Delhi

New Delhi

EA/194/2015

SH Aditya Raj Sehgal - Complainant(s)

Versus

M/S Ajs Builder Pvt Ltd - Opp.Party(s)

12 Apr 2017

ORDER

CONSUMER DISPUTES REDRESSAL FORUM-VI

(DISTT. NEW DELHI),

 ‘M’ BLOCK, 1^STFLOOR, VIKAS BHAWAN, I.P.ESTATE,

 NEW DELHI-110001

Case No.EX/194/2015                            Dated:

In the matter of:

SHRI ADITYA RAJ SEHGAL

R/o B-41, Jangpura-B,

New Delhi-110014.

 

……..DECREE HOLDER

VERSUS

M/S AJS BUILDERS LTD. PROMOTERS & DEVELOPERS

Through its Managing Director Ms.Madhu Singh

Having its Corp. Office at:

1^st Floor, 8-Shaheed Bhagat Singh Marg,

Golf Market,

New Delhi-110001

 

...........JUDGMENT DEBTOR

MEMBER: NIPUR CHANDNA

ORDER

The complainant/decree holder has filed the present execution petition for recovery of the decreetal amount. The final order was passed on 21/5/2012 in favour of complainant/decree holder by this District Forum in complaint case number 596/2011, and it was directed that the JD shall refund to the complainant/decree holder, a sum of Rs. 2,73,000/- with interest at the rate of 9% from the date of seeking refund till date of payment and a compensation amount of Rs.30,000/- was also awarded to the complainant/decree holder against the JD.

 

On behalf of JDs Ms Madhu Singh Director of JD Company, who is in custody in other case has stated that her company is a sick, inactive and is in liquidation and neither she nor her company presently is able to make payment and maybe after a few months time,  they would be able to make payment after sale of the property. The DH/complainant has strongly objected giving further time for making payment as he has already suffered a lot and is being harassed unnecessarily by prolonging execution petition.

 

We have carefully heard arguments from both sides, and have gone through the record of execution proceedings and relevant provisions of law.

 

Section 27 of the Consumer Protection Act, 1986 deals with penalties to be imposed in case any person fails or omits to comply with order of the consumer fora. The power of Judicial Magistrate is also given to the consumer fora under Subsection (2) of Section 27. For, omission or non-compliance of the order of consumer fora, the defaulter can be sentenced to imprisonment which shall not less be  than one month, but may extend up to 3 years or with fine, which shall not be less than Rs. 2000/- but which may extend to Rs. 10,000/- or with both said sentence of imprisonment and said fine.

 

Although a consumer/decree holder can be satisfied if the amount is paid to him by the defaulter/opposite party/judgment debtor so initial effort should always be for recovery of the amount to be paid to the consumer. But in a case when, despite the consumer to the detriment of his/her financial interest ,has agreed as per compromise on 27/11/2015 to receive the reduced principal amount paid and giving up right to receive interest and compensation in the execution proceedings and yet no amount is paid for more than one year of compromise or during the last more than three years of pendency of the present execution petition, this forum is of the view that this pending execution petition for implementation of the order of 21/5/2012 demands some harsh orders upon the judgment debtor as it would be a futile exercise and wastage of time to continue with the efforts for recovery of the amount. Further, when the JD is not making payment of the reduced amount equivalent to the  amount agreed by the decree holder/complainant, then the consent or compromise between the parties in the execution proceedings also stood nullified and became meaningless on account of inaction of the JD in making payment as per compromise between the parties. Therefore, the decree holder/complainant, in our view is entitled to recover now whole of the decreetal   amount inclusive of the interest awarded and compensation awarded in the original order dated 21/5/2012 by this District Forum.

 

 

The question now arises can a Managing Director/Director of a JD company  be sentenced to jail. Another question arises whether such an action is justified when the JD company is a sick company or company in liquidation. Instead of interpreting these questions ourselves we are seeking the help of precedents for guiding us on these questions.

 

The above two questions are directly dealt with in Sipani Automobiles Ltd. v. Dr. Kirti Malviya  : 2003(3) C.P.J. 142 : 2003(4) All WC 145 (N.C.D.R.C) wherein the Hon’ble National Commission was dealing with liability of directors and the provisions of section 22, SICA and has decided these two questions. It has made the following observations:

 

"4. Bare reading of the section would show that it only creates an embargo against disposal of assets of the company for recovery of its debts; the purpose of such an embargo is to preserve the assets of the company from being attached or sold for realisation of dues of the creditors; section does not bar payment of money by its directors for satisfaction of the legally enforceable dues. Petitioner company has not filed the copies of applications filed under Section 27/25 of the Act by the respondents. Presumably, in the applications, the prayer made was for sentencing to imprisonment the managing director and/or directors of the company for non-compliance of the order(s) for making payments by the petitioner company. A command to a Corporation is in fact a command to those who are officially responsible for the conduct of its affairs and if they after being apprised of the order, fail to take appropriate action, they are also guilty of dis-obedience and may be punished. That being so, without examining the issue, whether proceedings under Section 27 are of civil or criminal nature, the managing director and/or director of petitioner company cannot escape liability for payment and seek stay of the execution applications invoking aid of Section 22(1), SICA. "

In N. Narayanan versus Adjudicating Officer, SEBI. The Hon’ble Supreme Court in the Civil Appeal Nos. 4112-4113/2013 decided on 26.4.2013 has made the following observations:

“Company though a legal entity cannot act by itself, it can act only through its Directors.  They are expected to exercise their power on behalf of the company with utmost care, skill and diligence.  This court while describing what is the duty of a Director of a company held in Official Liquidator V. P.A. Tendolkar (1973) 1 SCC 602 that a Director may be shown to be placed and to have been so closely and so long associated personally with the management of the company that he will be deemed to be not merely congnizant of but liable for fraud in the conduct of business of the company even though no specific act of dishonesty is provide against him personally.  He cannot shut his eyes to what must be obvious to everyone who examines the affairs of the company evey superficially.”

 

In Shivkumar Dalmia v. Mangalchand Hukmichand Industries :1996(86) Comp Cas 366 : 1997(12) SCL 33 : 1996(2) CompL.J. 219 (M.P.)(D.B.)(Indore Bench), the Division Bench of Madhya Pradesh High Court has highlighted the responsibility and liability of the directors of a company to be prosecuted.

 

In Sipani Automobiles Ltd. v. Rama Thakur :1998(1) C.P.J. 261(D.S.C.D.R.C.) Honourable Delhi State Consumer Disputes Redressal Commission was dealing with a revision petition directed against order dated 8/5/1997, passed by Consumer Disputes Redressal Forum-II wherein it , in exercise of powers under section 27 the District Forum imposed simple imprisonment for 2 1/2 years on Managing Director of the JD company and directed NBW against him for his production before it to be sent to jail. The said revision petition was dismissed by honourable Delhi State Consumer Disputes Redressal Commission.

 

In Gyan Singh v. Carryon Savings and Investment Co. Ltd.  : 1994(3) C.P.J. 9 : 1994(2) C.P.R. 269 (W.B.S.C.D.R.C.) Honourable West Bengal State Consumer Disputes Redressal Commission, Calcutta has made the following observations:

"14. As regards the contention of the opposite parties that the company is a juristic person and it can sue and can be sued accordingly it is argued by the opposite parties that the Director of the Company cannot be held responsible for the liability of the complainants/petitioners.

15. We are unable to agree with the said contention in view the brochure published in this regard contained the names of three Directors who accepted the money invested by the complainant/ petitioners under different schemes for growth and the complainant/petitioners being allured by such publication in the brochure by the Directors invested different sums under different schemes for the growth of capital and improvement in financial conditions.

16. So, according to Section 62 of the Companies Act , the Directors are severally liable for mis-statement made in the prospectus published in this regard and as such the Directors are held responsible and liable to pay the dues of the complainants/ petitioners as per statement made in the prospectus published by them and as the prospectus of brochures contained the names of the three Directors namely Sri A. Talukdar, Sri M.Das and Sri M.K. Roy they are jointly or severally liable to pay the dues of the complainants/petitioners together with compensation as awarded by this Commission in its order dated 14.5.1993. "

It was also observed as follows:

"24. In default to re-pay the respective sums together with interest at the 18% p.a. and compensation at the rate 10% on matured sums within stipulated time by the Directors of the opposite party, the penal action will be taken as per provisions of Section 27 of the Consumer Protection Act without further notice and addition to it the matter would be referred to the D.I.G., C.I.D. for necessary actions."

In the light of the legal position enunciated from the above case law, it is clear that for non-compliance of the order of the consumer fora a Director/Managing Director can be punished under section 27 of the Consumer Protection Act, 1986 when the amount is not paid or recovered from JD. The liability of the judgment debtor/OP company in the present case as per  final order  passed by this District Forum, as already stated, is of the refund of the amount of Rs. 2,73,000/- along with interest at the rate of 9% per annum from the date of deposit made by the decree holder/complainant with the JD/OP besides payment of compensation of Rs.30,000/-. This liability is increasing month by month due to interest factor as no payment is made to the complainant/decree holder from the date of the said final order till date. Therefore, keeping in view overall facts and circumstances of the case we direct Ms Madhu Singh, the director/managing director of the JD company to undergo simple imprisonment for a period of one year. However, it is clarified that in case  the decreetal  amount along with interest and compensation awarded is either deposited with this District Forum or paid to complainant/decree holder before this District Forum by the JD/its directors/managing director or any authorised person then Ms Madhu Singh shall be entitled to be released from jail forthwith in this execution petition.

Copy of this order be sent to both the parties free of cost by post.  This order be sent to server (www.confonet.nic.in ).

 

   File be consigned to record room.

   Pronounced in open Forum on                              .

 

 

                                                                     (S K SARVARIA)                      (NIPUR CHANDNA)                                                                                                                  PRESIDENT                                        MEMBER