SOL PHARMACEUTICALS LIMITED vs SHYAMALA KHEMANI

THIS is an appeal against the order dated 7.12.1998 passed in Case No. 246/98 by the District Consumer Disputes Redressal Forum, Raipur (for short the ''District Forum'').

THE appellant is a registered Company under the Companies Act, 1956 (for short ''Companies Act'') having its registered office at 5-9-88/2, Saphire Building, Fateh Maidan, Hyderabad - 500 001. THE respondent purchased Alday Cash Bond Scheme of Rs. 62,500/- from the appellant of the maturity value of Rs. 77,500/- which included interest at the rate of 18 per cent per annum till the date of its maturity. On demand the maturity amount was not paid, hence the respondent filed a complaint before the District Forum. THE appellant filed its written statement but did not appear to contest the case. THE District Forum after appreciation of evidence ordered to make the payment of the maturity value with interest at the rate of 18% from 1.3.1998 and Rs. 500/- as cost of the proceedings. In the memo of appeal main ground of the contention is that a winding-up petition under Section 434 of the Companies Act read with Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short the ''SIC Act'') before the High Court of Andhra Pradesh, is pending against the appellant and, therefore, the complaint was not maintainable, hence the order of the District Forum is liable to be set aside. The appellant Company has also made a reference before the Board for Industrial and Financial Reconstruction (for short BIFR) and a Case No. 236/98 has been registered by the BIFR, therefore, till the final order is passed after inquiry under Section 22 of the SIC Act, all proceedings in respect of financial assets of the Company shall remain suspended. Appellant has referred in the memo of appeal a decision of Supreme Court in Real Value Appliance Ltd. v. Canara Bank, AIR 1998 SC 2064, and a decision of National Commission in Standard Motor Products of India Ltd. v. M. Mohan Rao, III (1994) CPJ 118 (NC). Besides, the complainant is not a consumer as defined under Section 2(1)(d) of the Consumer Protection Act, 1986 (for short the ''Act'') and that the District Forum had no territorial jurisdiction to admit the complaint.

Learned Counsel for the respondent submitted that the appeal has not been filed with the certified copy of order, as required by Sub-rule 3 of Rule 8 of M.P. Consumer Protection Rules, 1987 (for short ''Rules'') which speaks that "Each memorandum shall be accompanied by the certified copy of the order of the District Forum appealed against and such of the documents as may be required to support grounds of objection mentioned in the memorandum". The appeal is also barred by time as not filed within thirty days from the date of the receipt of the order.

THE contention about the incompetency of the appeal deserves consideration, but, we are not inclined to dismiss the appeal as incompetent and deal this appeal on the merits of the ground raised in the memo or appeal. The contention that the deposit holder is not a consumer as longer res-integra in view of the decisions of the National Commission in case of Neela Vasant Raje v. Amogh Industries & Anr., III (1992) CPJ 540=1993 (3) CPR 343 (Delhi), and Dhanalakshmi Consolidates Industries Ltd. v. C.S. Menon, III (1993) CPJ 299 (NC), wherein it has been held that when a Company or firm invites deposits promising attractive rates of interest, it amounts to rendering of financial services as it receives deposits from customers and pays interest therein. The consideration for the hiring of the services is the payment of the deposit for a fixed term so as to enable the Company to invest or utilise the money for earning profits, therefore, the deposit holder-the complainant would be a consumer within the meaning of Section 2(1)(d) of the Act.

THE contention that the District Forum lacks territorial jurisdiction is devoid of merit. THE amount paid for purchase of Alday Cash Bonds by the respondent was received by the appellant''s representative locally within the territorial jurisdiction of the District Forum and after receipt of the amount by cheque, the bonds were delivered to the respondent, the maturity amount was payable to the respondent within the territorial jurisdiction of the District Forum, therefore, when payment of the maturity amount was not made the cause of action, wholly or in part arose within the territorial jurisdiction of the District Forum under Section 11(2)(c) of the Act. The contention that in view that the winding-up petition pending before the High Court of Andhra Pradesh, the Consumer FORA had no jurisdiction is also of no substance. The question was considered by the National Commission in case of Dhanalakshmi Consolidates Industries Ltd. v. C.S. Menon & Ors. (supra), wherein the National Commission has ruled that mere pendency of such a petition for winding-up is no bar to the entertainment and disposal of the complaint by the Consumer FORA. Such a bar will be only when the order for winding-up of the Company is passed by competent Court. No such order has been placed before us nor in the memo of appeal there is mention of it. The question was also considered by the Delhi High Court in case of Ravi Kant & Anr. v. National Consumer Disputes Redressal Commission & Ors., I (1997) CPJ 271 (DB), a case, where after the final order passed by the Consumer FORA in the proceedings under Section 27 of the Act and an objection was passed that the Director after passing order by the State Commission on a complaint moved for winding-up of the Company, the Delhi High Court after referring to the relevant provisions of Sections 3, 25 and 27 of the Act and the provisions of the Companies Act for winding-up observed that the proceedings for recovery under Section 25 of the Act may, on the facts, require the taking into account of the pendency of the winding-up proceedings but the penal provisions under Section 27 of the Act are in addition to the mode of recovery contemplated by Section 25 and, therefore, the pendency of winding-up proceedings will not come in the way of the Commission passing orders under Section 27 of the Act.

IN case of S.M. Finance Limited v. Veena Sawant, III (1999) CPJ 358, the Union Territory Consumer Disputes Redressal Commission, Chandigarh, on a plea that some depositor had approached the Company Law Board, Southern Region Bench at Chennai and a scheme was formulated to refund the deposits by instalments, therefore, the complainant has to seek relief under the scheme the State Commission relying on the decision of the Delhi High Court in case of Ravi Kant & Anr. v. National Consumer Disputes Redressal Commission & Ors. (supra), observed that the complainant was not a party to the proceedings before the Company Law Board and depositors in various Companies were entitled for hearing and relief in the FORA and the Commission.

THE contention that a reference has been made under Section 22 of the SIC Act before the BIFR, therefore, the bar under Section 22(1) applied to a complaint made under Section 17 of the Act and, therefore, the automatic suspension of the proceedings is also of no help to the appellant. Section 22 of the SIC Act reads thus : "22. Suspension of legal proceedings, contracts, etc.-(1) Where in respect of an industrial Company, an inquiry under Section 16 is pending or any scheme referred to under Section 17 is under preparation or consideration or a sanctioned scheme is under implementation 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 and 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 properites 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 loan 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. (2) Where the management of the sick industrial Company is taken over or changed [in pursuance of any scheme sanctioned under Section 18], notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law or in the memorandum and articles of association of such Company or any instrument having effect under the said Act or other law- (a) it shall not be lawful for the shareholders of such Company or any other person to nominate or appoint any person to be a Director of the Company; (b) no resolution passed at any meeting of the shareholders of such Company shall be given effect to unless approval by the Board. (3) [Where an inquiry under Section 16 is pending or any scheme referred to in Section 17 is under preparation or during the period] of consideration of any scheme under Section 18 or where any such scheme is sanctioned thereunder, for due implementation of the scheme, the Board may by order declare with respect to the sick industrial Company concerned that the operation of all or any of the contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force, to which such sick industrial Company is a party or which may be applicable to such sick industrial Company immediately before the date of such order, shall remain suspended or that all or any of the rights, privileges, obligations and liabilities accruing or arising thereunder before the said date, shall remain suspended or shall be enforceable with such adaptations and in such manner as may be specified by the Board : Provided that such declaration shall not be made for a period exceeding two years which may be extended by one year at a time, so, however, that the total period shall not exceed seven years in the aggregate. (4) Any declaration made under Sub-section (3) with respect to a sick industrial company (sic) have effect notwithstanding anything contained in the Companies Act, 1956 (1 of 1956) or any other law, the memorandum and articles of association of the Company or any instrument having effect under the said Act or other law or any agreement or any decree or order of a Court, Tribunal, officer or other authority or of any submission, settlement or standing order and accordingly- (a) any remedy for the enforcement of any right, privilege, obligation and liability suspended or modified by such declaration, and all proceedings relating there to pending before any Court, Tribunal, officer or other authority shall remain stayed or being continued subject to such declaration; and (b) on the declaration ceasing to have effect- (i) any right, privilege, obligation or liability so remaining suspended or modified, shall become revived and enforceable as if the declaration have never been made; and (ii) any proceeding 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 with the proceedings become stayed. (5) In computing the period of limitation for the enforcement of any right, privilege, obligation or liability, the period during which it or the remedy for the enforcement thereof remains suspended under this section shall be excluded."

From a plain reading of Sub-section (1) of Section 22, it is clear that in respect of a Company, on a reference made under SIC Act before BIFR, if the reference is pending before the BIFR or the Appellate Authority then no proceedings for winding-up of the industrial Company or for execution, distress, etc. shall lie or be proceeded with further, except with the consent of the Board or the Appellate Authority as the case may be. Thus, the bar is placed on filing or continuation of any proceedings in the nature of winding-up, execution, distress etc. against any of the properties of the Company. Section 22 of the SIC Act does not put any restriction on power of the FORA or Commission given under the Act. The proceedings under the Act are not the suit nor the complaints filed under Section 12 of the Act before the Forum are the winding-up petition of the Company or for execution, distress or the like against any of the properties or assets of the industrial Company.

The Supreme Court in case of Deputy Commercial Tax Officer & Ors. v. Corromandal Pharmaceuticals & Ors., 1997 AIR SC 1816, considered the question of bar under Section 22 of the SIC Act in relation to the recovery of the sales tax against the sick Company and ruled that bar applies only to such of those dues reckoned or included in sanctioned scheme for rehabilitation. Such amounts like sales tax etc. which the sick industrial Company is enabled to collect after the date of the sanctioned scheme legitimately belonging to the revenue, cannot be and could not have been intended to be covered within Section 22 of the SIC Act. Any other construction will be unreasonable and unfair and will lead to a state of affairs enabling the sick industrial unit to collect amounts due to the revenue and a construction which is unfair, unreasonable and against sprit of the statute in business sence should be avoided.

IN case of Gujarat Steel Tube Co. Ltd. v. Virchandbhai B. Shah & Ors., 1999 AIR SC 3914, a case of eviction petition against the Company for non-payment of rent under the provisions of Bombay Rents, Hotels and Lodging House Rents Centrol Act of 1947, the Supreme Court observed that the provisions of Section 22 of the SIC Act do not in any way prevent the filing of eviction petition on the ground of non-payment of rent and that the order under Section 11(4) of the Bombay Rent Act could be passed. Section 22 of SIC Act no doubt, inter alia, states that notwithstanding any other law no suit for recovery of money shall be proceeded with except with the consent of the Board, but the filing of an eviction petition on ground of non-payment of rent cannot be regarded as filing of a suit for recovery of money. In view of the above in our opinion the bar created under Section 22(1) of the SIC Act for suspending or keeping the proceedings in abeyance relates to only winding-up of the industrial Company or proceedings for execution, distress or the like against any of the properties or assets of the sick industrial Companies or proceedings for appointment of the Receiver.

THE decisions referred in the memo of appeal in the present facts and circumstances of the case are distinguishable on facts and are of no help to the appellant. In the result, the appeal fails and is dismissed with no order as to costs. A copy of this order be conveyed to the parties and a copy be sent to the District Forum alongwith the record of the case. Appeal dismissed.