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ANDHRA PRADESH HIGH COURT
V.V.S. Rao, J.
PRUDENTIAL CAPITAL MARKETS LTD.—Petitioner
versus
STATE OF A.P. & ORS.—Respondents
W.P. No. 4528 of 1997 and Batch—Decided on 2.8.2000
WRIT - PROHIBITION - JURISDICTION - CONSUMER PROTECTION ACT, 1986 - SECTION 3 - COMPANIES ACT, 1956 - SECTION 10-E(4-D), 10-E(5), 58-A(9) - RESERVE BANK OF INDIA ACT, 1934 - SECTION 45-Q, 45-QA - COMPANY LAW BOARD - JURISDICTION - DEPOSITORS - REMEDY - CONSUMER DISPUTE - NBFC - SERVICE - ADDITIONAL REMEDY - NATURAL JUSTICE - SCHEME - NOTICE - SUPPRESSION OF FACTS - ALTERNATIVE REMEDY - WRIT PETITION - DISMISSAL. The provisions of the Companies Act and the Reserve Bank of India Act do not oust the jurisdiction of the Consumer Forums to entertain a consumer dispute at the instance of a depositor claiming repayment of the deposit from a non-banking finance company. The remedy under the Consumer Protection Act is an additional remedy and cannot be taken away by the Companies Act or the Reserve Bank of India Act. The order of the Company Law Board cannot be construed as either taking away the right of the depositors to approach the Consumer Forum or nullifying the orders passed by the District Forum/State Commission. The writ petitions filed by the non-banking finance company challenging the jurisdiction of the Consumer Forums are dismissed.
Fact of the Case:
The petitioner, a non-banking finance company (NBFC), filed writ petitions challenging the jurisdiction of the District Consumer Disputes Redressal Forum (District Forum) and the State Consumer Disputes Redressal Commission (State Commission) to entertain consumer disputes filed by depositors seeking refund of deposits made with the NBFC. The NBFC contended that the Company Law Board (CLB) constituted under the Companies Act has exclusive jurisdiction to entertain such disputes. The depositors opposed the writ petitions, arguing that the provisions of the Consumer Protection Act, 1986 (Consumer Act) are in addition to and not in derogation of any other law, and that the NBFC is amenable to the jurisdiction of the Forums under the Consumer Act.
Finding of the Court:
The Court held that the provisions of the Companies Act and the Reserve Bank of India Act do not explicitly or impliedly exclude the jurisdiction of the Consumer Forums to entertain consumer disputes at the instance of a depositor claiming repayment of the deposit from an NBFC. The Court further held that the order of the CLB cannot be construed as either taking away the right of the depositors to approach the Consumer Forum or nullifying the orders passed by the District Forum/State Commission. The Court also held that the NBFC's writ petitions were not maintainable as the NBFC had alternative remedies available, such as appeals to the State Commission and revision petitions to the National Commission.
Issues: 1. Whether the provisions of the Companies Act and the Reserve Bank of India Act oust the jurisdiction of the Consumer Forums to entertain consumer disputes at the instance of a depositor claiming repayment of the deposit from a non-banking finance company. 2. Whether the order of the Company Law Board can be construed as either taking away the right of the depositors to approach the Consumer Forum or nullifying the orders passed by the District Forum/State Commission. 3. Whether the writ petitions filed by the non-banking finance company challenging the jurisdiction of the Consumer Forums are maintainable.
Ratio Decidendi: 1. The provisions of the Companies Act and the Reserve Bank of India Act do not explicitly or impliedly exclude the jurisdiction of the Consumer Forums to entertain consumer disputes at the instance of a depositor claiming repayment of the deposit from an NBFC. This is because Section 3 of the Consumer Act provides that the provisions of the Act are in addition to and not in derogation of any other law, and because the NBFC is amenable to the jurisdiction of the Forums under the Consumer Act. 2. The order of the CLB cannot be construed as either taking away the right of the depositors to approach the Consumer Forum or nullifying the orders passed by the District Forum/State Commission. This is because the CLB did not give a reasonable opportunity of being heard to all the depositors, as required by the principles of natural justice and the provisions of the Companies Act and the Reserve Bank of India Act. 3. The writ petitions filed by the non-banking finance company challenging the jurisdiction of the Consumer Forums are not maintainable. This is because the NBFC has alternative remedies available, such as appeals to the State Commission and revision petitions to the National Commission.
Final Decision: The Court dismissed the writ petitions filed by the non-banking finance company challenging the jurisdiction of the Consumer Forums.
In this group of writ petitions, Prudential Capital Markets Limited (PCML), Calcutta is the petitioner. In all the petitions they prayed for a writ of prohibition, prohibiting the District Consumer Disputes Redressal Forum (hereafter called ‘the District Forum’) or the State Consumer Disputes Redressal Commission (hereafter called the State Commission), from entertaining any complaint or petition from the respondent-depositor (hereafter called ‘the depositor’) and further declare that it is only the Company Law Board (CLB) which can entertain a complaint against PCML.
2. There are three categories of cases. The first category of cases are those where the depositor filed a consumer dispute case before the competent District Forum for refund of the deposit made by the depositor with the PCML and on the District Forum allowing the application, the petitioner herein approached the State Commission which dismissed the appeal filed and whereupn depositor approached District Forum under Section 27(1) of the Consumer Protection Act, 1986 (hereafter called ‘the Consumer Act’) by filing penalty petition. The second category of cases are those where the depositor filed a penalty petition before the District Forum for implementation of the order in consumer dispute case and where the petitioner did not approach the State Commission which is the Appellate Forum. The third category of cases are those where the orders of the Appellate Forum are challenged by the petitioner. As the petitioner is the same and the questions of law that arise for consideration are same, it is convenient to dispose of all the writ petitions by a common order.
3. For the sake of convenience, the pleadings in Writ Petition No. 7920 of 1999 may be noticed.
4. The petitioner is a Non-Banking Finance Company (NBFC) under the control of Reserve Bank of India (RBI). The business of the petitioner is governed by the provisions of the Reserve Bank of India Act, 1934 (hereafter called, the RBI Act). In 1997 the RBI Act was amended and Section 45-QA in Chapter III-B was introduced which applies to all the NBFCs. Section 45-QA confers powers on CLB constituted under Section 10-E of the Companies Act, 1956 to order repayment of the deposit when NBFC fails to repay any deposit. In the case of any default committed by NBFC in repayment of the deposit in accordance with the terms and conditions of such deposit, the depositor shall have to approach the CLB only for redressal of grievance. The CLB is competent to order repayment of the deposit the failure of which attracts imprisonment for a term upto three years and fine of not less than Rs. 50/- from the date of default till the amount is paid, under Sub-section 4(AAA) of Section 58-B of the RBI Act. In view of Section 45-Q of the RBI Act, the provisions of Chapter III-B have over-riding effect and therefore, the CLB alone has exclusive jurisdiction.
5. In 1997 due to C.R. Bhansali scam there was a panic in finance market resulting in a ‘run on NBFCs’. All the investors wanted to withdraw their amounts. The petitioner faced problems to make payments to depositors at short notice, as funds were not available though they had sufficient assets to pay off all the amounts of the depositors. When the petitioner issued post-dated repayment/interest warrants to depositors they were returned by the bankers and the State Bank of India withdrew ‘at par’ facility given to the petitioner. Consequent thereto, number of criminal cases were filed against the petitioner for dishonour of cheques/repayment warrants. In this background, several depositors filed applications before the CLB, Eastern Region Bench under Section 45-QA of the R.B.I. Act. Taking into consideration large number of applications and after hearing all the concerned, the CLB passed a comprehensive order on 27.5.1998. This order covers all the deositors of the petitioner-Company whether they had approached the CLB or not. As per the repayment schedule determined by the CLB all
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