A.P. STATE CONSUMER DISPUTES REDRESSAL COMMISSIONAT HYDERABAD
F.A. 204/2008 to F.A.No.207/2008 against C.C. 44/2005 to 47/2005 Dist. Forum, Karimnagar
1. B. Jagataiah
C/o. Balaji Kirana General Store
Plot No. 29, H.No. 6-163/2
Maruthi Nagar, Road No. 1
Santhosh Nagar, Hyderabad.
2. Goud Janardhan, Director
S/o. G. Yellappa
Arvind Nagar, Jagtial Mandal
Karimnagar Dist.
3. Kayatham Babu Rao
M/s. Sadana Gas Lines
4-67, Manala Complex
Mamidipalli X Roads
Armoor Mandal, Karimnagar Dist. Appellants in F.A.Nos.204/08 to F.A.No.207/08/
Opp.parties 4, 6 and 2 in CD
And
1. B. Venkateswarlu
S/o. Seetaiah
R/o. 18-3-463/6
Shivaji Nagar, Hyderabad. *** Respondent/
Complainant in FA 204/08
2. B. Sushma
D/o. B. Venkateswarlu
Age : 11 years
Rep. by her father
B. Venkateswarlu S/o.Seetaiah
R/o. 18-3-463/6
Shivaji Nagar, Hyderabad. *** Respondent/
Complainant. in FA 205/08
3. B. Subhashini
D/o. B. Venkateswarlu
Age : 13 years
Rep. by her father
B .Venkateswarlu, S/o.Seetaiah
R/o. 18-3-463/6
Shivaji Nagar, Hyderabad. *** Respondent/
Complainant in FA 206/08
4. B. Nirmalamma
W/o. B. Venkateswarlu
R/o. 18-3-463/6
Shivaji Nagar, Hyderabad. *** Respondent/
Complainant in FA 207/08
5. M. Sridhar,
Managing Director,
H.No.5-4-80, Subash nagar,
Sircilla Mandal,
Karimnagar Dist.
6. Mukka Rajshree
W/o. M. Harish Babu
H.No.5-4-80, Subash nagar,
Sircilla Mandal,
Karimnagar Dist.
7. Kattapelly Rajamallaiah
S/o. Rajam, Tatipally post
Mallial Mandal
Karimnagar Dist. *** Respondents in
F.A.Nos.204/08 to
F.A.No.207/08/
Opp.parties 1, 3 & 5.
Counsel for the Appellants : M/s.K.S.Murthy
(Common in F.A.Nos.204/08 to 207/08
.
Counsel for the Respondents: Mr.N.Rajeshwar Rao-for R1 in all appeals
R2 & R3-served.
R4 served by paper publication.
(Common in F.A.Nos.204/08 to 207/08
.
CORAM:
HON’BLE SRI JUSTICE D. APPA RAO, PRESIDENT
&
SRI SYED ABDULLAH, MEMBER
FRIDAY, THE THIRTIETH DAY OF JULY,
TWO THOUSAND TEN
Oral Order: (Per Smt.M.Shreesha, Hon’ble Member.)
****
1) These appeals are preferred by opposite party No.2, 4 and 6 against the orders of the Dist. Forum directing them to pay the amount covered under the FDRs with interest and costs along with respondents 1, 3 and 5.
2) Though the Dist. Forum had passed separate orders on the complaints filed by different complainants seeking the amounts covered under the FDRs issued by M/s. Prithvi Financiers, Karimnagar directing the appellants, erstwhile directors of the company to pay the amount along with other respondents, we are of the view that since common questions of fact and law are involved, all these appeals can be disposed of by a common order.
3) The case of the complainants in brief is that the appellants and the respondents 1, 3 and 5 have established a finance business under the name and style of M/s. Pruthvi Financiers at Karimnagar inviting deposits from the depositors undertaking to repay the same with attractive rate of interest. The scheme stipulates that each member had to deposit Rs. 6,000/- at a time or Rs. 300/- per month for a period of 24 months and that on maturity it would pay Rs. 15,000/-. Accordingly they joined as members and obtained the following FDRS.
S.No. | F.A.No. | FDR No. | Deposit Date & Amount | Maturity Date & amount | Issued by |
1. | 207/2008 | 0198 | 12.05.1997 Rs. 7,200/- | 11.05.2003 Rs. 15,000/- | Prithvi Financiers, Karimnagar |
2. | 204/2008 | 0252 | 12.05.1997 Rs. 7,200/- | 11.05.2003 Rs. 15,000/- | Prithvi Financiers, Karimnagar |
3. | 205/2008 | 4584 | 12.05.1997 Rs. 7,200/- | 11.05.2003 Rs. 15,000/- | Prithvi Financiers, Karimnagar |
4. | 206/2008 | 0232 | 12.05.1997 Rs. 7,200/- | 11.05.2003 Rs. 15,000/- | Prithvi Financiers, Karimnagar |
The opposite parties had closed their business and despite repeated requests they did not pay. Therefore they sought payment of amount covered under the FDRs together with compensation and costs.
4) Respondent/O.P. No. 1 resisted the case. He alleged that he had no concern with M/s. Pruthvi Financers at Karimnagar. He did not receive any deposits from the complainants. He secured a government job in 1998. He was not involved in the activity of the company and was not liable to pay the amount claimed. He filed Ex. B1 certificate issued by Registrar of Companies to show that he was retired as Director with effect from 24.8.1998. At any rate, the company was not impleaded and therefore he was not liable to pay any amount and therefore prayed for dismissal of the complaint.
5) R2 did not choose to contest and therefore he was set-exparte.
6) R3, R4 and R6 resisted the case contending that they had no concern with M/s. Pruthvi Financiers and that they were not liable to pay any amount. No document whatsoever was filed to prove that they were either directors or partners or had anything to do with the company. In fact husband of the complainant Sri B. Venkateswarlu joined his wife and children as shareholders in M/s. Pruthvi Securities and as per the norms of the company each share-holder has to secure the deposits. Accordingly they were only shareholders and nothing to do with the amount claimed by the complainants and therefore prayed for dismissal of the complaint with costs.
7) The complainants filed their affidavit evidence and got Ex. A1 FDR receipt issued by M/s. Prithvi Financiers marked. The respondents filed their affidavit evidence and got Ex. B1 certificate issued by the Registrar of Companies to show that the R1 was retired from the company with effect from 24.8.1998.
8) The Dist. Forum after considering the evidence placed on record opined that R1 was a director up till 12.5.1997 and the deposit receipt being 12.5.1997 he was liable to pay the amount and that subsequent retirement will not absolve him from the liability. Therefore the Dist. Forum directed R1 to R4 and R6 to pay the amount covered under the FDRs with interest @ 9% p.a., from the date of complaint till the date of realization together with costs of Rs. 1,000/-.
9) Aggrieved by the said decision appellants/OP 2, 4 and 6 preferred the appeals contending that the Dist. Forum did not appreciate either facts or law in correct perspective. It ought to have seen that the company was not made a party which in fact was liable to pay the amount. They did not issue any FDR on behalf of the company nor personally liable to pay the amount to the complainant, if any, by the company. The complainants did not file any documents either Memorandum or Articles of Association to show as to the liability of the directors for payment of amount to them. The Dist. Forum had no jurisdiction to entertain the complaints, and therefore prayed that the complaints be dismissed.
10) The point that arises for consideration is whether the orders of the Dist. Forum directing the appellants to pay the amount covered under the FDRs is vitiated by mis-appreciation of fact and law?
11) It is an undisputed fact that M/s. Prithvi Financers at Karimnagar is a company registered under the Companies Act, 1956 and did finance business. The Managing Partner issued Ex. A1 FDR in favour of the complainants agreeing to pay Rs. 15,000/- on the date of maturity. Since the amount covered under the FDRs even after expiry of maturity date was not paid, the complainant filed these complaints.
12) It is important to note that the company was not impleaded as a party. The complainants impleaded R1 to R6 on the ground that they were the directors and liable to pay the amount covered under the FDRs. No document whatsoever was filed in order to prove that they were the directors and responsible for commitment made by the company. They did not obtain copies of Memorandum or Articles of Association of the company to find out as to the nature of the business and the liability of the directors individually. Despite the fact that the appellants denied that they had anything to do with the above said company, the company was not made a party nor shown the authority as to how they were liable to pay individually. The complainants did not choose to contest in these appeals.
13) When the complainants had filed the complaints they could have taken the particulars of the directors and others from the Registrar of Company to find out the persons liable to pay the amount covered under the FDRs. The Dist. Forum did not consider the liability of the directors personally for the amount liable to be paid by the company. Though the complainants had designated the R1 as Managing Director, the said fact was not noted in Ex. B1. The designation as required in Ex. B1 was not mentioned.
14) Equally the complainants did not file any document to show R2 to R6 were either directors or in a way responsible to pay the amount covered under the FDRs. The complaints were filed without recoursing to any law for that matter the Companies Act, 1956.
15) It is settled proposition of law that the companies are governed and regulated under Companies Act, 1956. The companies have limited liability and perpetual succession. The companies have a common seal. The company is a separate legal entity which can sue and be sued. Importantly no personal liability of individual director or a member of company could be fastened. The Dist. Forum mulcting liability personally against directors is contrary to the very law. Obviously, as no rules are framed under the C.P. Act unlike CPC as to how one should proceed in a case, the complainants are filing cases one after another without recoursing to any law. This undoubtedly leads to injustice. This is one of the classic cases where directors are made personally liable even without impleading the company as a party to the lis.
16) The Supreme Court of India has had an occasion to consider the position in the decision Tata Engineering and Locomotive Company Ltd. Vs. State of Bihar reported in AIR 1965 Supreme Court page 40. There, it has been held by His Lordship as follows:
“The true legal position in regard to the character of a Corporation or a Company which owes its incorporation to a statutory authority, is not in doubt or dispute. The Corporation in law is equal to a natural person and has a legal entity of its own. The entity of the Corporation is entirely separate from that of its shareholders; it bears its own name and has a seal of its own; its assets are separate and distinct from those to its members; it can sue and be sued exclusively for its own purpose; its creditors cannot obtain satisfaction from the assets of its members; the liability of the members or shareholders is limited to the capital invested by them, similarly the creditors of the members have no right to the assets of the Corporation. This position has been well-established ever since the decision in the case of Saloman v. Salomon and Co., 1897 AC 22, was pronounced in 1897; and indeed, it has always been the well recognized principle of common law.”
Section 3 of the Consumer Protection Act makes it clear that: the
3. Act not in derogation of any other law: It reads the provisions of this Act shall be in addition to and not in derogation of the provisions of any other law for the time being in force.
It should be in consonance with other laws which are in force. It is in addition to and not in derogation of other laws. The Dist. Forum did not consider any of these questions, simply directed the respondents to pay the amount without verifying whether they are the directors of the company. In the first instance, the complainants had to prove that the opposite parties are directors. Then only the liability could be fastened that too as per company law. Simply going by the version of the complainants no order of this nature, more so, against respondents could be passed. Despite the fact that objection was taken that no complaint could be made against the directors in their individual/personal capacity and the company was not impleaded being a necessary party, still the Dist. Forum without adverting to any of the contentions passed the order. This is contrary to the law.
17) In the result the appeals are allowed and the order of the Dist. Forum is set-aside. Consequently the complaints are dismissed. However, no costs.
Sd/-PRESIDENT
Sd/- MEMBER
Dt. 30. 07. 2010.
Jm/*pnr
