BALKAR SINGH vs MALWINDER SINGH BATTU & ORS.

These seven revision petitions, as detailed in the heading above, have been filed against the impugned order dated 02.11.2010, passed by the State Consumer Disputes Redressal Commission, U.T. Chandigarh (hereinafter referred to as ''the State Commission'') in appeals No. 125/2010 and 128/2010 and order dated 01.05.2012 passed by the same Commission in appeals no. 350/2012, 110/2012, 111/2012, 112/2012 and order dated 01.08.2012 in appeal no. 234/2012. This single order shall dispose of all seven revision petitions and a copy of the same be placed on each file.

The facts involved are that the complainants in all these cases became members of a Cooperative House Building Society, known as ''the Nectar Cooperative House Building Society'' with its operating office at SCO No. 208-209, Top Floor, Sector- 34A, Chandigarh, which is stated to have been formed with the objective of constructing flats/allotment of plots to its members at Sector-74A, Mohali, Punjab. The President of the Society is Sudeep Singh Sabharwal, resident of house no. 1285, Sector-34, Chandigarh. Smt. Kulwinder Kaur is the cashier of the Society, whereas the petitioner, Raj Kumar Goyal is the Vice-President of the Society and the petitioner Balkar Singh is stated to be the Secretary of the Society. The complainants, alongwith many other persons, were enrolled as members of the said Society by making payment of Rs. 510/- vide receipts on different dates. The complainants were also made to pay requisite membership fee of Rs. 10,500/- vide receipts issued on different dates. It has been alleged in the complaints that a sum of Rs. 1 lakh was also paid by the complainants in cash for which no receipt was issued. In addition, a sum of Rs. 5 lakhs was deposited by the complainants with the Society and hence, in total a sum of Rs. 6,10,500/- was paid by the members for obtaining flat/plot through the Society. It has been alleged in the consumer complaints that they had been assured by the petitioners that land had been purchased for the construction of flats etc. and the work shall be started very soon. However, even after lapse of sufficiently long time, no construction work of any sort was started by the Society, neither the possession of the proposed site was delivered to the Society. The requisite approvals/permissions for raising the construction were also not received. The complainants then wrote letters on various dates to the Society for refund of the amounts deposited by them, but on the failure of the OPs to give the said refund, the consumer complaints in question were filed. It has been alleged that the petitioner Raj Kumar Goyal being the Vice-President and Balkar Singh as Secretary took an active interest in enrolling the members and collecting money from them.

In complaint no. 1096/2008 filed by Malwinder Singh Battu and his wife Mrs. Manpreet Kaur, it was stated that Balkar Singh and Raj Kumar Goyal got the Society registered in the name and style of ''the Nectar Cooperative House Building Society'' with its administrative office at SCO No. 208-209, Top Floor, Sector- 34A, Chandigarh. Balkar Singh was stated to be the Secretary and Raj Kumar Goyal was stated to be the Vice President of the Society, and they were in charge of running the day to day work. They used to collect money for raising the Society and do all work related to the Society. It was stated that Balkar Singh met the complainants at house no. 2854, Sector 38C, Chandigarh and induced them to become the members of the Society for the allotment of a flat. He assured them that the land had already been purchased by the Society and construction work would start soon. On his assurance/inducement, the complainants paid membership fee of Rs. 10,500/- and they were enrolled as members of the Society. Another sum of Rs. 1 lakh was paid in cash through Balkar Singh for which no receipt was issued by him. Thereafter, the complainants paid a sum of Rs. 5,00,500/- on different dates to the Society. The said Balkar Singh had been telling the complainants that the site plans had been prepared and ''bhumi pujan'' would be done in December, 2006, but the same was not performed as promised. When the complainants asked Balkar Singh to show them the papers relating to construction on the land purchased by the Society, he neither showed them the papers, nor specified any date or month for starting the construction, rather issued them a share certificate dated 01.12.2006. When the complainants came to know that the registered deed for the land meant for construction of flats, had not been executed by the Society, they sent letter dated 28.03.2007 to the Society requesting for refund of the amount paid. However, despite sending a legal notice, the refund was not given. The consumer complaint was then filed seeking refund of Rs. 6,10,500/- alongwith interest @ 18% per annum from the date of payment till realization, Rs. 5,00,000/- for compensation for mental agony and Rs. 5,000/- towards litigation expenses.

The facts stated in the complaints filed by the other parties and the amount of money paid, are almost similar; only the dates of payment etc. are different in different cases.

In all these cases, it has been recorded by the District Forum that Sudeep Singh Sabharwal, President of the Society and Smt. Kulwinder Kaur, Cashier did not put in appearance before the District Forum, despite appropriate service of notice and were proceeded against ex-parte. However, Raj Kumar Goyal, Vice President and Balkar Singh, Secretary appeared before the consumer fora below and contested the case.

It has also come on record that the said Society has since been brought under liquidation as per the orders passed by the Assistant Registrar Cooperative Societies, Kharar, Punjab and a liquidator has been appointed. In the petitions before us, Mukhtiar Singh, Inspector, Cooperative Societies has been stated to be the liquidator.

In the joint written reply filed by the present petitioners, Raj Kumar Goyal and Balkar Singh, it was stated that the Registrar, Cooperative Societies had already taken cognizance of the matter and appointed a liquidator, vide order dated 23.04.2007, who had taken the affairs of the Society in his hands and hence, the complaint against them was liable to be dismissed. It was further stated that there was no relationship of consumer and service provider between the parties and that all members of the Society including the petitioners were similarly placed, and the decisions were being taken unanimously. They also stated that the jurisdiction of the consumer fora was barred under the provisions of the Punjab Cooperative Societies Act, 1961. According to them, there were 269 members of the Society, out of which 207 members had applied for flats and the remaining 62 had applied for plots. It was further stated that the Society had decided to purchase 22 acres of land vide agreement dated 30.09.2006 and the sale deed was to be executed on 30.09.2007. A total amount of Rs. 2,73,34,000/- was paid as per agreement to sell, but 212 members had not paid the whole amount, due to which the sale deed could not be executed. The OPs stated that members of the Society could not be impleaded in the case in their personal capacity. It was denied that any cash payment was received from the complainants.

The District Forum, after taking into account the averments of the parties, passed their order on 17.02.2010 in Consumer Complaint No. 1096/2008 filed by Malwinder Singh Battu & Ors. and directed that in the first instance, the liquidator shall make payment of Rs. 5,10,500/- alongwith interest @ 9% per annum from the date of payment by the complainants till realization and a litigation cost of Rs. 5,000/- to the complainants within three months of the date of order. In case, the said amount was not paid by the liquidator, the remaining amount or the entire amount as the case may be, shall be paid jointly and severally by Balkar Singh and Raj Kumar Goyal to the complainants within a period of one month from the expiry of the said period of three months. Being aggrieved against the order of the District Forum, the liquidator Mukhtiar Singh as well as the OPs Balkar Singh and Raj Kumar Goyal challenged the order of the District Forum before the State Commission by way of three separate appeals, which were decided on 02.11.2010 by the State Commission. The State Commission modified the order of the District Forum to the extent that alongwith Balkar Singh, Secretary and Raj Kumar Goyal, Vice President, Sudeep Singh Sabharwal, the President would also be liable jointly and severally to pay the amount in question alongwith interest and cost as ordered by the District Forum. It was also directed that the liquidator would start liquidation proceedings in accordance with rules and law. Being aggrieved against this order, the petitioner Raj Kumar Goyal and Balkar Singh are before this Commission by way of Revision Petition No. 681/2011 and Revision Petition No. 712/2011 respectively.

In Revision Petition No. 2644/2012, the consumer complaint no. 50/2010 was filed by the complainant Kamal Chaudhary. The District Forum, vide their order dated 18.11.2011, allowed the complaint and directed the OPs No. 1 to 4 i.e. the Society, through its President and Balkar Singh, Secretary, Raj Kumar Goyal, Vice President and Kulvinder Kaur to refund the amount of Rs. 1,11,010/- to the complainant alongwith interest @ 12% per annum and Rs. 5,000/- as cost. An appeal against this order was decided by the State Commission on 01.05.2012, and the said order was upheld. In Revision Petition No. 2645/2012, the complaint no. 224/2011 filed by Inderaswar Agnihotri, was decided vide order dated 02.01.2012 of the State Commission and all the OPs minus the liquidator were directed to refund an amount of Rs. 5,11,010/- to the complainant alongwith interest @ 12% per annum and litigation expenses of Rs. 20,000/-. An appeal against this order was dismissed by the State commission on 01.05.2012, as being barred by limitation and on merits. In Revision Petition No. 2646/2012, the complaint no. 223/2001, filed by Deep Chand Chauhan was decided by the order of the District Forum dated 02.01.2012, and the same order was passed by the District Forum as in the previous case. An appeal against the said order was dismissed vide order dated 01.05.2012, being barred by limitation and on merits. In Revision Petition No. 2647/2012, the complaint no . 225/2011 filed by Rajiv Sethi was allowed by order dated 02.01.2012 and a similar order was passed in this case as well. An appeal against the said order was dismissed by the State Commission on 01.05.2012, being barred by limitation and also on merits. In Revision Petition No. 2885/2012, the complaint no. 185/2011, filed by N. C. Beakta was allowed by the District Forum and the OPs were directed to refund the amount of Rs. 6,00,010/- alongwith interest @ 9% per annum and Rs. 7,000/- as litigation cost. An appeal against the said order was dismissed vide order dated 01.08.2012 of the State Commission, being barred by limitation as well as on merits. Being aggrieved against the order dated 01.05.2012 in the four cases mentioned above and the order dated 01.08.2012 in the fifth case, the petitioner Raj Kumar Goyal is before this Commission by way of Revision Petitions detailed above.

During hearing before me, the learned counsel for the petitioners stated that the Cooperative House Building Society in question was formed by Sudeep Singh Sabharwal, President of the Society, who was doing the business of developing colonies under the name and style of M/s. J. S. Dwellers & Infrastructure (P) Ltd., and his wife Amandeep Kaur and cashier Kulwinder Kaur were Directors in the Company. Although the petitioners were made Vice President and Secretary of the Society, the same was controlled by Sudeep Singh Sabharwal only, who kept the office of the Society at SCO 208-209, Top floor, Sector-34A, Chandigarh, where the said Sudeep Singh Sabharwal and Kulwinder Kaur used to sit regularly. The amounts in question from the members were received by Kulwinder Kaur and she used to issue receipts for the same. The Society for the purpose of purchase of land entered into agreement with M/s. J. S. Dwellers & Infrastructure (P) Ltd. on 30.09.2006 at Mohali. A sum of Rs. 2.73 crores was paid on 12.07.2006 by the Society to the said seller and the date of execution of the sale deed was fixed as 30.04.2007, later extended to 30.07.2007. Since most of the members of the Society had not paid the requisite amounts, the remaining amount for executing the sale deed could not be paid by the Society to the seller and hence, in terms of the agreement, the amount already deposited was forfeited and agreement to sell was cancelled . It has been alleged in the Revision Petition that Sudeep Singh Sabharwal went to USA and delayed his coming to India on one pretext or the other. The said Kulwinder Kaur was also making efforts to go abroad and seeking visa for the purpose. The petitioners got suspicious and obtained the Bank statement of the accounts of the Society from where, they came to know that only the amounts given by cheques had been deposited in the Bank account. A sum of Rs. 1.5 crores was further syphoned off from the account of the Society to the account of M/s. J. S. Dwellers & Infrastructure (P) Ltd. The petitioner stated that to safeguard the interest of the members of the Society, they lodged an FIR No. 503 dated 02.11.2007 under Section 406/420 of IPC in Sector 34, Police Station Chandigarh against Sudeep Singh Sabharwal, his wife Amandeep Kaur and Kulwinder Kaur. It was stated in the same that these persons had induced the general public to become the members of the Society and after collecting a sum of about 4.77 crores, they had syphoned off the money and misappropriated an amount of Rs. 4 crores. The petitioners stated that in fact, they were also a part of group of members of the Society, rather they were the persons watching the interest of the other members of the Society. The said Sudeep Singh Sabharwal was arrested also in the said case. In fact, the Society also went in liquidation and a liquidator was appointed, who took over the assets of the Society and is in control of the affairs of the Society. In fact, it is the liquidator, who is to look after the claims made against the Society, if any and in the process, the executive body of the Society also stands dissolved. The petitioners further stated that the consumer fora below had failed to appreciate that under bye-law 13 of the Society, the liability of a member in the event of Society being wound up, was limited to five times the value of the assured capital subscribed by him. Moreover, the consumer fora below failed to consider that the assets of the Society, which was now under the administrative control of the liquidator, consisted of a sum of Rs. 8 lakhs, lying in the account of the Society with the HDFC Bank. The petitioners also stated that they could not be held liable in their personal capacity towards other members of the Society. There was no evidence to show that the petitioners had received the money paid by the members of the Society and issued receipts in lieu of that. The claims of the members were, therefore, to be settled by the liquidator alone.

The petitioners have also stated that the complaints in question were barred by limitation as prescribed under Section 24A of the Consumer Protection Act, as the same had not been filed within two years of the cause of action having occurred. It was not a case of continuing cause of action, because the complainants had not made prayer for getting possession of the plots, rather they wanted refund of the money deposited by them alongwith compensation. The petitioners have drawn attention in this regard to the orders passed by the Hon''ble Supreme Court in State Bank of India vs. M/s. B. S. Agricultural Industries , (I) 2009 (2) RCR (Civil) 628 (SC) and another order of the Hon''ble Apex Court in Kandimalla Raghavaiah & Co. vs. National Insurance Co. & Anr., as reported in 2009(3) RCR (Civil) 888(SC) .

The learned counsel for the respondents/complainants stated that the petitioners Raj Kumar Goyal and Balkar Singh were the founding members and the office bearers of the Society and they had played an active role in the affairs of the Society by collecting money etc. from the members. It was clear from the facts on record that Sudeep Singh Sabharwal was running a construction company, and the petitioners acted in connivance with him in setting up and running the affairs of the Society. The petitioners also took an active part when the Society entered into an agreement with M/s. J. S. Dwellers & Infrastructure Pvt. Ltd. for the purchase of land and the payment of Rs. 2.73 crores was made by the Society on 12.07.2006. In fact, a further payment of Rs. 20 lakhs was also made on 10.05.2007, while extending the date for execution of the sale deed upto 30.07.2007. The learned counsel argued that the consumer fora have the jurisdiction to deal with the issue in question under Section 3 of the Consumer Protection Act, 1986, even if cognizance of the matter had been taken under the Cooperative law by the Registrar Cooperative Societies. Referring to the orders of the State Commission, the learned counsel stated that the share certificate were signed by Balkar Singh, Secretary, meaning thereby that he had played an active role in the whole affair. The learned counsel further stated that the complaints were not barred by limitation, as this was a case of continuing cause of action. In fact, the actions of the petitioners amounted to a case of embezzlement of the money deposited by the members. The learned counsel argued that the petitioners had filed the FIR against Sudeep Singh Sabharwal etc. just to save their own skin. The learned counsel for the respondents has also placed written arguments on record in Revision Petition No. 2645/2012.

In reply, the learned counsel for the petitioners stated that in addition to the petitioners, there were other promoter members of the Society, who were also responsible if it was to be believed that the petitioners were liable in any manner to provide relief to the complainants.

I have examined the entire material on record and given a thoughtful consideration to the arguments advanced before me.

From the entire facts and circumstances on record, it is made out that the Nectar Cooperative House Building Society Ltd. was floated by a group of persons including its President, Sudeep Singh Sabharwal, Kulwinder Kaur, cashier and the office bearers of the Society, including the petitioners and that they were able to enrol as many as 269 members of the Society and collected huge amounts from them on the pretext of providing flats/plots to them. The President, Sudeep Singh Sabharwal and Kulwinder Kaur, cashier although made respondents in proceedings in the present cases, did not enter appearance at any stage despite service of notice made upon them through publication also. It has been stated by the petitioners that the said Sudeep Singh Sabharwal was dealing in the business of developing colonies under the name and style of M/s. J. S. Dwellers & Infrastructure Pvt. Ltd. His wife Amandeep Kaur and Kulwinder Kaur were directors in the Company. It has also been stated by the petitioners that there was an agreement between the Society under the presidentship of the said Sudeep Singh Sabharwal and M/s. J. S. Dwellers & Infrastructure Pvt. Ltd. controlled by the same person for the purchase of land and a date was also given for executing the sale deed. However, on the pretext that the requisite payments were not made by some members and consequently, the total amount of money could not be paid to the sellers, the part payment made was forfeited. Later on, a liquidator was appointed by the office of Registrar Cooperative Societies, Punjab and the said liquidator is currently managing the affairs of the Society.

From the facts on record, it is clearly admitted by the petitioners Raj Kumar Goyal and Balkar Singh that they were the Vice President and the Secretary of the Society respectively. The share certificate was also signed by the said Balkar Singh, Secretary. It is established from the facts of the case that these petitioners played an active role in handling the affairs of the Society and hence, they cannot escape their liability towards other members of the Society. The State Commission have passed well-reasoned orders in all these cases on 02.11.2010, in the case of Revision Petition No. 681 & 712 of 2011 and on 01.05.2012, in Revision Petition No. 2644 to 2647 of 2012 and on 01.08.2012, in Revision Petition No. 2885/2012. The State Commission have brought out that the present petitioners alongwith Sudeep Singh Sabharwal etc. indulged in unfair trade practice towards the complainants. The State Commission also observed that for their deficiency in service in failing to provide the promised property to the complainants, they were liable to refund the amounts deposited by the complainants alongwith interest and cost, as specified in the respective orders of the State Commission.

The conclusion arrived at by the State Commission in holding the petitioners liable alongwith Sudeep Singh Sabharwal etc. to refund the amounts deposited by the complainants to them is in accordance with law as it is firmly established that the petitioners induced many persons to become members of the Society by making the requisite payments etc. The allegations that Balkar Singh, Secretary met the complainants in complaint no. 1096/2008 at house no. 2854, Sector 38-C, Chandigarh has not been denied anywhere. The petitioners had also been telling the complainants about the purchase of land, preparation of the site plans and the commencement of construction work etc. In case the petitioners felt that Sudeep Singh Sabharwal was playing a dubious role in misappropriating the amount for purchase of land, they should have alerted the other members of the Society against his nefarious designs, but the same was not done. It has, therefore, been rightly held that the petitioners are liable to refund the amount to the complainants alongwith other persons.

The issue whether the office bearers of the Cooperative Society can be personally held liable towards other members and whether they fall under the category of service providers has recently been examined by a three-Member Bench of this Commission in Revision Petition No. 2512 of 2011, Amarjit Singh vs. Gagandeep Singh & Ors. and other allied matters . In the order pronounced on 19.12.2016, it has been held as follows:-

"18. If the Ex-Secretary or the Ex-President or office bearers of any cooperative credit society has exploited the corporate character of the cooperative society for purpose of committing illegality or defrauding other, then the Courts would ignore the corporate character of the Cooperative Credit Society and will look into their reality behind the corporate veil so as to pass appropriate orders to do justice to the parties. Thus, it is clear that if the Ex-Secretary or the Ex-President or office bearers of any Cooperative Credit Society have indulged in misfeasance and fraudulent practice to defraud the people in order to get material gains under the garb of corporate veil they shall also be treated as service providers to the depositors/complainants and held personally responsible for the deficiency in service, if any."

The factual position and evidence brought on record makes it clear that the action and conduct of the petitioners did result in defrauding the other members of the Society and hence, the State Commission rightly held them to be personally liable for refund of the amounts collected to the members of the Society.

In so far as the point of limitation is concerned, the State Commission has dealt with the issue in detail and came to the conclusion that on account of the failure of the OPs in refunding the amount to the complainants, it was a case of continuing cause of action. It is manifestly clear that despite making payments of huge amounts, the members of the Society were not provided the property in question, neither their amount was refunded. The conclusion arrived at by the State Commission that the consumer complaint is not barred by limitation and that this is a case of continuing cause of action, is, therefore, in accordance with law.

In so far as the jurisdiction of consumer fora to handle the matter is concerned, Section 3 of the Consumer Protection Act, 1986 is an additional remedy available to the complainants as it states that:- 3. Act not in derogation of any other law. -The provisions of this Act shall be in addition to and not in derogation of the provisions of any other law for the time being in force.

Even if the issue is to be handled by the officers of the Cooperative Department under the cooperative law, the jurisdiction of the consumer fora to deal with these matters, is not barred and is independent of the action contemplated by such officers.

In a number of landmark judgments given by the Hon''ble Supreme Court, e.g. in Fair Air Engineers Pvt. Ltd. vs. N. K. Modi, III (1996) CPJ 1 (SC), Secretary Thirumurugan Cooperative Agricultural Credit Society vs. M. Lalitha (dead) through LRs., I (2004) CLT 20 (SC), Trans Mediterranean Airways vs. Universal Export, IV (2011) CPJ 13 (SC) and State of Karnataka vs. Vishwabarathi House Building Cooperative Society, I (2003) CPJ 1 (SC) , it has been laid down that the provisions of the Act are to be interpreted broadly, positively and purposefully to give meaning to additional/extended jurisdiction. It is clear, therefore, that the consumer fora below have rightly exercised their jurisdiction to deal with the matters in hand under the Consumer Protection Act, 1986.

In view of the facts stated above, it is held that the orders passed by the consumer fora below do not suffer from any irregularity, illegality or jurisdictional error of any kind and the same are upheld. The present Revision Petitions are ordered to be dismissed, being without any merit.

It is further stated that in the order dated 02.11.2010, passed by the State Commission, a direction was made to the liquidator to conduct the liquidation proceedings to recover the amount so as to satisfy the claims of the members of the Society. In addition to the directions contained in the orders of the consumer fora below, duly confirmed by this Commission as stated above, the Registrar Cooperative Societies, Punjab, whose role is to supervise the functioning of all Cooperative Societies registered under the Punjab Cooperative Societies, 1961 and allied legislation, is directed to ensure that sufficient steps are taken in accordance with law to ensure that relief is provided to the individual members of the Society by way of refund of the amounts deposited by them with the Society, as early as possible. The Registrar Cooperative Societies, Punjab shall take all necessary steps towards that direction to ensure equity, justice and fair play to the members of the Society, who have been duped by a group of persons, handling the affairs of the said Cooperative Society.