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Judgment
Dr. Inder Jit Singh, Presiding Member
The present Revision Petition (RP) has been filed by the Petitioner against Respondent as detailed above, under section 58(i)(b) of Consumer Protection Act, 2019 against the order dated 19.01.2023 of the State Consumer Disputes Redressal Commission, Uttar Pradesh (hereinafter referred to as the State Commission), in First Appeal (FA) No. 62/2022 in which order dated 27.10.2021 of District Consumer Disputes Redressal Commission, Gautam Budh Nagar (hereinafter referred to as District Commission) in Consumer Complaint (CC) No. 148/2020 was challenged, inter alia praying for:-
(i) Setting aside the impugned order dated 19.01.2023 passed by the State Commission in FA/62/2022 and order dated 27.10.2021 passed by the District Commission in Complaint No. 148/2020.
(ii) Direction to the Respondent to pay Rs.58,20,606/- as per details and proof submitted with District Commission with interest @18% p.a. on the total amount of Rs.57,70,606/- from the date of termination of agreement till the date of payment.
(iii) Considering and granting additional Revenue share, not mentioned in complaint but mentioned in detail with documentary proof in Rejoinder/Arguments (proof given in pages 128 and 129) submitted to District Commission, of Rs.6,29,600/-.
(iv) Considering and granting additional legal expenses of Rs.4,36,130/- committed/incurred over and above Rs.50,000/- mentioned in complaint.
While the Revision Petitioner(s) (hereinafter also referred to as Complainant) was Appellant before the State Commission and Complainant before the District Commission and the Respondent (hereinafter also referred to as OP) was Respondent in the said FA/62/2022 before the State Commission and OP before the District Commission in CC No. 148/2020. Notice was issued to the Respondent on 23.08.2023. Petitioner filed his Written Arguments/Synopsis on 04.12.2024.
Brief facts of the case, as emerged from the RP, Order of the State Commission, Order of the District Commission and other case records are that:
The Respondent approached the Revisionist and proposed to open their Brand Office at premise owned by the Petitioner. In the presentation as well as during discussions, the Respondent promised handsome payouts, guaranteed income as share revenue generated by providing services of the highly skilled sales force (minimum 3) along with manager deputed to the Branch. Agreement dated 17.02.2019 was signed and at the time of signing the Agreement, the Petitioner was unemployed, had no means of earning livelihood and had expressed the same during discussions and also mentioned in the Expression of Interest (EOI) form of the Respondent. The Petitioner for Self-Employment and earning livelihood, paid agreed amount of all-inclusive Rs.10,00,000/- as Association Fee by cheque favouring Respondent to open and operate their Branch Office from P3/21, Tower 8, Silver City, Sector 93, Noida (premises owned by Revisionist) by deputing and providing services of minimum 3 trained sales personnel & manager on payroll of Respondent. Amount was credited to bank account of Respondent and debited from Revisionist's bank account on 03.01.2019. The Respondent, vide e-mail dated 14.01.2019 sent the draft of the agreement titled as "BRANCH AGREEMENT" to the Petitioner. The Petitioner on the same day vide e-mail, pointed out certain objections, suggestions and asked for clarifications and modifications in the said agreement. Later, the Respondent advised and forced Revisionist citing their Policy of No Refund to take an expensive premises on rent at 515, 5th Floor, Chokhani Square, P Block, Pocket A, Sector 18, Noida with 5 work stations, meeting room, washroom and common area for Branch Office in most expensive sector of Noida. That the Respondent did not take any action on the objections/suggestions provided by the Revisionist vide email dated 14.01.2019. Further the Petitioner was forced to sign on the dotted line of the unmodified and totally one-sided agreement on 17.02.2019 as the Respondent referred to their "The Policy of No Refund" if agreement is not signed, thereby resorted to Unfair Trade Practice. On multiple follow ups for deploying trained staff, manager and paying revenue share as per discussions & presentation on 28.12.2018 for Branch Association, the Respondent modified the terms vide agreement dated 02.07.2019 titled as "First Addendum Agreement to the Branch Agreement" and promised to make major payment upfront, balance on quarterly reconciliation and deploy required staff and manager immediately. The Petitioner agreed to the changes in payout disbursal and the same was confirmed by signing of The First Addendum to the Branch Agreement dated 02.07.2019. Despite rigorous follow up over phone, email and whatsapp chat, Respondent did neither depute and provided services of the required sales personnel and manager nor gave the revenue share as per First Addendum to the Branch Agreement of 02.07.2019. Instead of meeting with the commitments, the Respondent transferred the only employee deployed by them at the Branch Office of the Petitioner, to the Head Office w.e.f. 20.11.2019 without even informing the Petitioner. The Respondent vide notice dated 21.11.2019 terminated the said branch agreement by mentioning fictitious, deceitful, imaginary, flimsy and unsubstantiated reasons without verifying with their own sole employee at Branch & the Petitioner and without settling the accounts with the Revisionist. Hence, the Petitioner filed complaint before the District Commission.
Vide Order dated 27.10.2021, in the CC No. 148/2020 the District Commission has dismissed the complaint being not maintainable with the observation that the transaction between the complainant and opposite party was commercial in nature and complainant being franchises of the opposite party is apparently not a consumer within the meaning of section 2(7) of Consumer Protection Act 2019.
Aggrieved by the said Order dated 27.10.2021 of District Commission, Petitioner appealed in State Commission and the State Commission vide order dated 19.01.2023 dismissed the appeal No. 62/2022 and confirmed the order passed by the District Commission.
Petitioner has challenged the said Order dated 19.01.2023 of the State Commission mainly on following grounds:
i. Both the Fora below have relied only on some sections of the Agreement dated 17.02.2019 overlooking complete facts and multiple documentary evidences on record. The fora below erred on the following counts a) the Agreement is Technically & Legally inoperative and ineffective b) the Branch Agreement was signed under duress, was totally one sided and is unconscionable. c) Respondent has clearly resorted to Unfair Trade Practice under the Consumer Protection Act d) Attempting to find definition of term Franchise under Finance Act, dictionary meaning of Franchise and understanding of term Franchise in India and then treating Branch Agreement as Franchise Agreement and making it basis for Judgment & Order is a grave error. These are totally different things e) The Respondents directly terminated the agreement without giving any opportunity to be heard (seeking any explanation, verifying facts from respondents sole employee allocated to Brach & Petitioner) and giving any opportunity to Revisionist to remove deficiency. This is clear violation of well-established Principle of Natural Justice, f) The Petitioner had taken the Branch Associate-ship with the sole purpose of self-employment to earn his livelihood g) The Expression of Interest (EOI) form sent to Respondents clearly mention the same, h) The State Commission erred in concluding that the Petitioner was using the brand name of the company. The sales and all allied activities of Brach Office were being done by the employee/s of as the Respondent deputed to Branch directly under Respondents supervision in their own name. The State Commission missed noting point-14 clearly stated in Evidence by way of Affidavit filed by Respondent. The statement under Affidavit gives name and start date of employees before start date of agreement, after termination of Agreement and consciously does not give exit date/transfer out date.
ii. The third last paragraph of Branch Agreement dated 17.02.2019 provides that AND WHEREAS notwithstanding the terms and conditions contained herein, the relation between the Company and the Branch Association/BA will be that of independent entity/ies and not as principle and agent. Hence, for any acts of omission or commission done by BA, Company shall not be held responsible in any manner whatsoever. In the agreement, the respondent has neither expressly nor impliedly said that the Petitioner is the owner of franchise of the company. The Fora below erroneously relied upon judgments mentioned in impugned order and opined that the Petitioner, being a Franchise, is not a consumer within the meaning of section 2(7) of the CP Act, 2019. The judgments mentioned in the District Commissions order have no relevance, particularly after the Respondent expressly provided in the agreement that relationship is NOT that of a principal and agent wherein the mentioned judgments particularly require the relationship between the parties to be that of principal and agent. The Fora below erred in conferring that the transaction between the parties was commercial in nature and that the complainant being a franchise of respondent party does not come under the meaning of consumer under section 2(7) as the agreement nowhere mentions the word Franchise Agreement.
Heard Petitioner, who appeared in person. Respondents were proceeded ex parte due to their absence despite notice. Contentions/pleas of the Petitioner, on various issues raised in the RP, Written Arguments, and Oral Arguments advanced during the hearing, are summed up below.
The petitioner contended that the Agreement itself is inoperative and ineffective, one sided and unconscionable. The Branch Agreement has been treated as Franchise Agreement by extrapolating, fetching definitions from outside the Agreement. Franchise Word/Terms is not used in Agreement, except the respondents name and what business they do. The State Commission and District Commission have relied upon Agreement dated 17.02.2019 and First Addendum dated 02.07.2019 while passing the order. The Respondent has not complied with the terms of the Agreement.
We have carefully gone through the orders of the State Commission, District Commission and other relevant records. The District Commission has dismissed the complaint of the Petitioner herein on the ground that complaint is not maintainable as the transaction between the complainant and opposite party was commercial in nature and complainant being franchise of the opposite party does not come in the definition of consumer as per the Consumer Protection Act 2019. The State Commission concurring with the findings of the District Commission, dismissed the Appeal filed by the Petitioner herein. Hence, there are concurrent findings of both the Fora below against the Petitioner herein. Both the Fora below have gone into details of various contentions of the parties and given well-reasoned orders. The State Commission has looked into the various clauses of the agreement signed between the parties and discussed at length various contentions of the Petitioner herein before concluding that complainant is a franchise and agreement entered into between the parties is a franchise agreement. Relying on various judgments of this Commission, the State Commission concluded that complainant cannot be defined as a Consumer within the definition of Consumer Protection Act, 2019, hence the Complaint is not maintainable under the Consumer Protection Act. The extract of relevant paras of the order of the District Commission is given below:
Opposite party has filed WS wherein allegations of the complaint has been denied except which are specifically admitted. Opposite Party has mentioned that the complainant is not a consumer within the meaning of consumer protection act 1986 as the nature of the transaction in dispute in the present complaint is purely commercial in nature and is not covered by the aforesaid act. This is admitted fact that the complainant through legally executed agreement known as "branch agreement" entered with O.P. company has availed services on commercial purposes, Branch agreement dated 17/02/2019 has arbitration clause to resolve all disputes thus the jurisdiction this commission is barred. All the amount paid by the complainant including licence fee branch model revenue or quarterly marketing fee is non refundable as per the Annexure A-I of branch agreement. As per the service agreement it is clear that the relations between the parties was not to offer service provider or that of service user but it was for partnership for sharing of revenue. The commission lacks territorial jurisdiction as only court in Delhi has exclusive jurisdiction to any dispute between the contracting parties. The complainant filed a false FIR against directors and officials of opposite party where the complainant has raised the similar issues which were purely in civil nature.
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Fact as narrated in complaint and WS goes to show that complainant and Opposite party entered in agreement called "branch agreement" dated 17/02/2019 for opening branch office at Gautam Buddh Nagar contracting parties agreed to do business at branch office at certain terms and conditions mention in the agreement. Contention of complainant is that he was looking at starting something for self employment and earning livelihood where as opposite party contended that the complainant is not a consumer within the meaning of consumer protection Act 1986 as the nature of transaction in dispute in the present complaint in purely commercial in nature. So it is an important question to be decided whether nature of transaction between parties are commercial in nature.
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Now we have to see whether the agreement is a franchise agreement. It has to be gathered from the terms of agreement. Ordinarily a grantor of franchise allows the franchise holder to use the name of the grantor and to sell the product of grantor in accordance with the agreement in the present case agreement was entered into to do business apposite parties at branch office and opposite party has to provide experienced sales staff and their supervising manager. Revenue generated with branch office had to be shared at predefined percentages. Terms and conditions of agreement invariably show that the agreement in fact was a franchise agreement. In proof P. Narayanakutty Vs Uptron India Ltd. 1(1996) CPJ 240 (NC) Hon'ble National Commission has held that "franchise holder cannot be held to have hired the service of the principal" Hon'ble High court of Bombay in case of General Manager Madras Telephones Vs R. Kannan 1 (1994) CPJ 14 held that "franchise holder in not a consumer and cannot be held to have hired the services of the principal.
In view of the above the transaction between in complainant and opposite party was commercial in nature and complainant being franchises of opposite party in apparently not a consumer within the meaning of section 2(7) of consumer protection Act 2019.
In this regard extract of relevant paras of order of State Commission is also reproduced below:-
In the Indian context as well as in universal definition, a 'franchise' is defined as a business owner who operates as a third party retail outlet or has right to sell or provide service on representatively basis in the name of another person i.e. franchisor. We find that all the attributes of a franchise agreement are definitely present in this case because in this case also, as per the agreement, the complainant is providing service to the clients representing itself in the trade name of opposite party/Company for which the complainant is paying the profit on the basis of percentage defined in the agreement. Therefore, there remains no doubt that the relationship between the complainant and the opposite party-company is that of a franchise and franchisor and the agreement, though written as 'Branch Agreement' is in fact a franchise agreement because it fulfils all the ingredients thereof.
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In view of the above discussion we are of the opinion that the agreement between the complainant and the opposite party is a franchise agreement and in light of the aforesaid judgments of Hon'ble National Commission we also conclude that the complainant cannot be defined as a 'Consumer' within the definition of Consumer Protection Act, 2019 and for this reason his complaint is not maintainable under the Consumer Protection Act. The learned District Consumer Commission has rightly dismissed the complaint holding that the complaint is not maintainable. We find no occasion or reason to interfere in the impugned judgment. The appeal is liable to be dismissed.
As was held by the Honble Supreme Court in Rubi Chandra Dutta Vs. United India Insurance Co. Ltd. [(2011) 11 SCC 269], the scope in a Revision Petition is limited. Such powers can be exercised only if there is some prima facie jurisdictional error appearing in the impugned order. In Sunil Kumar Maity Vs. State Bank of India & Ors. [AIR (2022) SC 577] held that the revisional jurisdiction of the National Commission under Section 21(b) of the said Act is extremely limited. It should be exercised only in case as contemplated within the parameters specified in the said provision, namely when it appears to the National Commission that the State Commission had exercised a jurisdiction not vested in it by law, or had failed to exercise jurisdiction so vested, or had acted in the exercise of its jurisdiction illegally or with material irregularity.
The Honble Supreme Court in Rajiv Shukla vs Gold Rush Sales And Services Ltd. Civil Appeal No. 5928 of 2022, decided on 8 September, 2022, held that:-
13. As per Section 21(b) the National Commission shall have jurisdiction to call for the records and pass appropriate orders in any consumer dispute which is pending before or has been decided by any State Commission where it appears to the National Commission that such State Commission has exercised its jurisdiction not vested in it by law, or has failed to exercise a jurisdiction so vested, or has acted in the exercise of its jurisdiction illegally or with material irregularity. Thus, the powers of the National Commission are very limited. Only in a case where it is found that the State Commission has exercised its jurisdiction not vested in it by law, or has failed to exercise the jurisdiction so vested illegally or with material irregularity, the National Commission would be justified in exercising the revisional jurisdiction.
In exercising of revisional jurisdiction the National Commission has no jurisdiction to interfere with the concurrent findings recorded by the District Forum and the State Commission which are on appreciation of evidence on record. Therefore, while passing the impugned judgment and order the National Commission has acted beyond the scope and ambit of the revisional jurisdiction conferred under Section 21(b) of the Consumer Protection Act.
In view of the foregoing, we find no illegality or material irregularity or jurisdictional error in the order of the State Commission, hence, the same is upheld. Accordingly, the Revision Petition is dismissed.
The pending IAs in the case, if any, also stand disposed off.