STANDARD MOTOR PRODUCTS OF INDIA LTD. vs M.ATHITHAN

BOTH these appeals a rise out of the same order passed by Tamil Nadu State Consumer Disputes Redressal Commission, Madras in O.P. No. 5/91. The complaint was filed by Thiru M. Athithan (hereinafter called the first Complainant) and Consumer Federation, Tamil Nadu (second Complainant) against the Standard Motor Products of India Ltd. (who was Opposite Party No. 1 in the complaint and hereinafter referred to as the Company) and M/s. Lakshmi Vilas Bank Ltd. (hereinafter referred to as Bank and who was Opposite Party No. 2 in the complaint). The State Commission dismissed the complaint vide order dated 4th April, 1991 against both the Opposite Parties However, it made the following observations against Opposite Party No. 1. i.e. the Company: "We shall however make it clear that the First Opposite party shall refund to the first Complainant the sum of Rs. 1,46,580.64 with interest at 18% per annum from the date of receipt till the date of repayment after the cessation of the moratorium". About the second opposite party the following observation was made: "However the second opposite party will consider the case of the first complainants with liberality and defer taking coersive action for collection of the loan till the moratorium ceases"

FEELING aggrieved against that order the Company has filed First Appeal No. 108 while the Complainants have filed First Appeal No. 130both of 1991. The brief facts are that the first Complainant wanted to purchase one Standard 20 Micro Van manufactured by the Company. He got sanctioned a loan of Rs. 1,32,000/- from a Bank for purchasing the said vehicle. The first complainant paid the margin money etc. and the Bank issued a demand draft on 13th December, 1988 for Rs. 1,48,580.64/- favouring the Company. When the first Complainant did not get the vehicle he wrote to the Company. The Company vide letter dated 17th May, 1989 replied that the factory has suspended the operations from 7th February, 1989 and he should wait for the factory to reopen. The first complainant received another letter dated 5th December, 1989 from the Company stating that the Company has been declared sick by the Board for Industrial and Financial Reconstruction for short BIFR) under the Sick Industrial Companies (Special Provisions) Act, 1985 (for short the Act) and that the Industrial Development Bank of India has been appointed as the Operating Agency on 9th February, 1989 for the revival of the Company. The grievance of the first Complainant is that the Company knew in December, 1988 that it was not in a position to supply the vehicle and, therefore, the Company ought not to have accepted the advance of Rs. 1,46,580.64 and hence it is guilty of unfair trade practice. As against the Bank the grievance of the first Complainant is that the Bank owed a duty to render proper service for which he had paid the necessary fees but as he could not get the delivery of the vehicle the Bank has rendered effective service and, therefore, is guilty of unfair trade practice. The Complainants, therefore, prayed: (i) A direction be issued to first opposite party to return Rs. 1,46,580.64 to second opposite party with subsequent interest. Both the opposite parties be directed to pay Rs. 20,000/- as compensation to the first complainant. (ii) Second opposite party be directed to return the margin money etc. received from the first complainant.

THE first Opposite Party, vide its detailed reply, admitted that a sum of Rs. 1,48,580.64 had been received in December as advance payment towards the price of one Standard 20 Micro Van to be supplied to the first Complainant. However, it was further pleaded that it was expected that the vehicle would be ready before the end of February, 1988 but due to labour unrest the production of vehicle was slowed down since December, 1988 and finally the production came to standstill by 7th February, 1989. It is not guilty of unfair trade practice as the first Complainant had been informed of the status of the suspension of operations of the Company''s factory due to labour unrest and that the supply of the light commercial vehicle would be resumed as soon as the factory reopened. Though the Company had been declared sick in December 1988 its manufacturing and other operations had not ceased and those continued right up to the time when they were forced to declare lock out on 7th February, 1989. The manufactured vehicles both light commercial vehicles and motor cars, were being delivered in the order of priority of booking to customers who had placed orders for the same prior to the order of the first Complainant. Industrial Development Bank of India was directed by the BIFR to prepare a scheme for rehabilitation of the company and such scheme has been prepared. The BIFR has passed an order on 27th June 1990 under section 22(3) of the Act suspending the operation of all legal processes, contracts, agreements, settlements, awards etc. including obligations and liabilities against the Company and, therefore, the State Commission was not entitled to entertain the complaint.

THE Bank also filed counter. It was admitted '' that the first Complainant had paid a margin money of Rs. 14,580.64 and the Bank and sanctioned a loan of Rs. 1,32,000/- and a total sum of Rs. 1,46,580.64 was paid to the Company. A sum of Rs. 69.80 was also collected as service charges from the First Complainant for the service rendered by the Bank to him. The Bank denied the allegation of unfair trade practice leveled by the complaints. The parties have been heard. We have carefully gone through the records.

IT was not disputed by the Complainants before the State Commission that the Company had become a sick industry and proceedings for its revival were pending before the BIFR. The fact of preparation of a scheme for rehabilitation of the said industry was noticed by the said Commission. Orders dated 27th June 1990and 12th March, 1991 passed by the BIFR under section 22(3) of the Act were also noticed and a portion of former has been reproduced in the State Commission''s order. After noticing all these facts the State Commission made the following observations: "The Board for Industrial and Financial Reconstruction by its subsequent order dated 12.3.91 has extended the provisions of Section 22(3) of the Sick Industrial Companies (Special Provision) Act of 1985 fora further period of six months from 1.4.91 till 30.9.91 or till the finalisation of the rehabilitation scheme whichever is earlier. In view of these orders of the Board for Industrial and Financial Reconstruction and the provisions of Section 22(3) of the Sick Industrial Companies (Special Provision) Act of 1985, there is moratorium on the operation of all contracts, agreements, settlements, awards and all rights, privileges, obligations and liabilities have to remain suspended. It follows that the first Complainant is not entitled to claim refund of the deposit or any damages during the period of moratorium. This petition has therefore to fail for the present as against the first Opposite Party. However, the State Commission proceeded further and issued the direction against the first opposite party which has been noticed above in the earlier part of this Order.

WE are of the opinion that the State Commission had no jurisdiction to issue the above direction to first Opposite Party (now appellant in First Appeal No. 108of 1991). The relevant portion of Section 22(3) of the Act reads as follows: 22(1)......... (2)........... (3) During the period of consideration of any scheme under Section 18 or where any such scheme is sanctioned there under, 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 or 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 occurring or arising there under 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. Therefore, when the scheme was under consideration and the BIFR had issued the necessary declaration which was in force at the time the Complaint was entertained and disposed of, the State Commission could not take notice of the suspended contract nor could pass an order about the refund of the advance in anticipation of declaration of the BIFR coming to an end. Under Clause (b) of sub section 4 of Section 22 any right, privilege, obligation or liability so remaining suspended or modified, shall become revived and enforceable only on the cessation of the declaration. Thus the order of the State Commission as far as it relates to the direction issued against the first Opposite Party (i.e. appellant in F.A. No. 108 of 1991) cannot be upheld.

There is another ground for accepting the appeal. It is settled principle 6f law that an appeal is a continuation of the original cause. The scheme for rehabilitation and modernization of the sick Company has since been approved and sanctioned by the BIFR vide order dated 21st January, 1992. Copy of the sanctioned scheme has been filed during the present proceedings. Under Section 18(8) of the Act such sanctioned scheme is binding on the Company. About the customers, advances the scheme provides as follows: "Repayment of advances aggregating Rs. 1,280/- lakhs in 4 equal annual installments from 1994-95 to 1997-98". Section 32 of the Act lays down that the provisions of the Act and of any rules or schemes made there under shall have effect notwithstanding anything inconsistent therewith contains in any other law except the provisions of the Foreign Exchange Regulation Act, 1973. Section 33 provides penalties to the violators of the provisions of the Act or the scheme or any order of the Board or the Appellate Authority. Thus the Company cannot make payment of the advance received from the first Complainant except in accordance with the scheme. Hence on that ground also, as the direction issued by the State Commission is in violation of the scheme sanctioned by the BIFR, and the Company cannot be directed to give effect to it.

IN Appeal No. 130 the Complainants have prayed for relief against the Company and the Bank. As far as the Company is concerned that appeal is liable to fail for the reasons given above. The complainants have also no case against the Bank. No deficiency in the rendering of service on the part of the Bank has been proved. Unfortunately the Company has become sick and manufacturing operations have come to a standstill and the Van could not be delivered to the first Complainant. The Bank cannot be held responsible for this default. No provisions of law has been cited under which the Bank can be restrained from realising its dues from the first Complainant. Hence the appeal against the Bank is also liable to be dismissed.

FOR the foregoing reasons we accept the First Appeal No. 108 and set aside the direction issued by the State Commission against the Company. First Appeal No. 130 is dismissed. In the circumstances, we do not make any order of costs in both the appeals.