STATE BANK OF INDORE vs C.V.MATHEW

THIS appeal is directed against the order dated 30.9.1998 passed in Case No. 329/97 by the District Consumer Disputes Redressal Forum, Indore (for short the ''District Forum'').

FACTS giving rise to this appeal are thus : The appellant was the collecting agent for the right issue shares of the respondent No. 2, at the premium of Rs. 150/- per share from the prospective allottees. The respondent No. 1/complainant applied for 100 shares and deposited the application money of Rs. 6,000/- on 26.11.1992 and Rs. 5,000/- on 13.3.1993 as allotment money. The respondent No. 1 also deposited a cheque of Rs. 5,000/- dated 13.5.1993, the amount of call and final money. The entire money collected was remitted with the list of the depositors to the respondent No. 2. By over-sight, the respondent No. 1 was shown at Serial No. 86. This defaulter was shown at Serial 101 in place of the respondent No. 1 and was allotted the shares. The respondent No. 1 made a complaint. On verification the error was found, therefore, the appellant sent a revised list to respondent No. 2 with a certificate of deposit of the amount. On this, the respondent No. 2 issued fully stamped paid shares. However, later-on respondent No. 2 forfeited the shares and the amount of respondent No. 1 in view of the fact that the shares were issued to the defaulter who ought to have been shown at Serial No. 86. The respondent No. 1 filed the complaint, which was resisted. The District Forum after appreciation of evidence held that the amount deposited by the respondent No. 1 was shown at the Serial No. 86 who was a defaulter while the respondent No. 1 was at Serial number 101, in whose place the name of the person who was at Serial No. 86 was shown in the list. As a result of which the right issue was not issued and the amount deposited was forfeited for no fault of the complainant, due to mistake and fault of the appellant. Though, the appellant corrected the mistake but the respondent No. 2 did not pay any heed, hence, for deficiency in service on the part of the appellant amount deposited of Rs. 16,000/- was ordered to be returned with interest thereon at the rate of 18% p.a. from 20.1.1994 alongwith Rs. 1,000/- compensation and costs. Learned Counsel for the appellant submitted that after enquiry the mistake was corrected and accordingly, the respondent No. 2 was intimated, who issued stamped paid shares, which later-on were cancelled and the amount was forfeited. If the shares were issued to the person at Serial Number 86, a defaulter, the respondent No. 2 ought to have taken action against the said person for realisation of the amount and/or for cancellation of shares issued to him. In the circumstances the complainant was not entitled to realise the amount from the appellant as the mistake was rectified. Besides the appellant was merely a collecting agent on behalf of the respondent No. 2, hence, no liability could be fastened on the appellant in view of Section 230 of the Indian Contract Act.

Mr. Harish Gilkey, learned Counsels for the respondent submitted that it is because of the negligence and carelessness of the appellant, the respondent No. 1 had to suffer. Inspite of the deposit of the amount in time, the respondent No. 1 was shown at Serial Number 86, a defaulter. For the mistake of the appellant the District Forum rightly held the appellant and the respondent No. 2 jointly and severally liable to return the amount with interest and costs.

THE contention that the respondent No. 1 did not hire any service for consideration hence was not "consumer" cannot be accepted. This Commission in case of Subhash Modi v. Union Bank of India & Anr., I (1993) CPJ 461, considered the question and observed that the Company issuing had hired the services of the Bank for collecting the application money for the prospective allotment of its shares. THE prospective applicant for purchase of shares was a beneficiary of such an arrangement with the approval of the Company. THErefore, such a complainant would squarely fall within the definition of "consumer" under Section 2(1)(d)(ii) of the Consumer Protection Act, 1986 (for short the ''Act''). THErefore, the complainant had a right to complain about the deficiency in service rendered by the Bank in the transaction. This Commission in Appeal No. 369/98, decided on 1.1.2001, Smt. Manorama v. The General Manager, Corporation Bank & Ors., reiterated the view of this Commission in case of Subhash Modi (supra).

THE Punjab State Consumer Disputes Redressal Commission in Ramlal Wadhwa v. Bank of Baroda, II (1994) CPJ 618, has considered the question and observed that the Company issuing shares had hired the services of the Bank for the purpose of collecting the application money for allotment of shares on its behalf and there is privity of contract between the Company and the Bank, but there is no privity of contract between the complainant for allotment of shares, though the money was deposited in the Bank by the complainant for allotment of shares, but the complainant was the beneficiary of such an arrangement with the approval of the Company, therefore, complainant squarely falls within the definition of "consumer" under Section 2(1)(d)(ii) of the Act, who has a right to complain about deficiency in service rendered by the Bank in the transaction. State Consumer Disputes Redressal Commission, Uttar Pradesh in case of Samanya Sahayak Prabandhak, State Bank of India & Anr. v. Abdul Moin, 1997 (2) CPR 205, also considered the question and observed that, failure on the part of the Bank in forwarding money deposited by the complainant for purchase of shares on rights issue to the Company and consequent non-allotment of shares is a deficiency in service, as the complainant was beneficiary of the services of the Bank hired by the Company. The National Commission in case of State Bank of India & Anr. v. Dr. Kalika Charan Dube, II (1996) CPJ 27 (NC), while considering the deficiency in service on the part of the Bank in a case where the complainant was issued a Bank draft for allotment of right issue shares the complainant was informed by the Company that the draft has been dishonoured, therefore, application for allotment of shares was not entertained; held that there is deficiency in service on the part of the Bank who was negligent in rendering the services properly to the respondent.

THE contention that the appellant was acting as an agent, therefore, under Section 230 of the Indian Contract Act, the appellant could not have been made personally liable, in the circumstances of the case cannot be accepted. It is because of the mistake and carelessness, intentional or unintentional, the amount deposited by the respondent No. 1 was shown as deposit by the person at Serial No. 86, who was a defaulter. THE respondent No. 2 acted on the list sent by the appellant. Later-on, though the revised list was sent and stamped paid shares were also issued, but the shares so issued were cancelled, as the shares could not have been issued to two persons.

STATE Consumer Disputes Redressal Commission, Gujarat in case Suman S. Dasani v. Asian Coffee Ltd. & Anr., II (1993) CPJ 891=1993 (2) CPR 40, while considering the deficiency in service for the mistake committed by the Agent, that is the Bank of the Company observed that if the Company has failed to allot shares applied for on right basis, it is deficiency in service and the Company cannot avoid its liability on the ground that default was committed on wrong advice of the Bank. In the circumstances, in the absence of any agreement between the respondent No. 2 and the appellant, the defence under Section 230 of the Indian Contract Act is not available; particularly when the deficiency in service on the part of the appellant is evident. It would be now inter se dispute between the appellant and the principal, that is respondent No. 2 to settle the claim, the case being of a joint and several liability, the respondent No. 1 cannot be forced to pursue only against the respondent No. 2. In any case, the appellant would be at liberty to claim indemnification or reimbursement of the amount so paid from the respondent No. 2 on whose behalf the appellant collected application money, allotment money and call and final money.

However, the award of interest in the circumstances of the case at the rate of 18 percent is excessive, when the District Forum has also ordered to pay compensation and costs of Rs. 1,000/-. It is also well-settled that interest should neither be low nor excessive. Therefore, we are of the view that the respondent No. 1 would be entitled to interest at the rate of 12% p.a. on the amount of Rs. 16,000/-.

IN view of the above, the appellant and the respondent No. 2 jointly or severally are directed to pay the amount of Rs. 16,000/- with interest thereon at the rate of 12% p.a. alongwith compensation and costs awarded by the District Forum within a period of two months from the date of receipt of certified copy of this order failing which the interest shall be payable at the rate of 15% p.a. In the result, the appeal is partly allowed. The order of the District Forum shall stand modified as indicated hereinabove. Parties to bear their own costs of this appeal. 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 partly allowed.