A S CHOWDARY Vs. V N RAO

JUDGEMENT

(1.) M/s. Navabharat Enterprises Limited issued prospectus on 5.9.1994 for public issue of 52,73,400 Equity Shares of the face value of Rs.10/- each on 29.9.1994 with a premium of Rs.40/- per share. Shri V. N. Rai the complainant applied for 2,100 shares and a sum of Rs.1,05,000/- and on allotment of 2,100 shares he paid a further sum of Rs.5,000/- evidenced by Ex. A 2 and the share certificates were issued to the complainant as evidenced by the copies of the share certificates Exs. A3 to A23. Thereafter, he received as shareholder the 36th Annual Report for the financial year 1993-95 i. e. Ex. A24. According to the complainant, on a careful scrutiny of the said report, he came to the conclusion that the statement made in the prospectus was false, baseless and concocted and with an intention to cheat the prospective investors. He, therefore, filed the Complaint O. P.833/96 in the District Forum, Hyderabad against M/s. Navabharat Enterprises Limited, the 1st opposite party and Sri A. S. Choudhary, Chairman and Managing Director and eight other Directors i. e. opposite parties 2 to 10 and SEBI and Hyderabad Stock Exchange, Himayatnagar, Hyderabad were added as opposite parties 11 and 12. As the opposite parties vowed to the prospective investors like the complainant the duty to disclose truely and correctly the affairs of the Company and its future prospects and as opposite parties 2 to 10 being signatories to the prospectus, where under they suppressed the truth and correct position of the Company and painted a rosy picture in order to enthuse the prospective investors to invest their amounts, amounting to deficiency of service and unfair trade practice, the complainant claimed against opposite parties 2 to 10 a direction to the opposite parties 2 to 10 for refund of the amount of Rs.1,05,000/- with interest @ 21% per annum, damages of Rs.1,00,000/- and costs of Rs.5,000/-.

(2.) The opposite parties 1 to 10 in their counter stated that since the complainant had purchased the shares for resale, the complainant is not a consumer and that there is no defect in the shares or deficiency of service or unfair trade practice on their part, secondly the profit and loss account was drawn up by the auditors of the opposite party No.1 Company and the statements were accordingly made taking profits and income into account and the complainant being an Auditor should have known the meaning and purport of the term 'other income' set out in the prospectus; thirdly the SEBI watched the prospectus and specified the stringent standards fixed by it; fourthly there was no mis-statement made by the opposite parties 2 to 10 and the prospectus did not paint a rosy picture nor made a reckless misstatement and hence the complaint is liable to be dismissed. The opposite parties 11 and 12 remained ex-parte.

(3.) The complainant filed his affidavit and Exs. Al to A28 were marked on his behalf and for the opposite parties no oral or documentary evidence was adduced.