20TH CENTURY FINANCE CORPORATION LTD. vs CIVIL AND CONSUMER WELFARE AND GENERAL SERVICE SOCIETY

THIS is an appeal against the order dated 25th August, 1992 passed by the State Consumer Disputes Redressal Commission, Tamil Nadu in the complaint filed by the present respondents. The brief facts according to the complaint leading to this appeal are that the present appellant which was Opposite Party in the complaint is a Gnancial institution providing financial for purchase of consumer durable by individuals or group of persons or employees of Companies and others. Respondent No. 2 M/s. Aruna & Co. (for short the Company) was Complainant No. 2 in the complaint. The Company approached the Appellant to provide finance as the former had entered into an contract with the employees of Ashok Leyland Company for the sale of television sets. The Appellant had entered into a contract with the Ashok Leyland Company to provide the finance. The Appellant acceded to this request and agreed to provide the finance stipulating that the Company must arrange to deposit to the extent of 20% of the total finance outlay. The deposit was to carry interest at the rate of 14% per annum. According to the complainants it was agreed that the deposits shall be for a period of five years and interest shall be paid to the company annually. Accordingly the company deposited with the Opposite Party a sum of Rs. 15,02,701/- on various dates. The appellant failed to pay interest on these deposits for the first one year. The amount of interest came to Rs. 2,10,378.14. The complainants in their complaint claimed the said amount as well as damages in the sum of Rs. 27,310.89.

THE complaint was contested by the appellant. It contended that the complaint was not maintainable under the Act and the remedy of the Company-complainant was to file a suit in the Civil Court having jurisdiction. On merits it was pleaded that the normal method of financing is for the dealer of consumer durables to make an arrangement with the Company (whose employees have to be provided consumer durables) for financing whereby the said company agrees to deduct monthly installments from the pay packets of its employees and pay to the dealer or its financier. If in the ordinary course a dealer was to supply the goods on installment basis, the monthly deductions are directly paid to the dealer. In the present case the Aruna & Company did not have the financial where withal to promote the installment scheme and therefore, they approached the Appellant to finance the entire deal which was originally estimated to be in the order of Rs. 1,00 crore. While Aruna & Co. was canvassing with Ashok Leyland Ltd. for this transaction, there were other dealers who were also approaching Ashok Leylands Ltd. Aruna & Co. desired that the financial package to be made available to the employees should be as competitive as that of the other dealers. THE Appellant works on certain scenario whereby they expect certain returns/yields on their investment. If the Appellant was to finance the Ashok Leyland deal, as per the package of Aruna & Co., it was necessary for Aruna & Co. to make good the returns/yields to the Appellant to fall within the Appellant''s scenario. Aruna & Co. who were keen on Completing the transaction, offered to compensate the appellant for the difference in returns/yields. Aruna & Co. and the Appellant worked out the deal whereby if the said company made a security deposit of 20% of the total financial deal to the Opposite Party for a period of five years at the simple rate of interest of 14% per annum, payable at the end of the tenure together with principal, the yield from the security deposit for the period of five years would compensate the appellant party for the loss of yield in the whole package of Ashok Leyland. THE security deposits are in the nature of performance guarantee offered by Aruna & Co. towards supply of consumer durables to the employees of Ashok Leyland. In these circumstances Aruna & Co. made a security deposit of 20% of total financial outlay with Appellant against which the appellant had to pay for the total financial package and against this payment goods were to be released by Aruna & Co. to the employees of Ashok Leyland. In view of the fact the total financing was being done by the Appellant an agreement, was made with Ashok Leyland Ltd. whereby the deducted monthly installments were being remitted by Ashok Leyland directly to the Appellant. THE total financial package given by the Appellant to Ashok Leyland Ltd. was Rs. 89.36 laks and 20% of which works out approximately to Rs. 17.93 lakhs which was placed by Aruna & Co. as security deposit. THE deposit was for irrevocable period of five years even though the transaction was to be over in 3 years. THE purpose of this security deposit was to make good the loss of the appellant. According to the Appellant interest was not to be paid at end of each year. The State Commission held that the security deposit made by Aruna & Co. carried simple interest at 14% and was payable annually. Accordingly it awarded Rs. 2,15,378.14 (which amount included a sum of Rs. 5,000/- which was awarded as damages to the complainant).

Feeling aggrieved against that order the Appellant has come before this Commission by way of this appeal.

WE have heard the parties and have gone through the records. WE are of the opinion that in the present case the dispute between the parties does not fall under the Act. Though the Appellant is a financier but the deposit made by Aruna & Co. was as security, the Appellant did not invite deposit from Aruna & Co. but it was made by the company only by way of security as the Appellant was to finance for the consumer durables which were to be supplied by Aruna & Co. to the employees of Ashok Leyland. Annexure ''B'' which is a letter written by Aruna & Co. to the appellant makes it clear that the Company had deposited the amount as security. The Hire Purchase agreement was to be entered into between the Appellant and the employees of Ashok Leyland as is clear from the letter written by Ashok Leyland to the Appellant. Thus there is no question of contract of hiring of services between the Appellant and Aruna & Co.

HENCE we hold that the present complaint did not raise a consumer dispute and therefore the complainant could not have filed the complaint before the State Commission. Accordingly we accept the present appeal and set aside the order of the State Commission and dismiss the complaint. The appellant will be entitled o costs of the present proceedings which we assess at Rs. 2,000/-. Appeal accepted.