Bombay High Court To Hear ACC Cement's Appeal In Case Over Dematerializing NRI’s Shares In Someone Else’s Name

Justice Amit Borkar observed that none of the necessary factors to record a finding of negligence had been considered by the trial court. Prime facie the NRI’s claim was not based on a right created under a statute or under contract, the judge added.

On March 27, 2017 a civil court held ACC negligent for dematerializing the NRI - Dr. Rustom Sam Boyce’s - shares in someone else’s name despite being put to notice that the shares were stolen.

It allowed the NRI to retrieve 3912 and 6250 shares of ACC along with accrual rights, bonus, dividends, from November 1, 2005. ACC approached the HC against this decree.

Background

Dr. Boyce, an NRI living in Singapore realized on his return to India in 2005 that his share certificates were stolen and informed ACC accordingly. ACC in turn informed Mr. Boyce that the shares were flagged, but Boyce would have to file certain documents for the company to issue of duplicate shares. In the absence of these documents ACC wouldn’t be able to block any request regarding the shares, the company claims it said.

Two years later, in 2007, a request was made by ICICI Bank and HDFC Bank to dematerialize (convert from physical form to digital form) the shares in the Demat account of someone else with a similar name as the petitioner. And since the documents as requested by ACC was not provided by Dr. Boyce the said shares were dematerialized.

Interestingly, the request for Dematerialization was made on the name of Dr. Sam Rustom Boycee i.e having a minor-discrepancies in name of Dr. Boyce. A suit for recovery was filed by Dr. Boyce, alleging that the company failed to act with due diligence. The City Civil Court Bombay inter alia found ACC to be negligent.

Before the Bombay High Court ACC submitted that the essential ingredients of finding of negligence are (i) Duty of Care (ii) Duty owed to Plaintiff and (iii) Careless breach of such duty. However, the city civil court in its judgment fails to discuss either the duty of care or duty owed to the NRI (plaintiff). The court while passing decree has considered oral evidence led by the plaintiff and based on a communication on behalf of the NRI that the shares are stolen, recorded a finding of negligence.

According to Dr. Boyce, ACC owed him a fiduciary liability to take care. According to him, the trial court had taken overall view of the matter and recorded the finding of negligence and, therefore, present appeal neither raises question of fact nor question of law and is, therefore, liable to be dismissed under Order XLI Rule 11 of the Code of Civil Procedure, 1908.

Having considered the submission made on behalf of both parties, the Bombay High Court observed that the factors necessary to prove negligence have been succinctly led down in the case of Rajkot Municipal Corporation Vs. Manjulben Jayantilal Nakum & Ors, reported in (1997 (9) SCC 552). The Apex Court has observed that not every carelessness conduct which causes damage will give rise to tortuous liability. Claim for injury and damage may be founded on breach of contract or tort. The degree of liability depends on decree of mental element.

In view of the same the Bombay High Court held that negligence does not entail liability unless the law exacts a duty in the given circumstances to observe care. Duty is obligation recognized by law to avoid conduct fraught with unreasonable risk of damage to other, the court held.

Based on the judgment, the Bombay High Court held that none of the factors necessary to record finding of negligence have been considered by the trial court. “Prima-facie, perusal of the plaint does not show that the claim of the plaintiff is based either on a right created under statute or under the contract. In absence of pleading or legal right or finding to that effect by the trial court, such decree, prima-facie, could not have been passed. In view of the same, the effect and implementation of the Impugned Judgment is stayed,” the court said.

ACC Limited was represented by Mr. Zal Andhyarujina, Senior Advocate a/w Ms. Serena Jethmalani, Counsel, Mr. Nishit Dhruva, Ms. Khushbu Chhajed, Mr. Shahbaz Malbari and Mr. Yash Dhruva i/by MDP & Partners.

Dr. Sam Rustom Boyce was Represented by Mr. Sheroy M. Bodhanwalla, Counsel a/w Mr. Sakshi Sharma and Mr. Burjis Doctor i/by M/s. Bodhanwalla & Co. Advocates & Solicitors

ICICI Bank was represented by Mr. U. Mannadiar i/by M/s. Mannadiar & Co.

HDFC Bank was represented by Mr. Sameer Pandit a/w Mr. Sarrah Khambati and Mr. Vaibhav Hari i/by M/s. Wadia Ghandy & Co. 

Case Title: ACC Ltd. Vs Dr. Rustum Samboyce And Ors.[First Appeal No.1356 Of 2019]

Citation: 2023 LiveLaw (Bom) 114