SIPANI AUTOMOBILES LTD. vs KM.KAMNA Lall

ALL these appeals relate to the same point and the same question of law, and facts are involved in all these appeals. Hence they are being taken together and are being disposed of by a common judgment.

THE facts of the case stated in brief are that M/s. Sipani Automobiles Limited issued an advertisement for sale of Montana diesel car. For purchase of this car, a sum of Rs. 10,000/- was asked for by the Company as deposit. All the applicants, who are the complainants, deposited the required amount of Rs. 10,000/- with Sipani Automobiles Limited as booking amount. As the delivery of the car was not made at all, all the persons who booked the car filed complaints before the District Forum concerned for refund of the amount of Rs. 10,000/- alongwith interest. The learned District Forum decreed the claim of the complainants for recovery of Rs. 10,000/- alongwith interest at the rate of 18% per annum from the date of deposit till the date of payment.

Aggrieved against the order of the District Forum concerned, the manufacturer of the car, M/s. Sipani Automobiles Limited, have come in appeal and has challenged the correctness of the order.

WE have heard the learned Counsels for the parties. Learned Counsel for the claimants has argued that there is a deficiency in service on account of the fact that the booking amount was deposited by the complainants for purchase of Montana car but the same was not delivered and the amount deposited as booking amount has also not been refunded. There has been a consistent view that if a service is to be rendered by a person in consideration of the amount paid and if that service is not rendered in time or is not rendered at all, then it will amount to deficiency in service. On account of the deficiency in service, if the party fails to honour its commitment, it has to refund the amount alongwith interest and will also be liable to pay for the compensation if the District Forum or the Commission finds it justified on the basis of evidence on record. In the present case as seen in the earlier part of the judgment, the complainants had booked a diesel car and deposited the amount. If Sipani Automobiles Limited could not manufacture its cars for any reason whatsoever, then it was its duty to have refunded the amount of deposit alongwith interest to the depositors. But as the manufacturers of the car has failed to refund the amount, it amounts to deficiency in service and the District Forum has jurisdiction to order for refund of the amount alongwith reasonable rate of interest.

THUS on the basis of evidence on record and the facts of the case we come to the conclusion that there was a deficiency of service on the part of Sipani Automobiles Limited in not delivering the car or in not refunding the amount alongwith interest to the depositors who had filed the claim petition before the District Forum. Learned Counsel for Sipani Automobiles Limited has raised legal question to the effect that on account of certain difficulties faced by the Company, it could not manufacture the car as the licence to do so was not granted to the manufacturers and the Company had to stop manufacture of the car mid-way after delivering certain number of cars. According to learned Counsel as the financial condition of the Company had deteriorated and it was not in a position to refund the entire amount to the depositors, hence it applied under Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as ''Act'') for declaring the Company as a sick industrial company. According to learned Counsel the Board for Industrial and Financial Reconstruction (hereinafter called BIFR), has already taken cognizance of this application and has taken action and declared Sipani Automobiles Limited as a sick industrial company. According to learned Counsel, under Section 22 of the Act, all the legal proceedings etc. against this Company shall remain suspended and no decree can be executed against Sipani Automobiles Ltd. and no proceedings pending before any authority can proceed and is to be stayed. This position of law has been contested by the learned Counsel for the complainant. According to the learned Counsel for the complainant, Sipani Automobiles Limited has not been declared to be a sick industrial company by the BIFR and as such the decree passed against Sipani Automobiles can be executed and the case or any other suit or proceedings can be continued till a final order is passed. Now in order to resolve this controversy we will have to refer to the provisions of the Act. A perusal of Section 15 of the Act will go to show that a reference is to be made to the Board whether industrial Company has become a sick industrial company. The Board of the Directors of the company shall, 60 days from the date of finalization of the duly executed accounts of the Company, will make a reference to the Board for determination of the measures which are to be adopted. Thus when a reference under Section 15 is made by the sick industrial company, the Board (which means Board for Industrial and Financial Reconstruction which has been established under Section 4 of the Act) will make an enquiry as it deems fit whether the industrial company has become a sick industrial company or not. The Board is required to decide the reference expeditiously by making enquiries under Sub-section (1) of this section and an operating agency is to be appointed for such matters as it may deem fit. If no operating agency is made then the Board has to decide and complete the enquiry within the period of 60 days from the date of commencement of the enquiry. The enquiry under this section is deemed to have commenced upon the receipt by the Board of the reference. The Board has also been given powers to appoint one or more persons as Directors or Special Director for safeguarding the financial and other interests of the Company in public interest.

THE next case which comes into play is Section 17 which provides for making a suitable order on completion of enquiry under Section 16 of the Act. If the Board is satisfied on the basis of the enquiries so made that the Company has become a sick industrial company, shall decide the matter under Section 18 of the Act. After an order under Sub-section (3) of the Section 17 of the Act, the operating agency shall prepare a scheme for providing that the financial reconstruction of the sick industrial company or for any other matter mentioned in this section.

THEREAFTER the most important Section 22, Sub-section (1) comes into play in which the suit or proceedings are stayed. For the sake of convenience this section is reproduced below : "Where in respect of an industrial company, an enquiry under Section 16 is pending or any scheme referred to under Section 17 is under preparation or consideration or a sanctioned scheme is under imple-mentation or where an appeal under Section 25 relating to an industrial Company is pending, then, notwithstanding anything contained in the companies Act, 1956 (1 of 1956) or any other law or the memorandum of articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding up of the industrial company or for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof (and no suit for the Recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans, or advance granted to the industrial company) shall lie or be proceeded with further, except with the consent of the Board or as the case may be, the Appellate Authority."

Sub-sections 4(a) and (b)(ii) of Section 22 also provides for stay of proceedings till the period they will remain stayed. These two sub-sections may also be reproduced for the sake of convenience : "(a) any remedy for the enforcement of any right, privilege, obligation and liability suspended or modified by such declaration, and all proceedings relating thereto pending before any Court, Tribunal, officer or other authority shall remain stayed or be continued subject to such declaration; and (b)(ii) any proceedings so remaining stayed shall be proceeded with, subject to the provisions of any law which may then be in force, from the stage which had been reached when the proceedings became stayed."

Thus a perusal of these sections goes to show that when an enquiry is pending under Section 16 of the Act and under Section 17, a scheme which is under preparation or consideration or has been sanctioned or an appeal under Section 25 of the Act is pending, no proceedings for winding up of industrial Company or for execution, distress or the like and no suit for recovery of the money or enforcement of any security against such company, etc. shall lie or proceed with except with the consent of both. It also provides for all the remedies for the enforcement of any decree which has been passed or any liability or obligations incurred in the Company and of proceedings relating thereto pending in any Court, Tribunal, officer or any authority shall remain stayed. These proceedings shall remain stayed from the stage which had been reached when the proceedings became stayed. The proceedings could also be continued and a decree can be executed only with the consent of both. If both the parties do not consent, the provisions of Section 22 of the Act will apply and all legal proceedings which are pending shall remain stayed.

The Hon''ble Supreme Court had occasions to interpret the provisions of this Act and has held that all the proceedings for execution, distress or like shall remain stayed. The first decision in this series is Gram Panchayat & Anr. v. Shree Vallabh Glass Works Limited & Ors., (1990) 2 Supreme Court Cases 440. The Apex Court referred to the provisions of Sections 16, 17, 18, 19 and 20 and came to the conclusion that a proceeding for execution, distress or like against the properties of the Company will remain suspended and can only be started or taken with the consent of the Board only. The Apex Court also observed that it may be against the principles of equity if the creditors are not allowed to recover the dues from the Company and in such circumstances the creditors may approach the Board for permission to proceed against the Company for recovery of their outstanding dues etc. It further held that if the Board refuses to grant permission, the remedy is not extinguished but it is postponed in view of Sub-section (5) of Section 22 of the Act. Thus the period for which the proceedings remain suspended will be excluded from the period of limitation.

THE next case is Maharashtra Tubes Limited v. State Industrial and Investment Corporation of Maharashtra Limited & Ors., (1993) 2 Supreme Court Cases, 144. THE Hon''ble Court after considering the various provisions of the Act also came to the conclusion that the word "proceedings" which has been used in Section 22(i) of the Act is not confined to the marginal note of the provisions but has to be broadly construed, it being a special enactment dealing with different situations would ordinarily prevail over other Acts. It further held that the words "execution" and "distress" will mean that no coercive action, etc. can be taken till the reference under Section 15 of the Act is disposed of. In para 14 the Hon''ble Supreme Court held as under : "We are, therefore, of the opinion that where an enquiry is pending under Sections 16/17 or an appeal is pending under Section 25 of the 1985 Act there should be cessation of the coercive activities of the type mentioned in Section 22(1) to permit the BIFR to consider what remedial measures it should take with respect to the sick industrial Company. THE expression "proceedings" in Section 22(1), therefore, cannot be confined to legal proceedings understood in the narrow sense of proceedings in a Court of law or a legal Tribunal and sale of the debtor''s property."

The next case is Tata Davy Limited v. State of Orissa & Ors., (1997) 6 Supreme Court Cases 669. It was held that the words "any other law" occurring in Section 22(1) even covered laws made under the State list. Therefore, the arrears of tax, etc. cannot be recovered without the Board''s consent during the continuance of the implementation of the scheme.

NOW we come to the case of Diamond Plastic Industries & Ors. v. Govt. of Andhra Pradesh & Ors., (1998) 9 Supreme Court Cases 121. In this case also provisions of Section 17 and other provisions of the Act were interpreted and it was held that the decision of a dispute by BIFR was held to be binding on the parties. Then we come to the case of Real Value Appliances Ltd. v. Canara Bank & Ors., V (1998) SLT 220=II (1998) BC 357 (SC)=(1998) 5 Supreme Court Cases 554. In this case it was held that as soon as an application by a sick industrial company is made under Section 15 of the Act and the registration of reference is completed after scrutiny, the proceedings against the assets of that Company shall remain suspended under Section 22 of the Act till final order of the BIFR. It, therefore, means that the enquiry must be treated as having commenced as soon as the registration of the reference is completed after scrutiny and thereafter all the proceedings are to remain suspended or stayed under Section 22 of the Act till the matter is finally decided by the BIFR. Thus we see that the provisions of the Act which have been interpreted by the Hon''ble Supreme Court clearly go to show that as soon as a reference, after scrutiny, is registered, all legal proceedings, etc. are suspended and shall remain stayed till the matter is decided by the BIFR. The suspension of proceedings applies to those proceedings which are pending in any Court or Tribunal or any other authority. Thus the scope of Section 22 is very wide and has a sweeping effect to suspend all the legal proceedings pending before any authority. In the present case if we apply those principles, we find that the decree which has been passed by the various FORA shall remain stayed as well as the decisions of appeals filed against those decisions shall also remain stayed till the matter is finally decided by BIFR. Learned Counsel for the complainant has argued that no final order of BIFR has been made till now. Hence the proceedings will not be stayed is not correct proposition of law in view of the interpretation put by the Hon''ble Supreme Court in various decisions which have been referred to in the earlier part of the judgment. Learned Counsel for the complainants have argued that the cases which have already been decided cannot be stayed because the decree has already been passed in those cases irrespective of the fact that an appeal has been filed. This is not correct law. The correct position of law is that an appeal is continuation of the suit and the finality to the decree passed by the District Forum cannot be attached till the matter is finally decided by the Appellate Court or the Appellate Authority.

THUS on the basis of the discussions made above, we come to the conclusion that all the proceedings pending before the District Forum for execution of the decrees passed against Sipani Automobiles Limited or the decisions of present appeals filed against those decisions shall remain stayed against Sipani Automobiles Limited till the matter is finally decided by BIFR.

NOW we take up Appeal Nos. 1494/SC/1997, 2218/SC/1998, 2807/SC/1998, 1983/SC/1998 and 1775/SC/1998 which are being taken up together as the question arises for consideration is the same as to whether a person who booked a car is a consumer or not. The learned District Forum has held that if a person has only booked a car and no delivery of the car has been given to him, then he is not a consumer. If a car is booked and no delivery is made within the time-bound period and the person who has booked the car applies for refund of the money, then he will be deemed to be a consumer within the meaning of Section 2(b)(i) of the Consumer Protection Act. There are number of decisions of different State Commissions and the National Commission on this point that if a car is booked and delivery is not given within the time-bound period, then there is a deficiency of service and the person who has booked the car is entitled to claim the amount deposited by him alongwith interest. Few such decisions are Sipani Automobiles Ltd. v. Susheela Gupta, III (1996) CPJ 306 and M/s. Wheels World of Ambala v. S.D. Verma, II (1992) CPJ 568. Thus in view of the position of law that if a car has not been delivered and the refund is applied for, then it is a deficiency in service and Sipani Automobiles Ltd. is bound to return the deposited amount even if that is not asked for and the Company is not in a position to deliver the car within a reasonable time. Therefore, the judgment of the learned District Forum on this point is not correct and is upset.

As we have already held in the earlier part of the judgment that the proceedings shall remain stayed in view of Section 22 of the Act, therefore, the proceedings in these matters shall also stand stayed.

WITH regard to Revision No. 14/SC/1995, M/s. Sipani Automobiles Limited has filed a revision against the order dated 26.8.1995 by which the order of dismissal of the complaint for non-prosecution was set aside. According to learned Counsel the learned District Forum has no jurisdiction to set aside the order passed by the learned District Forum by which the complaint case was dismissed. It is not necessary for us to decide this controversy for the present because even if there is no power to set aside dismissal order, then this Commission, on the basis of facts, can remand this case to the District Forum for trial according to law. A perusal of the order of the learned District Forum goes to show that after the complaint was dismissed for default, on the same day at 1.40 p.m. the learned Counsel for the complainant appeared and signed the order sheet. He had placed the facts of his absence before the District Forum which prevented the learned Counsel for being absent at the time of calling of the case. The reason given by the learned Counsel was that he was busy in the Hon''ble High Court. Thus the cause which was shown by the complainant is sufficient and in our opinion an opportunity should be given to the complainant to pursue his complaint and the opposite party should fight out the case on merit than to raise technical pleas. Therefore, the setting aside order of dismissal even though without jurisdiction is being sustained because the remand can be done by the District Forum, but in order to settle the controversy and dispute for all time to come, the complaint shall be tried and disposed of by the District Forum according to law. This revision is dismissed and the order for setting aside the dismissal order even though was beyond the power of the District Forum as argued is maintained. In view of the earlier finding that the case shall remain stayed in view of Section 22 of the Act, therefore, the complaint case shall remain stayed.

AS far as Revision No. 91/SC/1997 is concerned, this Revision has been filed by Sri Dinesh Sipani against the order dated 23.4.1997 passed by District Forum, Banda. The contention of the learned Counsel for the applicant is that proper procedure during execution has not been followed. A perusal of order goes to show that the decree passed by Kerala State Commission was sent to State Forum for directing compliance. It has further been mentioned that from the letter from District Forum, Bangalore that it is apparent that no compliance has been done by Dinesh Sipani on behalf of Sipani Automobiles Limited. The District Forum straightaway went to punish Dinesh Sipani and ordered that opposite party should be sentenced for simple imprisonment for a period of three months. A perusal of Sections 25 and 27 of Consumer Protection Act will go to show that certain procedure has to be followed before taking any action against the judgment-debtor. In the present case when the application was moved for execution a notice has to go to the opposite party and only thereafter proceedings be begun, but in the present case straightaway the party was sentenced without affording any opportunity to Sipani Automobiles as to why the compliance has not been made. M/s. Sipani Automobiles Ltd. did not file any objection to that notice in spite of knowledge of the order passed against him. AS this procedure has not been followed, the straighway passing of order of conviction is not proper and is set aside. The learned District Forum should, after remand and after vacation of stay, give opportunity to the other party to file objections and then dispose of the same according to law, if any objection has been filed. Thereafter the coercive process can be taken against the opposite party. Therefore, this case is to be remanded to the learned District Forum for following proper procedure under Sections 25 and 27 of the Consumer Protection Act. As the matter is being remanded to the District Forum, the execution proceedings shall proceed in accordance with the provisions of law only after the stay against the Company is vacated, but as the entire proceedings are liable to be stayed in view of Section 22 of the Act, the execution application of the complainant shall also remain stayed. Order Thus all the appeals and revisions mentioned above are disposed of as above. The implementation of this judgment shall remain stayed till the Board for Industrial and Financial Reconstruction vacates the stay order. The execution proceedings started in various District FORA on the basis of decree passed in favour of the complainants shall also remain stayed as aforesaid. Appeals and Revisions disposed of.