A.P. STATE CONSUMER DISPUTES REDRESSAL COMMISSION
AT HYDERABAD.
F.A. 49/2008 against C.C 976/2005, Dist. Forum-I, Hyderabad.
Between:
A.P.V. Subbaiah
S/o. Rangaiah
Age: 71 years, Pensioner
R/o. D-81, Madhura Nagar
Hyderabad-500 038. *** Appellant/
O.P. No. 2.
And
1. M/s. Ganesh Earth Movers
(A Parternership firm rep. by its
Managing Partner)
D. Narsinga Rao
D.No. 12-2-825/7/1/2
Mehidipatnam, Hyderabad. *** Respondent/
Complainant.
2. M/s. Abheeshta Chit Fund (P) Ltd.,
116, Ground Floor,
Sovereign Shelters
Lakdikapool, Hyderabad.
3. M. Madan Mohan Rao
12-2-823/A/20,
Santoshnagar Colony
Mehidipatnam
Hyderabad-500 028.
4. M. Sreenivas
R/o. 12-2-823/A/78
Santoshnagar Colony
Mehidipatnam
Hyderabad-500 028.
5. K. Kishan
R/o. 6-3-249/7/1B
Naveen Nagar Colony
Khairatabad, Hyderabad
6. K. Vijaya Lakshmi
R/o. 2-2-647/49,
Central Excise Colony
New Nallakunta
Hyderabad-500 013.
7. N. Venkateswara Rao
R/o. 2-2-1085/A/3
Amberpet, Hyderabad. *** Respondents/
O.Ps 1,3 to 7
(R 2 to 7 are not necessary parties)
F.A. 237/2008 against C.C 976/2005, Dist. Forum-I, Hyderabad.
Between:
K. Vijaya Lakshmi
W/o. K. Shiva Kumar
R/o. 2-2-647/49,
Central Excise Colony
New Nallakunta
Hyderabad-500 013. *** Appellant/
O.P. No. 6.
And
1. M/s. Ganesh Earth Movers
(A Partnership firm rep. by its
Managing Partner)
D. Narsinga Rao
D.No. 12-2-825/7/1/2
Mehidipatnam, Hyderabad. *** Respondent/
Complainant.
2. M/s. Abheeshta Chit Fund (P) Ltd.,
116, Ground Floor,
Sovereign Shelters
Lakdikapool, Hyderabad.
3. A.P.V. Subbaiah
S/o. Rangaiah
R/o. D-81, Madhura Nagar
Hyderabad-500 038.
4. M. Madan Mohan Rao
12-2-823/A/20,
Geeta Apartments
Santoshnagar Colony
Mehidipatnam
Hyderabad-500 028.
5. M. Sreenivas
R/o. 12-2-823/A/28
Geeta Apartments
Santoshnagar Colony
Mehidipatnam
Hyderabad-500 028.
6. Capt. K. Kishan
Plot No. 699
Naveen Nagar Colony
Banjara Hills, Hyderabad
7. N. Venkateswara Rao
R/o. 2-2-1137/4/A
Indira Nilayam,
New Nallakunta, Hyderabad. *** Respondents/
O.Ps 1 to 5 & 7
(R 2 to 7 are not necessary parties)
F.A. 91/2008 against C.C 976/2005, Dist. Forum-I, Hyderabad.
Between:
N. Venkateswara Rao
S/o. N. Krishna Rao
R/o. 2-2-1137/4/A
Indira Nilayam,
New Nallakunta, Hyderabad. *** Appellant/
O.P. No. 7.
And
1. M/s. Ganesh Earth Movers
(A Partnership firm rep. by its
Managing Partner)
D. Narsinga Rao
D.No. 12-2-825/7/1/2
Mehidipatnam, Hyderabad. *** Respondent/
Complainant.
2. M/s. Abheeshta Chit Fund (P) Ltd.,
117, Ground Floor,
Sovereign Shelters
Lakdikapool, Hyderabad.
3. A.P.V. Subbaiah
S/o. Rangaiah
R/o. D-81, Madhura Nagar
Hyderabad-500 038.
4. M. Madan Mohan Rao
12-2-823/A/20,
Geeta Apartments
Santoshnagar Colony
Mehidipatnam
Hyderabad-500 028.
5. M. Sreenivas
R/o. 12-2-823/A/28
Geeta Apartments
Santoshnagar Colony
Mehidipatnam
Hyderabad-500 028.
6. Capt. K. Kishan
Plot No. 699
Naveen Nagar Colony
Banjara Hills, Hyderabad
7. Smt. K. Vijaya Lakshmi
R/o. 2-2-647/49,
Central Excise Colony
New Nallakunta
Hyderabad-500 013. *** Respondents/
O.Ps. 1 to 6
(R 2 to 7 are not necessary parties)
Counsel for complainants: M/s. A. Krishnam Raju
Counsel for O.P3 & O.P5 M/s. G. Rajesham
Counsel for O.P.4 M/s. M. Kalyana Ramakrishna
Counsel for O.P6 & O.P7 M/s. A. Suryanarayana Murthy
QUORUM:
HON’BLE SRI JUSTICE D. APPA RAO, PRESIDENT
&
SMT. M. SHREESHA, MEMBER
THURSDAY THIS THE FIFTH DAY OF FEBRUARY TWO THOUSAND NINE
Oral Order: (Per Hon’ble Justice D. Appa Rao, President)
*****
Opposite Parties 2, 6 & 7 preferred appeals F.A. 49/2008, F.A. 237/2008 and F.A. 91/2008 respectively against the order of the Dist. Forum-I, Hyderabad in C.D. 976/2005 directing them to pay Rs. 10 lakhs with interest and costs covered under the chit.
2) The parties are described as arrayed in the complaint for felicity of expression.
3) The case of the complainant in brief is that Opposite Party No. 1 is a company registered under the Companies Act, 1956 carrying on business in chit funds. Opposite Parties 2 to 7 are its directors involved in day to day business, responsible for financial management of its affairs. The complainant became a member and subscribed a chit account No. AC 1/13 for Rs. 10 lakh. He subscribed Rs 40,000/- per month for 25 installments from August, 1999. The monthly subscriptions received by the company were entered in the pass book. Since he did not bid in any of the chits, he was entitled to the chit amount of Rs. 10 lakhs deducting Foreman’s commission. When he claimed the amount, opposite parties 2 to 7 the directors were postponing the payment alleging that they were in financial difficulties on account of default committed by some of the subscribers. He waited with a fond hope that they would pay as promised and as such issued a legal notice on 18.7.2004 for which no reply was given. Therefore he claimed Rs. 10 lakh towards chit amount, Rs. 7.00,000/- towards interest @ 24% p.a., from 1.9.2001 to 31.7.2004, Rs. 1,00,000/- towards mental agony and Rs. 25,000/- towards costs, altogether Rs. 17,85,000/- with interest and costs.
4) Opposite Party No. 2 the appellant in F.A. 49/2008 resisted the case. He alleged that he was no way concerned with opposite party No. 1 company since he retired long before the complainant joined as a subscriber. Opposite Party No. 1 company is not the one which was actually incorporated under the provisions of Companies Act, 1956. It came into existence on 23.4.1999 in place of M/s. Abheeshta Finance Private Limited with which, his association as its Director, stood terminated on 1.4.1999 in terms of Section 283(1) of the Indian Companies Act, 1956. His resignation was accepted by the Board of Directors with effect from 1.4.2000 instead of 1.4.1999. He was the Managing Director of erstwhile M/s. Abheeshta Finance Private Ltd. In view of differences between them he had issued a notice as long back as on 29.4.1997. He was replaced by another director by Board Resolution Dt. 26.9.1998. His share capital and that of his wife as on 1.4.1999, was adjusted against the loan outstanding against him. Thereupon he sent a letter of resignation, which was accepted by the Board of Directors on 1.4.2000. He learnt that opposite party No. 1 sought for conversion of its name without his involvement and got it changed on 23.4.1999 as such his name was dropped. At any rate, since the responsibility of the directors is limited, the question of personal liability of the directors will not arise. The claim was barred by limitation. Therefore he prayed for dismissal of the complaint.
5) Opposite Party No. 6 the appellant in F.A. 237/2008 resisted the case. She alleges that the entire affairs of the company were managed by one Late M. V. Sastry with the assistance of Sri P. S. Bhasker Rao and Sri M. Sridhar, his brother-in-law and nephew respectively. The complainant is the nominee of Late M. V. Sastry father of opposite party No. 4. After the death of M. V. Sastry in June, 2003 the complaint was filed in order to cause loss to the business and that of the directors. She was not associated with the management of the company. All through the complainant did not take any steps to initiate the proceedings. It was barred by limitation. Therefore, she prayed for dismissal of the complaint.
6) Opposite Party No. 7 the appellant in F.A. No. 91/2008 alleged that he was unnecessarily impleaded. He was neither director nor shareholder of the company. In fact no notice was served on him. While reiterating the contentions taken by Opposite Party No. 6, he alleged that his father N. Krishna Rao died on 21.12.2001, he being the L.R. of his father, complainant cannot be termed as consumer as against him. At any rate the liability of the directors is limited and restricted to the assets of the company. The complaint could not be filed against him, he being the L.R. of one of the directors.
7) The complainant in proof of his case filed his affidavit evidence and got Exs. A1 & A2 marked. The opposite parties filed Exs. B1 to B23.
8) The Dist. Forum after considering the evidence placed on record opined that Opposite Parties 1 to 6 and Opposite Party No. 7 being the L.R. of the deceased director, are jointly and severally liable on the premise that Opposite Party No. 1 is a partnership firm and others are its partners and by virtue of statutory obligation under the Act, they are liable to pay and accordingly allowed the complaint directing them to pay Rs. 10 lakhs with interest @ 12% p.a., and costs of Rs. 2,000/-.
9) Aggrieved by the said decision, Opposite Parties 2, 6 and 7 preferred these appeals contending that the Dist. Forum did not consider any of their contentions. Though the complaint was filed against the company, it assumed that it was a partnership firm and opined as such without considering any of their contentions directed them to pay the same.
10) At the outset we may state that the complainant claimed the chit amount of Rs. 10 lakhs paid under the chit commencing from August, 1999 to 2001 run by M/s. Abheeshta Finance Private Limited, a company registered under the Companies Act, 1956 on 15.9.1993 consisting of following Directors evidenced under Ex. B21
1. Avula Peda Venkata Subbaiah, S/o. Late Rangaiah
2. Moduga Madan Mohan Rao, S/o. Late M.L. Narasimham
3. Mylavarapu Srinivas, S/o. M. V. Sastry
4. Kanuganti Kishan, S/o. Late K. Yellaiah
5. Kaparti Vijaya Laxmi, W/o. K. Shiva Kumar.
Later a partnership firm under the name and style of M/s. Abheeshta Finance Company was constituted on 12.5.1994 with the following partners evidenced under Ex. B23
1. Avula Peda Venkata Subbaiah, S/o. Late Rangaiah
2. Moduga Madan Mohan Rao, S/o. Late M.L. Narasimham
3. Mylavarapu Srinivas, S/o. M. V. Sastry
4. Kanuganti Kishan, S/o. Late K. Yellaiah
5. Kaparti Vijaya Laxmi, W/o. K. Shiva Kumar.
6. N. Krishna Rao, S/o. Late Veeraswamy.
7. M/s. Abheeshta Finance Private Limited.
11) We may clarify herein that M/s. Abheeshta Finance Private Limited, a company incorporated under the Companies Act was made as a partner to the partnership firm having 40% share vide Ex. B23 Dt. 12.5.1994. Opposite Party No. 1 was incorporated with the same nomenclature under the provisions of Indian Companies Act, 1956 came into existence on 23.4.1999 on conversion of M/s. Abheeshta Finance (P) Ltd with the name ‘ M/s. Abheeshta Chit Funds (P) Ltd. vide Ex. B10.
Clause 7 of the Partnership Deed reads as follows :
“The an account/s may be opened in any bank/s in the name of the partnership firm and such account/s shall be operated under the join signatures of Sri P.S. Bhaskar Rao who is hereby authorized to operate the account/s and any one of the partners namely Sri A.P.V. Subbaiah, Sri M. Madan Mohan Rao and Sri M. Srinivas.
12) The complainant joined as a member in Abheeshta Chits Private Limited for which Sri N. Krishna Rao was the Managing Director, directors being Smt. K. Vijaya Lakshmi, Sri M. Srinivas, Sri K. Kishna and Sri M. Madan Mohan Rao. The name of M/s. Abheeshta Finance Private Limited was changed to M/s. Abheeshta Chit Funds Private Limited with effect from 23.4.1999 which ran chit fund business for which he subscribed in the year 1999-2001. It is curious to note that complainant when he filed the complaint against a finance company did not file representing the company either by the Managing Director or Directors. He reeled out names of the directors. He impleaded Opposite Party No. 2 the appellant in F.A. 49/2008 alleging that he was also one of the directors. Opposite Party No. 2 resisted the case on the ground that he was neither a director nor anything to do with Opposite Party No. 1 company. He contends that he seized to be director as long back as on 1.4.1999 well before the Opposite Party No. 1 company came into existence. He stated that he resigned as director and the said resignation was accepted by the Board evidenced under Ex. B8.
It is very important to note that for the reasons not explained the complainant did not file original pass book or receipts issued by opposite party No. 1 company. Xerox copies were marked as A1 & A2.. When the opposite parties questioned the validity of these transactions, necessarily the complainant itself being a firm ought to have filed the originals. Non explanation of non-filing of originals necessarily had to be viewed adversely, more so, when the opposite parties contend the authority of the person who issued these receipts etc.
13) The complainant did not adduce any evidence as to who among the directors he paid the amount and obtained receipts filed by him evidenced under Exs. A1 & A2. It is not known who on behalf of the company was issuing receipts or endorsing on the pass book. It is as vague as vagueness could be. It is not known who was the Foreman of the chit. This enquiry was necessitated in view of the fact that none of the opposite parties admitted that they were responsible for the administration of the company or that they have anything to do with it. Importantly, the complainant did not file any document from the Registrar of Companies to show the names of the directors and other relevant data. No doubt there were interse disputes among the directors of the erstwhile company. Opposite Party No. 2 alleges that he severed connections with the erstwhile company and has nothing to do with the present company evident from Exs. B6 & B7. His own notice under Exs. B9, and B10 mentioning that he resigned as director and the same was accepted by the Board. Despite such an evidence being produced the complainant did not bother to file any contra evidence.
14) We may state herein that evidently the proceedings under the Consumer Protection Act are summary in nature. If contentious issues of foregone conclusions are raised the consumer fora may not be able to determine such complicated questions, necessarily it has to direct the parties to approach the Civil Court for adjudication. At any rate the Dist. Forum was undoubtedly erred in thinking that Opposite Party No. 1 is a partnership firm and Opposite Parties 2 to 6 are partners and invoked the provisions of Indian Partnership Act, directed the directors to pay the amount personally forgetting the fact that Opposite Party No. 1 is a company where the liability of the directors is limited. They have no personal liability to pay the said amount.
15) With the scanty evidence placed by the complainant, not keeping track as to the exact directors whom he can implead, filed a complaint as though it was a partnership firm and that partners are liable personally as to the amount payable to it, which in fact a company. Opposite Party No. 2 contends that the Dist. Forum went wrong in stating that none of these parties had made a publication of their retirement, resignation or withdrawal from Opposite Party No. 1 company as required u/s 32(3) under Indian Partnership Act which is mandatory and therefore the defence taken in this regard does not sustain. It is not in doubt that M/s. Abheeshta Finance Pvt. Ltd., is a partner and the liability of the partners as far as their share is concerned will arise. The Dist. Forum relied Section 2 of Protection of Depositors of Financial Establishments Act, 1999 and held that any person or group of individuals accepting deposits under any scheme or arrangement or in any other matter are interested persons for shouldering the liability, as defined under clause 3 of Section 5 of Banking Regulation Act, 1949. We do not see how the said provision could be invoked for passing a decree against these appellants.
16) The question of liability of Opposite Party No. 2, appellant in F.A. 49/2008 in view of his resignation, and subsequent constitution of company cannot be gone into, in view of the fact that the complainant did not file the very essential document of Incorporation of the Company and the Directors and others who were responsible for the administration of the company.
17) The contention of Opposite Party No. 6 appellant in F.A. 237/2008 is that she was neither a director nor was a partner. No doubt in Ex. B23 partnership deed admittedly she was shown as partner. However, the claim was made against a private limited company. As per the provisions of the Companies Act, there cannot be any personal liability to be fastened against her. She also alleges that she retired from the company on 28.3.2002 which was accepted in the meeting of the Board held on 28.9.2002 evidenced by letter Dt. 17.9.2002 confirmed on 8.10.2002. This was not controverted.
18) Opposite Party No. 7, appellant in F.A. 91/2008 is admittedly son of late N. Krishna Rao, one of the directors who died as long back as on 21.12.2001. He was impleaded as one of the LRs of the deceased director, Evidently he was not a director. Obviously, no decree could be passed against the erstwhile director. In fact, he died even before commencement of the very same chit fund business. It is not known who was taken as director in the place of N. Krishna Rao. His name does not find a place in the extract of particulars taken from the Registrar of Companies marked as Ex. B19.
19) To sum up the complainant filed a case against a private limited company without filing the proof of particulars of directors who can represent the said company. The contention of the appellants is that they were no longer directors, retired and their resignation was accepted and they had nothing to do with opposite party No. 1 by filing documents. The complainant could not file any contrary evidence to prove that they had anything to do with the company. Passing an order against them assuming them as directors and directing them to pay the said amount, more so, personally would not sustain, in the light of the fact that it is a company. In view of the fact that various questions as to their retirement, resignation etc. were raised it is a fit case where the Civil Court had to adjudicate these matters, more so, when no evidence whatsoever was filed to rebut the contentions raised by the appellants in this regard. Necessarily, appeals have to be allowed setting aside the order of the Dist. Forum. Consequently, the complaint is dismissed with an observation that the complainant can as well move the Civil Court, if it is so advised necessarily it would be entitled to limitation provided u/s 14 of the Limitation Act since it was bonafidely pursuing the matter before the Dist. Forum.
20) In the result the appeals are allowed by setting aside the order of the Dist. Forum. Consequently the complaint is dismissed. However, in the circumstances of the case each party to bear its own costs.
PRESIDENT LADY MEMBER
Dt. 05. 02. 2009.
*pnr
“UP LOAD – O.K”
