DISTRICT CONSUMER DISPUTES REDRESSAL COMMISSION ERNAKULAM
Dated this the 29th day of October 2024
Filed on : 08.07.2022
PRESENT
Shri. D.B.Binu President
Shri. V.Ramachandran Member
Smt. Sreevidhia.T.N Member
C.C. No. 337/2022
COMPLAINANTS
- K.N Asokan, Kolamveettil House, Arankavu Road, Chendamangalam-683512.
- P.G Maheswary Teacher, W/o Asokan, Kolamveettil House, Arankavu Road, Chendamangalam-683512.
Vs
OPPOSITE PARTIES
- Managing Director, Thirukochi COCONUT PRODUCER COMPANY, Thirumarady P.O, Koothattukulam-686662
- Director, M Thirukochi COCONUT PRODUCER EM COMPANY, Thirumarady P.O, Koothattukulam-686662
- Secretary, Thirukochi COCONUT PRODUCER COMPANY, Thirumarady P.O, Koothattukulam-686662
(OPs’ Rep. By. Adv. K.M. Biju & Adv. Deepa N.D)
F I N A L O R D E R
D.B. Binu, President.
1) A brief statement of facts of this complaint is as stated below:
The complainant purchased shares from the opposite party, based on assurances given by the Company regarding voting rights and dividend payments. The complainant was informed by the Company that voting in the general meeting would be allowed only upon purchasing shares worth ₹10,000. However, it is alleged that the Company has not convened a general board meeting for the past seven years, raising serious concerns about its governance practices.
The complainant further states that two individuals, after purchasing shares worth ₹20,000, received ₹2,500 as a dividend from the Company. The Company also promised that upon receiving an additional ₹2,500, a total return of ₹5,000 would be realized. Relying on such promises, the complainant invested a sum of ₹30,000 in shares, expecting similar returns and benefits. However, the Company failed to allocate the promised ₹10,000 share entitlement to the complainant as assured.
Additionally, the complainant contends that the Company has a poor reputation in society, which makes it difficult to sell or transfer the shares, despite the Company’s claim that the shares are marketable. The complainant feels misled and alleges that the opposite party induced the purchase of shares through false representations about voting rights, dividends, and marketability.
The complainant now seeks appropriate relief, as the Company has failed to honour its commitments and provide the promised financial returns, which has caused financial loss and mental hardship. The complainant also raises concerns over the lack of transparency, governance issues, and the inability to exercise shareholder rights.
2. NOTICE:
The commission issued a notice to the opposite parties, who subsequently filed their versions.
3. THE VERSION OF THE OPPOSITE PARTIES
The opposite parties contends that the complaint filed by the complainants, who are shareholders of the company, is not maintainable under the Consumer Protection Act since there is no consumer relationship between the two parties. They stated that shareholders are not considered consumers but co-owners of the company and are entitled to receive dividends only when the company operates profitably. The complainants have no right to seek the return of their shares, as company law does not allow such a provision.
The opposite parties highlights that general meetings are conducted annually as per legal requirements, and during the COVID-19 pandemic, these meetings were held online to comply with safety protocols. They maintain that the company has not violated any legal provisions in this regard. Furthermore, as shareholders, the complainants must accept both profits and losses equally, along with other shareholders.
The opposite parties assert that the demands of the complainants are baseless, as they misunderstand their rights and obligations as shareholders. The complainants' role is to participate in the general meeting and share the company's financial outcome rather than demand a return of shares or specific consumer rights. Therefore, the opposite party requests the complaint be dismissed, stating it lacks legal merit and does not fall within the scope of the Consumer Protection Act.
4. Evidence:
The complainant did not submit a proof affidavit but provided two supporting documents.
5. Points for Consideration:
i) Whether the complaint is maintainable or not?
ii) Whether there is any deficiency in service or unfair trade practice by the opposite parties?
iii) If so, whether the complainant is entitled to any relief?
iv) Costs of the proceedings, if any?
6. The issues mentioned above are considered together and answered as follows:
I. Whether the complainant is maintainable before this Commission as per Section 2(7) of the Consumer Protection Act, 2019?
The primary question before the Commission is whether the complainants can be regarded as consumers under the Consumer Protection Act, 2019. It is well established through judicial precedents that shareholders in a company do not fall within the ambit of the Consumer Protection Act, as they are considered co-owners of the company rather than consumers availing services for consideration.
In Devashish Mitra v. Managing Director, M/s Lakshmi Varsha Company & Anr. (C.P.R. 434), the Hon’ble National Consumer Disputes Redressal Commission (NCDRC) held that claims related to financial returns from shares or dividends are not maintainable under the Consumer Protection Act, as they do not involve "deficiency in service." The transaction of purchasing shares is governed by the principles of company law, which distinguish shareholders from consumers.
Therefore, the Commission finds that the complainants, being shareholders of the opposite party company, are not considered as ‘consumers’ under the definition of Consumer Protection Act, 2019 , and the complaint is not maintainable before this Commission.
II. Alleged Deficiency in Service and Corporate Governance Issues
The complainants allege that the company failed to organize general board meetings, pay dividends, or allocate share entitlements as promised. However, the opposite parties clarified that general meetings were conducted in compliance with legal requirements, including virtual meetings during the COVID-19 pandemic. The company also stated that dividends are paid only when the company is profitable, which is a standard principle in corporate law.
The complainants did not provide any proof of misrepresentation or deficiency in service by the opposite parties. It is also noted that the complainants did not attend the scheduled hearings or submit a proof affidavit to substantiate their allegations, despite multiple opportunities granted by the Commission.
The Commission refers to Ravneet Singh Bagga v. KLM Royal Dutch Airlines & Anr. (AIR 2000 SC 2814), where the Hob’ble Supreme Court reiterated that the burden of proving deficiency lies with the complainant. Mere allegations without evidence are insufficient to establish a case of deficiency in service.
In the present case, the complainants failed to provide evidence of the alleged misrepresentations or the company’s failure to convene meetings. The complainants’ absence and non-participation during the proceedings further weaken their case.
In a series of decisions, it has been established that the burden of proof lies with the complainant to demonstrate negligence or deficiency in service by presenting evidence before the commission. Mere allegations of negligence are insufficient to support the complainant's case. Consequently, the complainant has failed to prove any deficiency in service or negligence on the part of the opposite party.
SGS India Ltd vs. Dolphin International Ltd 2021 AIR SC 4849
In this case, it was held that:
“The onus of proof of deficiency in service is on the complainant in complaints under the Consumer Protection Act, 1986. It is the complainant who had approached the Commission, therefore, without any proof of deficiency, the opposite party cannot be held responsible for deficiency in service. In a Judgment of this Court reported as Ravneet Singh Bagga v. KLM Royal Dutch Airlines & Anr., this court held that the burden of proving the deficiency in service is upon the person who alleges it.”
We have decided not in favour of the complainant on all the issues mentioned above.
ORDER
The complainants do not qualify as ‘consumers’ as per Section 2(7) of the Consumer Protection Act, 2019, and hence the complaint is not maintainable before this Commission. The complainants failed to provide sufficient evidence to establish any deficiency in service or unfair trade practice by the opposite parties.
The complaint filed by the complainants is dismissed for lack of jurisdiction under the Consumer Protection Act, 2019.
No costs are awarded to either party.
Pronounced in the open Commission on this 29th day of October , 2024.
Sd/-
D.B. Binu, President
Sd/-
V. Ramachandran, Member
Sd/-
Sreevidhia T.N, Member
Forwarded/By Order,
Assistant Registrar
APPENDIX
Complainants’ Evidence
NIL
Opposite Parties’ Evidence
NIL
Date of Despatch
By Hand ::
By post ::
AKR/
Order in CC No. 337/2022
Date: 29/10/2024
