TATA TIMKEN LTD. vs CONSUMER PROTECTION COUNCIL

THIS Revision Petition has been filed by the first opposite party challenging the legality and correctness of the order dated 24.3.94 passed by the State Commission, Gujarat, at Ahmedabad over-ruling the preliminary objections raised by the revision petitioner who was opposite party No. 1 before the State Commission that the complainants before the State Commission are not consumers within the meaning of Section 2(l)(d)(ii) of the Consumer Protection Act and hence the State Commission had no jurisdiction" to entertain and adjudicate upon the complaint.

THE complaint before the State Commission was filed by the Consumer Protection Council, Ahmedabad (1st respondent herein) on behalf of certain persons who had applied for the allotment of equity shares and partly convertible debentures in the revision petitioner company in response to an advertisement published by the Company offering to a public at large certain number of shares and partly convertible debentures. The grievance put forward by the petitioners was that these applicants were neither allotted the shares and debentures applied for by them nor were the amounts paid by them towards the purchase price of the shares and debentures refunded to them by the revision petitioner Company. It is unnecessary for us to narrate in detail the pleas advanced in the complaint petition and also in the statement of objections filed by the Company in defence to the complaint. It will suffice to mention that the revision petitioner Company raised a preliminary objection that relief under the Act had been claimed on behalf of the various applicants by the Consumer Protection Council on the erroneous assumptions that the persons who had applied for allotment of shares/debentures are consumers entitled to maintain a complaint under the Consumer Protection Act, that the non-allotment of shares and debentures and non-refund of the amounts paid by them to the Company constitute ''deficiency in service'' and that the Company was also guilty of unfair trade practice in denying allotment of shares and debentures to them and in any event in not refunding to them the price which they had remitted towards the value of shares/debentures.

THE revision petitioner contended before the State Commission by way of preliminary objection that persons who had merely applied for the allotment of shares/debentures are not consumers, under the Act since unallotted shares are not "goods" for which any contract of purchase had been entered into by them and there is also no arrangement of hiring of service entered into between the applicants and the Company. It was further contended by the revision petitioner as part of the preliminary objection that in making an offer of allotment of shares or debentures the Company was not conducting any trading activity fund hence no question could arise of the adoption of any unfair trade practice by the Company in relation to such activity.

ORIGINALLY , the State Commission had, by its order dated 14.10.92 refused to consider and decide the objections raised by the revision petitioner as preliminary issues. That order was challenged before this Commission by the present revision petitioner by filing a Revision Petition No. 485 of 1992. By judgment dated 21.5.1993 that the revision petition was allowed by this Commission and the State Commission was directed to decide the jurisdictional issues raised by the revision petitioner Company as preliminary issues. Though the Consumer Protection Council took up the matter to the Supreme Court by filing a Special Leave Petition being S.L.P. (Civil) No. 12186 of 1993, that petition was dismissed by the Supreme Court as per its judgment dated 20.8.1993.

THEREAFTER the State Commission proceeded to consider the preliminary issues and it passed an elaborated order over-ruling the objections raised by the revision petitioner Company. It has held that persons who have applied for the allotment of shares/debentures in the Company are ''consumers'' and that the default on the part of the Company to carry out its obligation to refund the amount paid by way of price of share/debenture to unsuccessful applicants who have not been allotted shares/debentures constitutes "deficiency in service" so as to warrant a complaint being filed by them before a Consumer Forum seeking relief under the Consumer Protection Act. It was further held by the State Commission that the failure on the part of the Company to refund the purchased price will also constitute ''unfair trade practice'' and on this ground also the complaint petition was maintainable.

IT has become unnecessary for us to discuss from first principles the question as to whether the persons who are merely applied for allotment of shares/debentures are consumers entitled to seek relief under the Consumer Protection Act against the non-allotment of shares/ I debentures to them or against the non-refund of the price remitted by them and whether the failure to make the refund of the price amounts within a stipulated period will constitute unfair trade practice because all these questions have been directly answered by the Supreme Court in its recent authoritative pronouncement in Morgan Stanely Mutual Fund v. Kartick Das, 1994 (2) CPJ Page 7. After exhaustive consideration of all the relevant aspects of these questions, the Supreme Court held that prior to the allotment of shares/debentures an applicant for such allotment is only a prospective investor of future goods and "there is no purchase of goods for a consideration nor again could he be called the hirer of service of the Company for consideration. The learned Judges of the Supreme Court proceeded to further explain legal position in the following words:� "In order to satisfy the requirement of above definition of consumer, it is clear that there must be a transaction of buying goods for consideration under Clause 2(i) of the said Act. The definition contemplates the pre-existence of a completed transaction of a sale and purchase. If regard is had to be definition of complaint under the Act, it will be clear that no prospective investor could fall under the Act,''

Proceedings further, the Supreme Court referred to a definition of "complaint" contained in Section 2(c) and observed as follows:� "What is that he could complain of under the Act ? This takes us to the definition of complaint under Section 2(c) which reads as follows:� "2(c) "complaint" means any allegation in writing made by a complainant that� (i) as a result of any unfair trade practice adopted by any trader, the complainant has suffered loss or damage; (ii) the goods mentioned in the complaint suffer from one or more defects; (iii) the services mentioned in the complaint suffer from deficiency in any respect; (iv) a trader has charged for the goods mentioned in the complaint a price in excess of the price fixed by or under any law for the time being in force or displayed on the goods or any package containing such goods, with a view to obtaining any relief provided by or under this Act."

Certainly, Clauses 2(iii) and (iv) of the Act do not arise in this case. Therefore, what requires to be examined is, whether any unfair trade practice has been adopted. The expression trade practice as per rules shall have the same meaning as defined under Section 369(a) of Monopolies and Restrictive Trade Practices Act of 1969. That again cannot apply because the Company is not trading in shares. The share means a share in the capital. The object of issuing the same is for building up capital. To raise capital, means making arrangements for carrying on the trade. It is not a practice relating to the carrying of any trade. Creation of share capital without allotment of shares does not bring shares into existence. Therefore, our answer is that a prospective investor like the respondent or the association is not a Consumer under the Act. 17. Q. No. 2: Whether the appellant company trades in shares ? From the above discussion, it is clear that the question of the appellant company trading in shares does not arise. 18. Q. No. 3. Does the Consumer Protection Forum has jurisdiction in matters of this kind ? In view of our answers to question Nos.1 and 2, it follows that the Consumer Protection Forum has no jurisdiction whatsoever.

IN the light of this categorical pronouncement by the Apex Court we hold that the persons represented by complainant-Consumer Protection Council being mere prospective investors are not ''consumers'' entitled to seek relief under the Act, that no arrangement of hiring of service existed between them and the revision petitioner Company and that no question of ''unfair trade practice'' could arise since in offering to the public shares and debentures the Company was not engaging in an) trading activity. It is thus manifest that the findings entered by the State Commission or the preliminary questions considered and decided by it are illegal, erroneous and unsustainable.

IN the light of the dictum laid down by the Supreme Court it is clear beyond doubt that the preliminary objections raised by the revision petitioner Company have to be upheld and the complaint petition filed by the first respondent before the State Commission has to be dismissed as not maintainable in law. This revision petition is accordingly allowed, the order of the State Commission is set aside and the complaint petition filed by the first respondent herein before the State Commission is hereby dismissed. The parties will bear their respective costs.