AMRIT LAL vs INSTANT GROWTH FUND PVT. LTD. NEW DLEHI

THIS order will dispose of complaint Nos. C-242, C243, C-255 of 1992 and C-82 of 1993. In complaint No.C-242 the decree has been obtained against M/s. Instant Growth Funds Pvt. Ltd. and others, whereas in the other three cases decrees have been obtained against M/s I.G.F. Leasing Pvt. Ltd. In all the aforesaid complaints/execution applications the complainants prayed that Shri Ravi Kant, M.D. of the company be convicted u/Sec. 27 of the Consumer Protection Act as he failed to pay the decretal amounts as directed by the Commission. In C-243/92 prayer has also been made that Smt. Asha Lata be convicted u/ Sec. 27 of the Consumers Protection Act. Show cause notice was issued to the respondents.

IN reply to the show cause notices in the complaints against INstant Growth Funds Pvt. Ltd. it is admitted by Shri Ravi Kant that he is Managing Director of the Company. He however stated that towards the end of 1990 the business of the Company suffered slumps due to adverse market trends caused by Mandal Commission agitation, disturbed communal situation and finally the gulf crisis. As a result of these unanticipated and unfortunate circumstances the Company was unable to meet its financial commitments on 15.4.91 the INdian Overseas bank closed the account of the Company. IN view of that number of creditors started putting pressure on him for making payments of the amounts due to them but the Company was unable to discharge their liability. It is further pleaded that the judgment debtor is a Company, therefore, it is the liability of the Company to make the payment of the decretal amount and not that of the Managing Director personally. No action can be taken by the complainant against the Managing Directors. It is further pleaded that in the complaint against I.G.F. leasing, appeal has been filed by them before the National Commission which is still pending and till the appeal is decided no action can be taken against them under Section 27 of the Act.

It is next pleaded that the respondent is willing to comply with the order of the Commission after recovering the amounts from its various debtors. At present they have got no money to pay. The Managing Director is dependent on his father for the purpose of residence, who is an old retired officer.

IT is further pleaded that both the companies have filed winding up petitions before the Hon''ble Delhi High Court u/Sec. 433(a)(d) & (f) read with Section 439 of the Companies Act. In the Instant Growth''s petition the High Court issued notice of winding up to Shri Kailash Chand, as he filed a caveat therein. The Court has granted time to him for reply. IT would, therefore, be proper to await the final order of the High Court in winding up petition. In the case of IGF Leasing a plea has been taken by the Respondent that the High Court has admitted the petition for voluntary winding up and ordered advertisement in the newspapers and official gazette in accordance with law. The Court has appointed the Official Liquidator attached to the High Court, as Provisional Liquidator of the Company, and he has been directed to take into possession the registered office, assets, books, records, furniture etc. of the Company. After the appointment of the Provisional Liquidator the Managing Director has no authority to recover any debts. The Provisional Liquidator has already initiated action against the debtors of the Company. In view of the appointment of the Provisional Liquidator, it is stated, all the proceedings before the other Courts stand stayed u/Sec. 446 of the Companies Act.

IT is not disputed that the complainants have obtained decrees against the two companies. In some of the cases Shri Ravi Kant and Mrs. Asha Lata were parties in individual capacities to the proceedings and decrees have been passed against them as well. Section 27 of the Consumer Protection Act (hereinafter referred to as the Act) reads as follows:- "Where a trader or a person against whom a complaint is made or complainant fails or omits to comply with any order made by the District Forum, the State Commission or the National Commission as the case may be, such trader or person or complainant shall be punishable with imprisonment for a term which shall not be less than one month but which may extend to three years, or with fine which shall not be less than two thousand rupees but which may extend to ten thousand rupees, or with both: Provided that the District Forum, the State Commission or the National Commission, as the case may be, may, if it is satisfied that the circumstances of any case so require, impose a sentence of imprisonment or fine, or both, for a term lesser than the minimum term and the amount lesser than the minimum amount, specified in this Section."

It is evident from a reading of the Section that if a person fails to comply with any order passed by the Commission under the Act such person is punishable with imprisonment and payment or fine. In all the cases the Respondents were directed to pay the decretal amount within a period of three months. Admittedly the amounts have not been paid in terms of the orders passed by the Commission. Thus the Respondents are liable to be punished u /Sec. 27 of the Consumer Protection Act. It is contended on behalf of the Respondents that as the Commission disposed of several cases against two different companies by a common order passed in complaint No.C-264/ 91 (now C-242/92), therefore, the order is illegal and liable to be struck down on this ground. We have duly considered the argument but do not find any substance therein. Both the companies were sister concerns and Shri Ravi Kant was the Managing Director of both the companies. The pleadings of the parties and the evidence led in the cases were similar. Taking into consideration all the aforesaid circumstances two complaints bearing numbers C-197 (now C-243/92) and C-264 (now C-242/92) were disposed of by a common order. However, complaint Nos. C208/91 (now C-255/92) and C-12/92 (now C82/93) were disposed of by separate orders. Therefore, we reject the objection of the learned Counsel for the Respondent.

THE second argument of the learned Counsel for the Respondent, is, that the Court could not direct the Company and their Directors to pay the decretal amount within a specified period. THErefore, no action can be taken on the basis of the order u/Sec. 27 of the Act. We have considered the argument but do not find any substance therein as well. THE Act has been enacted for the purpose of giving relief to the consumers. It is a very short Act and consists of only 31 Sections. No elaborate procedure has been prescribed for trial of the cases. It is well settled that in such case. THE Court can devise a procedure for deciding cases, taking into consideration the principles of natural justice. It is well known that the real trouble of the decree holder starts after he has obtained a decree from the Court. In execution proceedings, the judgment debtors raise frivolous objections so that the decrees may not be executed. In many cases it has been seen that the decrees remain unexecuted for many years. Taking into consideration all the aforesaid circumstances the Redressal Agencies have been given the powers to prosecute the persons, who fail to comply with their orders. Thus the intention of the Legislature is clear that the judgment debtors should not be allowed to raise frivolous objections in execution proceedings. THE Redressal Agencies can, therefore, give reasonable time to the judgment debtors to comply with the order. THEre is no illegality in passing such an order. Taking into consideration all the circumstances we are of the view that the judgment debtor under the Act can be directed to comply with the order within a specified period.

THE third argument of the learned Counsel for the Respondents is that Section 25 of the Consumer Protection Act provides for execution of the decrees. In view of that Section the complainant cannot make an application u /Sec. 27 of the Consumer Protection Act. We do not find any substance in this contention as well. THE Legislature has provided two different remedies to the decree holder to recover the decretal amount, one through execution of the decree as is done by a decree holder in a civil case and the other by initiating the criminal proceedings u/ Sec. 27 initiating Act. THE Legislature has wide powers to make any law for the benefit of its citizens. Consequently the argument that as Section 25 provides a method for recovery of decretal amount, therefore, no action can be taken u/Sec. 27 of the Act by the Redressal agencies is fallacious and liable to be rejected. The fourth contention of the learned Counsel for the Respondents is that I.G.F. Leasing is under process of winding up and Official Liquidator has been appointed as a Provisional Liquidator. As soon as a Provisional Liquidator is appointed by the High Court the legal proceedings pending at the time of appointment of the Provisional Liquidator a re liable to be stayed. In support of his contention he has placed reliance on Section 446 of the Companies Act.

We have given our thoughtful consideration to the argument but do not find any force therein. Section 446(1) reads as follows:- "(1) When a winding up order has been made or the Official Liquidator has been appointed as Provisional Liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of winding up order, shall be proceeded with, against the company, except by leave of the Court and subject to such terms as the Court may impose. (2) xxx xxx xxx (3) xxx xxx xxx (4) xxx xxx xxx

THIS Section came up for interpretation before this Commission in M. Anand v. M/s Anand Pratyabhoot Vit Nigam Ltd. & Anr. I (1992) CPJ 229. The relevant observations are as follows:- "From the reading of Sub-Section (1) it is evident that no proceedings against a Company after the appointment of a Provisional Liquidator can be commenced except by the leave of the Court. However, if any proceedings are pending on such dates these can continue till the date when winding up order is passed by the Court. After passing of the winding up order, such proceedings shall be stayed; but with the leave of the Court, they can continue. It is well-settled that the Legislature does not waste words in a statute. It is also well-settled, that if the language of statute is clear and unambiguous, the Court has to expound the word in their natural and ordinary sense and give effect to the intention of the Legislature as expressed in the words used in a statute. Under Sub-Section (1) the pending proceedings are liable to be stayed, only if the winding up order has been passed and not otherwise. In the petition pending before the High Court, admittedly, the winding up order has not been passed. Consequently we are of the view that the proceedings before the District Forum can continue inspite of the appointment of a Provisional Liquidator by the High Court."

The learned Counsel for the Respondent could not continue us that the view taken by us earlier is not the correct view. Therefore, we are of the opinion that these proceedings can continue inspite of the fact that a Provisional Liquidator has been appointed by the High Court for I.G.F. Leasing.

THE fifth contention of the learned Counsel for the Respondents is that where the Company is being wound up by or subject to the supervision of the Court the execution proceedings cannot continue under Section 537 of the Companies Act. This argument has also no merit. Section 537 applies to cases in which attachment, distress or execution is put in force, after the commencement of the winding up. In the present case the complainant has not prayed for any such relief. On the other hand he has prayed for punishing the Respondents u /Sec. 27 of the Act for not complying with the order of the Commission. THErefore, the Counsel for the Respondents cannot derive any benefit from Section 537 of the Companies Act. The last submission of the learned Counsel for the Respondents is that the Directors are not personally liable to pay the decretal amount and, therefore, no complaint u/Sec. 27 of the Act can be filed against Ravi Kant and his wife. The argument has been duly considered by us but we find no merit in it also. It is not necessary to dilate upon this point as the matter has been examined by the Supreme Court in Aligarh Municipal Board and Others v. Ekka Tonga Majdoor Union & Others. In that case there was a dispute in regard to realisation of fees claimed by the Municipal Board of Aligarh from ekka-walas and tonga-walas for the use of Municipal stands at various places in Aligarh city. The Ekka Tonga Majdoor Union instituted two suits in that regard which were decided in their favour. The Board still persisted in realising the fees. The Union filed a writ petition against the Board in Allahabad High Court, which made an interim stay order. Inspite of the stay order, which was duly served on the Respondents, the recovery proceedings were not stayed by the Municipal Committee. An application was filed before the High Court for initiating action for contempt of the Court. The High Court took action against the officials of the Municipal Committee. The Municipal Committee came up in appeal before the Supreme Court. It was observed by the Supreme Court that a command to a Corporation is in fact a command to those who are officially responsible for the conduct of its affairs. If they, after being apprised of the order, directed to the Corporation, prevent compliance or fail to take appropriate action, within their power, for the performance of the duty of obeying those orders, they and the corporate body are both guilty of disobedience and may be punished for contempt. The above observations are fully applicable in the case of the companies. After taking into consideration the aforesaid circumstances we are of the view that action can be taken against the Respondents u/ Sec. 27 of the Act. Consequently we convict Ravi Kant under the said Section in all the four complaints and Smt. Asha Lata in C-243/92.

THE question that now arises is what sentence should be awarded to Ravi Kant, Managing Director. THE Company in the present case offered 36% interest in order to attract depositors. THE Banks, well known sound companies and the Public Undertakings /Corporations are not paying even half of that interest. It is common knowledge that it is not possible to pay such high rate of interest. He, therefore, does not deserve any leniency. We, consequently, sentence him to undergo one year''s simple imprisonment and to pay a fine of Rs. 5,000/- in each of the for cases. In case Shri Ravi Kant fails to pay the fine he shall further undergo simple imprisonment for a period of three months. THE sentences shall run concurrently.

SMT. Asha Lata is a lady and it will not appropriate that she should be awarded jail sentence. In our view, the ends of justice would be met in case only sentence of fine is imposed on her. Taking into consideration the facts of the present case we impose a fine of Rs. 10,000/- on her in C-243 of 1992. In default of payment of fine she will undergo simple imprisonment for a period of one months. The fine be deposited by the accused within two months. Complaint allowed.