Surrinder Lal Kapur vs Sunaini Sharma

V.K. Jain, Presiding Member

The appellants before this Commission are stated to be the Directors of the Respondent M/s. Ansal Housing & Construction Limited. A consumer complaint was instituted by the complainants namely Sunaini Sharma and Dharminder Sharma against the above referred company and was allowed by the State Commission.

The order of the State Commission was upheld by this Commission with some modification.

In the execution application instituted by the complainants, the appellants were impleaded as parties on the application filed by them, on the ground that they were Directors of the company are as per record of the Ministry of Corporate Affairs. It would thus be seen that the appellants were not parties to the consumer complaint and the said complaint was allowed only against the company.

The issue of liability of the Directors of a company in a case where the order is passed only against the company came up for consideration of a Three-Members Bench of this Commission in EA/80/2016 in CC/14/2015 Rajnish Kumar Rohatgi & Anr. Vs. M/s. United Limited and Anr. decided on 08.1.2019 and the following view was taken:

"40. For the reasons stated hereinabove, we answer the reference and related questions as under:

(1) A company, or a partnership firm, which fails or omits to comply with any order made by a District Forum, State Commission or National Commission, as the case may be, will be liable to the penalty prescribed in Section 27 of the Consumer Protection Act.

(2) The date on which the order is passed by the District Forum, State Commission or the National Commission, as the case may be shall be deemed to be the date on which the offence under Section 27 of the C.P. Act is committed. The said offence will be deemed to continue till the order passed by the District Forum, the State Commission or the National Commission is complied in all respects.

(3) If the offence, punishable under Section 27 of the Consumer Protection Act is committed by a company, with the consent or connivance or is attributable to any neglect on the part of any Director, Manager, Secretary or other officer of the company such Director, Manager, Secretary or other officer shall also be deemed guilty of that offence, even if he was not incharge of and responsible to the company for conduct of its business, at the time offence was committed.

(4) All the persons who were incharge of and responsible to the company for the conduct of its business at the time the offence under Section 27 of the C.P. Act is committed shall be liable to punishment under the aforesaid Section.

(5) The persons mentioned in Para-25 above shall be deemed to be the persons incharge of and responsible to the company for the conduct of its business.

(6) If a person who was incharge of and responsible to the company for the conduct of its business at the time the offence was committed, proves that the said offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of the offence, he shall not be liable to punishment under Section 27 of the C.P. Act.

(7) A person nominated as Director of the company by virtue of his holding any office or employment in the Government or a Financial Corporation owned or controlled by the Government, shall not be liable for punishment under Section 27 of the CP Act.

(8) The vicarious criminal liability of a Director in a company shall apply to a partner in a firm where the offence under Section 27 of the CP Act is committed by a partnership firm.

(9) The procedure as outlined in paras 29 to 34 hereinabove shall be followed in the proceedings under Section 27 of the CP Act."

The submission of the learned counsel for the appellants is that no notice was served upon the appellants before they were impleaded in the execution application. The submission of the learned counsel for the complainants, on the other hand, is that the appellants had deliberately avoided accepting the notice and the lawyer was duly representing the company before the State Commission. In my opinion, service upon the company will not bind the Directors of the company in execution proceedings, when the consumer complaint has not been allowed against them. The least the State Commission ought to have done was to serve the appellants and give them the opportunity to file reply to the application for impleadment. The application then ought to have been decided taking into consideration the averments made therein against the appellants, their reply and the decision rendered by the Three-Members Bench of this Commission in Unitech Ltd. (supra).

For the reasons stated hereinabove, the impugned orders are set aside and the matter is remitted back to the State Commission to decide the application for impleadment afresh in the light of this order and the decision of the Larger Bench of this Commission in Unitech Ltd. (supra).

The parties shall appear before the State Commission on 26.8.2020. Applications shall be decided afresh within four weeks of the parties appearing before the State Commission.

Till the applications are decided afresh, the interim order passed by this Commission on 22.5.2020 shall remain in force.