CONSUMER RIGHTS
Investor should know his rights
Pushpa Girimaji

GIVEN the steep fluctuations in the stock market in recent times and the anxiety with which investors around the country are watching the movement of stocks and shares, I thought I should write on some interesting consumer court decisions pertaining to investor protection. Last week I did write on a related topic—the liability of the stock exchange and the stock-broker in case a consumer suffers a loss on account of deficient service provided by either or both of them. This week I will write on three orders pertaining to the rights of consumers in respect of shares and debentures issued by companies.

Let me begin with the case that dealt with the failure of a company to issue rights shares and bonus shares to a shareholder. The case of the complainant, Mahesh Takhtani, was that he had purchased, from Lalta Gupta, 50 shares of Indrol Lubricants and Specialities. However, he lost the share certificates and the purchase bill along with some shares of other companies. Following this loss, he lodged a complaint with the police and informed the company, too, through a letter dated January 13, 1987. Yet, he was denied the shares of the bonus issue and the rights issue declared by the company.

For the uninitiated, let me explain briefly at this juncture, the meaning of a rights issue and a bonus issue. A rights issue is an invitation to existing shareholders of a company to acquire additional shares at a price lower than the current market price of the old shares. The number of such rights shares offered will depend on the number of shares held by the shareholder. Similarly, in a bonus issue, shares are issued free to the existing shareholders. The bonus issue might be an alternative to increasing the dividend payout. The company's contention in this case was that since Lalta Gupta was the original shareholder holding 160 shares, the shares of the bonus issue and the rights issue declared by the company were offered to her.

If the complainant wanted, he could get his proportionate shares from her. The district forum, before which the case was first filed, held the company guilty of deficient service in not offering the bonus and the rights issue to the complainant, even after he had intimated them about the loss of the certificate and had also obtained a stay order from the court as advised by them.

It, therefore, directed the company to give 20 equity shares of 1989 at the price prevailing at that time to the complainant. It also directed the company to give additional 145 shares to the complainant, which he would have got as bonus shares up to 1995, had he got those 20 equity shares.

It also awarded the consumer a compensation of Rs 20,000 for the deficiency in the service rendered by the company, besides Rs 1,000 as costs. The National Consumer Disputes Redressal Commission, before which a revision petition was filed by the company, said the main controversy in this case was whether the 20 rights shares of the company were issued to Lalta Gupta or not. Since the information furnished by the company in support of its contention was not at all convincing, it found no reason to interfere with the orders of the lower.

In the case of Vijay Gandotra vs Apple Industries, decided in April 1996, the district forum, Lucknow, awarded Rs 7,000 as compensation to the consumer for the loss suffered by her on account of a delay of nearly two years on the part of the company in transferring the shares in her name. It also awarded interest on the dividend. The state commission, and later the national commission, upheld this award, but did not enhance the compensation amount as demanded by her on the ground that she had not been able to prove to the satisfaction of the court that the company had received the share certificates on September 27, 1990, as alleged by her.

In the case of Unit Trust of India vs Mrs Kavita Gupta and others, decided in January 1997, the state commission awarded Rs 22,250 to each of the three complainants for the delay on the part of the company in delivering unit certificates.

The national commission, however, reduced the compensation to Rs 8,500 on the ground that they were not entitled to compensation for any presumptive loss based on principles of lost opportunity or any other opportunity thereafter. It also directed the UTI to pay 15 per cent interest on the compensation amount from March 15, 1993, till the date of payment.

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