Share Trading For Additional Income Is Commercial Activity, Investor Not A 'Consumer': Uttarakhand State Commission

The State Consumer Disputes Redressal Commission, Uttarakhand, comprising Ms. Kumkum Rani (President) and C.M. Singh (Member), allowed an appeal filed by Consortium Securities Pvt. Ltd., set aside the District Commission's order, and held that the complainant had availed the services of the share broker for a commercial purpose. Consequently, the Commission ruled that he did not fall within the definition of a "consumer" under the Consumer Protection Act, 1986. Brief Facts The complainant, Sunil Kumar Gupta, a practising advocate, maintained a demat account with ICICI Bank containing shares and mutual funds. In early 2010, a representative of Consortium Securities approached him and persuaded him to open a demat account with the company, into which he transferred original share certificates valued at around Rs. 10 lakhs. Between May and December 2010, the complainant sold certain shares to meet financial requirements for constructing his house and received approximately Rs. 5,14,896.05 from those transactions, while believing that the remaining shares continued to remain safely invested and would appreciate in value. The Opposite Party continued to approach him for further investments. In January 2015, upon making inquiries regarding his account, the complainant discovered that the remaining shares, along with additional shares worth Rs. 1 lakh purchased on his behalf, had been sold without his authorization and had resulted in losses. Alleging deficiency in service on account of unauthorized liquidation of shares held in his demat account, he approached the District Consumer Disputes Redressal Forum, Dehradun, seeking compensation for the financial loss suffered. The District Forum allowed the complaint and directed the Opposite Parties to pay Rs. 5 lakhs along with compensation for mental agony and litigation expenses. Aggrieved by the order, the Opposite Parties preferred an appeal before the State Consumer Disputes Redressal Commission, Uttarakhand. Arguments by the O pposite Parties Consortium Securities contended that the complainant had voluntarily opened the demat and trading account after executing all necessary documents, including a Power of Attorney authorising operation of the account. It submitted that the complainant had actively traded in shares, resulting in a debit balance, and that details of all transactions were regularly communicated through SMS and email alerts. It further argued that the complainant had availed its services for a commercial purpose and, therefore, did not qualify as a consumer under the Consumer Protection Act, 1986. Observations & Decision The State Commission disagreed with the findings of the District Commission. It observed that the complainant himself had pleaded that he was an advocate by profession and earned his livelihood through legal practice. Therefore, his share trading activities could not be regarded as services availed exclusively for earning his livelihood by means of self-employment. Rather, the trading activity was undertaken to generate additional income and thus constituted a commercial activity. The Commission further noted that the complainant had opened both a trading account and a demat account, executed the requisite documents including a Power of Attorney, and had actively and continuously engaged in the purchase and sale of shares. It observed that transaction details were regularly communicated to him through SMS and email alerts. Referring to the settled position of law, the Commission observed that disputes relating to trading account transactions between a share broker and an investor are inherently commercial in nature and do not constitute a consumer-service provider relationship under the Consumer Protection Act. Holding that the complainant had availed the services of the Opposite Parties for a commercial purpose, the Commission concluded that he did not fall within the definition of a consumer under Section 2(1)(d) of the Consumer Protection Act, 1986. Accordingly, it allowed the appeal, set aside the order passed by the District Commission, and dismissed the consumer complaint. The Commission, however, granted liberty to the complainant to approach the appropriate forum for redressal of his grievances and to seek the benefit of Section 14 of the Limitation Act, 1963 for exclusion of the period spent prosecuting the consumer proceedings. Case Title: Director, Consortium Securities Private Limited & Ors. Vs. Sh. Sunil Kumar Gupta Case No : SC/5/A/104/20200 Click Here To Read/Download Order

Share Trading For Additional Income Is Commercial Activity, Investor Not A 'Consumer': Uttarakhand State Commission

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Share Trading For Additional Income Is Commercial Activity, Investor Not A 'Consumer': Uttarakhand State Commission

Muhammed Razik

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