Back
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION, NEW DELHI
R.K. Agrawal, President and Dr. S.M. Kantikar, Member
M/s. R.R. Chokhani Stock Brokers Pvt. Ltd. – Complainant
versus
The New India Assurance Co. Ltd. – Opp. Party
Consumer Case No.70 of 2003
Decided on 4.2.2021
Consumer Protection Act, 1986 – Section 21(a)(i) : [Consumer Protection Act, 2019 – Section 58] – Stock Broking – Arbitrage operations – Loss due to ‘fidelity’ of employee – Repudiation of insurance claim – Insurance Company appointed two surveyors, who failed to act as per IRDA guidelines and unnecessary delayed the settlement of the claim – Thus, it was the deficiency in service on the part of the opposite party – Admittedly, the complainant suffered loss due to dishonest actions of its employee who confessed his misdeeds and due to guilt, he committed suicide – Insurance Company directed to pay insurance claim of Rs. 1 Crore to complainant along with interest @ 9% p.a.
Held: After thoughtful consideration to the arguments from both the sides, we note the Complainant Co.’s insurance claim processing and settlement was inordinately delayed. Therefore, the Complainant initially on 04.03.2002 filed the Consumer Complaint No. 87 of 2002. However, this Commission did not grant interim relief and dismissed the Complaint on 22.05.2002. We further note that the Insurance Co. repudiated the claim vide its letter dated 19.07.2002. Thus, in our considered view, it was a new cause of action arose after the repudiation of claim by the Opposite Party. Thereafter on 25.02.2003 the instant Complaint was filed by the Complainant. The Complaint was admitted on 04.03.2003 as maintainable by a Three Member Bench of this Commission.
It is difficult to understand about the conservative approach of the Surveyors. Despite submission of entire information, the Surveyors time and again kept on demanding the information without any further clarification. The Complainant Co. subsequently provided the details in the bound volumes (more than 2300 pages of data) and there was no attempt to withhold any information. In our view, it was the apprehension of the Surveyors who surveyed arbitrage transactions only theoretically and failed to grasp the sophisticated techniques adopted by the Complainant Co. for arbitrage transactions. As per the affidavit evidence of the Complainant, that Mr. Chokhani had never carried out any speculative transactions since inception i.e. last 15 years nor his clients have any speculative transactions. The transaction under question in the instant case had been fraudulently carried out by Mr. Nilesh Patel without the knowledge of Mr. Chokhani. As a common practice the number of transactions carried out by the BSE and NSE were more than 10000 per day and it is impossible for the proprietor or a director of the company to verify each and every transaction. Therefore the Co. has to rely upon someone who is experienced, matured and reliable.
The insurance Co. contended that the Complainant Co. was claiming speculative or trading loss. It is pertinent to note that since the employees or the Director are not allowed to do own trading or speculation. Moreover, the record did not show any speculative profits and losses bills either in the name of Company or employees. In our considered view the exclusion clause (A) (6) of the Policy is not applicable in the instant case.
Based on the entirety the deficiency in service on the part of Insurance Co. is evident. The Complaint is partly allowed. The Insurance Company - Opposite Party is directed to pay an Insurance claim of Rs. 1 Crore to the Complainant Co. along with interest @9% p.a. with quarterly rest from the date of filing the Complaint till the date of realization within a period of three months from today failing which the Opposite Party will be liable to pay interest @12% p.a. with quarterly rest. The Opposite Party shall also pay a sum of Rs. 1,00,000/- (One lakh) towards costs of litigation to the Complainant Co. (Paras 8, 16 to 18)
Result: Complaint Allowed Partly.
ORDER
Dr. S.M. Kantikar, Member.—The Complainant, M/s R. R. Chokhani Stock Brokers P. Ltd.(hereinafter referred to as the “Company/Co.”), filed this Complaint through its Director, Mr. Ramakant R. Chokhani, against the New India Assurance Co. Ltd. (hereinafter referred to as the “Opposite Party”) under Section 21(a)(i) of the Consumer Protection Act 1986.
2. The Complainant M/s R.R. Chokhani Stock Brokers P. Ltd. is a member of Bombay Stock Exchange (hereinafter referred to as “BSE”) since October, 1985. Its Director and Principal Officer was Mr. Ramakant R. Chokhani. The Complainant Co. is engaged in the business of arbitrage between NSE and BSE. As per the mandatory requirements of Securities and Exchange Board of India (SEBI) and also as per laws of NSE and BSE, the Complainant Co. took the insurance cover from the Opposite Party for cover amount of Rs. 1 Crore. The Complainant was renewing the said policy every year regularly. The Insurance policy covers inter alia “fidelity” under Section 1A of the terms and conditions of the policy. Since 1989, Mr. Nilesh Patel was a key permanent employee of the Complainant Co. He was Incharge and looking after the arbitrage operations and other back-office work related to the updating of trade datas, MIS reports and deciding about volume of arbitrage. He was drawing salary and entitled to annual bonus like other employees. He was not allowed to trade on his own or otherwise, any time.
3. On 15.03.2000 for the first time, the Co. noticed some fraudulent arbitrage operations and the entries of buying / selling transactions made by Mr. Nilesh Patel between 01.03.2000 and 14.03.2000 for his personal benefit. It was without knowledge and any authority from the Complainant Co. He concealed it by manipulating the software data. The Director of the Co. tried to contact Mr. Nilesh Patel but he was unavailable on 15.03.2000 and it was learnt from Mr. Nilesh Patel’s residence that since 15.03.2000 he had not returned home. On the next day evening, Mr. Nilesh Patel spoke to one employee Mr. Sanat Jain and confessed about having committed fraud by him. Thereafter, it came to notice that on 18.03.2000, Mr. Nilesh Patel committed suicide by consuming poison. He left behind a suicide note and confirmed the fact of having committed fraud. The said suicide note was recovered by the Police and taken on record in the Panchanama Report (Annexure ‘D’). Thereafter, the Complainant Co. started reconciling its accounts and noticed that Mr. Nilesh Patel had committed a huge fraud by transferring the losses into the accounts of the Co.’s clients. The Co. lodged a formal Complaint with the Police on 07.04.2000, but the Police closed the case in view of the demise of Mr. Nilesh Patel. The Complainant submitted that the said acts were fraudulent, unauthorized, without consent or permission of authority of the Complainant Co. and I or his constituents. The Complainant Co. suffered a huge loss amounting to Rs. 2.50 crores from the aforesaid fraud and therefore the Co. was liable to compensate its clients as well as third parties. On 31.03.2000, the Complainant Co. filed an insurance claim with Opposite Party Insurance Co. The Opposite Party appointed M/s Parimal R. Shah & Co. and M/s Padamsey P. Shah & Co. as joint Surveyors for assessing the loss suffered by the Complainant Co. It was alleged that though the Complainant Co. furnished all the details and information as asked by the Surveyors, but the reasons best known to them, the Surveyors kept on asking and calling for details / information from the Complainant Co. which were either repetitive or irrelevant in nature. To avoid further delay the Complainant Co. wrote a letter to the Opposite Party on 17.09.2001 and requested to change the Surveyors, but no action was taken by the Opposite Party.
4. The Opposite Party vide letter dated 19.07.2002, rejected the claim of the Complainant Co. on the ground of speculative trading entered into by its employee which was ou
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
