BRAHAM DUTTA AGARWAL vs SAN TUBES LTD

WHETHER the private placement or purchase of shares of a Public Limited Company and their subsequent non-delivery would come within the ambit of a consumer dispute? This indeed is the threshold significant question in this set of 22 connected appeals.

FIRST Appeals No.486 to 507 of 1993 are all directed against the same order of the District Forum, Hisar dated the 30th of September, 1993 declining to intervene and grant any relief and dismissing the three connected sets of complaints before it. At the very threshold learned Counsel for respondents No. 1 to 3 Mr. Suman Jain took up the categories stand that the appellants did not even remotely come within the definition of a consumer under the Act and consequently neither the complaints nor the present appeals are at all maintainable. It was highlighted that the District Forum in para 7 of the order had interims noticed that the status and the locus standi of the complainants was challenged on the ground that they were not consumers because they have neither purchased anything from the Company nor hired any services for consideration. Nevertheless the District Forum instead of addressing itself to this fundamental flaw had skirted this basic issue without pronouncing thereupon and proceeded to ramble further by rejecting the bar of limitation and adverting to the merits of the case though relief was ultimately denied on an ancillary ground. Mr. Suman Jain''s spear head argument was that the appellants have first to cross the hurdle of being not consumers and establish their locus standi before the merits of the individual cases can even be entered into. Firm reliance was placed on the decision of this Commission in III (1993) CPJ 1721, M/s. Pfizer Ltd. v. Hansaf Singh and on the decision of the National Commission in II (1993) CPJ 216 (NC), Sqn. LDR. Gurdial Singh & Ors. v. United Land & Housing Ltd

On the other hand Mr. P.K. Mutneja, learned Counsel for the appellants in all the appeals in a persistent argument had first taken the somewhat ambivalent stand that his case was both that of the defective goods or a deficiency in services. However faced with the binding precedent of the National Commission in Sqn. LDR. Gurdial Singh & Ors. v. United Land & Housing Ltd. & Ors. (supra) he conceded that the question of hiring of service could not be possibly urged and consequently be confined himself to the allegation that the some came within the sale of defective goods. The judgment of this Commission in M/s. Pfizer Ltd. v. Hansaf Singh (supra) was sought to be distinguished on the ground that the present was a case of completed allotment of snares and not merely one of an application therefor. It was tenuously argued that non-delivery of shares was triable within the consumer jurisdiction and reliance was vaguely placed on Clauses (b), (c), (d), (e), (g), (i) and (o) of Sub-section (1) of Section 2 of the Act. Support was sought from the observations of the Rajasthan State Commission in I (1993) CPJ 215, Ram Kumar Ashwani & Anr. v. M/s. A.K. Structural Foam Ltd.

TO cut the Gordian knot of the rival submissions we may record at the very outset that we are firmly inclined to the view that the threshold objection of non-maintainability by the learned Counsel for the respondent No. 1 to 3 Mr. Suman Jain must be upheld. In our view even taking the appellant''s case at the highest they would not within the ambit of the definition of a consumer on principle and equally so in view of our earlier decision in M/s. Pfizer''s case (supra) and the binding precedent of the National Commission in Sqn. LDR. Gurdial Singh''s case (supra). In view of the above, it would be obviously wasteful to overly elaborate the matter and even the facts merit notice succinctly and with relevance only to the issue whether the complainant-appellants are consumers or not for the purpose of the Act. It suffices to mention that in the three sets of complaints clubbed together for trial the complainants had made a grievance with regard to the purchase of shares by them from M/s. San Tubes Limited, M/s. San Electronics Limited and M/s. Panson India Limited having their head offices at New Delhi. One Shri JP Aggarwal was duly constituted attorney of all the complainants and in that capacity had signed and verified the complaints. It was the allegation that Smt. Geeta Devi and her son Sanjiv Bansal and Shri Sant Lal a brother of Smt. Geeta Devi were the Directors of all the three Companies. The allegation was that large sums had been deposited by the complainants in the three Companies for the purchase of their Equity shares out of the promoters quotas. However the shares applied for were not allotted to them and further were not despatched and the deposited amounts were wrongfully retained to the detriment of the complainants. The details of the respective sums allegedly deposited by numerous complainants with M/s. San Tubes Ltd; M/s. San Electronics Ltd; and M/s. Panson India Ltd. ranging around Rs. 50,000/- and above were given in the relevant complaints. It was the case of the complainants that the allotment of shares should have been made in favour of the complainants immediately on the receipt of the money, but the same were neither allotted nor delivered despite the passage of considerable time. Apprehensions were expressed in the complaints that the shares had in fact not been allotted or in the alternative they had never been despatched or received by the complainants. Further claim was that in any case representation had been made to the respective Companies and its Directors to refund the deposited amount with interest at 24% but no action was taken at all by the Companies to the great prejudice of the complainants. Consequently relief in the terms indicated above was sought by all the complaints preferred as already noticed through Shri JP Aggarwal.

ON notice being issued the strenuous threshold preliminary objections were raised by the opposite parties. It bears repetition that the very locus standi of the complainants was challenged on the ground of their being not consumers within the Act and further that the District Forum at Hisar had no territorial jurisdiction to entertain the same further that in any case the complaints were barred by limitation. The allegations on the merits were also controverted. The District Forum proceeded to consolidate all the cases in a single trial and disposed them off by the same order on the ground that the facts claimed and allegations levelled by the complainants and further reply filed by the contesting respondents are similar and identical in nature. However, somewhat surprisingly the District Forum despite noticing the fundamental objection of the complainant-appellants'' being not consumers evaded the issue altogether and proceeded to decide all the complaints in an exhaustive order running into 24 pages on ancillary grounds. It is manifest from the aforesaid resume of the relevant facts that the complainant-appellants case was that the amounts were deposited with the respondent-Limited Companies for allotment of shares either out of the promoters quota or otherwise. It was the complainant''s own case that either the shares had not been allotted at all and the money misappropriated or in any case the said shares were not dispatched or delivered to the complainant-appellants. The core question, therefore, is whether on these facts of appellant''s own showing they would be consumers in the eye of law. Since we are of the view that the matter is covered by precedent it is unnecessary to launch on any exhaustive dissertation on principle and the language of the statute. Herein there is no dispute that according to the definition in the Sale of Goods Act the shares do come within the definition of goods. However, it is the appellant''s own case that the said shares were either not in fact allotted at all but in any case not delivered to any one of the complainants. Since the alleged goods were not even delivered, any question of there being defective becomes entirely hypothetical and conjectural. As already noticed learned Counsel for the appellants Mr. Mutneja has fairly conceded that there is no question of hiring any service or deficiency arise. In such a situation all that would remain is the question whether the non-delivery of shares can in any way be deemed as the defect in the allegedly purchased goods.

IN view of binding and persuasive precedent it is unnecessary to traverse the same ground over again. It suffices to mention that the closely connected if not identical question came up for exhaustive consideration before this Commission in M/s. Pfizer Ltd. v. Hansaf Singh (supra). Therein after an in-depth consideration of the car issued involved, it was concluded as follows:- "IN the light of the somewhat exhaustive discussion, of principle, the language of the statute and precedent, the answer to the question posed at the out-set has to be rendered in the negative. It is held that the unsuccessful applicants seeking allotment of shares in the public issue floated by incorporated companies are not consumers within the meaning of the definition under the Act."

The aforesaid ratio directly or by way of analogy goes deeply in aid of the stand taken by the respondents. The appellant-complainant''s own tenuous case was that they had merely deposited the money and the shares perhaps were not even allotted to them. That being so they would come close if not totally kin to applicants seeking allotment of shares in public issues floated by the incorporated companies barring the distinction that whether the shares were by allotment of shares out of the promoters quota or otherwise. The earlier view of this Commission thus tilts strongly in favour of the respondent''s stand.

HOWEVER, what seems to conclude the matter is the binding force of the observation of the National Commission in SQN. Ldr. Gurdial Singh & Ors. v. United Land & Housing Ltd. & Ors. (supra) whilst reversing the contrary view of the State Commission, Chandigarh. The relevant paragraph 4 merits notice in extenso:- "After having heard both sides, we have come to the conclusion that First Appeal No. 124/92 filed by the Company has to be allowed and its contention that the complaint did not raise a "consumer dispute'' has to be accepted. The transaction between the parties was plainly one of sale of shares by the Company to the complainant with a stipulation for re-purchase of the shares within a period of three years. This was purely a transaction of sale of goods with a condition for re-purchase and not an agreement of hiring of any service. There being no defect in the goods sold, there was no cause of action for the complainants to initiate proceedings under the Act in respect of the said transaction of sale of shares. Inasmuch as we have already held that there was no transaction of hiring of service involved in this case, the dispute raised by the complainants cannot be regarded as a consumer dispute that which can be legitimately brought before the Consumer Forum for adjudication under the Act. The resultant situation is that the complainants should not have been granted any relief at all by the State Commission and the complaint petition should have been only dismissed.

It appears to us that the aforesaid ratio concludes the matter against the appellants by holding that the transaction was neither an agreement of hiring service nor any defect in the goods sold and consequently there was no cause of action for the complainants to launch proceedings under the Act in respect of the alleged transaction of shares. Even placing the case of the appellants at the highest, the aforesaid ratio sees to categorically negative the same.

In all fairness we might as well notice Mr. Mutneja''s ingeneous argument that nondelivery of shares would be a defect in the goods and, therefore it would raise a consumer dispute. Since this issue is also covered against appellants by analogy reference may be made to the decision of this Commission in I (1991) CPJ 631, Dr. B.S. Gaba v. Steel Authority of India Ltd. & Another. Therein the said question had fallen for consideration and it was concluded as under:- "To conclude on this aspect, the answer to the second question posed at the outset is rendered in the negative. It is held that in a contract of sale of goods simpliciter mere delay in delivery thereof beyond the agreed date, would not convert it into a deficiency of service within the meaning of the Act."

Lastly reference may be made to Ram Kumar Ashwani & Another v. M/s. A.K Structural Foam Ltd. I (1993) CPJ 215. The said case is plainly distinguishable because therein the matter was merely remanded back in appeal to the District Forum on the short ground that stock and shares were within the meaning of the definition of goods as spelt out in Section 2(7) of the Sale of Goods Act. The said case can not possibly be read as authority for the preposition that an applicant for the shares of a public limited company or the non-allotment or non-delivery thereof would raise a consumer dispute. In any case such a view would now be contrary to the categoric and binding observation of the National Commission in Sqn. Ldr. Gurdial Singh''s case (supra).

TO finally conclude the answer to the question posed at the outset has to be rendered in the negative. It is held that private placement or purchase of shares of a Public Limited Company and their non-delivery does not come within the ambit of a consumer dispute. In view of the aforesaid ratio, it has necessarily to be held that the complainant-appellants were not consumers for the purpose of the Act and inevitably neither the complaints nor the present appeals are maintainable within this jurisdiction. First Appeals No. 486 to 507 of 1993, therefore, must fail on that threshold ground and are hereby dismissed. However, in view of the somewhat ticklish issue involved and the fact that the District Forum did not advert to the same, we leave the parties to bear their own costs. Appeal dismissed.