NCRDC agrees with state commission ordering Karvy Computershare & JSW Steel to compensate a shareholder

NCRDC agrees with state commission ordering Karvy Computershare & JSW Steel to compensate a shareholder

Observes the investor submitted details of financial loss suffered by her by not receiving new shares and dividend warrants

The National Consumer Disputes Redressal Commission (NCDRC) has upheld the order passed by the State Consumer Disputes Redressal Commission in Delhi.

It directed Karvy Computershare Pvt Ltd and JSW Steel Ltd to jointly pay Rs.5 lakh for the financial loss suffered by the complainant, Sarla Prasad, who filed a complaint for deficiency in service against the two companies.

The case pertains to the non-receipt of new share certificates and dividend warrants by Prasad and her family. These were issued by the Jindal group company through Karvy, its registrar and transfer agent (RTA). However, the woman did not receive any new share certificates or dividend warrants.

The bench of Deepa Sharma (presiding member) had in an earlier order stated, "The grant of compensation of Rs.5 lakh is not based on surmises and conjectures, but on facts and evidence on record. I found no illegality, perversity or infirmity in the impugned order (of the state commission). The present appeal has no merit and the same is dismissed."

The bench noted that in the documents presented before the state commission, the companies had not denied that Prasad was entitled to buy 393 new shares.

The Commission ruled, "It is clear that had the shares of JSW Steel been issued to her, she could have applied for the right shares, which she could not do due to the deficiency on the part of the appellants. She, therefore, has established that she had suffered a loss of Rs.5 lakh."

Prasad held 45,500 shares in Jindal Vijay Nagar Steel Ltd (JVSL). The company was merged with Jindal Iron and Steel Co Ltd and further integrated into JSW Steel. After the merger, JSW Steel issued 1,890 shares per the merger scheme and issued a dividend warrant for Rs.5,670 to Prasad.

She contended that despite depositing her own shares with Karvy, she did not receive new share certificates or dividend warrants from the company. In March-April 2005, after writing letters to Karvy, she was told that her share certificates and dividend warrants were dispatched by 'registered post' in March.

However, on approaching the post office, Prasad was informed that no registered parcel was ever received by them for her from Karvy. Once again, she wrote to the RTA, but elicited no response from Karvy.

Thereafter, in July 2005, she sent a legal notice to Karvy, who reiterated its stand that since they did not receive back the registered post, it was presumed that the same was delivered to her. Again, in May 2006, she sent a legal notice complaining before the Delhi State Commission.

Initially, the complaint was dismissed for misjoinder of parties vide the November 2007 order. But later, in January 2008, Prasad filed a revised complaint in her individual capacity seeking directions to the opposing parties (jointly and severally) to deliver her share certificates for 1,890 shares along with a dividend warrant or to pay her the market value of those shares as on 13 December 2007 amounting to Rs.25.11 lakh.

Prasad also requested the amount of dividend warrant amounting to Rs.5,670 and Rs.28,538 on account of the dividend declared by JSW Steel on 12 March 2007. She also sought compensation of Rs.5.22 lakh for the financial loss suffered due to the non-delivery of shares and warrants along with interest at 24 percent, and Rs.1 lakh for mental harassment and agony.

While rejecting all objections raised by Karvy and JSW Steel, the state commission asked the company to issue 1,776 new shares in JSW Steel to Prasad within 30 days. It also asked them to jointly and severally pay Rs.5 lakh for the financial loss suffered by her due to the non-delivery of shares since 2006 and non-payment of dividends declared to date and for causing her mental harassment and agony. The RTA and the company were also asked to compensate her by paying Rs.10,000 as litigation costs.

Unhappy over the order, Karvy and JSW Steel approached the NCDRC.

Both the RTA and the company contended that there was no deficiency in service on their part since Prasad had never deposited the share certificates. Thus, the new share certificates could not be issued by them and, in 2009, when it was done, they issued new share certificates.

The bench of presiding member Deepa Sharma observed that JSW Steel could decide that Prasad was entitled to 1,776 shares only in 2008. "Therefore, apparently, there is a deficiency in service on the part of the appellants in issuing the share certificates to the complainant to which she was entitled immediately on the merger in 2005. Therefore, the argument of the counsel clearly shows deficiency on the part of the appellants."

Sharma also pointed out the different stands taken by the counsel for the companies. The counsel had told the state commission that on the merger, the company had issued 1,776 shares of JSW Steel in 2005 itself and sent it by post. However, the counsel told the NCDRC that the company could decide only in 2008 that Prasad was entitled to 1,776 shares.

The bench noted, "The argument of the counsel for the appellants that they could decide that the complainant was entitled to 1,776 shares only in 2008 is in direct conflict with the earlier stand of the appellants."

On the other hand, the company argued that the grant of Rs.5 lakh as compensation to Prasad was not based on any facts or evidence.

However, NCDRC observed that Prasad had submitted details of financial loss suffered by her by not receiving new shares and dividend warrants. She had also mentioned knowing about warrants issued by JSW Steel against existing shareholdings for the purchase of new shares and based on her existing shareholding of 1,890 shares, 393 warrants were issued in her favour.

Prasad contended that in terms of the new warrants, she could have purchased 393 additional shares in JSW Steel. However, she did not even receive the new warrants. As the last date for applying for the purchase of 393 additional shares was 1 April 2006, Prasad missed the option and suffered a loss on account of the values of the shares and also the dividend she would have earned.

In her complaint, Prasad cleared, "The purchase amount of these 393 shares at Rs.160 per share would have been Rs.62,880. The market value of 393 shares as of 13 December 2007 at Rs.1,329 per share was Rs.5,22,297. Therefore, the total loss suffered by the complainant on the additional 393 shares amounts to Rs.4,59,417. The loss on account of the amount of dividend declared/receivable on the additional 393 shares amounts to Rs.4,912.50."