BEFORE JUSTICE (Retd.) M.A. KHAN SOLE ARBITRATOR Arbitration Case No. D-035/2011 IN THE MATTER OF: Ms.

Madhu Sachan Constituent 4C 3229, Sector 4, Aadarsh Apartments Vasundhara Aadarsh Park 4645 Ghaziabad - 101012 ... Applicant Versus Way2Wealth Brokers Private Limited Trading Member Registered Office: 14, Frontline Grandeur Walton Road, Bangalore 560001 AWARD I. Respondent Way2Wealth Brokers Private Limited is a Trading Member of the National Stock Exchange. The applicant Ms. Madhu Sachan opened a trading account with the respondent by executing a Member Client Agreement on 19.2.2010. She is impugning trades executed in the said account which has resulted in a debit balance. The present arbitration application is filed by her for recovery of a sum of Rs. 2,25,000/- from the respondent. The dispute has been referred to me for adjudication by arbitration in accordance with the Agreement between the parties and the Bye-laws and Regulations of the Exchange. 2. Along with the arbitration application form, the applicant submitted her complaint made to the Arbitration department of the Exchange on 25.2.20] I. In the said letter, the applicant stated that she had written so many times to the Trading Member for showing her proof of her placing orders for the purchase and sale of the shares. She requested the Exchange her case to be inquired into by the arbitrator so that the loss of Rs. 2,25,000/- incurred in the unauthorized sale and purchase of her shares is recovered from the respondent. She stated that whatever documents are available with her are being filed. She attached a copy of a complaint dated] 6.7.201 0 sent to the Branch Manager of the respondent at NOIDA. In the complaint, she alleged that about 2 years back she had purchased certain shares for long term holding. At that time she had account in the Sharekhan Broker. When she opened the account with the respondent, she got her shares from her account in Sharekhan transferred to the account of the respondent. She also deposited Rs. 25,000/- by cheque in the account. She told the employee of the respondent that the shares, which have been transferred to the respondent should not be sold as she had acquired them to secure the future of her children and that whatever purchase and sale is

. Respondent .

to be done, it should be done from the amount of Rs. 25,000/- and that nothing should be done without her permission. On 5.7.2010 when she was in need of some money, she asked the employee of the respondent for payout Rs. 10,000/-. She was promised that the money would reach her by cheque within three days. When she reminded for payment over telephone, she was told that her account had the credit balance of Rs. 7,000/- and there was nothing else in her account. This disturbed her. She wanted to know as to who would compensate her for this. She wanted a reply from the respondent. She also fi led copy of the statement of account which she had received /Tom the respondent. She also gave list of the shares which were transferred to the respondent from her earlier broker Sharekhan. The shares were VSNL - 50; SUZLON - 100; DCBL - 528; GMRINFRA.- 100; RIL-12; HECL _ 100; A TLANT A - 20; RNPL - 100; and HUL- 190 and gave their value as about Rs. 2,00,000/

3. The respondent contested the arbitration application and filed statement of defense. The allegations made by the applicant about unauthorized sale and purchase of the shares in the account without the permission of the applicant were denied. It was stated that after the account was opened on 9.2.20 I 0 by executing Member Client Agreement the applicant placed orders which were executed by the respondent as per her instructions. The trades were carried out as per requirement of the applicant. Copies of the ledger account statement etc. was duly and regularly sent to her. The contract notes and the bills for those trades were also sent to her E-mail ID being sachan@gmail.com which was provided in the KYC by the applicant herself. The copy of the log report showing that the contract notes and bills were sent to the applicant were also filed. She was also receiving SMS about her trade on the registered Mobile No. 91-9711201680 about the trades and transactions which were never disputed by the applicant. According to the agreement executed the respondent was entitled to liquidate / close out all or any of the client's position for non-payment of margins or other amounts, outstanding debts and that the losses and financial charges on account of such liquidation / closing out are to be charged and borne by the applicant. She is now claiming the amount of the trading losses included due to her trading activity which are uncalled for and without any basis. 4. I have heard the representative of the applicant and the representative of the respondent. I have also carefully considered the documents which have been submitted and the submissions made during the hearing of the case. 5. The material facts of the case are not disputed. The applicant had opened a trading account with the respondent. She executed Member Constituent Agreement. She also paid Rs. 25,000/- and transferred some shares, which were, according to her, of the value of about Rs. 2,00,000/- to the Demat account in the respondent. The account was opened by her in February, 2010. All her shares were transferred from her account and sold to meet the required mark to market margin and in settlement / close out of position. Her account had a debit balance of Rs. 6,876.45 on 30'h June, 2010 which was also paid out to her on 20.7.2010 after deducting DP charges.

6. Her shares holding which according to her was of the value of Rs. 2,00,000/- and which she got transferred from the Demat account of Sharekhan broker to the Demat account of the respondent have been sold to meet the margin requirements of the future trade and as a consequence of the close out of the future positions. The respondent has produced the telephonic recording of confirmation calls of future and other transactions and the telephone calls made by her husband on her behalf. However no recording of the placement of the order by the applicant for trades has been produced. The respondent has filed copy of Member Client Agreement, Statement of account, copy of the proof of delivery of the contract notes alongwith statement of defence. 7. The applicant was represented by her husband. The telephone number, which was given in the agreement, was also of her husband. It has not been disputed that the calls were used to be made and received on that telephone by her husband. During the hearing, the representative of the applicant admitted that SMS and confirmation calls were being received from time to time but the applicant did not pay any heed to them since she had given instructions to the respondent at the time of the opening of the account that her shares transferred to Demat account would not be touched and would be kept intact and that the trading would be restricted to the extent of Rs. 25,000/- which she had deposited. He has, however, denied that the contract notes or the financial statement were ever received by the applicant. 8. The representative of the respondent, on the other hand, submitted that the transactions were executed on the instructions and with the consent and knowledge of the applicant. The applicant has admitted the receipt of SMS and the confirmation calls of trade and transactions but she never raised any objection. According to him, the contract notes were also regularly sent to her, the proof of which has been filed and she has never raised objection to any of the trades. He contended that the case of the applicant is that she did not carry out any trade in her account at all which is belied by the recording of the conversation on the registered mobile. He has placed CD of the recorded conversations. The recorded conversations show that the confirmation calls were made by the office of the respondent to the registered mobile phone which was attended by the husband of the applicant. During the conversations, the transaction details were given by the office of the respondent which included reduction of the shares and additions of the shares by purchase or sale of the shares, about some loss and profit in the market, and mark to market loss suffered in F&O transaction. The meaning and import of M to M margin loss was also explained to him. Some calls were made by the husband of the applicant also. The inference from all these calls is that the transactions and trades were being carried out in the account of the applicant which were confirmed by the applicant. From some of the calls, it appears that the trades were executed by R.M. Mr. Sumit and they were confirmed during the confirmation calls. In the complaint also the applicant has alleged that she had given instructions at the time of opening of the account that the shares would be sold and bought out of the amount of Rs. 25,000/- which she had deposited leaving the shares which she got transferred from Sharekhan to the Demat account in the respondent intact. The representative of the applicant has stated that according to the applicant she was

satisfied with the services provided by Sharekhan, still she got her shares transferred from the Demat account there to the new demat account opened with the respondent. She not only opened the trading account but had also deposited in it a sum of Rs. 25,000/-. She wanted this money to be used for carrying out transactions. The transactions have been carried out in the account in the capital and F&O segment and some losses have been incurred. It is, however, denied that any delivery instructions slip was signed by her for the transfer. But the transaction calls received from the DP would have disclosed the transfer of shares from the demat and in case it was not as her instructions she would have immediately got the transaction statement from the DP and objected to the transfer. 9. In fact, during the hearing the representative of the respondent disclosed that the applicant had on-line facility and she could have viewed her transactions and the holdings on line. He has made reference to the conversations during one call which was made by the husband of the applicant when he wanted removal of some difficulty of viewing the information available on line and he was given a telephone number of Delhi to be contacted for advice and removal of the difficulty. 10. From all the facts, which have been discussed above, particularly the conversation recorded, it is apparent that the transactions were being carried out in the account of the applicant of which she had full knowledge and apart from a query here and there about the amount of loss suffered or the reason why the loss was suffered (mark to mark loss margin) and the profits earned the applicant never raised objection against the trade and nor did she file any written complaint with the respondent before July, 2010. By that time her shares were sold and her deposit of Rs. 25,000/- was also reduced to Rs. 6876.45 and which was paid to her after deducting DP charges of Rs.17/-. Merely because there is no proof and recorded conversation about the placement of orders by the applicant, it is difficult to hold that the trades and transactions carried in her account were unauthorized and illegal for which the applicant is entitled to be compensated. 11. As a result, the arbitration claim petition is dismissed. However, the parties are left to bear their own costs. Award announced on 25th June, 2011 / (M.A. KHAN) SOLE ARBITRATOR