Decided on February 04,2021

M/S. R.R. Chokhani Stock Brokers Pvt. Ltd.Ltd. Appellant
The New India Assurance Co. Ltd. Respondents


S.M.KANTIKAR, MEMBER, J. - (1.) The Complainant, M/s R. R. Chokhani Stock Brokers P. Ltd.(hereinafter referred to as the "Company/Co."), filed this Complaint through itsDirector, Mr. Ramakant R. Chokhani, against the New India Assurance Co. Ltd. (hereinafter referred to as the "Opposite Party") under Section 21(a)(i) of the Consumer Protection Act 1986.
(2.) The Complainant M/s R.R. Chokhani Stock Brokers P. Ltd. is a member of Bombay Stock Exchange (hereinafter referred to as "BSE") since October, 1985. Its Director and Principal Officer was Mr. Ramakant R. Chokhani. The Complainant Co. is engaged in the business of arbitrage between NSE and BSE. As per the mandatory requirements of Securities and Exchange Board of India (SEBI) and also as per laws of NSE and BSE, the Complainant Co. took the insurance cover from the Opposite Party for cover amount of Rs. 1 Crore. The Complainant was renewing the said policy every year regularly. The Insurance policy covers inter alia "fidelity" under Section 1A of the terms and conditions of the policy. Since 1989, Mr. Nilesh Patel was a key permanent employee of the Complainant Co. He was Incharge and looking after the arbitrage operations and other back-office work related to the updating of trade datas, MIS reports and deciding about volume of arbitrage. He was drawing salary and entitled to annual bonus like other employees. He was not allowed to trade on his own or otherwise, any time.
(3.) On 15.03.2000 for the first time, the Co. noticed some fraudulent arbitrage operations and the entries of buying / selling transactions made by Mr. Nilesh Patel between 01.03.2000 and 14.03.2000 for his personal benefit. It was without knowledge and any authority from the Complainant Co. He concealed it by manipulating the software data. The Director of the Co. tried to contact Mr. Nilesh Patel but he was unavailable on 15.03.2000 and it was learnt from Mr. Nilesh Patel's residence that since 15.03.2000 he had not returned home. On the next day evening, Mr. Nilesh Patel spoke to one employee Mr. Sanat Jain and confessed about having committed fraud by him. Thereafter, it came to notice that on 18.03.2000, Mr. Nilesh Patel committed suicide by consuming poison. He left behind a suicide note and confirmed the fact of having committed fraud. The said suicide note was recovered by the Police and taken on record in the Panchanama Report (Annexure 'D'). Thereafter, the Complainant Co. started reconciling its accounts and noticed that Mr. Nilesh Patel had committed a huge fraud by transferring the losses into the accounts of the Co.'s clients. The Co. lodged a formal Complaint with the Police on 07.04.2000, but the Police closed the case in view of the demise of Mr. Nilesh Patel. The Complainant submitted that the said acts were fraudulent, unauthorized, without consent or permission of authority of the Complainant Co. and I or his constituents. The Complainant Co. suffered a huge loss amounting to Rs. 2.50 crores from the aforesaid fraud and therefore the Co. was liable to compensate its clients as well as third parties. On 31.03.2000, the Complainant Co. filed an insurance claim with Opposite Party Insurance Co. The Opposite Party appointed M/s Parimal R. Shah and Co. and M/s Padamsey P. Shah and Co. as joint Surveyors for assessing the loss suffered by the Complainant Co. It was alleged that though the Complainant Co. furnished all the details and information as asked by the Surveyors, but the reasons best known to them, the Surveyors kept on asking and calling for details / information from the Complainant Co. which were either repetitive or irrelevant in nature. To avoid further delay the Complainant Co. wrote a letter to the Opposite Party on 17.09.2001 and requested to change the Surveyors, but no action was taken by the Opposite Party.;

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