LIMITATION OF THE CONSUMER FORUM WHEN COMPANY GOES SICK

In the matters of Fixed deposits made with the financial institutes, industries ,Govt.undertakings and banks etc ,depositor is  considered to be a consumer under the consumer protection act  against the financial institutes for keeping their deposits with them for a specific period under specific terms and such institute /body/bank is rendering service to the depositor by keeping and maintaining the account,calculating interest and issuing FDR(fixed deposit receipt) for the same .This was held by the Hon’ble National commission vide their order dt 26.8.1993 in the matter of Neela Vasant Raje v Amogh Industries&others in RP NO. 409/1992.Incidently while this revision petition was pending before this commission ,an amendment to this act was made on 18.6.1993 wherein Services were brought under the purview of consumer protection act for the first time and specific words defining ‘service’ were also added to the act at section 2(O)and banking/financing were one of them/those areas of services .Further Section 14 of the act was also suitably amended  making the provision of removing the defect /deficiencies in services  meaning thereby that appropriate orders for payment of FD’s money with interest could also be given .Hence no appeal was preferred against this order, instead it was matching to the tune of recently amended provisions in the act just before this order. National commission’s this order was final in respect of considering deposit made with financial bodies as service rendered and services received by the consumers and was further confirmed in number of similar cases by the Hon’ble Supreme Court.

But respondents do  take objection to the jurisdiction of consumer forum customarily inspite of the fact provision of preliminary hearing was brought to the act by amenendment 2002 which is meant to see  three things at the time of admission itself .Consumer forums are supposed to check whether the complainant is a consumer as defined under the act ,whether particular forum has the territorial and pecuniary jurisdiction to deal with the matter under dispute and whether the case has been filed wihin prescribed time limit .While checking on the first point,forums are supposed to bear in mind and scrutinize carefully about the areas/subjects  where they can step in for exercising their jurisdiction.By now almost all services coming under the purview of this act are well defined through  pronouncement of various judgements by the apex court and at times are confirmed and reconfirmed

But with the passage of  time, new situations were faced by the consumers when sick  industrial units approached BIFR(Board for industrial and financial reconstruction) under companies law and they took the plea before the  consumer forums that no case can be filed before any court of law without seeking permission from BIFR under the provisions of Sick Industrial companies (Special provisions)Act 1985.It was further argued in number of cases when company is declared sick or matter has been referred to company law board or has gone in liquidation etc,etc.that they are no more liable to face any court case /recovery suit etc.Now the question before the consumer forums was as to whether defendants are entitled to enjoy blanket exemption from any legal action against them before consumer court under the changed circumstances.

 Till 1999 National commission while deciding the matter between M/S World Link Finance company Ltd.V M.R.Dixit, decided in 1999 maintained that  consumer can go to consumer forum even when matter has been pending before Company Law Board but later on in the matter of M/S Aliyas Capital and Management services Ltd Versus V.P.Grover case National commission went into details  of the situation arising out of two different orders by two redressal agencies on the similar subjects.National commission felt it proper that consumer forums should not  take up such matters and it be decided by Company Law Board in this situation This order by the National commission was passed on 9.4.2001.The similar stand was taken in another case of Sarita Nagpal V D.T.C.Financial services wherein Sarita Nagpal was directed to approach Company Law Board as the new scheme for payments of FD’s was approved by Company Law Board by then .  

On the same  subject matter again came  before the National commission and it had held in the matter of Sneha Dyechem Ltd v Jyoti Rathore RP NO 2938of 2004 decided on14 Dec. 2005 that reference to consumer court can be made even if company was already pending with reference before BIFR and thereafter declared sick.

National commission has recently dealt with such situation giving their firm verdict in favour of consumers on 26.5.2009 reported as 2009 CTJ 68(CP)(NCDRC)in case of Manohar lal Bhandari v Sun Earth Ceramics RP No.1926 of 2004 arising from the order dated 3.6.2004 of Rajasthan State Commission in appeal no. 1871 of 2003

In the case above referred the facts in brief are that the complainant before the consumer court had deposited with  respondent company an amount of Rs 50,000/- with a promise to yield interest @13.5% p.a. whereas at the time of maturity after three years , he was paid  only Rs 7180 towards interest taking the plea that the company went sick and reference was made to the Board of  Financial and Industrial Reconstruction under section 15 of the Sick Industrial companies (Special provisions)Act 1985 and liability to pay the claimed amount denied.District forum dismissed the complaint holding it could be filed only after obtaining permission from BIFR .Appeal filed against this order was also dismissed by the State Commission on the same ground.National commission while deciding the case in favour of consumer held that   section 22 of SICA 1985,does not provide for any permission to continue with a pending complaint before consumer court nor does it place any restriction to deal with pending proceedings under the CP act  1986.It only talks of permission from BIFR  to file suit/recovery proceedings  before the civil court .Fixed Deposits are not recovery matters ,it is a consumers own money kept with the company with a promise to pay it back with agreed interest.Hence consumer’s case can continue before the consumer forum and  company’s reference to BIFR shall not make any difference or bar the consumer forum to deal with the matter before it.

The similar matter was dealt by SCDRC Rajasthan( Jaipur) in the matter of Smt Sarvjeet Kinra v Modern Denim Ltd in 2008 in appeal no 2069of 2006 alongwith Appeal no 2067 of 2006and 2068 of 2006;in the matter of Smt Sarvjeet Kinra v Modern Thread ((India )Ltd Appeal no 2065 of 2006:in the matter of Ms Priti Kinra v Modern Terry Towel Ltd Appeal No 2066of 2006 .In the above said appeals clubbed together ,the fact in the case were that the companies had not paid the maturity amount after specified period as they had become sick and a scheme for repayment of the deposits were framed by company law board .District forum dismissed the complaint as not maintainable under section 22(1)of SICA .The question before the State Commission in appeal was as to whether the money deposited with company amounts to deposit or loan and whether recovery of deposit constituted a ‘suit for recovery of loan/money’attracting sec.22 of SICA.Held,deposit is not a loan but a sum held in trust till the time of maturity Respondent companies were made to pay the principle amount with agreed rate of interest till the date of maturity  but there after simple interest was allowed to be paid as spelled out in the scheme approved by Company Law Board. This order of by SCDRC Rajasthan Jaipur Bench was much in tune with the earlier order by the National commission on 9.4.2001 as referred above

In View of the discussions above ,the law related to Fixed deposits made by the depositor/consumer as on date through various judgements is as hereunder:

1)                          Depositor is a consumer under Consumer Protection Act 1986 as amended upto 2002 for receiving services from the service provider who keeps his acconts,calculates and sends interest ,isssues FDR etc and also uses his money for expanding his business for a specified fixed tenure.

2)                          Depositor can go to the consumer court even if  respondent company is referre to BIFR and even declared sick.Consumer is not to seek permission from BIFR under the provisions of section 22(1)of SICA for filing his complain before the consumer  forum.

3)                          In case company  after getting declared sick approaches Company Law Board for preparing a scheme for making payment to the creditors ,in such circumstances ,consumer can go to Company law board for their claim afresh in order to avoid any ambiguity in the orders of both the redressal agencies  and also for execution of their order if any obtained from the consumer court by that time .

4)                          In case company fails to pay the amount due to the consumer as per the scheme prepared /approved by the Company law board ,consumer can contact with  his complaint to the Company Law Board under the Reserve Bank Of India (amended )Act 1997.

 

Dr Prem Lata  

Member, ConsumerForum

(West Delhi)

 

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