ORDER
P.D. Shenoy, Member
1. Aggrieved and dissatisfied by the order of the State Commission Ms. Manipal Sowbhagya Nidhi Ltd., has filed this appeal.
2. The issue involved in this case is whether a Nidhi Company registered under Section 620 of Companies Act is justified in not refunding the deposits with interest to its members, despite persistent requests by its members, in the absence of any stay order from a Company Court/the High Court. The obvious answer is No.
Case of the complainants :
3. Complaint was filed by nearly 250 persons who formed an association of All Goa Manipal Finance Group of Companies Creditors Association (hereinafter called the Nidhi) and others.
4. The complainant alleged that:
* The opposite party/appellant without any reasonable cause closed down their business in Goa and refused to refund the deposits to the depositors.
* The appellants approached the Company Law Board (hereinafter be referred as the Board) seeking their guidance in the matter under Section 58A (9) of the Companies Act, but the Board dismissed the application. Thereafter the appellant approached the Karnataka High Court and proposed a scheme of arrangement/repayment in a phased manner to the creditors which failed as it was strongly opposed by the creditors.
Therefore in order to recover the deposits the aggrieved creditors formed an association under the name and style as ‘All Goa Manipal Finance Group of Companies’ Creditors Association.’
* During the pendency of the petition, before the Board the appellant had repaid various deposits to the friends, relations and well wishers but not to the respondents.
* Most of the respondents are senior citizens, retired persons, sickly persons and are entirely dependent on the interest earned from these deposits.
* The silence of the appellant to the letter dated 28.11.2002 is indicative to suggest that the appellants have no intention to return the deposits to the respondents.
* It is also learnt that the appellants are disposing of their office premises and other immovable properties at Goa. If this happens it will cause irreparable loss and injuries to them and it will be difficult for the respondents/complainants to recover their claims. Hence it is necessary that the appellants be restrained from selling or leasing in any manner their immovable properties.
* The appellants committed unfair trade practice and adopted unfair method while conducting their trade/business.
* The appellant shut down their business at Goa in violation and conditions laid down in the deposit certificates.
* The complainants/respondents claimed Rs. 84,85,500 from the appellant/opposite party with interest and costs.
5. Case of the opposite party/appellant:
* The complainants are not the consumers as defined in the Consumer Protection Act (hereinafter called the Act). It is only when the firm/company invites deposits from the public for the purpose of using the same for running the business of the company, then the depositor is a consumer. In the present case it is the depositor that seeks to make profit from the company and as such the depositor is not a consumer and as such this (State) Commission has no jurisdiction to try complaint.
* The applications for deposit are addressed to the registered office of the opposite party at Manipal and the certificate is issued from Manipal, with the seal of the company which has its registered office at Manipal. The Goa State Commission has no jurisdiction to try this complaint.
* The subject matter of the complaint is referred in the application filed by the opposite party under Section 391 of the Companies Act, 1956 bearing No. CA 711 of 2002 before the Hon’ble High Court of Karnataka. The complainant, therefore, ought to have agitated his grievance before the Company Law Board under Section 58-A(9) of the Companies Act.
* The complainant has filed the complaint even after receiving notice of the meeting of creditors convened by Justice R.G. Desai appointed by the Hon’ble High Court for arriving at a conclusion regarding the scheme for repayment of deposits and other investments for the alleged refusal to repay the amount by the opposite party.
* The Hon’ble State Commission, Goa, therefore, has no jurisdiction to try this complaint.
* While admitting the list of investors detailed in para 5 of the complaint be true the opposite parties have submitted that :
The allegation with regard to refusal to release the amount and deficiency in service is vehemently denied. The allegation is made for the purpose of claiming heavy interest and compensation, which cannot be justified under any circumstances since there is no deficiency in service or refusal to release the amount.
They have also vehemently denied that the opposite parties committed unfair trade practices and adopted unfair methods and deceptive practices while conducting their business. The O.Ps. have always served its customers efficiently and promptly to their utmost satisfaction and also denied that the opposite parties have shut down their business in Goa.
Submissions of the learned Counsel for the appellant:
5. The learned Senior Counsel for the appellant submitted that premature sale of debentures is not permissible according to the terms and conditions of the Nidhi. Therefore, there is no deficiency in service. He based this arguments on Sections 391 and 392 of the Companies Act, 1956 which deals with the power to compromise or make arrangements with creditors and members and also power of High Court to enforce compromises and arrangements. He further submitted that they have filed a petition before the Hon’ble High Court of Karnataka for restructuring the debts. A meeting of depositors was convened by a retired Judge of the High Court in pursuance of the petition filed by them, but however, the requisite strength of 75% of the depositors agreeing for the scheme could not be achieved. Therefore, the scheme submitted by them could not be approved by the High Court. He further submitted that the Karnataka High Court had initially granted stay of recovery proceedings subject to the condition that 10% of the amount payable were paid to the depositors including the respondent in this case. To a query raised by the Commission he submitted that no stay order was passed by the High Court restraining any Fora to order recovery from Nidhi to repay its creditors. He submitted that the complaint is not covered under Section 2(c)(iii) of the Consumer Protection Act (hereinafter be referred as Act). There has been no deficiency at all on the part of the Nidhi. Appellants want to repay its deposits along with interest, but because of sudden change in the climate and the regulations of RBI, they are not getting any further deposits. Though they want to repay the deposits, but are not in a position to do so as borrowers have taken huge sums which are blocked. As and when they are recovered, they will pay to the depositors in a phased manner. As the scheme was not sanctioned by the High Court their hands are tied. They are still pursuing the case in the High Court. Accordingly the National Commission may refrain from passing any final order in this case.
Submissions of the learned Counsel for the respondent:
6. The learned Counsel for the respondent submitted that the society consists of more than 240 members many of whom are senior citizens and they have invested their life long savings expecting a reasonable interest from the Nidhi, but they started closing their office in 2002. Now Goa office is fully closed.
7. The following issues were framed by the State Commission and the appellant could have asked for additional issues to be framed:
(i) Whether the complaint is within pecuniary and territorial jurisdiction of this Commission?
(ii) Whether the complainant is entitled for premature withdrawal of fixed deposits and debentures held with the opposite party-company?
(iii) Whether the opposite party -company committed deficiency in service by refusing to refund the deposit amounts?
(iv) Whether the investor members of the complainant are entitled to the reliefs prayed for in the complaint?
8. All these issues have been answered after hearing both the parties. They did not plead the issue of pendency before the High Court to stall the proceedings before the State Commission. Mere pendency of the petition before the Company Law Board or the High Court does not result in a ban on the functioning of the Consumer Fora. Section 3 of the Act is an additional remedy available to the consumers. No scheme has been approved by the High Court, so the petition before the High Court has become infructuous. He quoted the judgment of this Commission in Lloyds Finance Ltd. case in RP No. 1849 of 2001, R.P. No. 745 of 2002, R.P. No. 1350 of 2002 and R.P. No. 1351 of 2002 in which it is held that the consumer has the right to file a complaint against a non-banking finance company under the Consumer Protection Act. He quoted the following extracts of this Commission’s judgment which read as under:
A question of utmost importance has been raised in these revisions and that is the jurisdiction of Consumer Forum vis-a-vis that of the Company Law Board, latter exercising jurisdiction under Section 45 QA of the Reserve Bank of India Act, 1934 though constituted under Section 10E of the Companies Act, 1956.
In this batch of 11 revisions, there are respondent-complainants who had made deposits with the petitioner, a Non-Banking Finance Company (NBFC) which deposits were not paid to the complainants as per the terms and conditions of the deposits. These depositors-complainants filed complaints before the different District Forums under the Consumer Protection Act, 1986 (for short the Consumer Act). Complaints were allowed by the District Forums and the appeals filed by the petitioner-NBFC were dismissed by the respective State Commission. Now these petitions are filed under Clause (b) of Section 21 of the Consumer Protection Act, 1986.
It is contended before us by the petitioner that it being NBFC, functions under the guidelines of Reserve Bank of India (RBI for short) within the purview of the Reserve Bank of India Act, 1934. Petitioner, it is stated had received deposits from various depositors from all over the country to the tune of over Rs. 350.00 crores. Petitioner has its registered office at Mumbai and branches at various places in the country from where deposits were taken from the depositors. It is contended that a scheme was framed on 16.4.1999 by Company Law Board (western branch) which was subsequently modified on 22.12.2000. That scheme was in the interest of the depositors including the respondent-complainants herein. Complaints in the present case were filed in between the period from 1999 to 2001 before different Consumer Forums. It is not contended that District Forum had no territorial jurisdiction to take cognizance of the complaints filed before them.
Findings :
9. Whether Consumer Fora can entertain any dispute between the depositors and Nidhi/’ mutual benefits societies. In this case it is fruitful to look into the directions relating to functions and norms of Nidhi/Mutual Benefit Socieites as per the Government notification dated 26.7.2001.
Clause B (ii) reads as follows :
In case of any deficiency of the Nidhi or Mutual Benefit Society in servicing its deposits, the depositor may approach the National Consumer Disputes Redressal Forum, the State Level Consumers Disputes Redressal Forum or District Level Consumers Disputes Redressal Forum for relief.
10. This makes it very crystal clear that the Consumer Fora are the appropriate authorities before whom consumers can agitate their grievance.
11. Whether depsoitors can withdraw deposits prematurely. The deposit scheme and the relevant rules of business are quoted below:
Minimum period for which a deposit is accepted is 48 days and the maximum period is 6 years.
Deposits are refundable before the date of maturity, at the sole discretion of the company, subject to the directives of the Reserve Bank of India regarding payment of interest on premature refund. Premature refund of deposits before the expiry of six months (wherever such deposits kept for 6 months or above) from the date of deposits does not carry any interest.
A deposit in respect of which a refund application has been sanctioned will be paid on the expiry of 15 days from the date of receipt of such application on surrendering the relative deposit receipt, cash certificate duly discharged.
12. The above rules of premature withdrawal of fixed deposits apply to Sowbhagya Lakshmi Cash Certificate also.
13. This makes it clear that premature withdrawal are permissible with interest at rates, depending upon the guidelines issued by the RBI time to time. This point has been rightly stated by the State Commission wherein it has stated as under:
In the case of fixed deposits and Sowbhagyalakmi Cash Certificates, the terms and conditions clearly provide for premature closure after a specified period and the rates of interest payable on such premature withdrawal is also specified in the terms and conditions framed by the opposite party-company for such deposit schemes. It is seen from the records that the complainants gave notice of premature withdrawal of their various fixed deposits/cash certificates held with the company and demanded payment of the due amounts. This request was not complied with by the opposite party-Company on one pretext or the other. It is also seen that the request for premature withdrawals were made well within the period specified in the said terms and conditions fixed by the company. In our opinion, failure to pay the principal amount along with specified interest, albeit prematurely, amounts to gross deficiency in service. The complainant is entitled to a direction to the opposite party to refund the fixed deposits/cash certificates along with interest at the rate specified in the terms and conditions of such deposit scheme.
14. The next issue to be decided is that when a case is pending in the High Court whether Consumer Protection Act can provide any protection. Firstly the High Court has not granted any stay by the Hon’ble High Court of Karnataka at Bangalore on 5.10.2005 in Company Application No. 768 of 2004 in Company Petition No. 193 of 2002, Manipal Sowbhagya Nidhi Ltd. and the respondent. In a petit ion filed by the petitioner company seeking permission of the High Court to sell the immovable properties belonging to it as detailed in Annexure ‘A’ to enable them to disburse and sale consideration to the depositors in terms of the scheme of arrangement, the High Court has permitted such sales. Manipal Sowbhagya Nidhi Ltd., has not got any permanent injunction from the High Court/Company Court against the repayment of amount due by them to their needy depositor. This is clear from the order of the Company Court dated 15.4.2004:
The petitioner company is enjoying the protective order passed by this Court on 19.9.2003 only to enable it to show the bona fides in the context of the scheme and for examination of the merits of the scheme and for consideration of the rival version for such purpose. As the petitioner company has not been able to demonstrate its bonafides and at any rate have not been able to show its ability or the state of readiness to put into action even the first phase of the said scheme, I am of the view that there is absolutely no justification to continue the protection in favour of the petitioner company. Accordingly, interim order of stay granted in favour of the petitioner company on 19.9.2003 is hereby vacated.
(Emphasis Supplied)
15. In view of the above, the learned Counsel for the respondent submitted as follows:
The appellants are guilty of misrepresenting and not disclosing the entire facts, therefore, the present appeal deserved to be dismissed on this ground alone. In any event of the matter, pendency of any dispute before the Karnataka High Court has no bearing with the complaint filed by the respondents herein. The appellants are trying to mislead and confuse the issue while referring the dispute pending before the High Court of Karnataka, to which the respondents are not even the parties.
16. Accordingly, we do not find any merit in this appeal and the same is dismissed. The appellant shall pay Rs. 1,000 as costs to each one of the depositors who are members of respondent association.