BEFORE JUSTICE K.SAMPATH (RETD.

) SOLE ARBITRATOR In the matter of Arbitration under Bye laws, Rules and Regulations of National Stock Exchange of India Ltd., (NSE) Arbitration Matter No. CM/C-0002/2010 BETWEEN Mrs.R.Radha(Constituent) AND India Infoline Ltd. (Trading Member) 1 Respondent Applicant

I 1.

CLAIM OF THE APPLICANT

The applicant seeks the relief of offsetting certain transactions

alleged to have been unauthorizedly effected by the respondent company and payment of Rs.5,11,254 by the respondent. II 2.1
HEARINGS

Initially NSEIL appointed Sri N.S.Srinivasan as Arbitrator.

However at the initial hearing held by him Sri.Srinivasan found that the applicants husband who represented her at the hearing was 2

known to him. Sri. Srinivasan duly informed NSEIL that he was stepping down from the Arbitration Matter. Thereafter NSEIL

appointed me as the Arbitrator and notified me by letter dated 8.3.10 received by me on the 10th of March. I instructed NSEIL to send notice to the parties fixing 22.3.2010 for counter and 31.3.2010 for rejoinder if any and the hearing on 5.4.2010. However the respondent filed its counter only on 5.4.2010. I adjourned the matter to 22.4.2010 for rejoinder fixing the hearing for 27.4.2010 for further hearing. I directed the applicant to file documents relating to the earlier dispute between her husband and the respondent company as it was contended that the facts in the present proceedings were identical with the facts in the claim made by her husband and relief was also granted to her husband. The applicant filed further documents as directed. She also filed a new document. I granted time till 5.5.2010 to the respondent for reacting to that. On 5.5.2010 I adjourned the case to 28.5.2010 for arguments. Arguments were heard. The respondents representative sought time to verify whether any complaint had been received by one Mr.Suresh of the respondent as alleged by the applicant. I directed the respondent to send communication to NSEIL office by 3.6.2010 and reserved orders. The respondent filed further submissions on 4.6.2010 and the applicant responded with her further submissions on 10.6.2010
III. STATEMENT OF CASE (SOC) BY THE APPLICANT

3.1 She opened an account with the respondent trading member on 14.7.2008 and transferred shares from other accounts in August 2008. The respondent carried out unauthorized transactions from October 2008 to 20.8.2009. She registered a complaint with the respondent on 23.5.2009. She also registered email complaint in May 2009. There was no reply received from the respondent. She registered a complaint with NSEIL in September 2009. She also sent an email to SEBI. The respondent sent a reply through NSEIL on 12.10.09. She sent her response to NSEIL on 23.11.09. Hearing was held at NSEIL office and minutes received on 10.12.09. The main points regarding the complaint are: 1) Copies of account opening form and annexure were not given to the applicant till October 2009. 3

2) In the account opening form there is no mention that she opted for off line trading. 3) In the opening form it is mentioned that TTadv software would be provided. 4) TT adv software was installed only during May 2009 5) She did not give instructions to buy or sell shares on her behalf. 6) TPIN was also not given to her. In the absence of the software and the password it is not known how the account was operated. 7) Monthly statement of account/transaction not sent to her postal address. 8) When the Relationship Manager Mr.Rajkumar was contacted regarding email and messages on the debits, it was told that there was some mistake and the same would be rectified 9) After December 09, Mr.Rajkumar did not respond to the applicants phone call and it was told that Mr.Rajkumar had met with an accident and would resume work within 15 days. 10) In May 09 she contacted the new relationship manager and lodged a complaint with him. She was orally informed that that Mr.Rajkumar had quit or been sacked by the company. She had no communication on this. She also lodged an email complaint with the company for which also there was no response. 11) As she had not given instruction to buy/sell shares and as Mr.Rajkumar had told over phone during September to December 2008 asking her to ignore the debits and that the same would be rectified shortly thereafter she did not respond to the email sent to her. 12) The same type of unauthorized transaction had happened in another account opened by her husband Mr.Balaji and handled by Mr.Rajkumar and the company had accepted the error and settled the dispute 3.2 The following documents have been enclosed to the application. (1) Complaint and correspondence with NSEIL along with claims (2) Reply received from the respondent through NSEIL (3) Second correspondence with NSEIL (4) Minutes of the meeting held with company officials along with NSEIL officials. (5) Account opening forms and others forwarded by the respondent through NSEIL 4

IV. RESPONDENTS DEFENCE

4.1 The applicant became a trader with the respondent with client ID RRADHA11 agreeing to all the terms and conditions relating to speculative trading as could be spelt out from the documents the contents of which she knew fully well and of which she was a willing and consenting party. The respondent carried out all trades with the consent of the applicant and used to send the contract notes in respect of all the transactions in the applicants account through her email ID mail4radha@yahoo.co.in. That the applicant was well aware of trading in shares would be evident from the fact that she had not objected to the digital contract notes sent through email and mobile numbers. If it had been otherwise she would have objected to the trading by the respondent on her behalf immediately on receipt of the SMS sent to her by the respondent. This she did not do. Further the transactions had commenced even in October 2008 and the applicant raised objections only in March 2009. The respondent also sent quarterly statement of transactions as also email confirmations. In terms of the clauses in the broker client agreement, the applicant cannot blame the respondent for any losses due to the applicants own decisions in speculative trading. 4.2 The applicant has not approached the Arbitration Tribunal with clean hands and the application has to be dismissed. 4.3 The respondent has produced the following documents along with the counter: 1) Email logs relating to the applicant 2) Quarterly statement of transactions -- Xerox -- Xerox

3) Ledger pages relating to the applicant -- Xerox 4). Email confirmations -- Xerox

V. THE APPLICANTS REJOINDER TO THE COUNTER

5.1 Mr.Rajkumar met the applicants husband in February 08, introduced himself as Client Relationship Officer attached to the Triplicane Branch of the respondent company and opened an account for the applicants husband. He came again in July 08, and opened accounts for the applicant and her sister-in-law. He was told that it was only the applicants husband who would be operating the 5

accounts and any instruction should be taken from the applicants husband through his cell phone with number 9789966665 and this could be seen from the account information furnished by the respondent. During August and September 08, there were messages and mails on her mobile and email. Her husband contacted Mr.Rajkumar who informed him that there was some problem in their software and therefore several accounts got messages that the messages could be ignored and things would be rectified soon. He also informed that since the accounts were online accounts and the necessary software not having been installed there was no need to panic. In December 08 and January 09 Mr.Rajkumar was not responding properly and failed to call on the applicant and her husband despite repeated reminders. During Feb-April 10(according to the applicant it is mistake for 2009), answering the applicants call, the company informed the applicant that Mr.Rajkumar had met with an accident and would be resuming shortly and would be meeting the applicant and her husband shortly thereafter. In May 2009 the new Relationship Manager Mr.Balamurugan and one Mr.Suresh called on them and received the complaint regarding unauthorised transactions in their accounts. The applicant and her husband had also sent their complaint by email and helpline. Till the filing of the complaint there was no response from the company. 5.2 After the applicant and her husband took up the matter with SEBI Mr.Ravishanker Area Manager of the respondent company along with one Mr.Newton met the applicant and her husband and tried to compromise the matter and asked them to contact Mr.Rajkumar. This applicant and her husband refused to do as the dispute was entirely between the applicant and the respondent company. Thereafter during the meeting at SEBI office the respondent company agreed that there were unauthorised transactions carried out in the applicants husbands account and settled the losses. 5.3 During the meeting Mr.Ravishanker told that the company had approached its mobile service provider about the details of the calls made from Mr.Rajkumars mobile and that they would get back to the applicant. Subsequently Mr.Ravishanker informed the applicant that since the calls were made more than 6 months prior to the meeting it 6

was not possible to get the details. This is not correct. It is possible to get the details of the calls from the service provider for any length of time. The application has to be allowed.
VI FURTHER DOCUMENT PRODUCED

6.1 To her rejoinder dt 22.4.10, the applicant enclosed a copy of the reply received from her service provider regarding the outgoing calls made from the mobile numbers 9789966665 and 97909965973. According to the complainant copies of the detailed bills furnished by the mobile operator would show that she had made only one call to Mr.Rajkumars number 9994123120 from the above mobile numbers on 24.1.09 during the period August 08 to March09 and therefore it would follow that the applicant and her husband had not made calls and instructions were not given by them to operate the account as claimed by the respondent company. These bills are also received in evidence and given a distinct number.
VII DIRECTION BY THE ARBITRAL TRIBUNAL FOR PRODUCTION OF DOCUMENT-AND-THE-CONTENTIONS-OF-THE-PARTIES

7.1 The Arbitral Tribunal directed the production of the papers relating to the applicants husbands complaint against the

respondent company and the settlement thereof. This was done. The papers thus produced are all taken on file and marked on the side of the applicant. 7.2 According to the applicant the facts in the present application are identical with the facts of the earlier complaint of her husband. But the respondents representative Mr.Kumaran contended that the facts were different and there was no question of settling the present claim on the same lines.
VIII. MARKING OF DOCUMENTS

8.1 The documents produced by the applicant are marked as Exhibits A1 to A7 series while those on the side of the respondent are marked as Exhibits R1 to R4 series.
IX. ISSUE TO BE DECIDED

9.1Whether the applicant is entitled to offsetting the transactions alleged to have been unauthorizedly effected by the respondent payment of Rs. 5,11,254 transactions 7

X. REASONING AND CONCLUSIONS

10.1 Let us first see whether the complaint from the applicants husband and the subsequent resolution of the dispute by payment by the respondent company have any bearing on the present application for arbitration. 10.2 The relevant papers produced at the instance of the Arbitral Tribunal have been marked as Ex.A7 series. I am now referring to the minutes of the resolution meeting between the complainant Mr.Balaji and the representative of the trading member M/s India Infoline Ltd.(IIL) at the Exchange premises. It is worth reproducing the contents in extenso as it may be necessary to refer to the same in the course of this discussion. The complaint pertains to the unauthorized transactions by the trading member. The complainant had stated that he has opened trading account with the trading member in March 2008 and had opted for online transaction through TT advance software. However, it has not been installed by the' trading member till April 09. In March 2009 he has checked the email id of his wife R.Radha wherein some debit emails have been received and then he has enquired the status of his account and came to know that some unauthorized transactions have been done in his account. In June 09, the complainant has made a complaint to the trading member' for-which-they have not received any reply. Finally in July 09, the complainant has approached SEBI for redressal. The trading member has stated that they have been trading on the instructions, of the client only and the contract notes were sent to the email id mentioned .in the MCA and even SMS alerts were sent to the mobile number mentioned in the MCA. The complainant has insisted that he has only opted, for 'online trading and asked whether there is' any proof that he has placed orders offline.' For which; the trading member has replied that the orders were placed orally by telephone and they don't have any voice recording available for the same. Also, the complainant has stated that he has opened his account with Triplicane branch and his, account has been shifted to R.A.Puram branch without his consent. The trading member has not replied for the same. The complainant has stated that the MCA has been 'filled up by their relationship manager Mr.Rajkumar and he has entered their email id wrongly as balaji6p@yahoo.com however it is balaje6@yahoo.com. It has been intimated to their relationship manager over phone to change the same. Also, the mobile number .mentioned in the MCA has: been changed' , and for the change of the mobile number he has orally informed to his RM and also filled' in an application form of IIL for change of the same; The complainant has provided a printout of the 8

email which was given to the Vodafone manager to disconnect his mobile number. : It has been observed from the elogs submitted by the trading member that the emails and the SMS alerts have been sent to the em ail id and mobile number which does not exist. In view of the above, the trading member was questioned that when the contract notes and sms alerts were not successfully delivered why the trading member has not taken any 'effort in sending the statements through post/courier for which the trading member has not responded. Also, it was observed from the elogs that the quarterly statements of accounts were sent to the email id of Ms Radha which was not submitted by the complainant till August 2008. Hence, the trading member was of the opinion to settle the matter by giving back the 380 shares of Bank of Baroda and 160 shares of Carborandum Universal. However after the representative of the trading member spoke to their HO, they came to the opinion that they want to recheck whether the elogs provided by them is correct or not as they suppose that there might be some technical error in the elogs giving! wrong information. The trading member has accepted to come back by December 11 10.3 It is seen from the above extract that the ground on which the claim of the applicants husband was conceded was that the emails were dispatched to the wrong or non existent ID. The logical inference would be that if the email communications relating to the

transactions had been sent to the correct ID the claim of the applicants husband would not have been accepted whether

instructions had been given online or offline. Incidentally it should also be noted that it had been conceded that email communications had been received at the applicants ID. In fact only when the applicants husband checked the ID of the applicant he found that some debit details had been received. I therefore hold that the ground on which the earlier complaint of the applicants husband was entertained and relief directed to be given is not available to the applicant in the present proceedings. The applicant has to establish her case on its own merits. 10.4 In this context it is worthwhile to refer to the minutes of the conciliation meeting in which the rival contentions of the parties in the present proceedings were considered and failure report filed and the applicant had requested for arbitration. Let me extract the minutes of the resolution meeting dated 10.12.09.

Date:December 10,2009 Place:Chennai Minutes of the resolution meeting between the complainant Ms R.Radha and the representative of the trading member m/s India Infoline Ltd, held at the Exchange premises: The complaint pertains to the unauthorized transactions by the trading member. The complainant had stated that she has opened her account with the trading member in August 2008 and had opted for online transaction through TT advance software. However it has not been installed by the trading member till April 09. In March 2009, she has received an SMS on her mobile number 9790965973 intimating debit balance for which she has been trying to contact Mr.Rajkumar, their relationship manager but which was in vain. In June 09, the complainant has made a complaint to the trading member for which they have not received any reply. Finally in July 09, the complainant has approached SEBI for redressal. The trading member has stated that they have been trading on the instructions of the client only and the contract notes were sent to the email id mentioned in the MCA and even SMS alerts were sent to the mobile number mentioned in the MCA The complainant has stated that they have been contacting Mr.Rajkumar on phone for the debit sms received by her. And Mr.Rajkumar has replied that he will look into the matter. Also the complainant has queried that when the relationship manager Mr.Rajkumar had quit the company, why (s)he was not intimated about the change of the RM. The trading member has replied that they have intimated by telephone for which the complainant has disagreed. Also the complainant has insisted that she has only opted for online trading and asked whether there is any proof that she has placed orders offline. For which the trading member has replied that orders were placed orally by telephone and they dont have any voice recording available for the same. It is also observed from the elogs submitted by the TM that the contract notes were sent to the email id of the complainant which was there in the MCA and also this is the email id through which the complaint was registered with SEBI. (Emphasis supplied) In view of the above stated details and on account of non availability of proof, as the Exchange is unable to resolve the issue, the complainant has requested for arbitration. 10.5 It can be easily seen from what is stated above that alerts on mobile had been sent by the respondent as also contract notes by email. The respondent has also produced documents in support of their stand. Even assuming that the applicant had opted only for online trading and not offline trading that she had not given any 10

instruction for purchase or sale of shares offline and that TT advance software promised to be installed by the respondent was not installed immediately on the opening of the account, the fact remains that she had positive information on what was happening in the shape of mobile alerts and contract notes via email. This cannot at all be disputed. She ought to have reacted immediately and taken exception to what the respondent was doing with her account. Merely saying that Mr.Rajkumar did not do this or did that does not advance her case. Her husband had opened the email of the applicant and found that there were some debit emails. From the elogs produced by the respondent it is seen that even in October 2008 the transactions had commenced and there should have been an immediate response and the applicant should have raised hue and cry. This she did not do. She is also not justified in saying that the respondent should have contacted only her husband on his mobile number. The respondent had communicated only on the basis of the details furnished in the KYC and the MCA. The defence of the respondent company in the complaint by the applicants husband failed because the respondent had sent messages to the wrong ID. That is not the case here. They had contacted the correct mobile and despatched to the correct email ID. 10.6 According to the applicant unauthorized transactions were

carried out from October 2008 to 20.8.09. But she registered the complaint only in May 09. The inaction and the delay have not been satisfactorily explained by the applicant notwithstanding her

knowledge of the alleged unauthorised and irregular transactions to both the applicant and her husband through SMS alert and email debits. Bringing in Mr.Rajkumar does not advance the applicants case. She had opened the account in July 2008 and transferred shares from other accounts in August 2008. The idea in doing that should have been to trade in shares. Even according to the applicant, she had only demat account with Karvy. To facilitate trading she had transferred the shares to the newly opened account with the respondent. Perhaps the respondent promised to provide TT adv software to facilitate online trading but delayed installing it. That does

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not mean that till the software was installed the applicant could not trade or did not want to trade. Even with regard to installation of the software she has no consistent case. In the complaint under the main points she says that TT adv software was installed only in May 2009. But in her letter dated 22.5.09 to the respondent she says that the software package had not been installed till January 2009. In any event it is not very material. None of the documents produced says that the transactions had to be carried out only online and that till the software got installed there could be no trading. As already noted the applicant had knowledge of the debit bills through email id provided by her to the respondent. There were sms alerts given and still she took her own time to come up with a complaint.
XI. FURTHER WRITTEN SUBMISSIONS

11.1. The further written submissions made by the parties were on the same lines as in their earlier submissions
XII. FINAL ANALYSIS

12.1. Non installation of TT adv software by the respondent is immaterial. The transaction and account statements had been sent by email and mobile alerts had been given. The alleged non couriering the account statements is not relevant and cannot be taken as an infraction on the part of the respondent when the question is whether the applicant had given instructions to the respondent for trading or not. 12.2. Unless instructions had been given it was very unlikely that the respondent would have traded. Even conceding for the sake of argument that no instructions were given for trading, still email statements and contract notes the receipt of which is not and cannot be disputed, should have put the applicant and her husband on notice and made them raise serious objections if really they had not given instructions for trading. 12.3. No online or offline instructions. The applicant had entered into MCA, Combined Risk Disclosure Agreement for Capital Market/Cash Segment and Future and Options(BSE and SSE), provided details for 12

KYC, started trade by depositing a cheque for Rs.5555/-

dated

24.7.08 on Axis Bank Ltd. Nanganallur Main Branch. Digital contract notes were emailed to her given ID and according to the respondent sms sent to her given mobile number viz., 9790965973. Any discrepancy she ought to have reported immediately on receipt of the debit notes 12.4. As regards her grievance that the promised TT adv software was not installed it has to be stated that even her husbands account with the respondent opened in February 2008 was not provided with TT adv software and still the family chose to open further accounts one in the name of the applicant in August 2008 and another in the name of a kin in October 2008.However as already noted non installation of the promised TT adv software is immaterial. 12.5. There were debit notes sent via email to the applicant which is also admitted by the applicant and her husband. The applicants husband had accessed the applicants email and therefore had first hand knowledge of the debits. Still they did not choose to voice their protest at the earliest point of time. Their stand that they were searching in vain for Mr.Rajkumar is only to be stated to be rejected. Equally it is unbelievable that the discrepancies were known only when the new branch manager took over in April, May 2009 12.6. Again the point sought to be made by the applicant that it was only to her husbands mobile that calls had to be made by the respondent is also without substance. That is not what the documents say. They give the number 9790965973. Merely because the respondent did not provide the applicant with a telephone number(identification number) which had to be used as the clients Id and a separate 4 digit Telephone Personal Identification Number (TPIN), it could not and did not mean that the client could not and in fact did not trade. 12.7. At the close of the hearing the applicant produced a document obtained from the mobile service provider purporting to contain the details of outgoing and incoming calls made from mobile numbers 9789966665 and 970965973 for the period 1.8.08 to 31.4.09 and 13

submitted that it would show that during the period she had only one call to Mr.Rajkumars number (9994123120) on 24.1.09 and that it would show that the applicant and her husband had not made calls or given instructions for trading. First and foremost the document produced shows only the calls made from 9789966665 and not from 9790965973. Secondly from the email correspondence between the complainants husband and the service provider it is seen that the complainants husband had threatened the service provider that if the details required were not furnished within 24 hours he would close all his 11 mobile phones and switch over to another operator. Thus at the relevant time the applicant and her husband had 11 mobile phones at their command. It is also seen that 9790965973 is one of one of the numbers to which calls were made from 9789966665 (Items196,198,209,223,224,240,255,256,271,273,290,294,295,311,3 12,351,354 and 366). In most of the calls the number 9790965973 is preceded by 0. In my view nothing turns on this document. 12.8. When once the applicant and her husband knew on accessing the applicants email that there were debits which according to them had occurred on account of alleged unauthorised trading by the respondent, they should have taken it up with the respondent immediately. This not having been done they have to thank themselves 12.9 In the result I hold that there is no case made out for granting relief to the applicant and the application deserves to be dismissed. 13. The Arbitration Matter No. CM/C-0002/2010 is dismissed. Parties shall bear their respective costs. Dated at Chennai this the 5th day of July 2010.

(Justice K.Sampath) Sole Arbitrator

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