Kandhari Rubber Ltd. vs HIMACHAL ROAD TRANSPORT CORPORATION

APPELLANT which was the opposite party before the State Commission has filed this Appeal against the judgment and order dated 13.5.2004 passed by the State Consumer Disputes Redressal Commission, Himachal Pradesh (in short, ''the State Commission'') in Complaint No. 01/02 whereby the State Commission allowing the complaint has directed the Appellant to pay/refund an amount of Rs. 20,00,000 as compensation to the Respondent. Facts:

Briefly stated the facts of the case are that the Respondent, Himachal Road Transport Corporation being a statutory Corporation created under the Road Transport Corporation Act, 1950 is plying its buses throughout the State of Himachal Pradesh as also other States for the welfare of the general public. Respondent Corporation placed two orders of 3000 each for supply of 6000 tubes through its Deputy Division Manager (Technical) on the Appellant. Appellant supplied 4510 rubber tubes for which an amount of Rs. 22,60,500 was paid to it. Respondent Corporation noticed the following defects in the tubes supplied by the Appellant:

(i) The tubes were somewhere thick and somewhere thin after inflation.

(ii) There was leakage on the joint.

(iii) Some tubes were in punctured condition and the inflation was not uniform.

(iv) There was separation of tubes nozzles in some tyres.

(v) After coverage of few kms. The tubes were getting burst.

On being informed, Appellant sent its representative for inspecting the tubes. The representative inspected only two tubes and reported that there was no error. Respondent sent two defective tubes to the Central Institute of Road Transport for testing on 28.5.2001. A report was received from the said Institute informing the Respondent that the tubes had failed in parameters, such as rubber hydrocarbon contents, Elongation at Break, Strength of splice, tension test, etc. Complainant, being aggrieved, filed the complaint before the State Commission claiming a compensation of Rs. 20,00,000.

APPELLANT , on being served, entered appearance and filed its short reply taking the preliminary objection that the State Commission, Shimla has no territorial jurisdiction to entertain the complaint as the orders for supply of tubes were placed by the Respondent at Udaipur and the tubes were also supplied from the Udaipur. On merits, it was pleaded that the Complainant was not a ''consumer'' as the goods were purchased for commercial purposes. After filing of the short reply, no one appeared on behalf of the Appellant on the subsequent dates and they were proceeded ex parte. State Commission, after considering the material available on record and going through the evidence led by the parties, came to the conclusion that since the goods were supplied at Shimla, part cause of action had arisen in Shimla and as such it has the territorial jurisdiction to deal with the complaint. State Commission further held that the Appellant has failed to lead any evidence to show that the goods were purchased for commercial purpose.

SINCE the averments made in the complaint and the evidence led by the Respondent remained unrebutted and uncontroverted, State Commission accepting the averments made in the complaint duly supported by the affidavit, to be correct allowed the complaint directing the Appellant to pay a sum of Rs. 20,00,000 as compensation to the Respondent. State Commission observed thus:

Coming now to the merits of the case, the allegations in the complaint remained unrebutted and the same having been supported by an affidavit of a responsible official of the Complainant Corporation, have to be taken as true and correct. The same are also supported by Annexures C -1 and C -2 on the record thereby disclosing the supply of defective rubber tubes from the opposite party to the complainant. This, in turn, makes out a case of deficiency in service on the part of the opposite party.

Appellant, being aggrieved, has filed the present Appeal.

We have heard the learned Counsel for the parties at length.

LEARNED Counsel appearing for the Appellant raised two -fold arguments. Firstly, that the complaint could not proceed against the Appellant as the Appellant was a sick industrial unit and its reference to the Board of Industrial and Financial Reconstruction (in short the ''BIFR'') under Section 15(1) of The Sick Industrial Companies (Special Provision) Act, 1985 had already been registered as case No. 30/2001 on 15.1.2002; that in view of the bar imposed by Section 22 of the said Act, the complaint could not proceed against the Appellant and in any case no execution proceedings for recovery of money could be proceeded against the Appellant without taking the consent from BIFR. In support of his contention, learned Counsel for the Appellant has placed reliance on the judgment of the Hon''ble Supreme Court in the case of M.D. Bhoruka Textiles Ltd. v. Kashmiri Rice Industries, : II (2009) BC 687 (SC). Secondly, it was submitted that the State Commission has committed an error in holding that the Respondent fell within the definition of ''consumer'' given in Section 2(d) of the Consumer Protection Act, 1986 (in short, ''the Act''). That the expression ''Consumer'' given in Section 2(1)(d) of the Act excludes from its preview "a person who obtains such goods for resale or for any commercial purpose". That admittedly, the Respondent Transport Corporation was dealing in transport business on a very large scale generating huge revenues and therefore, would not fall within the meaning of ''consumer'' as defined in the Act. As against this, learned Counsel appearing for the Respondent submits that the Appellant Company has not been declared as a sick industrial unit. The Bench of BIFR has appointed IFCI as O.A. under Section 16(2) of the Act for conducting an inquiry into the sickness of the Appellant Company and other related aspects by getting a Special Investigative Audit (SIA) of the Appellant''s accounts done for the last 3 years (1997 -98 to 1999 -2000) through an independent and reputed firms of Chartered Accountants. He further contends that the tubes were not purchased for ''commercial purposes'' by the Respondent Corporation as alleged by the Appellant. The tubes were purchased to be used in the buses being plied by it for the general public. That if the tubes had been purchased for re -sale to a third party for commercial purpose only then the Respondent Corporation could be held not a ''consumer'' as defined in the Act. The facts of the case are not disputed before us.

WE find substance in both the submissions made by the learned Counsel for the Appellant. Appellant Company being a Sick Industrial Unit had made a reference under Section 15(1) of SIC (SP) Act, 1985 to the BIFR for declaring it as a Sick Industry Unit, The said application was admitted and registered as case No. 30/02 on 15.1.2002. Section 22 of the said Act provides for suspension of the proceedings before any other Court/Forum. Complaint was filed by the Respondent on 26.12.2001. Reference to the BIFR was made by the Appellant on 26.11.2001 before filing of the complaint by the Respondent. Application filed by the Appellant was admitted by the BIFR and registered on 15.1.2002. Since the application filed by the Appellant had been registered by the BIFR, the State Commission lacked inherent jurisdiction to entertain the complaint in view of bar imposed by Section 22 of the SIC (SP) Act, 1985. The Hon''ble Supreme Court in Bhoruka''s case (supra), has held that the provisions of SIC (SP) Act, 1985 in particular Chapter III thereof is a complete Code and the Civil Court''s jurisdiction was ousted in terms of the provisions of Section 22 of the Act and any judgment rendered by the Civil Court after the initiation of the proceedings under the said Act would be coram non judis. That it was a well settled principle of law that a judgment and decree passed by a Court or Tribunal lacking inherent jurisdiction would be a nullity. Relevant observations of the Supreme Court reads as under:

Before adverting to the rival contentions of the parties, we may notice the following admitted facts. Supply of husk during the period 17.9.2001 and 28.11.2001, the agreement wherefor was entered into on or about 6.9.2001. Reference to BIFR in terms of Section 16 of the Act was made on 27.12.2001. The said reference was registered by the BIFR on 20.3.2002. Respondent filed the suit on 17.12.2002. The learned Trial Judge, therefore, committed a manifest error in opining that the transaction in question was subsequent to the reference. It is also apparent from the record that respondent was aware of the fact that the appellant had made reference to the BIFR in terms of the provisions of Act.

THE Act was enacted to make, in the public interest, special provisions with a view to securing the timely detection of sick and potentially sick companies owning industrial undertakings, the speedy determination by a Board of experts of the preventive, ameliorative, remedial and other measures which need to be taken with respect to such companies and the expeditious enforcement of the measures so determined and for matters connected therewith or incidental thereto. Indisputably, thus, appellant is an industrial undertaking. Chapter III of the Act provides for reference, inquiries and schemes. Section 15 of the Act provides for reference to the Board in terms whereof the Board of Directors of the Company is required to make a reference within 60 days from the date of the duly audited accounts of the company for the financial year as at the end of which the Company has become a sick industrial company. Such reference is made for determination of the measures which may be adopted with respect to the company. The proviso appended thereto, however, entitles the Board of Directors to make a reference within 60 days from the date of formation of the opinion that the Company had become a sick industrial company before the audited accounts of the financial year in question are finalized.

Section 16 of the Act empowers the Board to make such inquiry as it may deem fit for determining whether any Industrial Company has become a sick industrial company, inter alia, upon receipt of a reference with respect to such company under Section 15.

Sub -section (1) of Section 22 of the Act reads as under:

Suspension of legal proceedings, contracts, etc. - -(1) Where in respect of an industrial company, an inquiry under Section 16 is pending or any scheme referred to under Section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under Section 25 relating to an industrial company is pending, then, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof and no suit for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or advance granted to the industrial company shall lie or be proceeded with further, except with the consent of the Board or, as the case may be, the Appellate Authority.

A plain reading of the aforementioned provision would clearly go to show that a suit is barred when an inquiry under Section 16 is pending. It is also not in dispute that prior to institution of the suit, respondent did not obtain consent of the Board.

The provisions of the Act and, in particular, Chapter III thereof, provides for a complete Code. The Board has a wide power in terms of the provisions of the Act, although it is not a Court. Sub -section (4) of Section 20 as also Section 32 of the Act provides for non obstante clauses. It envisages speedy disposal of the enquiry and preferably within the time framed provided for thereafter. Section 17 empowers the Court to make suitable orders on the completion of inquiry. Preparation and sanction of the scheme is also contemplated under the Act.

SECTION 22 of the Act must be interpreted giving a plain meaning to its contents. An inquiry in terms of Section 16 of the Act by the Board is permissible upon receipt of a reference. Thus, reference having been made on 27.12.2001 and the suit having been filed on 17.12.2002, the receipt of a reference must be held to be the starting period for proceeding with the inquiry. The effect of the provisions of the Act has been considered by a three -Judge Bench decision of this Court in Tata Motors Ltd. v. Pharmaceutical Products of India Ltd. and Another, : (2008) 7 SCC 619, wherein it, in no uncertain terms, held that SICA is a special statute and, thus, overrides other acts like Companies Act, 1956, stating: 31. SICA furthermore was enacted to secure the principles specified in Article 39 of the Constitution of India. It seeks to give effect to the larger public interest. It should be given primacy because of its higher public purpose. Section 26 of SICA bars the jurisdiction of the Civil Courts.

What scheme should be prepared by the operating agency for revival and rehabilitation of the sick industrial company is within the domain of BIFR. Section 26 not only covers orders passed under SICA but also any matter which BIFR is empowered to determine.

The jurisdiction of the Civil Court is, thus, barred in respect of any matter for which the Appellate Authority or the Board is empowered. The High Court may not be a Civil Court but its jurisdiction in a case of this nature is limited.

If the civil Court''s jurisdiction was ousted in terms of the provisions of Section 22 of the Act, any judgment rendered by it would be coram non judis. It is a well settled principle of law that a judgment and decree passed by a Court or Tribunal lacking inherent jurisdiction would be a nullity. In Kiran Singh and Others v. Chaman Paswan and Others, : [1955] 1 SCR 117, this Court held:

...It is fundamental principle well -established that a decree passed by a Court without jurisdiction is a nullity and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject -matter of the action, strikes at the very authority of the Court to pass any decree, and such a defect cannot be cured even by consent of parties.

Since in the present case, reference to the BIFR had been made by the Appellant before filing of complaint by the Respondent Corporation, respectfully following the law laid down by the Supreme Court, it is held that the State Commission lacked inherent jurisdiction to entertain the complaint. The complaint filed by the Respondent, under these circumstances, was not maintainable.

State Commission has held that the question as to whether the goods were purchased for a commercial purpose was a question of facts to be decided in the facts and circumstances of each case. Since the respondent did not lead any evidence to show that the Respondent had purchased the goods for commercial purpose, the State Commission held that the goods purchased by the Respondent were not for a commercial purpose. There is no dispute about the proposition, but in the facts of the present case, we disagree with the view taken by the State Commission that the Respondent had not purchased the goods for commercial purpose. Respondent Corporation in its complaint has admitted that it has suffered a loss of more than one crore due to supply of defective tubes which shows that the Respondent is carrying the transport business for commercial purposes. Paragraphs 6 and 7 of the complaint read as under:

That due to the above defects the complainant Corporation is not in a position to give best services to the public at large. There is increase in breakdown of buses. The Corporation has to spend a huge amount on outside repair and image of the Complainant has lowered in the eyes of public at large.

That the Opposite Party has violated the terms and conditions of the agreement and also in not taking any steps towards the replacement of these defective tubes as a result of which the Complainant Corporation has suffered a loss of more than one crore including mental agony and harassment but for the purpose of jurisdiction the complainant restricted its claim upto Rs. 20 lakh only.

A perusal of these paragraphs clearly shows that the Respondent had purchased the tubes for a commercial purpose. Hon''ble Supreme Court in Laxmi Engineering Works v. P.S.G. Industrial Institute, : II (1995) CPJ 1 (SC) : 1995 (3) SCC 583, has held 17 years back that if a person buys goods for re -sale or commercial purposes, he cannot be considered to be a ''consumer'' falling within the meaning of Section 2(1)(d) of the Act. The same -view has been reiterated by the Hon''ble Supreme Court in the case of Birla Technologies Ltd. v. Neutral Glass and Allied Industries Ltd., : IX (2010) SLT 396 : 1 (2011) CPJ 1 (SC) : (2011) 1 SCC 525, employment. In view of this, it is to be held that the complaint filed by the Respondent was not maintainable.

FOR the reasons stated above, the Appeal is accepted, impugned order is set aside and accordingly the complaint is dismissed without any order as to costs. Since, we are dismissing the complaint on the ground that it was not maintainable, liberty is reserved to the Respondent to seek its remedy before the appropriate Forum in accordance with the law. It would be open to it to file an application before the Court under Section 4(A) of the Limitation Act for excluding the period spent before the Consumer Fora for the purpose of computation of limitation in terms of the observations made by the Apex Court in Laxmi Engineering''s case (supra). Registry is directed to refund the sum of Rs. 35,000 deposited by the Appellant as statutory deposit along with accrued interest.