysis and reports as asked for by surveyor to make a judgment whether loss is suffered due to a genuine error or not.
· Trade activity log of the computer system.
· Time of placing order and subsequent changes by the erring member.
·
It is urged that since the appellant had taken every precaution to avoid any errors or omissions as pointed out therein, then in that event the exclusion clause would not be attracted and the claim would be indemnifiable.
On the aforesaid facts the issue that has to be answered keeping in view the findings recorded by the State Commission is as to whether the exclusion clause extracted herein above, applies to the facts of the present case or not.
Heard Mr. Seth, learned counsel for the Insurance Company and Mr. Vidant Kumar Singh, learned counsel for the respondent no. 3. Mr. Seth urged that the claims procedure chapter would not be applicable nor does it in any way dilute clause 6 of the exclusion clause, and the complainant having admitted the consequence of the loss in the complaint itself, the findings recorded by the State Commission do not suffer from any infirmity.
Having perused clause 6, it is evident that the exclusion will not apply only if physical loss or liability of the securities is due to either fake, forged or stolen shares, which is not the case here, in as much as indicated above, the loss occurred on account of wrong trading, which stands admitted by the complainant and which has been found to be established on record by the State Commission.
There is therefore neither any legal or factual error in the impugned order of the State Commission dated 27.07.2012 for being examined in this appeal. Consequently, the appeal lacks merits and is accordingly dismissed.