IMPORTANT POINTS
(1) Trading Loss - Trading loss means loss sustained during trade.
(2) Exclusion Clause - loss attributable to business and trading loss of the assured, including non-recovery of trade debts & indirect or consequential losses of any nature. The claim was covered under Section II Errors & Omissions (Legal Liability). The exclusion clause will not apply.
(3) Exclusion Clause - Exclusion Clause provides that loss attributable to business or trading losses of the Assured, including non-recovery of trade debts.

ORDER

Heard Mr. Saurajay Nanda, Advocate, for the complainant and Mr. Amit Kumar Singh, Advocate, for the opposite parties.

2. Motilal Oswal Securities Ltd. (the Insured) has filed above complaint for directing The New India Assurance Company Ltd. (the Insurer) to pay (i) Rs.7972500/- with interest @18% per annum from six months after the loss till the date of payment towards EMIC claim, (ii) Rs.1647305/- with interest @18% per annum from six months after the loss till the date of payment towards Durga Chemical claim, (iii) Rs.4114765/- with interest @18% per annum from six months after the loss till the date of payment towards Morgan Stanley claim, (iv) the costs of the litigation and (v) any other relief, which is deemed fit and proper, in the facts of the case.

3. The facts, as stated in the complaint and emerged from the documents attached with the complaint, are as follows:—

(a) The Insured was a stock broker on the Bombay Stock Exchange (with SEBI Registration No. INB 011041257) and National Stock Exchange (with SEBI Registration No. INB231041238) and provides services to the investors in stock market. The New India Assurance Company Ltd. (the Insurer) is a public sector insurance company and used to provide different types of insurance services. The Insured obtained (i) Stock Brokers Indemnity Policy No.130800/46/05/01246, for Rs.200/- lacs, valid from 01.07.2005 to 30.06.2006, (ii) Stock Brokers Indemnity Policy No.112700/46/06/51/0000419 for Rs.200/- lacs, valid from 01.07.2005 to 30.06.2006 and (iii) Stock Brokers Indemnity Policy No.112700/46/06/51/0000419, for Rs.400/- lacs, valid from 01.06.2006 to 31.05.2007, from the Insurer.

(b)(i) The Insured received an order from Emerging Market to sell 923112 shares of Indian Overseas Bank on 17.05.2006. Soros Fund Management, a Foreign Institutional Investor placed an order to the Insured to buy a block of 500000 shares of Indian Overseas Bank at the rate of Rs.94/- per share on 17.05.2006. The Insured instructed its dealer Kiran Patel to put the buy order for shares of Indian Overseas Bank and simultaneously placed a sale order with another dealer Parvez Moosani on 17.05.2006. However, the dealer Parvez Moosani committed a mistake and placed the order for sale of the share in regular segment of market instead of segment of Foreign Institutional Investors. Standard Chartered Bank, the custodian of the Insured informed that the deal was cancelled as Foreign Institutional Investor could not buy the shares from regular segment.

(ii) The Insured informed the dealer that the deal was wrongly placed in regular segment of market, due to which, the deal was cancelled. On 18.05.2006, the Insured notified the insurance claim to the Insurer, under Stock Brokers Indemnity Policy No.130800/46/05/01246. The Insured sold these share on 19.05.2006 at the rate of Rs.78.055 per share and suffered a loss of Rs.7972500/.

(iii) The Insurer appointed Sudhir Tandon & Company, Mumbai as the surveyor to assess the loss. The surveyor submitted his Final Survey Report dated 04.09.2006, in which, he has verified the loss of Rs.7972500/-. However, he observed that the claim was not payable as per valuation method prescribed under the policy. He further observed that the claim falls outside the scope of policy.

(iv) Thereafter, the Insurer repudiated the claim, vide letter dated 11.01.2008 on the grounds that (i) the insured loss was not payable as per valuation method, (ii) Exclusion clause-1 (b) of Part I and Part II of the Policy excluded loss attributable to loss of market or delay on the part of the Insured as there was delay in squaring up the erroneous trades by the insured and (iii) reasonable care was not exercised by the insured to minimize the loss.

(c)(i) On 15.05.2006, the account of M/s. Durga Chemical Agency, a client of the Insured was showing a debit balance. Risk Management System Team of the Insured at its Head Office squared off the position of the client by selling its share o