Reliance Industries Ltd. vs NEERA MAHESHWARI

THE issue involved in this case is whether the Consumer Fora have powers to award damages to the tune of Rs. 500 per day for delayed transfer/non-transfer of share certificate to the complainant/consumer. THE answer is No.

THE complainant Smt. Neera Maheshwari filed a complaint against the respondents Reliance Ind. Ltd. and Carbo Consultants Ltd., Unit of Reliance Ind. Ltd. that after submitting an application in the prescribed proforma she had applied for purchasing 100 equity shares of Rs. 10 each and she had deposited the said application in the authorized Bank of the Company along with a sum of Rs. 500 towards stock invest. Later on the Reliance Ind. on the basis of this application sent her 100 equity shares of Rs. 10 each through their portfolio No. 34442789. Further, through their Notice No. 004998071 dated 24.9.1994 demanded a sum of Rs. 250 @ Rs. 2.50 per share, in accordance with their prospectus dated 14.10.1992 which was paid by the complainant. THE company made second and final demand of Rs. 250 which was paid through the Bank. Case of the complainant: The respondent sent a demand notice dated 25.5.1995 wrongly demanding further sum of Rs. 271.08 a sum of Rs. 500 on 12.2.1996. Despite several letters issued by the complainant, the company has not issued the share certificates, bonus certificates, dividend on the shares as required by the Section 53 of the Companies Act. Accordingly, the complainant filed a complaint before the District Forum seeking following relief: 1. The complainant has suffered a loss of Rs. 500 per day due to not making available the share certificates etc. within prescribed period of three months and hence damages at the rate of Rs. 500 may kindly be awarded in favour of the complainant with effect from November, 1994 upto 12.2.2003; 2. Interest at the rate of 18% may also be awarded in favour of the complainant with effect from 26.7.1996 upto 12.2.2003, for delay in payment of dividend; 3. A sum of Rs. 10,000 towards costs of the complaint, transportation and Counsels fee and a sum of Rs. 20,000 towards physical and mental agony, i.e., a total sum of Rs. 30,000 may also be awarded in favour of complainant and against the respondents;

Certificate of 100 shares of RPEL may also be given to the complainant; Case of the opposite parties : 4. The opposite parties have filed a written statement stating that the complaint is barred by limitation and the complainant has not hired their services and hence he is not a consumer. The opposite party submitted that Section 10 of the Companies Act, 1956 prohibits filing of the case against a company in any Court other than the Court within local jurisdiction of the registered office of the company. They have further submitted as follows:

A perusal of the contents of the complaint reveals that the complaint filed by the complainant is for non-receipt of converted shares against her holding of 100 Nos. of shares in the erstwhile Reliance Polyethylene Ltd. These opposite parties stated that upon verification of the records it was found that the complainant was holding 100 Nos. of shares under folio No. 34442789 in the erstwhile Reliance Polyethylene Ltd. Opposite parties further submitted that erstwhile Reliance Polyethylene Ltd., pursuant to a scheme of amalgamation sanctioned by the High Court, was merged with Reliance Ind. Ltd. with effect from 1.1.1995. In accordance with the scheme of amalgamation, the holders of the shares in the erstwhile Reliance Polyethylene Ltd. were entitled to allotment of shares in Reliance Ind. Ltd. in the ratio of 25 shares for every 100 shares in the erstwhile Reliance Polyethylene Ltd. Accordingly certificates of the proportionate 25 shares in Reliance Ind. Ltd. were also allotted to the complainant during the year 1995 itself. Opposite parties stated that upon further verification of the records, it was found that due to non-confirmation of Stock Invest Application, the amount has not been credited in respect of the above 100 Nos. of shares in Reliance Polyethylene Ltd. and thereby, the conversion shares of the complainant was kept in abeyance. Opposite parties further submitted that the Reliance Ind. have declared bonus shares in the ratio of 1:1 during the period November, 1997 and proportionate 25 bonus shares were issued in the name of the complainant and the same were also kept in abeyance. Upon receipt of the complaint from the complainant, Reliance Consultancy Services Lt. by its letter dated 5.8.1996 requested to provide the proof of payment in respect of the said 100 Nos. of shares in Reliance Polyethylene Ltd. These opposite parties have neither received any clarification nor any certificate from the bank confirming the payment made by the complainant. Thereafter, in order to sort out the grievance of the complainant, opposite parties have issued 50 Nos. of shares (25 Nos. of original shares along with 25 Nos. of bonus shares) bearing distinct Nos. 469962895-919 and 1341387633-657 and despatched the copies of the said certificates under the cover of letter dated 30.8.2002 of Karvy Consultants Ltd. with a request to withdraw the complaint. Since the grievance of the complainant has already been redressed the complaint filed by the complainant being devoid of merit is liable to be dismissed with costs. Orders of District Forum and State Commission:

THE complaint of the complainant seeking compensation @ Rs. 500 per day as per provisions of the Company Act by not transferring the shares in her name within statutory period of two months was dismissed by the District Forum vide order dated 28.3.2003 on the ground that power to award this amount is not vested within the jurisdiction of the District Forum and as such the appellant was advised to seek redressal before the special designated Court. Dissatisfied by the order of the District Forum, Smt. Neera Maheshwari filed an appeal before the State Commission, Delhi. The State Commission held that the Consumer Forum has the jurisdiction to entertain such complaints as it falls under the definition of deficiency in service as per Section 2 (i) (o) of the Consumer Protection Act, 1986. Further non-transfer of shares within the prescribed period can be construed as deficiency in services as per Section 2(1)(g) of the Act, according to the State Commission. In view of the above, the State Commission allowed the appeal, set aside the impugned order and penalized the respondent company directing it to pay Rs. 500 per day as per the provisions of the Companies Act for not transferring the shares within the statutory period of two months.

AGGRIEVED by the order of the State Commission, Reliance Ind. Ltd. has filed this revision petition. When this matter came for admission on 3.5.2005, learned Counsel for the revision petitioner pointed out that: "under the Companies Act in case of non-transfer of shares a sum of Rs. 500 is imposed as penalty. Penalty could not be imposed by the Consumer Fora for deficiency in service. It is also submitted by the learned Counsel that in HUDA v. Sunita, (2005) 2 SCC 479, Supreme Court held that statutory obligations under relevant rules could not be treated as acts or omissions constituting deficiency in service within the meaning of the Consumer Protection Act, 1986".

Accordingly, this matter was admitted and notice was issued to the respondent. Submissions of the learned Counsel for the revision petitioner:

MS. Surekha Raman submitted that the limitation time for issue for share certificate is covered by Section 113 of Companies Act: (1) Every company, unless prohibited by any provision of law or of any order of any Court, Tribunal or other authority, shall, within three months after the allotment of any of its share, debentures or debenture stock, and within two months after the application for the registration of the transfer of any such shares, debentures or debenture stock, deliver, in accordance with the procedure laid down in Section 53, the certificates of all shares, debentures and certificates of debenture stocks allotted or transferred: Provided that the Company Law Board may, on an application being made to it in this behalf by the company, extend any of the period within which the certificates of all debentures and debentures stocks allotted or transferred shall be delivered under this sub-section, to a further period not exceeding nine months, if it is satisfied that it is not possible for the company to deliver such certificates within the said periods. The expression "transfer", for the purposes of this sub-section, means a transfer duly stamped and otherwise valid, and does not include any transfer which the company is for any reason entitled to refuse to register and does not register.

(2) If default is made in complying with Sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees for every day during which the default continues. (3) If any company on which a notice has been served requiring it to make good any default in complying with the provisions of Sub-section (1), fails to make good the default within ten days after the service of the notice, the (Company Law Board) may, on the application of the person entitled to have the certificates or the debentures delivered to him, make an order directing the company and any officer of the company to make good the default within such time as may be specified in the order, any such order may provide that all costs of and incidental to the application shall be borne by the company or by any officer of the company responsible for the default. (4) Notwithstanding anything contained in Sub-section (1), where the securities are dealt with in a depository, the company shall intimate the details of allotment of securities to depository immediately on allotment of such securities."

She submitted that from the above, it is clear that the power vested under Section 113 of the Companies Act cannot be invoked in a complaint filed for alleged deficiency of service before a Consumer Court as has been rightly held by the District Forum.

She quoted Sections 621 and 622 of the Companies Act which requires that a complaint has to be filed before the Magistrate and a trial is necessary before any damages / penalties are imposed under Section 113(2).

LEARNED Counsel also submitted that it is pertinent to mention that the learned District Forum was pleased to record that the share certificates and the dividends had been handed over to the complainant which had been accepted by the complainant and the complaint was disposed of as being satisfied. Learned District Forum in its order dated 13.2.2003, has stated thus: O.P. has brought share certificates and dividend and balance of Rs 240 in cash to A/R of complainant. O.P. has filed a copy of letters showing delivery of documents including shares certificates and dividend warrants upto 2001 along with cash receipt of Rs. 240. If any grievance after 2001, complainant may file separate complaint, if so advised. The order as to costs and damages would hence stands satisfied after this complaint be consigned.

THEREAFTER, the complainant filed an identical complaint bearing Case No. OC/235 of 2003 on the same facts as in OC/324 of 2002 and inter alia prayed that the petitioner be directed to pay to the complainant penalty @ Rs. 500 per day as well as damages. It is pertinent to mention that reliefs sought for by the complainant were identical to the relief claimed by her in her earlier complaint. The learned District Forum vide order dated 28.3.2003 dismissed the complaint as not being maintainable. The learned Counsel for the revision petitioner submitted that the principle constructive res judicata would apply in this case. Hence, the second complaint being on the same issue and between the same parties before the District Forum is not maintainable Accordingly any appeal on this issue also suffered from same infirmity. Submissions of the Respondent : Shri Maheshwari husband of the respondent/consumer appeared in person and explained the case in detail. He forcefully argued defending the judgment and order passed by the State Commission. He read the various provisions of the Companies Act with special reference to Section 113 of the Companies Act.

FINDINGS : (1) The complainant had filed a complaint No. 324/02 before the District Forum, Kasturba Gandhi Marg, New Delhi. It is relevant to mention that the learned District Forum was pleased to record that the shares certificates and the devidents have been handed over to the complainant which were accepted by the complainant and the complaint was disposed of as being satisfied. Thereafter, the complainant filed an identical complaint bearing No. OC/235/2003 on the same facts as in OC/324/2002 and inter alia prayed that the petitioner be directed to pay to the complainant penalty @ Rs. 500 per day for delay in handing over the certificates as well as damages. It is relevant to mention that reliefs sought by the complainant were identical to the reliefs claimed by her in her earlier complaint. The learned District Forum by its order dated 28.3.2003, dismissed the complaint as not being maintainable. Therefore, the principle of constructive res judicata applies in this case.

LEARNED Counsel for the petitioner amplified this by quoting the following citation from the judgment of the Supreme Court. In Jaswant Singh & Anr. v. Custodian of Evacuee Property, (1985) 3 SCC 648, the Apex Court held that: "In order to decide the question whether a subsequent proceeding is barred by res judicata it is necessary to examine the question with reference to the (i) Forum or the competence of the Court; (ii) parties and the representatives; (iii) matters in issue; (iv) matters which ought to have been made ground for defence or attack in the former suit; and (v) the final decision. In order that a defence of res judicata may succeed it is necessary to show that not only the cause of action was the same but also that the plaintiff had an opportunity of getting the relief which he is now seeking in the former proceedings. A cause of action for a proceeding has no relation whatever to the defence which may be set up, nor does it depend upon the character of the relief prayed for by the plaintiff or the applicant. It refers entirely to the grounds set forth in the plaint or the application as the case may be as the cause of action or in other words to the media upon which the plaintiff or the applicant asks the Court to arrive at a conclusion in his favour."

In this connection, it is relevant to point out that most of the provisions of the Civil Court are not applicable to the Consumer Fora barring those mentioned in Section 13 of Consumer Protection Act, 1986.

However, one cannot be oblivious to the concept behind the principle of res judicata. Therefore, repeated complaints on the same subject before the same Forum and between the same parties should not be entertained.

THE bare reading of Section 113(2) of the Companies Act, 1956 as amended reads as follows: "Limitation of time for issue of certificate-If default is made in complying with Sub-section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees (this was Rs. 500 earlier) for every day during which the default continues."

(emphasis and words added) Sections 621(1) and 622 of the Companies Act are quoted below: "621. Offences against Act to be cognizable only on complaint by Registrar, shareholder or Government-No Court shall take cognizance of any offence against this Act (other than an offence with respect to which proceedings are instituted under Section 545), which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registar, or of a shareholder of the company, or of a person authorised by the Central Government in that behalf: Provided that nothing in this sub-section shall apply to a prosecution by a company of any of its officers. (Provided further that the Court may take cognizance of offence relating to issue and transfer of securities and non-payment of dividend on a complaint in writing by a person authorized by the Securities Exchange Board of India.) "622.-Jurisdiction to try offences-No Court inferior to that of a Presidency Magistrate or a Magistrate of the First Class shall try any offence against this Act."

THIS makes it obvious that only Presidency Magistrate or a Magistrate of the First Class shall try any offence under this Act. So the panalty can be imposed only after a trial which obviously means the Consumer Fora can not impose any penalty as prescribed under the Companies Act for alleged delay in the transfer of the shares. This is amplified by the following judgment of the Supreme Court. In M.C. Mehta v. Kamal Nath & Ors., V (2000) SLT 36=III (2000) CLT 5 (SC)=(2000) 6 SCC 213, Apex Court held that: "All the three Acts, referred to above, also contemplate the taking of the cognizance of the offences by the Court. Thus, a person guilty of contravention of provisions of any of the three Acts which constitutes an offence has to be prosecuted for such offence and in case the offence is found proved then alone can he be punished with imprisonment and fine or both. The sine qua non for punishment of imprisonment and fine is a fair trial in a competent Court. The punishment of imprisonment or fine be imposed only after the person is found guilty."

ACCORDINGLY, we hereby allow the revision petition, set aside the order of the State Commission and confirm the order of the District Forum.

IN the peculiar facts and circumstances of the case, there shall be no order as to costs. Revision Petition allowed.