DISTRICT CONSUMER DISPUTES REDRESSAL COMMISSION, ERNAKULAM.

Dated this the 24^th day of May 2024.

PRESENT

Shri.D.B.Binu                                                                President

Shri. V. Ramachandran                                                   Member

Smt.Sreevidhia.T.N                                                        Member               

I.A. 86/2023 INC.C. 205/2022

PETITIONER/ OPPOSITE PARTY No. 1

Reliance Securities Limited, 11^th Floor, R-Tech IT Park, Nerlon Compound, Western Express Highway, Goregaon (East), Mumbai, Maharashtra – 400063. Represented by its Managing Director.

(Rep. by Adv. Johnson Gomez, S. Biju, Sanjay Johnson, John Gomez & Mohammed Sheharan, A.R. Prakasham Road, Near Power House, North End, Cochin 682018)

VS

RESPONDENT / COMPLAINANT/ OPPOSITE PARTY No. 2, 3, 4, 5 6& 7

1. Dr. Prasan Prabhakar, S/o. Dr. M.C. Prabhakar, Laxmi Prasad, Panampilly, Near Laxmi Hospital, Thoppumpady, Ernakulam - 682005.

(Rep. by Adv. Aswin Gopakumar, Aditya Venugopalan, Nikitha Susan Paulson, Ijas Mohammad & Rohan Kumar, M/s. Veritae Legal, Attorneys & Solicitors, Kottencanal Juction. Lisie Hospital Road, Ernakulam 18)

2. NAMindex Derivatives LLP, Building No. 13/149, Kallore House, Kooveri, Kannur, Kerala - 670581.
3. Mr. Sunish Nambiar, Director, NAMindex Derivatives LLP, Building No. 13/149, Kallore House, Kooveri, Kannur, Kerala - 670581.
4. Mrs. Nithya Sunish, Director, NAMindex Derivatives LLP, Building No. 13/149, Kallore House, Kooveri, Kannur, Kerala - 670581.
5. Mr. Suresh Kaloore Pothera, No. 3/887E, Syed Building, Panicker Road, Kerala, India - 673011.
6. Mr. Homai Ardeshir Darwalla, Director, Reliance Securities Limited, 11th Floor, R-Tech IT Park, Nerlon Compound, Western Express Highway, Goregaon (East), Mumbai, Maharashtra - 400063.
7. Mr. Lav Ramji Chaturvedi, Director, Reliance Securities Limited, 11th Floor, R-Tech IT Park, Nerlon Compound, Western Express Highway, Goregaon (East), Mumbai, Maharashtra - 400063.

FINAL ORDER

D.B. Binu, President.

This application arises out of a complaint filed by the respondents/complainants, claiming redress for losses alleged to have been suffered due to deficient services and unfair trade practices by the petitioner/opposite party no. 1.

1. Jurisdiction and Maintainability

The petitioner/opposite party no. 1 has raised a preliminary objection concerning the maintainability of the complaint, invoking the jurisdiction of this Commission to adjudicate the dispute already subject to arbitration under the framework of the National Stock Exchange's rules and regulations, as provided for in Clause 1A of Chapter XI of the Bye-Law.

In "Instalment Supply Ltd. Vs. Kangra Ex-Serviceman Transport Co. and Ors" [(2007) 1 CPJ 34 (NC)], the National Commission opined that a complaint cannot be entertained post-arbitration unless the arbitration award itself is set aside. Further, in "Mir Alam Vs. Magma Finance Corporation" [(2021) 3 CPR 348], it was held that the authorities under the Consumer Protection Act, 1986, do not hold supervisory or appellate powers over arbitration awards. As such, the complaint is prima facie barred by the earlier resolution of the dispute through arbitration, the result of which is binding unless challenged and set aside under the appropriate legal framework.

The counsel for the Petitioner/Opposite Party No.1 submitted that it is well established that the jurisdiction of this Commission is limited to incidents of deficiency in service as defined under Section 2(1)(g) of the Consumer Protection Act, 1986. It does not extend to taking evidence involving highly disputed questions of fact or cases involving tortious acts or criminality, such as fraud or cheating. This principle was reiterated by the Hon'ble Supreme Court in its Judgment dated 27.03.2023 in CIVIL APPEAL NO. 7289 OF 2009; THE CHAIRMAN & MANAGING DIRECTOR, CITY UNION BANK LTD. & ANR. versus R. CHANDRA MOHAN.

“ The proceedings before the Commission are summary in nature. Therefore, complaints involving highly disputed questions of fact or cases involving tortious acts or criminality, such as fraud or cheating, cannot be decided by the Forum/Commission under the said Act. The term 'deficiency in service,' as well settled, must be distinguished from criminal acts or tortious acts. There can be no presumption regarding wilful fault, imperfection, shortcoming, or inadequacy in the quality, nature, and manner of performance in service, as contemplated in Section 2(1)(g) of the Act. The burden of proving the deficiency in service always lies upon the person alleging it.”

Summary of Arguments Note Filed by the Counsel for the Respondents/Opposite Parties (2 to 7):

1. Complaint Overview:
   • The Complainant seeks Rs. 14,87,633/- for losses due to deficient services and unfair trade practices by the Opposite Parties.
   • Respondents filed I.A No. 86 of 2023 in C.C No. 205 of 2022, petitioning to hear maintainability as a preliminary issue.
2. Investment Approach:
   • In September 2017, Opposite Party No. 1, through Mr. Shyju, approached the Complainant for investment, presenting as a Principal Officer.
   • Mr. Shyju claimed Opposite Party No. 1 was linked to Reliance Capital, a leading retail broking house.
   • Opposite Party No. 3, a wealth management consultant, and Opposite Party No. 4, his wife, founded Opposite Party No. 2 to provide wealth creation and portfolio management services.
   • They promised high returns (24% annually) through derivatives trading, which they claimed was low risk and insured.
3. Investment Scheme Details:
   • Opposite Party No. 3 touted a unique investment scheme offering guaranteed returns and investment protection.
   • The Complainant opened an account with Opposite Party No. 1, based on these assurances.
   • Complainant was advised to ignore formal communications and follow instructions blindly.
   • Opposite Parties executed reckless trades, resulting in complete loss of the Complainant's investments.
4. Complaints and Legal Actions:
   • On 23rd March 2020, the Complainant filed a complaint with NSE for unauthorized trades, incurring a loss of Rs. 42,07,565/-.
   • A subsequent complaint was filed with SEBI on 20th April 2020, but no action was taken.
   • NSE's Investor Grievance Redressal Panel (IGRP) determined trades post-01.04.2018 were unauthorized and awarded Rs. 39,53,560/-.
   • The Arbitral Tribunal upheld this award on 07.09.2021.
   • The current complaint addresses trades prior to 01.04.2018, not covered by IGRP or the Arbitral Tribunal.
5. Grounds Relied on by the Complainant:
   • False Assurances and Misleading Information:
     • Opposite Parties falsely assured fixed returns and provided misleading information to earn brokerage, resulting in unfair trade practices.
     • Complainant suffered a loss of Rs. 10,02,337.91/- for unauthorized trades pre-01.04.2018.
   • Issue of Fraud:
     • IGRP's order, upheld by the Arbitral Tribunal, indicated fraud allegations need to be proven in a competent forum, thus res judicata does not apply.
   • Alternative Remedies:
     • The presence of alternative remedies does not bar filing the present complaint before the Consumer Forum.
     • Supreme Court decisions affirm the protection under the Consumer Protection Act is in addition to other statutory remedies.

• The Complainant seeks the Commission to find the present Complaint maintainable in the interests of justice, equity, and good conscience.

It is a settled legal position that a complaint is barred when an Arbitration Award has already been passed concerning the same subject matter. This principle has been reiterated by the Hon'ble National Consumer Disputes Redressal Commission, in Instalment Supply Ltd. vs. Kangra Ex-Serviceman Transport Co. and Ors [1 (2007) CPJ 34 (NC)], where it was observed as follows:"

"The issue involved in this case is whether a complaint can be decided by the Consumer Fora after an arbitration award has already passed. The simple answer to this question is No"

It was further observed that "Award was passed before the complaint was filed by respondent No. 1. It will thus govern the dispute between the parties. In view of the decision of the Arbitrator which is binding on parties, the Fora below should not have passed an order by overlooking the award Hence, this revision petition is allowed, orders passed by Fora below set aside and the complaint dismissed"

This position was again reiterated by the National Consumer Disputes Redressal Commission in Mir Alam Vs. Magma Finance Corporation (2021 (3) CPR 348) wherein it was observed as below:

"The authorities under the Consumer Protection Act, 1986 do not exercise supervisory or appellate powers over the Arbitrator's award. The complaint before the District Consumer Forum was not maintainable. The remedy of the complainant was to file an application for setting aside ex parte Arbitrator's award under Section 34 of the Arbitration and Conciliation Act, 1996 or to file an appeal against it."

It should be further noted that it was the Complainant who initiated the Arbitration proceeding before the Arbitration Panel of NSE. Once the Complainant has initiated proceedings under the Arbitration and Conciliation Act 1996, he cannot then turn around and make an application under the Consumer Protection Act. This position has been reiterated by the Hon'ble Supreme Court in National Seeds Corporation Limited v. M. Madhusudhan Reddy & Anr. [(2012)2 SCC 506]

"The remedy of arbitration is not the only remedy available to a grower. Rather, it is an optional remedy. He can either seek reference to an arbitrator or file a complaint under the Consumer Act. If the grower opts for the remedy of arbitration, then it may be possible to say that he cannot, subsequently, file a complaint under the Consumer Act."

The counsel for the Respondents/Complainant submitted that the arbitration clause in the agreement does not bar the jurisdiction of the Consumer Commission under the Consumer Protection Act, 2019. The decisions cited by the Petitioner, namely Instalment Supply Ltd. vs. Kangra Ex-Serviceman Transport Co. and Ors. [1 (2007) CPJ 34 (NC)] and Mir Alam v. Magma Finance Corporation (2021 (3) CPR 348), are not applicable to this case.

2. Analysis of Arbitration and Prior Proceedings
   The petitioner provided documents demonstrating that an arbitration process concerning the same subject matter of this complaint was initiated and concluded, resulting in an Arbitration Appeal Award dated 19th February 2022. This award addressed all transactions up to and including the date of the SEBI circular effective 01 April 2018.

Significantly, the dispute resolution mechanism as per the National Stock Exchange's Bylaws was properly invoked and complied with, culminating in a decision that was not contested for setting aside within the statutory period. It is a well-established principle, as stated in "National Seeds Corporation Limited v. M. Madhusudhan Reddy & Anr." [(2012) 2 SCC 506], that once a party opts for arbitration, it may preclude them from seeking remedy through an alternate forum for the same issues.

We have meticulously considered the detailed submissions of both parties, as well as thoroughly reviewed the entire record of evidence, including the argument notes.

Given the foregoing, the contention of the petitioner regarding the lack of jurisdiction and the bar on maintainability of the present complaint stands substantiated. The arbitration award has addressed the disputes between the parties concerning the alleged deficient services and unfair practices, and this Commission does not possess the authority to act as an appellate body over the conclusions reached through the arbitral process.

Therefore, it is hereby ordered that:

• The application filed by the petitioner/opposite party no. 1 is allowed.
• The complaint filed by the respondents/complainants is dismissed.

Pronounced in the open Commission on this the 24th day of May 2024.

DISTRICT CONSUMER DISPUTES REDRESSAL COMMISSION, ERNAKULAM.

Dated this the 24^th day of May 2024.

PRESENT

Shri.D.B.Binu                                                                President

Shri. V. Ramachandran                                                   Member

Smt.Sreevidhia.T.N                                                        Member               

I.A. 85/2023 INC.C. 204/2022

PETITIONER/ OPPOSITE PARTY No. 1

Reliance Securities Limited, 11^th Floor, R-Tech IT Park, Nerlon Compound, Western Express Highway, Goregaon (East), Mumbai, Maharashtra – 400063. Represented by its Managing Director.

(Rep. by Adv. Johnson Gomez, S. Biju, Sanjay Johnson, John Gomez & Mohammed Sheharan, A.R. Prakasham Road, Near Power House, North End, Cochin 682018)

VS

RESPONDENT / COMPLAINANT/ OPPOSITE PARTY No. 2, 3, 4, 5 6& 7

8. Mangalore Chinchalkar Prabhakar, S/o. late M.N. Bhat Chinchalkar, Laxmi Prasad, Panampilly, Near Laxmi Hospital, Thoppumpady, Ernakulam - 682005.

(Rep. by Adv. Aswin Gopakumar, Aditya Venugopalan, Nikitha Susan Paulson, Ijas Mohammad & Rohan Kumar, M/s. Veritae Legal, Attorneys & Solicitors, Kottencanal Juction. Lisie Hospital Road, Ernakulam 18)

9. NAMindex Derivatives LLP, Building No. 13/149, Kallore House, Kooveri, Kannur, Kerala - 670581.
10. Mr. Sunish Nambiar, Director, NAMindex Derivatives LLP, Building No. 13/149, Kallore House, Kooveri, Kannur, Kerala - 670581.
11. Mrs. Nithya Sunish, Director, NAMindex Derivatives LLP, Building No. 13/149, Kallore House, Kooveri, Kannur, Kerala - 670581.
12. Mr. Suresh Kaloore Pothera, No. 3/887E, Syed Building, Panicker Road, Kerala, India - 673011.
13. Mr. Homai Ardeshir Darwalla, Director, Reliance Securities Limited, 11th Floor, R-Tech IT Park, Nerlon Compound, Western Express Highway, Goregaon (East), Mumbai, Maharashtra - 400063.
14. Mr. Lav Ramji Chaturvedi, Director, Reliance Securities Limited, 11th Floor, R-Tech IT Park, Nerlon Compound, Western Express Highway, Goregaon (East), Mumbai, Maharashtra - 400063.

ORDER

D.B. Binu, President.

This application arises out of a complaint filed by the respondents/complainants, claiming redress for losses alleged to have been suffered due to deficient services and unfair trade practices by the petitioner/opposite party no. 1.

1. Jurisdiction and Maintainability

The petitioner/opposite party no. 1 has raised a preliminary objection concerning the maintainability of the complaint, invoking the jurisdiction of this Commission to adjudicate the dispute already subject to arbitration under the framework of the National Stock Exchange's rules and regulations, as provided for in Clause 1A of Chapter XI of the Bye-Law.

In "Instalment Supply Ltd. Vs. Kangra Ex-Serviceman Transport Co. and Ors" [(2007) 1 CPJ 34 (NC)], the Hon'ble National Commission opined that a complaint cannot be entertained post-arbitration unless the arbitration award itself is set aside. Further, in "Mir Alam Vs. Magma Finance Corporation" [(2021) 3 CPR 348], it was held that the authorities under the Consumer Protection Act, 1986, do not hold supervisory or appellate powers over arbitration awards. As such, the complaint is prima facie barred by the earlier resolution of the dispute through arbitration, the result of which is binding unless challenged and set aside under the appropriate legal framework.

The counsel for the Petitioner/Opposite Party No.1 submitted that it is well established that the jurisdiction of this Commission is limited to incidents of deficiency in service as defined under Section 2(1)(g) of the Consumer Protection Act, 1986. It does not extend to taking evidence involving highly disputed questions of fact or cases involving tortious acts or criminality, such as fraud or cheating. This principle was reiterated by the Hon'ble Supreme Court in its Judgment dated 27.03.2023 in CIVIL APPEAL NO. 7289 OF 2009; THE CHAIRMAN & MANAGING DIRECTOR, CITY UNION BANK LTD. & ANR. versus R. CHANDRA MOHAN.

“ The proceedings before the Commission are summary in nature. Therefore, complaints involving highly disputed questions of fact or cases involving tortious acts or criminality, such as fraud or cheating, cannot be decided by the Forum/Commission under the said Act. The term 'deficiency in service,' as well settled, must be distinguished from criminal acts or tortious acts. There can be no presumption regarding wilful fault, imperfection, shortcoming, or inadequacy in the quality, nature, and manner of performance in service, as contemplated in Section 2(1)(g) of the Act. The burden of proving the deficiency in service always lies upon the person alleging it.”

Summary of Arguments Filed by The Respondents/Complainant/Opposite Parties

1. Complaint and Relief Sought:
   • The Complainant filed a complaint seeking ₹10,02,337.91 for losses due to alleged deficient services and unfair trade practices by the Opposite Parties.
   • The Respondents filed I.A No. 85 of 2023 in C.C No. 204 of 2022 to challenge the maintainability of the complaint as a preliminary issue.
2. Allegations Against Opposite Parties:
   • In September 2017, the Complainant was approached by Mr. Shyju, an employee of Opposite Party No. 1, who misrepresented the company's credentials and investment opportunities.
   • Opposite Party No. 3, along with Opposite Party No. 4, falsely assured high returns (24% annually) and full protection for investments through derivatives trading insurance.
   • The Complainant, inexperienced in financial markets, believed these assurances and opened an account on October 3, 2017. He was instructed to ignore formal communications and confirm all transactions without scrutiny.
   • Opposite Parties executed reckless trades, leading to a complete loss of the Complainant's investments, contrary to the guaranteed protection.
3. Actions Taken by the Complainant:
   • The Complainant lodged a complaint with the NSE on April 1, 2020, and with SEBI on April 20, 2020, regarding unauthorized trades from October 3, 2017, to September 12, 2018, resulting in a loss of ₹42,07,565.
   • The NSE's Investor Grievance Redressal Panel (IGRP) ruled on November 11, 2020, that trades post-April 1, 2018, were unauthorized and awarded the Complainant ₹31,78,366.08.
   • The Arbitral Tribunal upheld this order on July 30, 2021. The current complaint addresses trades prior to April 1, 2018.
4. Grounds for Complaint:
   • Misrepresentation and Fraud:
     • The Opposite Parties provided false assurances and misleading information to earn brokerage, resulting in the Complainant’s financial losses.
     • The actions of the Opposite Parties constitute unfair trade practices as defined under Section 2(47) of the Consumer Protection Act, 2019.
   • Res Judicata Not Applicable:
     • The IGRP and Arbitral Tribunal did not address the fraud allegations for trades before April 1, 2018. Thus, the current complaint is not barred by res judicata.
     • The Supreme Court’s ruling in Prem Kishore and Ors. v Brahm Prakash and Ors. supports this position, as the previous proceedings did not cover the same issues.
   • Alternate Remedy and Consumer Protection:
     • The presence of alternate remedies does not bar the complaint before the Consumer Forum.
     • The Supreme Court in Fair Air Engineers Pvt. Ltd. v N.K Modi and subsequent cases have affirmed that consumer protection remedies are additional and complementary to other statutory remedies.

In light of the above arguments, the Respondents urge the commission to find the present complaint maintainable in the interests of justice, equity, and good conscience.

It is a settled legal position that a complaint is barred when an Arbitration Award has already been passed concerning the same subject matter. This principle has been reiterated by the Hon'ble National Consumer Disputes Redressal Commission, in "Instalment Supply Ltd. vs. Kangra Ex-Serviceman Transport Co. and Ors" [1 (2007) CPJ 34 (NC)], where it was observed as follows:

"The issue involved in this case is whether a complaint can be decided by the Consumer Fora after an arbitration award has already passed. The simple answer to this question is No."

                      It was further observed that:

"Award was passed before the complaint was filed by respondent No. 1. It will thus govern the dispute between the parties. In view of the decision of the Arbitrator which is binding on parties, the Fora below should not have passed an order by overlooking the award. Hence, this revision petition is allowed, orders passed by Fora below set aside and the complaint dismissed."

This position was again reiterated by the Hon'ble National Consumer Disputes Redressal Commission in "Mir Alam Vs. Magma Finance Corporation" (2021 (3) CPR 348), wherein it was observed as below:

 "The authorities under the Consumer Protection Act, 1986 do not exercise supervisory or appellate powers over the Arbitrator's award. The complaint before the District Consumer Forum was not maintainable. The remedy of the complainant was to file an application for setting aside ex parte Arbitrator's award under Section 34 of the Arbitration and Conciliation Act, 1996 or to file an appeal against it."

It should be further noted that it was the Complainant who initiated the Arbitration proceeding before the Arbitration Panel of NSE. Once the Complainant has initiated proceedings under the Arbitration and Conciliation Act 1996, he cannot then turn around and make an application under the Consumer Protection Act. This position has been reiterated by the Hon'ble Supreme Court in "National Seeds Corporation Limited v. M. Madhusudhan Reddy & Anr." [(2012) 2 SCC 506]:

"The remedy of arbitration is not the only remedy available to a grower. Rather, it is an optional remedy. He can either seek reference to an arbitrator or file a complaint under the Consumer Act. If the grower opts for the remedy of arbitration, then it may be possible to say that he cannot, subsequently, file a complaint under the Consumer Act."

The counsel for the Respondents/Complainant submitted that the arbitration clause in the agreement does not bar the jurisdiction of the Consumer Commission under the Consumer Protection Act, 2019. The decisions cited by the Petitioner, namely "Instalment Supply Ltd. vs. Kangra Ex-Serviceman Transport Co. and Ors" [1 (2007) CPJ 34 (NC)] and "Mir Alam v. Magma Finance Corporation" (2021 (3) CPR 348), do not apply to this case.

The Complaint before the IGRP was for unauthorized trades by the opposite parties from 03.10.2017 to 12.09.2018, resulting in a loss of Rs. 38,01,215/-. However, the IGRP and Arbitral Tribunal only investigated trades post 01.04.2018, based on the SEBI Circular dated 22nd March 2018 (SEBI/HO/MIRSD/DOP1/CIR/P/2018/54). They stated that for allegations of fraud, the investor should approach the competent forum.

The current complaint addresses trades before 01.04.2018, which were not covered by the IGRP or Arbitral Tribunal. The claims in paragraph 3 (i) of the Petitioner's affidavit are false and misleading. The Petitioner has omitted important details and misrepresented the Orders/Awards by the IGRP, Arbitral Tribunal, and Appellate Arbitral Tribunal to mislead this commission. The Tribunals acknowledged unauthorized trades by the Opposite parties but confined their investigation to trades after 01.04.2018 due to the SEBI Circular.

2. Analysis of Arbitration and Prior Proceedings

The petitioner provided documents demonstrating that an arbitration process concerning the same subject matter of this complaint was initiated and concluded, resulting in an Arbitration Appeal Award dated 19th February 2022. This award addressed all transactions up to and including the date of the SEBI circular effective 01 April 2018.

Significantly, the dispute resolution mechanism as per the National Stock Exchange's Bye-laws was properly invoked and complied with, culminating in a decision that was not contested for setting aside within the statutory period. It is a well-established principle, as stated in "National Seeds Corporation Limited v. M. Madhusudhan Reddy & Anr." [(2012) 2 SCC 506], that once a party opts for arbitration, it may preclude them from seeking remedy through an alternate forum for the same issues.

We have meticulously considered the detailed submissions of both parties, as well as thoroughly reviewed the entire record of evidence, including the argument notes.

Given the foregoing, the contention of the petitioner regarding the lack of jurisdiction and the bar on maintainability of the present complaint stands substantiated. The arbitration award has addressed the disputes between the parties concerning the alleged deficient services and unfair practices, and this Commission does not possess the authority to act as an appellate body over the conclusions reached through the arbitral process.

Therefore, it is hereby ordered that:

• The application filed by the petitioner/opposite party no. 1 is allowed.
• The complaint filed by the respondents/complainants is dismissed.

Pronounced in the open Commission on this the 24^th day of May 2024.

D.B.Binu, President

Sreevidhia.T.N, Member

Forwarded/By Order

Assistant Registrar

kp/

Despatch date:

By hand:                                                                 

by post:      

CC No. 205/2022

Order Date: 24/05/2024/1