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

Mr. Alok Verma, a resident of Chandrapur, recently found himself in a perplexing situation. He received an SMS from a stock brokerage company named ‘Apex Stocks & Securities’ claiming that his trading account had a negative balance of over a few thousand rupees. The problem was, Mr. Verma had never opened an account, traded, or made any investments with this firm. His anxiety grew when his attempts to contact their customer care went unanswered, and he found no way to access or close this mysterious account. He is now worried that this alleged debt will continue to accumulate and whether the company could initiate legal proceedings against him for non-payment.

Advice in such cases

Receiving such a demand can be alarming, but it’s crucial to act systematically and not panic. Ignoring the issue is not advisable, as it could lead to further complications.

• Do not ignore the communication. Treat it as a serious matter, even if you believe it’s an error or a scam.
• Immediately send a formal written communication to the brokerage firm via both email and a registered post with acknowledgement due (RPAD). Clearly state that you have never opened an account with them and that the demand is erroneous. Request them to provide details of the alleged account, including the account opening form and proof of any transactions.
• Check your credit report from agencies like CIBIL. An unauthorized account opened in your name might reflect there and could impact your credit score.
• File a formal complaint with the Securities and Exchange Board of India (SEBI) through their online portal, SEBI Complaints Redress System (SCORES). SEBI is the regulatory body for the securities market and takes such complaints seriously.
• Do not make any payment, as it could be construed as an admission of liability.
• 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 legal principles and statutes:

• Indian Contract Act, 1872: For a liability to exist, there must be a valid contract. Since you never opened an account, there is no agreement between you and the brokerage firm, and thus, no contractual obligation to pay.
• SEBI Regulations: Brokerage firms are strictly regulated by SEBI. Opening an account without proper Know Your Customer (KYC) documentation and in-person verification (or its digital equivalent) is a violation of these regulations.
• Bharatiya Nyaya Sanhita, 2023 (BNS): If an account was opened in your name using your details without your consent, it could amount to identity theft (Section 319 of BNS) and cheating (Section 318 of BNS). This would be a criminal offence.
• Consumer Protection Act, 2019: You can file a complaint in a consumer forum for deficiency in service and unfair trade practices by the brokerage firm.
• Information Technology Act, 2000: This act is relevant as the communication and potential fraud involve electronic records and communication.

If you are the complainant

As the person who has received this erroneous demand, you are the complainant in this matter. Your goal is to get the demand nullified and the unauthorized account, if any, closed.

• Gather all evidence, including the SMS, emails, call records of your attempts to contact customer care, and a copy of the written communication you sent to the firm.
• File a detailed complaint on the SEBI SCORES platform, attaching all relevant evidence.
• Send a legal notice to the brokerage firm through a lawyer, demanding the immediate withdrawal of their claim and confirmation of account closure.
• 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

If your identity has been stolen to open this account, you are a victim of fraud. The steps are similar but with an added emphasis on reporting the crime.

• In addition to complaining to SEBI, you should consider filing a complaint with the National Cyber Crime Reporting Portal (cybercrime.gov.in) or your local police station’s cyber cell.
• Clearly state in all your communications that you are a victim of identity theft and that the account was opened fraudulently.
• Preserve all evidence meticulously, as it will be crucial for both regulatory and potential criminal proceedings.
• 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

Initially, the police might view this as a civil dispute, especially if there isn’t clear, immediate evidence of criminal activity like identity theft. They might advise you to approach a consumer court or the relevant regulatory body (SEBI). However, if you present a strong case suggesting that your documents were forged or your identity was stolen to open the account, they are obligated to register a First Information Report (FIR) under relevant sections of the BNS and the IT Act and initiate an investigation.

FAQs people normally have

Can the brokerage firm sue me for the negative balance?
It is highly unlikely they can succeed in a lawsuit without proof of a valid contract (i.e., a properly executed account opening form). However, they might send recovery notices or use collection agents, which is why it’s important to have a clear record of your dispute.

Will this affect my CIBIL/credit score?
If the firm reports this as a default, it can negatively impact your score. Disputing the claim with both the firm and credit bureaus is essential to prevent or correct this.

Should I just pay the amount to make it go away?
No. Paying the amount could be interpreted as an admission that the debt is yours. You should only resolve the matter after it has been properly investigated and your name has been cleared.

What evidence is required?

To build a strong case, you will need:

• The original SMS or email demanding payment.
• Copies of your written communications (email, registered letter) sent to the company.
• Records of your complaint filed with SEBI SCORES and any other regulatory body.
• A copy of your credit report showing any unauthorized entries.
• If a police complaint is filed, a copy of the FIR or the complaint receipt.

How long will the investigation take?

The timeline can vary. A complaint on the SEBI SCORES platform usually gets a response from the company within 30 days, as it is a regulated process. If the matter goes to a consumer court or involves a police investigation, it can take several months to a year or more for a complete resolution, depending on the complexity of the case and the cooperation of the brokerage firm.

Advocate Sudhir Rao, Supreme Court of India