If you are stuck in such a situation, here is what to do.

Mr. Sameer, an investor from a Tier-2 city, recently used an online investment platform called ‘QuantumCapital’ to purchase some corporate bonds. For several weeks, his portfolio on the QuantumCapital app displayed an exceptionally high yield of nearly 50% per annum for a specific bond he had purchased. Trusting the platform’s data, he felt confident in his investment choice. However, one day, he noticed that the yield for the very same bond had been drastically reduced to 8.60% in his portfolio. Upon contacting the company, he was informed that the previously displayed 50% return was a ‘technical glitch’ and the system was now showing the correct, much lower, yield. Mr. Sameer discovered through online forums that other users had faced similar issues with QuantumCapital in the past, with the company often being unresponsive to their complaints on social media. He is now seeking guidance on the legal steps he can take to address this issue of misrepresentation.

Advice in such cases

When faced with a situation where an online brokerage or financial services platform has displayed misleading information that influenced your investment decisions, it is crucial to act systematically to protect your rights.

• Gather and Preserve Evidence: Immediately take screenshots of your portfolio showing the incorrect high returns, the current corrected returns, and any communication with the company. Save all emails, chat transcripts, and account statements.
• Formal Communication: Do not rely on social media posts. Send a formal, written complaint to the company’s designated grievance redressal officer via email. Clearly state the facts, the discrepancy, and the resolution you seek. Keep a record of this communication.
• File a Complaint with SEBI: The Securities and Exchange Board of India (SEBI) is the market regulator. You can file a complaint through the SEBI Complaints Redress System (SCORES) portal. This is a formal mechanism to address grievances against listed companies and registered intermediaries.
• Consumer Complaint: You can also file a complaint before the appropriate Consumer Disputes Redressal Commission for ‘deficiency in service’ and ‘unfair trade practices’.
• Legal Notice: Have a lawyer send a formal legal notice to the company, outlining the entire issue and demanding compensation for the misrepresentation and any potential losses incurred due to the misleading information.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

Applicable Sections of Law

This situation involves several areas of Indian law:

• Securities and Exchange Board of India Act, 1992: SEBI regulations govern market intermediaries like QuantumCapital. Misleading investors and failing to provide accurate information is a violation of SEBI’s code of conduct for brokers and investment advisors.
• Consumer Protection Act, 2019: The act of displaying incorrect returns can be classified as an “unfair trade practice” and a “deficiency in service,” making the company liable.
• Indian Contract Act, 1872: An argument can be made for misrepresentation under Section 18 of the Act, which could make the agreement to invest voidable at your option.
• Information Technology Act, 2000: This Act deals with electronic records and data. Providing incorrect electronic information that causes loss can attract penalties.
• Bharatiya Nyaya Sanhita, 2023 (BNS): If it can be proven that the company intentionally deceived investors to induce them to invest, it could potentially amount to cheating under the BNS. However, proving criminal intent is a high bar.

If you are the complainant

As the person who has been wronged, your actions should be focused and documented.

• Document Everything: Create a timeline of events. Note down the date you invested, when you first noticed the high yield, when it was changed, and all your attempts to contact the company.
• Use Formal Channels: Escalate your complaint through the company’s official grievance redressal mechanism first. If they fail to resolve it within their stipulated timeframe (usually 30 days), you can then approach SEBI and consumer forums.
• Calculate Your Loss: Determine the basis of your claim. Were you induced to buy more because of the high yield? Did you miss out on other investment opportunities? Quantify your notional or actual loss.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

If you are the victim

Being a victim of such misrepresentation can be frustrating. Here is a focused approach to take control of the situation.

• Stay Calm and Objective: Emotional responses, while understandable, are not helpful in legal proceedings. Stick to the facts in all your communications.
• Do Not Accept Verbal Assurances: Insist on written communication from the company. A phone call where they apologize for a ‘glitch’ holds no legal value. Ask for a written explanation and resolution plan.
• Seek Professional Help: Financial matters and legal regulations are complex. Do not try to navigate this alone.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

How the police behave in such cases

Approaching the police might not be the most effective first step. This is primarily seen as a regulatory and civil dispute rather than a criminal one. The police will likely advise you that it is not a matter of theft or traditional fraud and will direct you to the appropriate regulatory bodies like SEBI or civil forums like the Consumer Court. An FIR for cheating under the Bharatiya Nyaya Sanhita (BNS) can be filed, but the police may be hesitant to register it without clear evidence of malicious and deceptive intent from the company’s side. They often perceive such cases as disputes over service deficiency, which fall outside their primary jurisdiction.

FAQs people normally have

Can I sue the company for the 50% return they promised?

It is difficult to sue for the promised return itself, as the company will defend it as a ‘technical error’. However, you can sue for damages caused by their misrepresentation and deficiency in service. The compensation would be based on the loss you suffered by relying on their incorrect information, not on the inflated return itself.

Is “technical glitch” a valid legal defense for the company?

While companies often use this defense, it doesn’t absolve them of responsibility. As a service provider, they have a duty of care to provide accurate information. A recurring ‘glitch’ points towards negligence and a deficient system, which is grounds for a complaint under the Consumer Protection Act and SEBI regulations.

What if the company’s terms and conditions say they are not responsible for technical errors?

Such one-sided clauses in terms and conditions can be challenged in court, especially in consumer contracts. A court can rule that such a clause is unfair and unenforceable if it seeks to absolve the company of its basic responsibility and negligence.

What evidence is required?

Strong evidence is the backbone of any such claim. You must collect:

• Screenshots and Recordings: Clear screenshots of the app/website showing the inflated yield in your portfolio, and subsequent screenshots of the corrected, lower yield.
• Account Statements: Official statements from the platform showing your investment.
• Communication Records: All emails, chat logs, or records of calls (with dates and times) with the company’s customer support or grievance officer.
• The Legal Notice: A copy of the legal notice sent to the company and any reply received.
• Public Complaints: Screenshots of other users complaining about the same issue on social media or online forums can help establish a pattern of negligence.

How long will the investigation take?

The timeline can vary significantly:

• SEBI (SCORES): An initial resolution is expected within 30 days, but a detailed investigation into the intermediary’s conduct can take several months.
• Consumer Court: Proceedings in consumer courts are designed to be swift, but depending on the case complexity and appeals, it can take anywhere from 6 months to a few years.
• Civil Suit: A full-fledged civil suit is the longest route and can take several years to conclude.

The speed of resolution often depends on the quality of your evidence and the responsiveness of the company to regulatory pressure.

Advocate Sudhir Rao, Supreme Court of India