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TMI Blog2018 (5) TMI 1953X X X X Extracts X X X X X X X X Extracts X X X X ..... Lipsa Unadkat, Manilal Kher Ambalal & Co. for the Respondent. Dr. C. K. G. Nair, Member 1. These two appeals have been filed challenging the decision of the Defaulter's Committee ('DC' for short) of the National Stock Exchange of India Ltd. ('NSE' for short) whereby the claims of the appellants herein against their broker M/s. Kassa Finvest Pvt. Ltd. ('Kassa' for short) have been rejected by the DC. Since the basic question raised in both the appeals is whether all claims of the investors / clients against their defaulter broker can be paid out of the Investor Protection Fund ('IPF' for short) of the stock exchange, both the appeals are heard together and are disposed of by this common decision. 2. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lished a newspaper advertisement inviting legitimate claims against Kassa. On June 19, 2015 the appellants filed their claims before the DC of NSE seeking relief under IPF. Vide letter dated December 28, 2015 NSE informed the appellants that their claims were inadmissible for compensation under IPF. Further representation to NSE was also rejected and this appeal has been filed challenging the decision of the DC of NSE rejecting their claims of Rs. 80 lac of Appellant no. 1 and Rs. 20 lac of appellant no. 2 on the ground that the appellants did not do any trading in securities since the opening of their accounts in October 2012 / February 2013 and they received credits of interest and TDS had been deducted on the same as per the ledger of Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts opened the trading accounts with Kassa on different dates between November 2011 and March 2014. They also did not trade in any securities. Kassa credited some amount to the appellants account in the form of corporate benefits etc. However, when they asked Kassa to refund their margin money Kassa did not oblige. Therefore, they complained to NSE and SEBI. Later Kassa was expelled by NSE on April 21, 2015. Appellants' claims and review application thereon were rejected by the DC of NSE for payment out of IPF in its meeting held on different dates during 2015, 2016 and 2017. Rejection of the claims, according to DC, was because the transactions between the appellants and their broker Kassa were in the nature of loan transactions and pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pter XII of the Bye-laws of NSE details how default of a broker has to be dealt with. Chapter XIII of the Bye-laws deals with various aspects of the IPF. In Chapter XII, Bye-law 24 specifies the claims that cannot be admitted by the DC. One of the inadmissible claims is "in respect of a loan with or without security". Accordingly, the DC is bound by the Bye-laws while considering claims from investors / clients for payment from IPF. He further submitted that these conditions are meant to protect the genuine investors who trade in securities market and not meant for those clients who enter into loan transactions with their broker for predecided returns / loyalty bonus etc. The appellants in both these appeals belong to the latter category wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ants and Kassa was in the nature of a client - broker one rather than an investor - broker one. Very fact that the clients did not do a single trade for a long period after opening their trading accounts and they had entered into agreements which specified the percentage of fixed returns to the appellants make it very clear that the appellants were supporting the illegal para banking activity of their broker. The submissions made by some of the appellants that they were uninformed investors cannot be accepted since the claims of all the appellants (except one) are in millions of rupees (in the range of Rs. 2 million to Rs. 8 million). It is also a fact that SEBI and exchanges have widely publicized the specific manner in which clients accou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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