Failure To Transfer Shares Amounts As Deficiency In Service: NCDRC

The National Consumer Disputes Redressal Commission, presided by Justice A.P. Sahi and Dr Inder Jit Singh, held that while trading in shares is generally a commercial activity, a company's failure to perform its duty of transferring shares constitutes a deficiency in service. Brief Facts of the Case The complainants purchased around 250 shares of Glaxo SmithKline Pharmaceutical Company and submitted them along with a transfer deed to have the shares transferred into their names. The complaint arose because, despite the transfer being completed, the share certificates were not returned to the complainants, leading them to file a complaint with the District Consumer Disputes Redressal Commission in Jaipur. The District Commission allowed the complaint, following which the Company filed an appeal before the State Commission of Rajasthan. The State Commission upheld the District Commission's order. Consequently, the Company filed a revision petition before the National Commission. Contentions of the Opposite Party The company argued that they had informed the complainants that the share certificates were never received. The key issue was whether the share certificates were transmitted, which would determine if there was a deficiency on the company's part. Additionally, the company questioned whether the consumer forum had jurisdiction, suggesting that this dispute fell under the Companies Act. However, the company did not file any response before the District Commission, leaving the complainants' allegations uncontested. Observations by the National Commission The National Commission observed that the maintainability of the complaint under the Consumer Protection Act, 1986, must be considered in light of how the terms “consumer” and “service” are defined. Referring to the Supreme Court's judgment in Shrikant G. Mantri Vs. Punjab National Bank, the Court discussed the legislative history and the scope of “consumer” under Section 2(1)(d) of the Act. The judgment clarified that the term “consumer” excludes those who purchase goods for resale or commercial purposes but includes those who hire or avail of services for personal use or for earning a livelihood through self-employment. In this case, the primary issue was whether the failure of the company to transfer share certificates as requested by the complainant constituted a deficiency in service under the Consumer Protection Act. The company argued that such disputes fall under the Companies Act and questioned the jurisdiction of the Consumer Forum. However, both the District and State Commissions found that the company had not taken adequate steps to transfer the shares, which amounted to a deficiency in service. The Commission also noted that while trading in shares is generally a commercial activity, the complaint, in this case, was centred on the company's failure to perform its duty of transferring shares. The company's denial of receiving the share certificates was insufficient to contest the allegations in the limited revisional jurisdiction of the Consumer Protection Act. The Commission upheld the lower forums' findings. It noted that the company had complied with the State Commission's order to compensate the complainant, except for a pending amount related to mental harassment and litigation costs. Given these circumstances, the Commission did not find it necessary to further investigate the broader issues of the complaint's maintainability, leaving open the possibility for the company to take legal action concerning the shares as per applicable laws. The National Commission decided that awarding ₹10,000 for mental agony was not justified since the dispute had been largely resolved through the payments already made. Therefore, the ₹10,000 award for mental agony was set aside. The revision was partially allowed, and the company was ordered to pay ₹2,000 in litigation costs to the complainants within a month. Case Title: Glaxo Smithkline Pharmaceuticals Ltd. Vs Dr Rajendra Ghiya Case Number: R.P. No. 3213/2012 Click Here To Read/Download Order

Failure To Transfer Shares Amounts As Deficiency In Service: NCDRC

Ayushi Rani

Tags