The High Court dismissed the petitioner's writ petition challenging a consumer forum order against him personally. The court held that a company's liability for deficiency of service in a consumer dispute cannot be evaded by the resignation of its director, and the forum's order was legally sustained.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction)
SATURDAY, THE EIGHTEENTHDAY OF APRIL TWO THOUSAND AND NINE
PRESENT
THE HON'BLE MR JUSTICE V.ESWARAIAH
&
THE HON'BLE MR JUSTICE SANJAY KUMAR
WRIT PETITION No.11954 of 2001
Between:
Krishna Bhoopal S/o Sri Dharma Raja Gopal M/s. Leafin India Ltd., R/o 3-6-416/3, Madhupala, Himayat Nagar, Hyderabad-29.
..... PETITIONER
AND
.....RESPONDENTS
Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to quash and set-aside the orders dt: 25-7-2000 made in C.D.No.299/2000 passed by the 1st respondent, confirmed the same by order dt: 30-11-2000, made in F.A.No.528/2000 passed by the 2nd respondnet and not to reviewed the same in its orders dt: 6-2-2001 made in Review F.A.I.A.No.26/01 as it has no power to review its own orders, and consequential issue of the Non Bailable Warrant in execution of the
orders, and passed by the 1st Respondent in P.P.No. /01 and to strict down Sec.27 of Consumer Protection Act as unjust, illegal, voilative of Art. 14, 19 & 21 of Constitution of India and against the principles laid down by this Hon'ble Court in the case of B.S.Dwaraknath Vs Govt. of A.P. and others (W.A.No.104/97), by issuance of a writ more particularly in the nature of Writ of Certiorari or any other appropriate writ or order or direction as this Hon'ble Court may deem fit and proper in the circumstances of the case. Or else the petitioner will be put to great hardship and suffer irreparable loss.
Counsel for the Petitioner :MR.CH.RAMESH BABU
Counsel for the Respondent No.: MR.V.M.J.SAGAR
The Court made the following:
Form-NIC-OGS/WP{SRAVAN}
THE HON'BLE MR JUSTICE V.ESWARAIAH &
THE HON'BLE MR JUSTICE SANJAY KUMAR
WRIT PETITION No.11954 of 2001
ORDER: (per Hon’ble Sri Justice V.Eswaraiah)
The petitioner is said to be the Ex-director of the first opposite party in Consumer Dispute No.299/2000 on the file of the District Consumer Forum, Visakhapatnam (hereinafter referred to as “the District Forum”). The petitioner questions the order dated 25.07.2000 passed by the District Forum in C.D.No.299/2000, as confirmed by the A.P.State Consumer Disputes Redressal Commission at Hyderabad (hereinafter referred to as “the State Commission”) in F.A.No.528/2000 by order dated 30.11.2000. The petitioner also questions the dismissal of the Review Petition in I.A.25/2001 by the State Commission by order dated 06.02.2001.
2. Respondents 3 and 4 filed the Consumer Dispute No.299/2000 under Sec.12 of the Consumer Protection Act, 1986
(hereinafter referred to as “the Act”) on the file of the District Forum against (1) Leafin India Limited, rep.by its whole time Director Shri Krishna Bhoopal, aged about 48 years, residing at Madhupala, Dr.No.3060416/3, Himayathnagar, Hyderabad-29 (Krishna Bhoopal is the petitioner herein) and (2) Chairman & Managing Director, Shri D.Ravi Shankar, aged 45 years, residing at 1-2-593/34, Block-A, Suryakiran Apartments, Domalguda, Gagan Mahal, Hyderabad-29.
3. The parties are referred to as arrayed in the Consumer Dispute No.299/2000 before the District Forum.
It is the case of the complainants that they have deposited amounts with the opposite parties and on maturity the opposite parties issued Ex.A1 cheque for Rs.60,000/- in favour of the first complainant and another cheque for Rs.1,00,000/- in favour of the second complainant, drawn on the State Bank of Travancore, Kothi, Hyderabad on 03.02.1999 and 24.9.1999 respectively. The opposite parties have failed to arrange for payment of the money due under the said two cheques. It is stated that the opposite parties requested the complainants to retain the deposit amount covered by the said two cheques for further period of three months as there were no sufficient funds in the bank account, assuring that they will be benefited interest at 22% p.a. for the delayed period. Keeping trust and confidence on the representation of the opposite parties and its officials, the complainants renewed the deposits for further period. The second complainant deposited Rs.1,00,000/- with the first opposite party on 28.04.1998 under short term deposit and the first complainant deposited Rs.60,000/with the opposite parties on 05.11.1998 and the opposite parties paid interest and issued Exs.A1 and A2 cheques towards the amount deposited by the complainants. But the said cheques were dishonoured and the opposite parties have not paid the amount due and the branch office of the opposite parties at Visakhapatnam was suddenly closed.
Therefore, the complainants approached the District Forum. The opposite parties adopted unfair trade practice of collecting the amounts, promising to pay interest at high rates and thereafter closed the offices. The opposite parties have also issued cheques to create confidence without making available the funds in the bank, which amounts to deficiency of service on the part of the opposite parties, and therefore sought for a direction to the opposite parties to refund the deposited amounts with interest.
4. As the opposite parties did not appear despite of service of notice by way of substituted service, the District Forum allowed the Consumer Dispute No.299/2000 with costs, by order dated 25.07.2000, directing the opposite parties to refund Rs.60,000/- and Rs.1,00,000/respectively to the complainants with interest at 24% p.a. thereon, as well as Rs.6,000/- and Rs.10,000/- respectively to the complainants towards compensation.
5. Against the said order the opposite parties did not prefer any appeal before the State Commission. But the petitioner in his individual capacity as Ex-Director of Leafin India Limited alone filed appeal against the order of the District Forum in F.A.528/2000 on the file of the State Commission. The State Commission by order dated 30.11.2000 dismissed the appeal on the ground that as per the evidence adduced by the complainants the opposite parties are bound to repay the amounts with interest to the complainants. The State Commission also dismissed the review petition filed by the petitioner herein in I.A.25/2001 on the ground that there is no power to the Commission to review its order.
6. It is the case of the petitioner that earlier he held the post of one of the Directors of the 5th respondent company, namely Leafin India Limited. The complainants lodged the complaint before the District Forum for repayment of their deposited amounts along with interest and
compensation as the cheques issued by the company were dishonoured. No notice has been served on the petitioner in the said consumer dispute as he has resigned to the post of the Director of the 5th respondent company on 06.03.1999. Therefore, he is not responsible or liable for non-payment of the deposited amount with the said company. It is stated that he was unable to file the counter in the said Consumer Dispute before the District Forum to appraise the aforesaid facts and to get his name deleted from the cause title of the complaint under Or.1 Rule-10 CPC or to seek dismissal of the complaint against him. It is further stated that the appeal filed by the petitioner before the State Commission was erroneously dismissed without looking into the material papers filed along with the appeal. It is stated that the complainants played fraud in adding the petitioner herein as a party respondent in the complaint and obtained the order though he was not necessary or proper party to the said complaint and no liability can be fixed on a Director of the company when the deposit was made to the 5th respondent company. The petitioner is ceased to be the Director of the 5th respondent company and his name was deleted by the Board of Director with effect from 06.03.1999 consequent upon his resignation.
7. It is stated that the order of the District Forum as confirmed by the State Commission is illegal and the petitioner is not a proper and necessary party to the said consumer dispute and his name was unnecessarily added. As the order of the District Forum is an ex parte order it is liable to be set aside. It is stated that Sec.27 of the Act is unconstitutional and liable to be struck down. It is stated that the nonbailable warrants issued under Sec.27 of the Act are illegal.
8. In so far as the constitutional validity of the Section 27 of the Act is concerned, there was no averment in the affidavit either in respect of the legislative competency of the Parliament in enacting the said law or any foundation has been laid down as to how Sec.27 of the Act is
unconstitutional. However, the Union of India is not made a party to the writ petition to decide the constitutional validity and therefore, we are of the opinion that it may not be just and proper to deal with the constitutional challenge in this writ petition.
9. The only contention raised by the learned counsel for the petitioner is that the petitioner is not a Director of the 5th respondent company and he has resigned to the post of the whole time Director of the 5th respondent company and therefore, he is not liable for repayment of the said deposited amounts to the complainants. The learned counsel for the petitioner submits that as per the judgment of a Division Bench of this Court in the case of B.S.Dwarakanath vs. Government of A.P. (W.A.104/1979, dated 07.03.1978) the President of the Cooperative Society therein who had executed counterpart agreement on behalf of the cooperative society is not liable to pay excise arrears personally as the liability rests on the society but not on its President or its members. It is stated that the same analogy is applicable in the instant case as the petitioner, being Director, is not liable and the 5th respondent company is liable to pay the amounts to the complainants. The creditors are entitled to proceed against the assets of the Company alone, but not against the Directors. However, it is stated that the petitioner had resigned to the post of the Director by the date of filing of the consumer dispute.
10. To resolve the controversy, it is just and proper to extract the relevant definitions made in the Consumer Protection Act, 1986 hereunder:
Sec.2(1)(b) Complainant means (i) a consumer; (ii) to (v) ………..
Sec.2(1)(c) Complaint means any allegation in writing made by a complainant that—
(i) an unfair trade practice or a restrictive trade practice has been adopted by any trader (or service provider);
Sec.2(1)(d) Consumer means any person who,----
(i) ……….
Sec.2(1)(o) Service means service of any description which is made available to potential users and includes (but not limited to) the provision of facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, board or lodging or both, (housing construction) entertainment, amusement or the purveying a news or other information, but does not include the rendering of any service free of charge or under a contract of personal service;
Sec.2(1)(r) Unfair trade practice means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any service, adopts any unfair method or unfair or deceptive practice;
11. A perusal of the order of the District Forum goes to show that the complainants deposited the said amounts of Rs.1,00,000/- and Rs.60,000/- with the opposite parties on 28.04.1998 and 05.11.1998 respectively. The contention of the petitioner is that he has resigned to the post of the Director only on 06.03.1999 i.e. after receipt of the said deposits. A specific averment has been made in the complaint stating that both the opposite parties have promised the complainants for repayment of the deposited amount and in fact, they have paid the
interest assuring that the deposited amounts will also be paid and requested complainants to extend the deposit for further more period, for which the complainants have extended the deposit period for three more months, but after expiry of three months also the said deposited amounts have not been paid and therefore, the said action of the opposite parties is unfair trade practice and it is a clear case of deficiency of service.
12. The consumer dispute was filed before the District Forum by the complainants against the specified opposite parties i.e. the Leafin India Limited, represented by its whole time Director as well as the Chairman & Managing Director of the said company. Section-3 of the Act says that the provisions of the Act are in addition to and not in derogation of the provisions of any other laws which are in force. The right of a consumer to approach the Consumer Forum is an additional right from that of approaching the Civil Court for necessary relief. There is no specific protection under the Act from proceeding against the whole time Director or the Chairman & Managing Director of Leafin India Limited. There was a specific allegation of unfair trade practice on the part of the opposite parties and admittedly, the complainants are the consumers and there was deficiency of service. The District Forum based on the facts and the material available on record clearly recorded a finding that there was deficiency of service on the part of the opposite parties and the opposite parties were indulged in unfair trade practice. In view of the said concurrent findings of facts recorded by both the District Forum as well as the State Commission it cannot be said that there was no unfair trade practice or that there was no deficiency of service on the part of the opposite parties. Therefore, under the provisions of the Act it cannot be said that the petitioner is not liable to pay the amounts as directed by the District Forum merely because he was said to be resigned to the post of Director w.e.f. 06.03.1999. In the instant case, the so-called designation of the petitioner is only after
receiving the deposits from the complainants. In view of the specific allegations made against the opposite parties we are of the opinion that the District Forum has rightly concluded that there is deficiency of service on the part of the opposite parties. We do not see any infirmity legal or otherwise in the orders passed by the District Forum as well as the State Commission.
The Writ Petition is devoid of merit and is accordingly dismissed. No order as to costs.
____________________ V.ESWARAIAH,J ________________________ SANJAY KUMAR,J ..... REGISTRAR
Dated: 18.04.2009 Dsr // TRUE COPY //
SECTION OFFICER To 1 District Consumer Forum Visakhapatnam District. 2 A.P. State Consumer Disputes Redressal Commission Khairatabad, Hyderabad.
3 2 CD copies
3 issues framed by the court
Whether a resigned director of a company is liable for deferred payment of deposits in a consumer dispute where the company was the actual recipient of funds.
Whether Section 27 of the Consumer Protection Act is unconstitutional and invalid.
Whether the District Forum's order directing repayment with interest was legally sustainable.
Colour shows how this judgement treated each authority
B.S. Dwarakanath vs. Govt. of A.P.Referred¶47
B.S.Dwarakanath vs. Government of A.P. (W.A.104/1979, dated 07.03.1978)
2 provisions across 2 enactments
Krishna Bhoopal
1 District Consumer Forum
A.P. State Consumer Disputes Redressal Commission
Sri P. Lakshmana Rao
Smt. P. Bhagya Lakshmi
M/s. Leafin India Ltd.
V Eswaraiah
Sanjay Kumar
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
