Mumbai: 21 years on, share broker to get insurance claim of ₹2.53 crore – Hindustan Times

Twenty one years after a city share broker suffered losses of about ₹2.5 crore due to unauthorised fraudulent share transactions entered into by one of its employees, the firm will get back the entire amount by way of insurance claim.

Last week, the national consumer disputes redressal commission (NCDRC) allowed consumer complaints filed by M/s. RR Chokhani Stock Brokers and directed The New India Assurance Company Ltd. to pay insurance claim of ₹1 crore to the firm, along with interest at the rate 9% per annum from 2003, when the firm filed the complaint — totalling to ₹2.53 crore.

The insurance company has been directed to make the payment in three months, failing which it will have to pay interest at the rate of 12% p.a. It will also have to pay additional amount of ₹1 lakh towards the litigation cost.

On March 15, 2000, the firm noticed fraud committed by one of its key employees, who was in-charge and looking after the arbitrage operations and back-office work related to updating of trade data and deciding volume of arbitrage.

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Between March 1-14, the employee, who was not allowed to trade on his own or otherwise, entered into several arbitrage transactions without authorisation from the firm and had suffered huge losses that he transferred to some of the firm’s clients. Three days later, the employee died by suicide, leaving behind a note admitting to the fraud.

On March 31, the share broker lodged an insurance claim, but the insurance company repudiated the claim on the ground that the loss was caused by its employee by entering into speculative trading, which was outside the scope of the policy. That prompted the firm to move NCDRC.

NCDRC, however, refused to accept the insurer’s defence. “In the instant case, admittedly the complainant suffered loss due to dishonest actions of its employee who confessed his misdeeds and due to guilt, he committed suicide,” the commission said, concluding that the stock broker’s claim was covered under the policy, especially its fidelity clause.