Back
ANDHRA PRADESH STATE CONSUMER DISPUTES REDRESSAL COMMISSION
D. Appa Rao, President and M. Shreesha, Member
P. GYANCHANDER - Appellant
Versus
K. PARVATHALU AND ORS. - Respondents
First Appeal No. 1046 of 2005 against C.D. No. 963 of 2004
Decided on : 31-07-2008
Mr. S. Ravikanth, Advocate, for the Appellant
The judgment establishes the principle that directors of chit fund companies can be held personally liable for the payment of chit amounts under Section 27 of the Consumer Protection Act, 1986, based on the application of the principle of lifting the corporate veil.
Headnote:
Chit Fund - Liability of Directors - Consumer Protection Act, 1986, Section 27 - The judgment discusses the liability of directors of a chit fund company for the payment of chit amounts. It highlights the application of the principle of lifting the corporate veil and the interpretation of Section 27 of the Consumer Protection Act, 1986.
Fact of the Case:
The complainant joined a chit fund and paid a total amount. When he requested his money back, the opposite parties agreed to pay a certain amount but issued post-dated cheques that were dishonoured. The complainant filed a complaint seeking payment and compensation.
Finding of the Court:
The court found that the opposite parties' act of agreeing to pay and issuing dishonoured cheques amounted to deficiency of service. The appellant's contention of not being liable as a director was rejected based on the interpretation of Section 27 of the Consumer Protection Act, 1986 and the principle of lifting the corporate veil.
Issues: Liability of directors in chit fund companies, application of Section 27 of the Consumer Protection Act, 1986, and the principle of lifting the corporate veil.
Ratio Decidendi: The court relied on the interpretation of Section 27 of the Consumer Protection Act, 1986 and the principle of lifting the corporate veil to establish the liability of the appellant as a director for the payment of chit amounts.
Final Decision: The appeal was dismissed, and the court upheld the order of the District Forum, holding the appellant liable for the payment of chit amounts.
ORDER
Mrs. M. Shreesha, Member - Aggrieved by the order in C.D. No. 963 of 2004 on the file of District Forum-I, Hyderabad, opposite party No. 5 preferred this appeal.
2. The brief facts as set out in the complaint are that opposite party No. 1 is the chit fund company of which opposite party No. 2 is the Managing Director, and opposite parties 3, 4 and 5 are Directors and the complainant joined as a member of opposite party No. 1 chit series No. SP 42 BDH-47 for Rs. 1,00,000 on the basis of daily subscription of Rs. 200 for 500 days. The complainant paid a total amount of Rs. 81,298 from 23.12.2001 to 29.4.2003 and in the month of May 2003, the complainant wanted his money back for the purpose of the marriage of his daughter and requested opposite party No. 1 to settle and pay the said chit amount. In spite of repeated requests of the complainant, opposite party No. 1 informed the complainant that they are facing financial problems and agreed to pay a total amount of Rs. 88,459 towards full and final settlement and issued eight post dated cheques to be encashed during the period from October 2003 to December 2003. The complainant submitted on presentation of the said cheques, they were dishonoured, he informed the said fact to opposite parties and requested to pay the agreed amount but opposite parties have failed to pay the same. Therefore, the complainant got issued a legal notice dated 24.6.2004 to the opposite party No. 1 and though it received the notice, failed to give any reply. Hence the complaint for a direction to the opposite parties to pay an amount of Rs. 88,459 with 24% interest from May, 2003 till the date of payment together with compensation of Rs. 50,000 and costs of Rs. 5,000.
3. Notices were sent to opposite parties and there was no representation and they were called absent and were set ex parte.
4. Based on the evidence adduced i.e. Exs. A1 to A12 and the pleadings put forward, the District Forum allowed the complaint in part directing opposite party Nos. 1 to 5 jointly and severally to pay an amount of Rs. 88,459 with 12% interest from 1.1.2004 to 18.7.2004 and at 9% p.a. from 19.7.2004 till the date of payment together with costs of Rs. 2,000.
5. Aggrieved by the said order, opposite party No. 5 preferred this appeal.
6. The learned Counsel for the appellant submitted that the District Forum erred in directing the appellant herein to pay the amount along with other respondents and submitted that he was no way connected with respondent No. 2 herein and he was not a Director on the date of filling of the above C.D. and he was never an active Director and was only a name sake Director and resigned the said company on 3.2.2003 and Form No. 32 was also filed before the Registrar of Companies and filed the certified copy and hence he is not liable to pay any amount that is payable by respondent No. 1 company. He also submitted that the appellant is neither related to the family of Managing Director or other Directors of the said company and he is absolutely a stranger to the said company and submitted that no Director of a company is personally liable for any dues that are payable by the complainant. He further submitted that he is in no way connected with the chit subscriber nor connected with the transaction admittedly made when the complaint was filed and as such fixing the liable on him to pay the amount is illegal. He submitted that respondent No. 2 cheated the appellant and made him believe that he is settling the matter with the complainant. He submitted that he is no way connected with the alleged cheques and he is not a signatory to the said cheques and no way concerned with the liability of respondent No. 2 company and prayed to allow the appeal.
7. We observe from the record that the complainant joined in opposite party No. 1 chit and paid a total amount of Rs. 81,298 from 23.12.2001 to 29.4.2003. It is the case of the complainant that when he wanted his money back for the purpose of his daughter's marr
