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Judgment
Deepa Sharma, J
Vide this common order, I propose to dispose off the Revision Petition No. 3349 of 2017 and 39 of 2018 filed by the petitioner, who was the opposite party in a complaint filed by the respondent before the District Forum, because similar question of law and facts are involved in both the revision petitions.
Revision Petition No. 3349 of 2017 has been filed by the petitioner against the order of the Karnataka State Consumer Disputes Redressal Commission (in short, the State Commission) dated 14.09.2017 passed in Appeal No.1264/2017 filed by the petitioner against the order of the District Forum in Complaint No.20 of 2017 dated 31.03.2017 filed by the respondent.
Revision Petition No.39 of 2018 has been filed by the petitioner against the order of the Karnataka State Consumer Disputes Redressal Commission ( in short, the State Commission) dated 26.10.2017 passed in Appeal No.299/2017 filed by the petitioner against the order of the District Forum in Complaint No.762 of 2016 dated 22.12.2016 filed by the respondent.
The admitted facts of this case are that respondent is a senior citizen and invested his retiral benefits amounting to Rs.2,50,000/- in FDR No.219302 dated 29.11.2012 for 36 months, whose maturity date was 28.11.2015 and another fixed deposit of Rs.1,00,000/- vide FDR No.219659 dated 30.01.2013 for 36 months and whose maturity date was 29.01.2015 and thus he had deposited a total sum of Rs.3,50,000/- with the petitioner.
In the written version filed by the opposite party in Consumer Complaint No.762 of 2016, the petitioner had admitted the said facts. However, no affidavit evidence was filed by the opposite party.
In Revision Petition No. 3349 of 2017, complaint no. 20 of 2017 was filed by the respondent for refund of principal amount of Rs.3,90,100/-, which he had deposited in the form of Fixed Deposit between the period 15.10.2011 to 23.05.2012 having maturity date between the period 15.10.2014 to 22.05.2015. His claim was that despite the maturity of his deposits, the maturity deposit was not refunded and even the petitioner had stopped paying monthly hardship since June 2016. In this case, written version was filed by the petitioner and no evidence was led.
In complaint No.20/17, the District Forum found deficiency of service on the part of the petitioner and directed the petitioner to refund the principal amount and interest accrued on it @ 12.5% per annum from 01.10.2013, till the date of maturity and on principal deposited amount, an interest @ 18% per annum till its realization, along with compensation of Rs.25,000/- and litigation costs of Rs.3,000/- was also granted.
Vide order dated 22.12.2016 in Consumer Complaint No.762 of 2016, the District Forum, along with Rs.3000/- as litigation cost, awarded 12.5% interest on deposits from the date of deposit(s), till the date of maturity and thereafter 18% interest on deposit, till its realisation. The District Forum also directed the petitioner to pay compensation of Rs.25,000/- to the respondent.
The petitioner preferred an appeal against both the orders of the District Forum. In Complaint no. 762 of 2016, Appeal No. 299 of 2017 was filed against the order of the District Forum and vide the impugned order, appeal of the petitioner was dismissed and order of the District forum dated 22.12.2016 was confirmed. While dismissing the appeal, cost of Rs.2500/- was also imposed upon the petitioner.
Appeal no. 1264 of 2017 was filed against the order of the District Forum dated 31.03.2017 in Consumer Complaint No. 20 of 2017 and the appeal of the petitioner was dismissed with cost of Rs.2500/-.
Aggrieved by these two impugned orders, separate revision petitions have been filed. The grounds of challenge in both the revision petitions are common. The contention of the petitioner is that he had filed an application dated 10.07.2013 bearing CP No. 27.01.2013 under Section 58AA of Companies Act, 1956 for extension of time for repayment to the depositors and for the re-scheduling of payments to the depositors, including that of the respondent, and, on his application, order dated 30.09.213 was passed by the Company Law Board. It is submitted that payment has already been released to the respondent pursuant to the order of the Company Law Board. It is submitted that this order of the Company Law Board has not been challenged and thus has attained finality and also acts as resjudicata and the respondent could not have approached this Forum. It is further contended that this order has been passed by Company Law Board after giving public notice and inviting objections. It was only after considering the objections and in exercise of powers conferred by Section 58AA read with Section 5 8A (9) of the Companies Act, 1956 that the said order was passed by Company Law Board. It is submitted that petitioners are adhering to the schedule given in the said order of the Company Law Board because they are aware that in case of default, the have to bear huge penalties.
It is also contended that deposits made by the respondent was in the form of unsecured loan and does not fall under the definition of goods and services as defined in Section 2 (i) and Section 2 (o) of the Consumer Protection Act ( in short, the Act) and hence, the respondent is not a consumer under section 2 (d) of the Act. It is submitted that findings in the case of Mahesh Chandra Sharma Vs. Modern Threads (India) Ltd. in Revision Petition No. 2355 of 2006 decided on 10.10.2007 is distinguishable from the present case. It is submitted that in the present case the respondent was a party before the Company Law Board as notice was issued to him by way of a public notice. It is submitted that in terms of order of the Company Law Board which has given five years for repayment of the FD amount from the date of maturity, the amount has not yet become payable. On these grounds, it is contended that impugned order is liable to be set aside. The arguments have been addressed by counsel for the petitioner on the same lines.
The respondent has appeared in person and has also addressed the arguments. He has relied on the case of Llyod Finance Ltd. Vs. Ms. Napeena Singh, 1 (2006) CPJ 163 (NC) and has argued that powers of the Consumer Fora are in addition to the powers conferred under the Companies Act and the Companies Act does not take away the jurisdiction of this Fora. It is further argued that the amount deposited by way of Fixed Deposit is not a loan as has been clearly held by this Commission in the case of Mahesh Chandra Sharma (supra). It is argued that the petitioner at the time when they made the FDs, promised to return the maturity amount on the maturity of the FDs and since they have failed to do so, they have failed in their service. Hence, the respondent is a consumer under the Consumer Protection Act.
I have heard the arguments and given my thoughtful consideration. The argument of counsel for the petitioner that respondent is not a consumer within the meaning of Section 2 (1) (d) of the Act is of no consequence. The nature of the transaction between the petitioner and the respondent shows that the petitioner had provided the services of creating fixed deposits of the money deposited by the respondent with the promise to return the maturity amount on its maturity, in which they have failed and, therefore, the argument on this count is of no consequence. Al-though as per the petitioner, they are not the banking institution but they certainly have provided facilities in connection with banking and financial transaction and that is why they under a scheme accepted the deposits from the various depositors. This argument thus has no merit.
The next argument of the learned counsel for the petitioner is that the nature of the fixed deposit itself shows that it was a loan given to the petitioner by the respondent and hence the respondent falls in the category of unsecured creditor and is solely governed by the provisions of Companies Act. This argument of counsel for the petitioner that fixed deposit is a loan has no merit in view of the clear findings of this Commission in Mahesh Chandra Sharma (supra), wherein this Commission has observed as under:
"A deposit by the depositors is not a sum lent to the Company but is a sum deposited with the company to be held in trust by the company till the time of maturity. It is not a loan in the strict sense of the terms."
The next argument of the learned counsel for the petitioner is that the order of the Company Law Board passed on an application under section 58AA, in exercise of the powers vested in Company Law Board, under the Companies Act, 1956 are binding and, therefore, the complaint ought to have been dismissed on this count alone as accepted before the amendment of the Companies Act, 2013.
The relevant provisions of Section 58A and 58AA of the Companies Act, 1956 are reproduced, as under:
58A. Deposits not to be invited without issuing an advertisement:
(1) The Central Government may, in consultation with the Reserve Bank of India, prescribe the limits up to which, the manner in which and the conditions subject to which deposits may be invited or accepted by a company either from the public or from its members.
(2) No company shall invite, or allow any other person to invite or cause to be invited on its behalf, any deposit unless-
(a) such deposit is invited or is caused to be invited in accordance with the rules made under sub- section (1), and
(b) an advertisement, including therein a statement showing the financial position of the company, has been issued by the company in such form and in such manner as may be prescribed.
(3) (a) Every deposit accepted by a company at any time before the commencement of the Companies (Amendment) Act, 1974 , (41 of 1974 ). in accordance with the directions made by the Reserve Bank of India under Chapter IIIB of the Reserve Bank of India Act, 1934 , (2 of 1934 ) shall, unless renewed in accordance with clause (b), be repaid in accordance with the 2 terms and conditions of such deposit.]
(b) No deposit referred to in clause (a) shall be renewed by the company after the expiry of the term thereof unless the deposit is such that it could have been accepted if the rules made under sub- section (1) were in force at the time when the deposit was initially accepted by the company.
(c) Where, before the commencement of the Companies (Amendment) Act, 1974 (41 of 1974 ), any deposit was received by a company in con- travention any direction made under Chapter IIIB of the Reserve Bank of India Act, 1934 (2 of 1934 ), repayment of such deposit shall be made in full on or before the 1st day of April, 1975 and such repayment shall be without prejudice to any action that may be taken under the Reserve bank of India Act, 1934 for the acceptance of such deposit in contravention of such direction.
(3A) Every deposit accepted by a company after the commencement of the Companies (Amendment) Act, 1988 , shall, unless renewed in accordance with the rules made under subsection (1), be repaid in accordance with the terms and conditions of such deposit.]
(4) Where any deposit is accepted by a company after the com- mencement of the Companies (Amendment) Act, 1974 (41 of 1974 ), in contravention of the rules made under sub- section (1), repayment of such deposit shall be made by the company within thirty days from the date of acceptance of such deposit or within such further time, not exceed thirty days, as the Central Government may, on sufficient cause being shown by the company, allow.
(5) Where a company omits or fails to make repayment of a deposit in accordance with the provisions of clause (c) of sub- section (3), or in the case of a deposit referred to in sub- section (4), within the time specified in that sub- section,-
(a) the company shall be punishable with fine which shall not be less than twice the amount in relation to which the repayment of the deposit has not been made, and out of the fine, if realised, an amount equal to the amount in relation to which the repayment of deposit has not been made, shall be paid by the Court, trying the offence, to the person to whom repayment of the deposit was to be made, and on such payment, the liability of the company to make repayment of the deposit shall, to the extent of the amount paid by the Court, stand discharged;
(b) every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to five years and shall also be liable to fine.
(6) Where a company accepts or invites, or allows or causes any other person to accept or invite on its behalf, any deposit in excess of the limits prescribed under sub- section (1) or in contravention of the manner or condition prescribed under that sub- section or in contravention of the provisions of subsection (2), as the case may be,-
(a) the company shall be punishable,-
(i) where such contravention relates to the acceptance of any deposit, with fine which shall not be less than an amount equal to the amount of the deposit so accepted,
(ii) where such contravention relates to the invitation of any deposit, with fine which may extend to one lakh rupees but shall not be less than five thousand rupees;
(b) every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to five years and shall also be liable to fine.
(7) (a) Nothing contained in this section shall apply to,--
(i) a banking company, or
(ii) such other company as the Central Government may, after consultation with the Reserve Bank of India, specify in this behalf.
(b) Except the provisions relating to advertisement contained in clause (b) of sub- section (2), nothing in this section shall apply to such classes of financial companies as the Central Government may after consultation with the Reserve Bank of India, specify in this behalf.
(8) The Central Government may, if it considers it necessary for avoiding any hardship or for any other just and sufficient reason by order issued either prospectively or retrospectively from a date not earlier than the commencement of the Companies (Amendment) Act, 1974 (41 of 1974 ), grant extension of time to a company or class of companies to comply with, or exempt any company or class of companies from, all or any of the provisions of this section either generally or for any specified period subject to such conditions as may be specified in the order: Provided that no order under this sub- section shall be issued in relation to a class of companies except after consultation with the Reserve Bank of India.]
(9) Where a company has failed to repay any deposit or part thereof in accordance with the terms and conditions of such deposit, the Company Law Board may, if it is satisfied, either on its own motion or on the application of the depositor, that it is necessary so to do to safeguard the interests of the company, the depositors or in the public interest, direct, by order, the company to make repayment of such deposit or part thereof forthwith or within such time and subject to such conditions as may be specified in the order: Provided that the Company Law Board may, before making any order under this sub- section, give a reasonable opportunity of being heard to the company and the other persons interested in the matter.
(10) Whoever fails to comply with any order made by the Company Law Board under sub- section (9) shall be punishable with imprisonment which may extend to three years and shall also be liable to a fine of not less than rupees fifty for every day during which such noncompliance continues.]
Explanation.- For the purposes of this section" deposit" means any deposit of money with, and includes any amount borrowed by, a company but shall not include such categories of amount as may be prescribed in consultation with the Reserve Bank of India.
58AA. Small depositors
(1) Every company, which accepts deposits from small depositors, shall intimate to the Company Law Board any default made by it in repayment of any such deposits or part thereof or any interest thereupon.
(2) The intimation under sub-section (1) shall, -
(a) be given within sixty days from the date of default ;
(b) include particulars in respect of the names and addresses of each small depositor, the principal sum of deposits due to them and interest accrued thereupon.
Explanation - For removal of doubts, it is hereby declared that the intimation under this section shall be given on monthly basis.
(3) Where a company has made a default in repayment of any deposit or part thereof or any interest thereupon to a small depositor, the Company Law Board, on receipt of intimation under sub-section (1) shall, -
(a) exercise, on its own motion, powers conferred upon it by sub-section (9) of section 58A;
(b) pass an appropriate order within a period of thirty days from the date of receipt of intimation under sub-section (1) :
Provided that the Board may pass order after expiry of the period of thirty days, after giving the small depositors an opportunity of being heard :
Provided further that it shall not be necessary for a small depositor to be present at the hearing of the proceeding under this sub-section.
(4) No company shall, at any time, accept further deposits from small depositors, unless each small depositor, whose deposit has matured, had been paid the amount of the deposit and the interest accrued thereupon :
Provided that nothing contained in this sub-section shall apply to -
(a) any deposit which has been renewed by the small depositor voluntarily ; or
(b) any deposit, whose repayment has become impracticable due to the death of the small depositor or whose repayment has been stayed by a competent court or authority.
(5) Every company, which has on any occasion made a default in the repayment of a deposit or part thereof or any interest thereupon to a small depositor, shall state, in every future advertisement and application form inviting deposits from the public, the total number of small depositors and amount due to them in respect of which such default has been made.
(6) Where any interest accrued on deposits of the small depositors has been waived, the fact of such waiver shall be mentioned by the company in every advertisement and application form inviting deposits issued after such waiver.
(7) Where a company had accepted deposits from small depositors and subsequent to such acceptance of deposits, obtains funds by taking a loan for the purposes of its working capital from any bank, it shall first utilize the funds so obtained for the repayment of any deposit or any part thereof or any interest thereupon to the small depositor before applying such funds for any other purpose.
(8) Every application form, issued by a company to a small depositor for accepting deposits from him, shall contain a statement to the effect that the applicant had been apprised of -
(a) every past default by the company in the repayment of deposit or interest thereon, if any, such defaults has occurred; and
(b) the waiver of interest under sub-section (6), if any, and reasons therefor.
(9) Whoever knowingly fails to comply with the provisions of this section or comply with any order of the Company Law Board shall be punishable with imprisonment which ay extend to three years and shall also be liable to fine for not less than five hundred rupees for every day during which such non-compliance continues.
(10) If a company or any other person contravenes any provision of this section, every person, who at the time the contravention was committed, was a director of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.
(11) The provisions of section 58A shall, as far as may be, apply to the deposits made by a small depositor under this section.
Explanation - For the purposes of this section, "a small depositor" means a depositor who has deposited in a financial year a sum not exceeding twenty thousand rupees in a company and includes his successors, nominees and legal representatives.
Admittedly, the petitioner filed the application in the Company Law Board, under section 58AA. From the provisions of Section 58AA, as reproduced above, it is clear that it relates to small depositors. On an application under section 58AA, relating to small depositors, Company Law Board could have exercised powers of rescheduling the repayments to such depositors, in terms of clause 3 (a) of Section 58AA, under section 58A(9),. Section 58 AA relates to small depositors and an application can be moved under this provision in relation to small depositors and the Company Law Board can exercise powers of Sub-Section 9 of Sec 58A in terms of sub-section 3(a) of Section 58AA, only in relation to small depositors. The small depositors for the purpose of Section 58AA are defined in the Explanation of Sec 58AA, as under :
"a small depositor" means a depositor who has deposited in a financial year a sum not exceeding twenty thousand rupees in a company and includes his successors, nominees and legal representatives."
From the bare reading of this provision, it is apparent that an application under section 58AA could have been moved by the petitioner in relation to the deposits made in a financial year and does not exceed Rs.20,000/-. No application could have been moved qua the depositors who had made the deposits with the petitioner exceeding Rs.20,000/- in a financial year under Section 58AA. Admittedly, the respondent had deposited more than Rs.20,000/- in a financial year and, therefore, the petitioner could not have made an application under section 58AA qua the respondent and no rescheduling could have been done by Company Law Board under Section 58AA qua the respondent.
Even otherwise, it has been held in Llyod Finance Ltd. (supra) that the power of Consumer Forums are independent of powers conferred to the Company Law Board under Companies Act.
In the light of the above discussion, it is apparent that the impugned orders do not suffer with any illegality or infirmity. The revision petitions have no merit and same are dismissed with further cost of Rs.25,000/- in each revision petition, totalling to Rs.50,000/-.
Rs. 25,000/- out of the cost imposed, shall be paid to the respondent by way of demand draft in his name within six weeks from the date of the order and balance amount shall be deposited with Consumer Legal Aid Account-NCDRC', within six weeks.
The revision petitions stand disposed of in these terms.