Ravikant vs Mrs Veena Bhatnagar

THIS First Appeal is directed against the common Order dated 15.10.93 passed by the State Commission, Delhi in Complaint Case Nos. C -242, C243, C -255 of 92 & C -82 of 1993 convicting Shri Ravi Kant in all the four cases and Smt. Asha Lata in C -243/92 under Section 27 of the Consumer Protection Act, 1986. Consequently Shri Ravi Kant was sentenced to undergo one years simple imprisonment and to pay a fine of Rs. 5000/ - in each of the four cases. In case Shri Ravi Kant failed to pay the fine, he was directed to further undergo simple imprisonment for a period of three months and the sentences were to run concurrently. A fine of Rs. 10,000/ -was imposed on Smt. Asha Lata and in default of payment of fine she, was to undergo simple imprisonment for a period of one month.

TINE background of the appeal may first be noticed. Shri Ravi Kant Managing Director and Smt. Asha Lata, Director, who are husband and wife floated and got incorporated two Companies namely Instant Growth Funds (P) Ltd. and I.G.F. Leasing (P) Ltd. The Companies advertised and offered handsome interest of 36% per annum and 100% security of money by way of post -dated cheques and received deposits from the complainants and others. The said two companies failed in their service in refunding the deposits when due and the cheques were dishonoured on presentation. The complainants obtained decrees from the State Commission, Delhi against the said two Companies. In some of the case Shri Ravi Kant and Mrs. Asha Lata were parties in individual capacity and in those proceedings decrees have been passed against them also. As the opposite parties failed to comply with the Orders passed by the State Commission by paying the amount decreed within the period of three months, the opposite parties are liable to be prosecuted and punished under Section 27 of the Consumer Protection Act, 1986. This is what the State Commission did by a very detailed and reasoned order and convicted and sentenced the appellants. The appellants filed the present appeal and prayed for stay of the operation of the impugned order. This Commission did not find any valid or adequate ground for the grant of stay and rejected the application for stay in the order dated 13.12.93. The Appellants again approached this Commission for stay due to certain changed circumstances. This Commission by order dated 15.5.95 directed that the Petitioners shall deposit in the Registry of the State Commission within the period of three weeks from that day one -half of the entire amount payable by them as on the date of deposit under the basic order passed by the State Commission which was sought to be enforced under Section 27 of the Consumer Protection Act, 1986. It was further directed that in case such deposit was made the amount so deposited would be paid over by the State Commission to the complainants and if the Appellants complied with the directions given above regarding the deposit of one -half of the amount payable by them under the State Commissions order within time stipulated above the proceedings for the arrest of Shri Ravi Kant and detention under Section 27 of the Act would remain stayed until final disposal of the appeal by this Commission. If, however, default was committed, by the Appellants in the matter of compliance with the conditions stipulated above, there would be no stay of enforcement of the proceedings and the Miscellaneous Petition No. 863/93 would stand dismissed. The Appellants did not comply with the conditional order of stay and filed another affidavit that the Appellants are not in a position to pay the amount as they have no funds or properties, movable and immovable.

WHEN the appeal came up for final hearing on 22.9.95 it was part heard. This Commission recorded that the conditions stipulated in our order dated 15.5.95 had not been complied with by the Appellants and thus the stay granted as per that order stood vacated and the order of imprisonment passed against the Appellant would be implemented. The final arguments were heard on 1.11.95 when the order was reserved. The main submission made at the time of hearing is that the Company is in process of liquidation and the Honble Company Judge of High Court of Delhi in the order dated 3rd June, 1992 had already given charge of the Company to the Official Liquidator attached to the Honble Company Court, that all proceedings are liable to be stayed against the Company by virtue of the provisions of Section 446 of the Companies Act and further more the Company after appointment of the Official Liquidator/Provisional Liquidator the charge of the Company goes in the exclusive hands of the liquidator and the Company can exclusively be represented through Official Liquidator and that no attachment or recovery can be made or enforced against tine Company by virtue of the provisions of Sections 441,442,446 and 537 of the Companies Act and in such cases the provisions of the Companies Act are to be followed as also by the Redressal Forum functioning under the Consumer Protection Act. It is further argued that a decree holder cannot resort to the recovery by way of simple execution in case of Company which is under process of liquidation, and the only remedy in such cases is to approach the concerned Company Court under the provisions of preferential payments under Section 530 of the Companies Act.

ADMITTEDLY no winding up order has been passed of the two companies. The State Commission considered the provisions of 446 of the Companies and held, in our view rightly that from the reading of Sub -section (1) of Section 446 of the Companies Act 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 date these can continue till the date when winding up orders are passed by the Court. The proceedings before the State Commission thus could continue inspite of the fact that a Provisional Liquidator has been appointed by the High Court for I.G.F. Leasing (P) Ltd. as the cases were pending on the date of the appointment of the Provisional Liquidator. It was also feebly urged that the Directors were not personally liable to pay the decretal amount and, therefore, no complaint could be filed under Section 27 of the Act against the Appellants personally. The State Commission rightly came to the conclusion that action can be taken against the Appellants under Section 27 of the Act and observed that a command to a Corporation is in fact a command to those who are officially responsible for the conduct of the affairs of the Company. If after being apprised of the order directed to the Corporation, they prevent compliance or fail to take appropriate action, within their power for the performance of duty of obeying those orders, they and the Corporate Body, are both guilty of failure in the compliance of the orders. The Corporate veil has rightly been lifted and the Managing Director and the Director who have failed to comply with the basic orders of the State Commission, besides being personally liable under some decrees to discharge the obligations of the payment of decretal amount, have been rightly convicted and sentenced. We uphold the conclusion and the sentence awarded by the State Commission in the impugned order. For the above reasons, the appeal fails and is dismissed with costs assessed at Rs. 2000/ -. Appeal dismissed.