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Judgment
V.K. Jain, J.
The complainant is a cooperative society registered under the provisions of Maharashtra Cooperative Societies Act. Opposite party No.1 is a non-banking financial company registered under the provisions of the Companies Act whereas OP No.2 is Managing Director. The complainant invested a sum of Rs.1,12,00,000/- with OP No.1 during the year 1999-2000. The company, however, failed to repay the said deposits with interest whey they matured on expiry of their term. A meeting was thereafter held in about May 2001 wherein the complainant was informed that the Board of Directors of the company had decided to transfer selling rights of 24622 sq.ft. of flats to the complainant company by way of collateral security. Accordingly, a Memorandum of Understanding was executed between the parties on 19.6.2001. On behalf of the company, the said MOU was signed by its Managing Director Mr. Ratnakar Rao. In terms of the said Memorandum of Understanding, Rs.10 lakhs were payable to the complainant by 30.6.2001 besides transfer of selling rights of flats admeasuring 24622 sq.ft. Though the MOU referred to a resolution passed by the company on 21.5.2001, no such resolution had actually been passed transferring the selling rights of the flats to the complainant. A sum of Rs.20178880/- is now stated to be due from the opposite parties to the complainant. Hence, the complainant is before this Commission for directions to the opposite parties to pay the said amount to it.
The complaint has been resisted by OP Nos.1 & 2. Preliminary objections have been taken by OP Nos.1 & 2 that the complainant is a commercial establishment and the complaint is barred by limitation. They have denied having confirmed the liability and having decided to sell 24622 sq.ft. of flats to the complainant by way of collateral security. However, the aforesaid opposite parties have not denied the deposits taken from the complainant.
The first question which arises for consideration in this complaint is as to whether the complainant can be said to be a consumer within the meaning of the Consumer Protection Act. A perusal of the Memorandum of Understanding executed by OP-1 company, through its Managing Director Ratnakar Rao, in favour of the complainant society would show that the fixed deposits had been given to the company and that there was delay in repayment of the said deposits and interest which had accrued on them. The deposits therefore, not only were made but they had also matured before 19.1.2001. According to the complainant, all these deposits were made by cheques between September, 1998 to June, 2000.
Section 2(1)(d) of the Consumer Protection Act was amended w.e.f. 15.3.2003 so as to exclude, from the ambit of the term 'consumer', a person who availed services for any commercial purpose. Therefore, prior to 15.3.2003, even a person hiring or availing services for a commercial purpose was covered within the ambit of the term 'consumer'. Since the deposits with the opposite party were made prior to 15.3.2003, the complaint would be governed by the provisions of Section 2(1)(d) of the C.P. Act as they stood prior to amendment w.e.f. 15.3.2003 and, therefore, the complainant would be a consumer for the purpose of this complaint. Even otherwise considering the bye-laws of the complainant society, it cannot be said to have hired or availed the services of the opposite party for a commercial purpose. The model bye-laws which govern the functioning of the complainant society, to the extent they are relevant, read as under:-
"B.1.1. "B" OBJECTS :
Society's objects are as follows:
To encourage thrift and co-operation amongst the members.
To accept deposits from members. To accept cheques/drafts in savings and current account.
To borrow or raise fund.
To lend or to advance fund with or without security to members.
To acquire place/premises with prior permission of Registration Officer, on rent or on ownership for use of society.
To make arrangement for disposing of moveable or immoveable property mortgaged by member for loan given by society, for recovery of his outstanding loan.
To provide financial assistance for promoting small industry and home industry and self-employment.
To do all things as required for achieving all or any aforesaid objects.
j, k, l as per Annexure No. "1".
G.1.1 Profit distribution
Net profit of society will be drawn up in accordance with Maharashtra Co-operative Societies Act, 1960 and Rules thereunder.
As per the recommendation of Managing Committee, distribution of net profit will be made as under in general meeting.
A. Profit not less than 25 percent will be deposited in statutory reserved fund, as per the provisions in Maharashtra Co-operative Societies Act, 1960.
B. Provision for paying dividend will be made subject to maximum limit mentioned in the provisions of Maharashtra Co-operative Societies Act, 1960.
C. The amount from balance amount will be transferred for building fund and other funds, as per the approval of Annual General Meeting. If amount remains balance from profit distribution, it will be carry forward for next year.
D. As per Section 68 of M.C.S. Act, 1960 and Rule 53 thereunder, education fund should be paid to Maharashtra State Co-operative Federation, within 3 months from expiry of co-operative year.
E. Before taking out net profit, the society should make provision for suspicious and bad debts from rough profit."
It would thus be seen that one of the objectives of the complainant's society is to provide financial assistance for promoting small industries, home industries and self-employment, whereas another purpose of the society is to encourage thrift and cooperation amongst its members besides accepting deposits from its members and to give loan to them. The net profits of the society are controlled by the provisions of Maharashtra Co-operative Societies Act, 1960 and the rules made thereunder. The complainant is not at liberty to deal with its net profits in any manner it desires. The said profits can be dealt with only as per its bye-laws from which it is governed. At least 25% of its profits are required to be deposited in a Statutory Reserve Fund as per the provisions of the Maharashtra Cooperative Societies Act. After payment of dividend, the balance amount is to be transferred for building funds and other funds. The society is also required to pay educational fund to Maharashtra Cooperative Federation. Therefore, the complainant cannot be said to be a commercial establishment set up solely for the purpose of making profits. Though the complainant can make profits from its activities, the said profits can be utilized only in the manner provided in its bye-laws, including at least 25% of the said deposits in a Statutory Reserve Fund. Therefore, it cannot be said that the complainant had hired or availed the services of the opposite party No.1 for a commercial purpose.
The next issue which involved in this complaint is as to whether it is barred by limitation or not. An MOU was executed between the complainant and OP-1 on 19.6.2001 which to the extent it is relevant, reads as under:-
"Dear Sir,
Ref : Delayed repayment of fixed deposits of Rs.1,12,00,000/- (as per annexure ) & attending interest.
On your intercorporate deposit's with us.
This is to inform you regarding the delay in repayment of fixed deposits of Rs.1,12,00,000/- and attendant interest (as per annexure) on your deposit with us, we wish to inform you that Trustwin finance co. ltd. is shortly undertaking a very large housing project at barampur, as a result of which there is shortfall of funding.
However, we are working post-haste to arrange for your interest payments in part, to be settled within the next quarter (june-july) Rs.10,00,000/-.
We have held a board meeting on 21.5.2001 & as per resolution no.2/01 have decided to transfer the selling rights of 24622 (twenty four thousand six hundred and twenty two) Sq.Ft. of completed flats in the form of an agreement giving you sufficient collateral security against your exposure to our financial institution. This will allow you to recover principal overdue interest with further interest @ 15% p.a. for the next one and half years.
As mentioned above Trustwin finance company has requested to the society that due to financial constraints the said fixed deposits could not be paid on its due date and the company has requested the society for time to pay the fixed deposits and interest at 15% p.a. the company has further requested the society that on 30th June 2001 a sum of Rs.1,34,66,750/- is due (one crore thirty four lacks sixty six thousand seven hundred fifty only) and payable, however, the company is in a position to honour a interest of only Rupees ten lacks (10,00,000/-) the balance amount of 12,66,750/- (twelve lacks sixty eight thousand and seven hundred and fifty) will be adjusted along with the remaining amount in the above-mentioned sq.ft. additional interest of Rs.20,00,000/- which is also due upto June 16, 2001 has also been added in the above mentioned sq.ft.
As per resolution no....(Annexure 2), minutes of meeting (annexure 3) attended by directors - 1) ratnakar rao, 2) mr. kamath, 3) mr. abdul haq patel, 4) mr. dilip shah, 5) mr. hs desai, 6) Ex-director mr. vishwanath shetty, this above letter is issued to Starjyot credit society. Any delay on part of Trustwin finance company will carry a further interest liability beyond dec 2002."
A perusal of the MOU would show that fixed deposits of Rs.1,12,00,000/- had fallen due by that time. The company agreed that as on 30.6.2001 a sum of Rs.1,34,66,750/- would be due from it inclusive of interest. Thus the quantum of interest upto 30.6.2001 came to Rs.2266750/-. The company agreed to pay Rs.10 lakhs by June-July 2001. The additional interest of Rs.20 lakhs as well as the principal amount of Rs.1,12,00,000/- as on 30.6.2001 was to be repaid by way of transferring selling rights of 24622 sq.ft. of completed flats to the complainant. Had the aforesaid selling rights been transferred to the complainant that would have also covered further interest for next one and half years i.e. upto December 2002. However, the selling rights of 24622 sq.ft of completed flats were never transferred by OP-1 to the complainant. In view of the aforesaid MOU, a fresh cause of action accrued to the complainant at the end of December 2002 on account of the opposite party having not transferred selling rights of 24622 sq.ft. of completed flats to it. In terms of Section 24A of the Consumer Protection Act, the period of limitation is 2 years from the date on which the cause of action arises. Computed from 31.12.2002, the complaint could have been filed upto 31.12.2004. Having been filed on 16.7.2004, the complaint was well within the prescribed period of limitation.
As noted earlier on merits, OP-1 has not disputed the execution of the MOU dated 19.6.2001. As per the aforesaid MOU, a sum of Rs.1,34,66,750/- became due to the complainant as on 30.6.2001. Since OP -1 did not honour the MOU by transferring 24622 sq.ft. of completed flats to the complainant, it is liable to pay interest w.e.f. 1.7.2001 to the complainant on the principal amount of Rs.1,12,00,000/- besides paying a sum of Rs.2266750/- as interest upto 30.6.2001.
However, as far as OP No.2 is concerned, he is not personally liable for repayment of the deposits since no personal guarantee was given by him for repayment of the said deposits. It is only OP -1 Trustwin Finance Co. Ltd. which is liable to pay the amount payable to the complainant in terms of the MOU dated 19.6.2001.
For the reasons stated hereinabove, the complaint is disposed of in terms of the following directions:-
Opposite party No.1 - Trustwin Finance Co. Ltd. is directed to pay the principal amount ofRs.1,12,00,000/-to the complainant along with interest on the aforesaid amount of Rs.1,12,00,000/- @ 15% per annum w.e.f. 1.7.2001 till the date on which this complaint was instituted.
The opposite party No.1 shall also pay a sum of Rs.2266750/- as interest payable upto 30.6.2001 and Rs.20,00,000/- (Rs. Twenty lacs) as additional interest referred in the MOU.
Opposite party No.1 shall also pay interest @ 10% per annum to the complainant on the amount of Rs.1,12,00,000/-w.e.f. the date of filing of this complaint till the date of payment.
Opposite party No.1 shall also pay a sum of Rs.25,000/- as cost of litigation to the complainant.
The complaint against OP-2 stands dismissed.