USHA RECTIFIER CORPN. (I) LTD vs SHAH DHANSUKHLAL SAKARLAL

THE appellant is the original opponent against whom 8 complainants had filed the complaint claiming refund of amount paid against allotment of debentures. THE District Forum having granted the relief prayed by the complainants, the opponent has filed this appeal.

SOME facts are necessary to be reproduced in order to understand the issues involved in this complaint The complainants were shareholders of the opponent which has offered 14% fully convertible debentures as of right to the existing shareholders at the price of Rs. 100/- per debenture. Since the issue was to remain open from 11.10.89 to 24.10.89 the complainants must have applied during this period. After having made the application and having made the initial payment as required, the complainants changed the mind and long after the issue was closed allegedly made an application on 11.1.90 by registered post requesting the refund of the application money. The said application which is the foundation of the complaint has not been produced by the complainant so as to know the contents or the reasons for return of money. This application was important because we want to ascertain the reasons which have been given in the complaint. We, therefore, asked Mr. Reshmikant, one of the opponents to give us the letter if he has written to the Company. He has got the copy which do not contain the reasons for cancellation of the issue. With the consent of the opponent we have taken the xerox copy of the application on record. The company did not agree to return the amount inspite of the correspondence and being aggrieved by the denial of the company to return the application amount the complainants filed the present complaint.

In reply to the summons the appellant company has taken preliminary contention that the convertible debentures of the company are not goods in relation with or trade by the company. There would be no question of service in the purchase of the debentures of the company. With regard to unfair trade practice the company has in turn stated that Sec. 2(1)(r) of the Consumer Protection Act specifically excludes the jurisdiction of the Consumer Forums in respect of companies to which Part-A of Chapter-Ill of M.R.T.P. Act is applicable. They have further stated that the appellant company is registered under Rule 9(4) of the M.R.T.P. Rules 1970 (Ann-A) and, therefore, the Consumer Protection Act was not applicable to the company. They have further stated that this point was directly covered by the judgment and order of the Delhi Consumer Disputes Redressal Commission in Appeal No. 15/89 between Appollo Tubes Ltd. v. Lal Chand Malhotra and Usha Rectifier Corporation v. Jayashree P. Rai in Appeal No. 93/90. That the averments of the complainants that the right issue was under subscribed and, therefore, he intimated the company not to allot the debentures by registered post on 11.1.90 has not been proved by the complainant The company has further stated that they have allotted the shares (it should be debentures) before the receipt of the intimation and the allotment letters were sent to the complainants in the month of January 1991 itself. According to the company the allotment being made before the receipt of intimation there was no question of refund of money. They have further stated that the allegation regarding unfair trade practice was not true. Annexure-D is the xerox copy of the certificate of registration whose production is not objected. The certificate bears the date 14.9.90 whereas the complaint is filed on 31.7.91 i.e. much after the registration. In reply to the counter affidavit there is an application by way of letter to the District Forum by the complainant Dhansukhlal where he has requested the District Forum to pass an order of refund. In para 3 of that letter he has stated that their refusal letter of allotment dated 11.1.90 was received by the company on 13.1.90. However the allotment has been made on 15.1.90 and the letter is received by him on 22.2.90. He has further stated that the company is not listed in Part A Chapter III in of the M.R.T.P. Act since at present the company is making turn over below 1,000 crores. Mr. Bhatt, the learned advocate appearing on behalf of the appellant states that no copy of this letter has ever been given to the company which is not supported by any affidavit and cannot be considered to be of any evidential value. In this case the District Forum has observed that the company has floated convertible debentures of 1,000 crores but ultimately the said debentures were not fully subscribed and, therefore, they made a change in the project without notifying the general public and before notifying the general public they have allotted to the applicant. In that case it is nothing but an unfair trade practice by the opponent and the Forum has right and jurisdiction to decide. With regard to interpretation of Section 2(1)(r) of Consumer Protection Act the District Forum has observed that it is not correct that the Corporation is excluded because of interpretation of Section 2(1)(r) of Consumer Protection Act. The District Forum has opined that Section 2(1)(r) states that unfair trade practice has the same meaning as contained in Section 336-A of M.R.T.P. Act but shall not include the unfair trade practice adopted by an owner of an undertaking to which Part A Chapter II of that Act applies. The District Forum has further observed that it has not been made clear by the opposite corporation that they followed any unfair trade practice to which Part I (it should be A) of Chapter II (it should be III) of the Act applies. They have not made the same clear either in the affidavit or anywhere. The learned Judge, thereafter, gone to the extent of stating that even if they made clear the Forum is of the opinion that there is a case of complainants who are duped by the company by advertising in the newspapers to the effect that they are going to float 1,000 crore project and thereafter changed the conditions of the prospectus is highly objectionable. This is nothing but unfair trade practice adopted by the corporation.

TO our opinion the question which was posed before the District Forum was whether on interpretation of Section 2(1)(r) of Consumer Protection Act the appellant company comes within the provisions of Part A of Chapter III of M.R.T.P. Act as prevailing when the Consumer Protection Act was enacted. If you refer to Part A of Chapter III of M.R.T.P. Act, Part A of Section 20 provides as under Undertaking to which this part applies: This part shall apply to (a). undertaking if the total value of (i) Assets of such undertaking or (ii) Assets of such undertaking together with assets of its interconnected undertakings is not less than (100 crores of rupees). Therefore it cannot be disputed that this undertaking has assets of the total value exceeding 100 crores of rupees. The learned Judge has observed that this company has floated debentures of 1,000 crores is sufficient for the learned Judge to consider this company as a company falling within Chapter III Part A of the M.R.T.P. Act. Not only this but the company has produced a certificate which itself shows that the company has been registered under Section 20 of M.R.T.P. Act, since its assets must be exceeding 100 crores. On a true interpretation of Section 2(1)(r) of Consumer Protection Act the owner of an undertaking to which Part A of Chapter III of that Act applies or any person acting on behalf or for the benefit of such owner is not included. In other words, the jurisdiction regarding unfair trade practice adopted by the owner of the company has been distributed between the Consumer Forum and M.R.T.P. Commission. The Consumer Forum is not entitled to take up the case for decision regarding unfair trade practice adopted by an owner of undertaking to which Part A of Chapter III of the Act applies. And in view of the evidence before the District Forum it cannot be disputed that Part A of Chapter III was not applicable to the appellant company. There were two decisions cited before the District Forum to show that other Commissions had also taken a view that the Consumer Forum has no jurisdiction to decide a case where unfair trade practice is challenged regarding undertaking which falls within the purview of Part A of Chapter III of M.R.T.P. Act. The decision of the learned Judge is, therefore, erroneous on this point. We are of the opinion that Usha Rectifier Corporation is a 2 very big company which has been registered as a company whose assets exceed Rs. 100 crores and certificate to that effect has also been granted under the Act. If we have no jurisdiction to decide unfair trade practice then we cannot entertain a complaint by holding that the company was following unfair trade practice. Such a decision is therefore, without jurisdiction.

NOW it cannot be disputed that the complainant had the right to purchase the debentures. The complainant applied for the same within the prescribed period. The same have been accepted by the company and allotment letters have been issued. The contract having been, thus, completed the applicant cannot rescind from that position when he saw that the market value of such debentures was fallen down. This cannot be permitted. Otherwise no company will be able to function. If one is given right and if that right is exercised then whether to accept the application for cancellation is on the appellant company and the appellant company having rejected that application it cannot be said that there is any deficiency of service. We cannot decide the contractual rights of the parties. We can only give relief if we find that there is any deficiency of service and to our opinion accepting the application which the company was bound to accept since the issues were of right it cannot be said that there is any deficiency of service by the company. The only argument that remains to be answered is, when the complainants have cancelled their applications and it is alleged that requests for cancellation was sent on 11.1.90 which has reached the company on 13.1.90 whereas the allotment was made on 15.1.90, the offer having been withdrawn the company should have refunded the money. So far these dates are concerned we are unable to understand as to how the District Forum came to the conclusion that the application for refund was received by the company on 13.1.90 since neither the application nor the acknowledgment thereof has been produced by the complainant We have perused the whole judgment and even on merits we are not satisfied that there was any unfair trade practice. If the debentures were not fully subscribed if the company reduces the total capital cost which is for the benefit of the debenture holders after following the required procedure it cannot be objected. On this point Mr. Bhatt is relying upon the report of the Director General of Investigation and Registration which was submitted to the M.R.T.P. Commission in pursuance of letter of the M.R.T.P. Commission which has ordered a preliminary investigation in the matter of same company-M/s. Usha Rectifier Corporation (India) limited in which the same question was raised and it was observed that "the question that requires to be examined is whether failure of a public issue can be considered as an unfair trade practice even assuming that the management had the fore knowledge of the impending failure, but had not taken any steps to prevent the said failure. The answer for this question is that the failure of public issue cannot be considered as an unfair trade practice and the subscribers who had applied for shares/debentures for such a failed public issue would not get any legal right to demand their money back unless the company fails to get the minimum subscription as envisaged in Section 69 of the Companies Act, 1956. Since the Complaint company has complied with the legal formalities in this regard, the management of the company is entitled to proceed with the allotment of shares and debentures in the manner provided under the Companies Act. Thus there is no merit in the allegations preferred by the Complainants and the complaints deserve to be disposed of without any further action". In the aforesaid view of the matter we are of the opinion that the decision of the District Forum is erroneous and cannot be sustained and the appeal shall have to be allowed. ORDER The appeal is allowed. The judgment and order of the District Forum, Vadodara is set aside and the complaint is dismissed. In the circumstances there will be no order as to costs. Appeal allowed.