Co-operative Societies Fall Under Consumer Protection Act; Failure to Repay Deposits is 'Deficiency in Service': Gujarat State Consumer Commission - 2025-09-05

Gujarat Consumer Commission Upholds Order Against Credit Society for Non-Payment of Deposits, Affirms Jurisdiction

Gandhinagar: The Gujarat State Consumer Disputes Redressal Commission, presided over by Justice V.P. Patel, has dismissed an appeal by Sinai Co.Opp.Credit Soc.Ltd., ruling that co-operative societies are subject to the jurisdiction of consumer forums and that failure to refund matured fixed deposits constitutes a clear "deficiency in service."

The Commission upheld the Anand District Consumer Commission's order directing the credit society to refund ₹10,83,557 to depositor Apabhai Chhotabhai Patel and others, along with 9% annual interest from the date of the complaint.

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Case Background

The original complainants, led by Mr. Apabhai Chhotabhai Patel, had invested their savings in 17 separate fixed deposits with the Sinai Co-operative Credit Society. Upon maturity of these deposits between 2018 and 2019, the society failed to return the principal and promised returns. Despite repeated demands, the complainants received no payment, prompting them to file a complaint with the Anand District Consumer Disputes Redressal Commission in 2019.

The District Commission ruled in favor of the depositors on November 16, 2021, ordering the society to pay the full maturity amount of ₹10,83,557 with 9% annual interest, plus ₹3,000 for mental anguish and ₹1,000 for legal costs. The society, its manager, and chairman subsequently appealed this decision before the State Commission.

Arguments of the Parties

Appellant's Contentions (Sinai Co.Opp.Credit Soc.Ltd.):

- The primary argument was that consumer forums lack the jurisdiction to hear complaints against co-operative societies. They contended that any disputes should be addressed to the Registrar of Co-operative Societies.

- They argued that the society's inability to pay was due to a severe financial crisis that began in 2018, exacerbated by the COVID-19 pandemic and the suicide of a former chairman.

- The society claimed it had no intention of withholding funds and was actively pursuing recovery from loan defaulters.

- They also argued that since an administrator had been appointed for a period, the current office-bearers were not the correct parties to be sued.

Respondent's Contentions (Apabhai Chhotabhai Patel):

- The respondents asserted that the consumer forum has full jurisdiction, as the case pertains to a deficiency in the financial services provided by the society.

- They pointed out that the administrator's tenure had expired, and the society's managing committee was now responsible for its affairs, making them the appropriate defendants.

- They maintained that the District Commission's order was just, reasonable, and legally sound, and should be upheld.

Commission's Analysis and Ruling

The State Commission, in its order authored by Presiding Member Ms. Archanaben C. Raval, meticulously dismantled the appellant's arguments.

On Jurisdiction: The Commission clarified that co-operative societies are explicitly included within the definition of a "person" under Section 2(m) of the Consumer Protection Act, 1986 (provisions mirrored in the 2019 Act). Therefore, a complaint against a co-operative society for deficiency in service is perfectly maintainable before a consumer forum.

"As per the definition of 'person'... it includes a co-operative society whether registered under the Gujarat Co-operative Societies Act, 1961 or not. Hence, a complaint against the appellant credit society is maintainable under the Consumer Protection Act," the judgment noted.

On Deficiency in Service: The Commission found that the society's own admissions in its appeal memo confirmed its failure to repay the depositors. The society had acknowledged its poor financial condition and inability to pay its depositors, which the Commission held as conclusive proof of deficient service.

The judgment quoted the society's own appeal: "...due to the society’s financial situation worsening in 2018... we have not been able to pay this case's complainants and other depositors."

The Commission concluded that the society's financial mismanagement and internal issues do not absolve it of its contractual obligation to refund the depositors' hard-earned money. By failing to do so upon maturity, the society was unequivocally deficient in its service.

Final Order

Finding no reason to interfere with the "just and legal" order of the District Commission, the State Commission dismissed the appeal at the admission stage. It confirmed the original order, directing Sinai Co.Opp.Credit Soc.Ltd. to pay the depositors the full maturity amount with interest and compensation. The decision reaffirms the protection available to consumers who invest in co-operative financial institutions and clarifies that such entities cannot evade accountability under the Consumer Protection Act by citing internal financial troubles or jurisdictional issues.