A.K. LAL GUPTA vs Unit Trust of India

THE complainant/petitioner is a contributor to the Units Scheme, 1964 and he is still holding units of various denominations under the different accounts with the opposite parties. It is stated by the complainant/petitioner that the Unit Trust of India Act, 1964 was passed by the Parliament to enable the public to get safety of capital against inflation, to obtain reasonable rate of return above Bank rate and for liquidity and the aim of the act was to develop the capital market of India. It is alleged that the opposite party while developing the capital market in India became an organ of the Government and became a machinery for indirect taxation in the hand of the Government thus forgetting the role to protect the interest of the investor. It is allegation of the complainant/petitioner that it usurped the saving resources of the people for unproductive use.

IT is further alleged that the complainant/petitioner invested various sums since 1964 and thereafter, whereby the complainant received a compounded rate of inflation on an average at the rate of 8% per annum as against the inflation effect on the invested amount would be more than 500%. IT is again alleged that the opposite party are giving a low net asset value of their scheme and thus paying much less value to the investor than actual capital appreciated by the opposite party in comparison to the original investment made by the investor. IT is accordingly alleged that the complainant/ petitioner had to surrender a part of units held by him numbering 3048 units in all on two occasions on 3.9.1991 and 20.1.1992 for Rs. 42,642.13. IT is alleged that the special offer of the units in July, 1991 was Rs. 14/- whereas the re-purchase price on 3.9.1991 was at the rate of Rs. 13.50 per unit and 20.1.1992 at the rate of Rs. 13.85 per unit. IT is contended by the complainant/petitioner that from the above position, it is crystal clear that the unit holders are not only paid less than investment but also are denied the benefit of their interest and capital appreciation. IT is also contended that the price index during the period from July, 1991 to 1992 has been more than double and the value in January, 1993 of the investment made by the complainant/petitioner has appreciated more than six times if assessed on the basis of the actual inflation in the market. IT is alleged that the opposite party is giving misleading picture of their achievements and is publishing other schemes with a lock in period and the net asset value of Master share in a use of 10 years has appreciated by six times and the net asset value of Master share was Rs. 46/- (exdividend) in August, 1992. IT is the contention of the complainant/ petitioner that as he has invested the units under the Units Scheme, 1964 of a continuous basis he would have been entitled to six times appreciation of his capital. IT is contended that if the opposite party had invested the capital without giving atleast six time appreciation of the capital, then it was a bad investment on its part and it failed to exercise its duty as a trustee and liable to compensate the unit holders accordingly. IT is alleged that the opposite party must have to publish and give true value of the units and allow the unit holders to exit at the true value, but the opposite party gave an artificially low value of re-purchase price thereby depriving the unit holders of their true value. IT is contended that the petitioner/ complainant came to know about the said alarming position about the affairs of units 64 Scheme from the publication in a leading financial paper. IT is contended that the opposite party is aware of the position and to mitigate partly the hardship of the unit holders and has offered the units at 25% discount to existing small unit holders and the said compensatory attitude of the opposite party though commendable does not mitigate the actual entitlement of unit holders because of the facts that it does not give option to the unit holders to exit at a correct price. IT is further alleged that the opposite party has usurped the resources of the nations for speculative gain and deprive the units holders to exit at the correct price. In paragraph 9 of the petition of complains, the complainant/ petitioner have worked out the net alleged loss of Rs. 1,44,329.35 on account of re-purchase of the units by the opposite party, on account of units 3048 in numbers sold on 3.9.1991 and 20.1.1992 the complainant suffered loss and prayed for direction upon the opposite party to pay the sum of Rs. 1,44,329.35 together with interest at the rate of 18% per annum from the surrender date of the units till payment of the said amount and also for appropriate damages. The complainant/petitioner further prayed for refixation of the re-purchase price of the units according to the true disposable real value and also for cost of the proceedings.

The complainant/petitioner filed an interim petition for appointment of Security Exchange Board of India to probe into the matter and to submit a report if the re-purchase value of units under U.S.64 Scheme on 3rd September, 1991 was at the rate of Rs. 13.50 and on 20.1.1992 at the rate of Rs. 13.85 was correct or not which remained undisposed at that time.

THE opposite party filed a written statement denying all material allegations raised by the petitions complainant in his petition of complaint. It is contended by the opposite party that the petition of complaint is not maintainable on the ground that the unit sold to the unit holders under U.S. 64 Scheme are not ''goods'' within the meaning of Section 2(1)(i) of the Consumer Protection Act, the said act adopts the definition of ''goods'' given under the Sales of Goods Act, 1930. THE Sales of Goods Act under Section 2(7) defines ''goods'' which means every kind of movable property other than actionable claims and Money; and includes stock and shares, growing crops grass and things attached to or forming part of the land which was agreed to be served before the sale or under the contract of sale. It is contended that the units under the U.S. 64 Schemes are actionable claims and are excluded from the definition of Sales of Goods Act. THE stock and shares are infact actionable claims as defined under Section 3 of the Transfer of Property Act and goods in the strict sense but those have been included in the definition of goods in the Sales of Goods Act but the units sold under the U.S. 64 Scheme are neither ''goods'' nor stocks and shares nor are they quoted in stock ex-change as such the units held by the complainant/petitioner are not ''goods''. Further it was contended that the complainant/petitioner by purchasing units under the U.S. 64 Scheme has not hired any services either of the opposite party. THE relationship between the unit holders and the opposite party is purely contractual and solely governed by the terms and conditions of the U.S. 64 Scheme and the opposite party has not undertaken to do anything more than what has been stated in the said scheme and the right and obligation of the opposite party are clearly indicated in the said scheme and the opposite party has not undertaken to render any other service to unit holders including the petitioner/complainant. It is argued that for implementation of this U.S. 64 Scheme, the opposite party taking services of various experts in matters of investors to unit by the trust but such experts are engaged by the trust and they are rendering services to the trustees and not to any individual unit holder. In this connection, the opposite party referred to a case of Investors and National Company Limited v. New Shorrocks Spinning and Manufacturing Company Limited reported in 42 Company cases page 145. It is contended by the opposite party that the complaint petition has neither disclosed any defect in the goods nor any deficiency in service rendered by the opposite party. It is further contended by the opposite party that the petition of complaint is not entertainable under the Consumer Protection Act and even if it is assumed that it is entertainable under the Consumer Protection Act as it involves a most comprehensive detail and thorough enquiry into the intricate question of valuation, accounting and assessment of market forces at the relevant time it cannot be adjudicated in summary process of disposal of the complaint which required detail and thorough investigation, evidences and intuition of the market trend and effect of inflation and deflation of the market and the same is outside the scope and ambit of Consumer Protection Act. The opposite party also referred Section 37 of the Unit Trust Act which created a legal bar to suit or other legal proceeding against the trust or the Reserve Bank of India or the Development Bank or any trustee or any officer or other employee of the trust or any other person authorised by the trust to discharge any function under this Act for any damages cost or likely to be caused by anything which in good faith do not or intended to be done in pursuance of the said Unit Trust Act. The opposite party also argued giving three broad outlines for determination of the price of the units for repurchase by them: (I) Based price reflecting the market price of the underlying asset; (II) The income from investments what is known as ''income equilizer'' and (III) The incidental charges.

IT is contended by the opposite party that the re-purchase of the unit is arrived at on the same basis with the exception that a nominal deduction is made on account of incidental charges incurred by the opposite party for liquidating underlying investment and the said minimum charges are recovered from the unit holders for which the re-purchase price remains lower than the sale price. IT is also argued that the sale price and re-purchase price of units are given in Clauses 8(2), 8(3) and 8(4) of the U.S. 64 Scheme. IT is further contended that the amended Clause of 8(6) of the U.S. Scheme empowers the trust to determine sale price and re-purchase price or both at a rate which may not necessarily be in accordance with Sub-clause (3) and Sub-clause (4) of the said clause. The said Clause 8(6) further declares that any such determination shall be deemed to be in the interest of the trust and the unit holders. Accordingly it is contended by the opposite party that it gives a very broad and clear protection to the trust in the matter of determining the sale price and re-purchase price of the units. IT is contended that the complainant/petitioner has urged for introduction for valuation of the assets inflation accounting etc. but he has no-where pleaded any deficiency in service on the part of the opposite party nor the complainant has shown anywhere that the opposite party has failed to discharge its function or to act in terms and conditions of the said scheme. IT is argued by the opposite party that even if it is held that the opposite party has failed to act in accordance with the terms of the said scheme and such failure or default be regarded as a breach of the contract and the complainant/ petitioner''s remedy in such case would be agitated in damages in a Civil Court. IT is argued that the contention of the petitioner/complainant is founded on total mis-understanding of the said scheme for its suggestion to act in different manner than the terms of the said scheme. DECISION Heard the Learned Advocates of both the parties perused the materials on record. We are of opinion that the whole pleadings of the petition of complaint filed by the complainant/ petitioner is based on surmise and conjectures and there is no real and solid foundation to justify his claim. Moreover the complainant/ petitioner have utterly failed to establish any deficiency in service rendered by the opposite party nor any defects in goods has been appointed out in the petition of complaint. We are also of opinion that the units under U.S. 64 Schemes are not goods at all and these are only actionable claims which are excluded from the definition of goods under the Sales of Goods Act. That the relation between the Unit holders and the Unit Trust of India are purely contractual and solely governed by the terms and conditions of the U.S. 64 Scheme which are categorically and specifically stated in the proposal form and the Clauses 8(2), 8(3), 8(4) and 8(6) clearly indicate the outline for determination of sales price and re-purchase price of the units. But the complainant/petitioner has not founded any breach for determination of Sales price and re-purchase price as per agreed terms of the Unit 64 Scheme. Moreover the Section 37 of the Unit Trust Act creates embargo for starting legal proceeding or suit against the trust. So as per said saving clause of the Unit Trust Act, the complainant/petitioner''s case before the Consumer Dispute Redressal Forum is not maintainable. We wanted to dispose of the case on preliminary point of maintainability but as the complainant/petitioner insisted on to hear out the matter taking all issues including the issue of maintainability we could not dispose of the interlocutory petition for appointment of Stock Control Board of India. On that point we are of clear opinion that as the petition of complaint is not maintainable exfacie before the Consumer Dispute Redressal Forum, we did not feel urge to appoint ''SEBI for investigation as to the repurchase price of unit on 3.9.1991 and 20.1.1992 as alleged by the complainant /petitioner. Moreover we feel that it is beyond our competency to appoint such agency for investigation into such controversial question of a National Importance even if the alleged cause raised by the complainant/petitioner had been existing in the present petition of complaint. It is also not known to us if ''SEBI'' is also competent to probe into the alleged question of valuation of the units as raised by the complainant/ petitioner. For all these reasons we were not inclined to appoint ''SEBI'' for investigation into the matter as such the said application was not disposed of and it sends redundant at this moment.

WE do not agree to the contention of the opposite party that even there had been any deficiency in service due to failure to fulfil the obligation in terms of the U.S, 64 Scheme such failure or default is to be dealt to by the Civil Court. Had it been a concrete case of deficiency in service for breach of the contract and/or failure to fulfil its obligation as per agreed terms of the U.S. 64 Scheme, we are definitely competent to entertain such case for awarding appropriate damages, by virtue of Section 2(1)(g) of the Consumer Protection Act where it is indicated that failure to fulfil the obligation as per agreed terms of the contract is deficiency in service. On the other hand we do not find any deficiency in service in fixing the sale and repurchase price of units as per norms laid down in Unit Trust Act and Scheme.

HOWEVER, as we have observed that the petition of complaint is not maintainable before the Consumer Disputes Redressal Forum and accepted the contentions put forward by the opposite party. We also observe that there is no violation of the agreed terms of the contract under the U.S. 64 Scheme. The petition of complaint is, therefore, dismissed on contest. The parties will bear the respective costs. Complaint dismissed. ______________