BEFORE THE DISTRICT CONSUMER DISPUTES REDRESSAL COMMISSION AT BANGALORE (URBAN)

DATED 23^RD DAY OF NOVEMBER 2022

ORDER

SMT.M.SHOBHA, PRESIDENT

1. The complaint has been filed under Section 35 of C.P.Act (hereinafter referred as an Act) against the opposite party for the following reliefs against the opposite party:-

1. Direct the opposite party to repay a sum of Rs.1,32,500/- with interest at the rate of 24% p.a.,
2. Harassment made to the complainant as a sum of Rs.50,000/-
3. Miscellaneous expenses for a sum of Rs.10,000/-. Totally a sum of Rs.1,92,500/-
4. Pass such other direction that this Hon’ble Commission deems fit to grant in the interest of justice and equity.

2. The case set up by the complainant in brief is as under:-

The opposite party is running a chit fund business under the name and style of Reddy Chits Pvt. Ltd., Bangalore. The opposite party and complainant are known to each other since one year.

3. The opposite party had opened the chit in its head office and the opposite party said the first month pay Rs.50,000/- and second month Rs.50,000/- and after monthly payment of Rs.32,500/- for totally 24 months.  The opposite party has assured that they bid the chit amount, they issued a sum of Rs.8,20,000/- after first two months.  The complainant believed the said words and he has paid a sum in the head office of the opposite party on 08.10.2021 and he has paid an amount of Rs.38,000/- and the complainant has paid cash of Rs.2,000/- to the opposite party on the same day.  
4. Further the complainant paid a sum of Rs.60,000/- to the opposite party on 13.12.2021 by way of transaction ID to the opposite party bank account at Punjab Sind Bank. Again the complainant has paid a sum of Rs.32,500/- to the opposite party on 19.11.2021 to the opposite party account in the same bank.  The complainant has totally paid Rs.1,32,500/- to the opposite party.
5. It is the grievance of the complainant that the opposite party has not bid the chit and not paid any amount to the complainant and the complainant stopped the payment to the opposite party at present.  The opposite party has not returned the deposited amount and the said office is opened but the opposite party is not in the office and some office staff has not taken any steps to return the amount.  The opposite party has not received the complainant’s phone call and he has not in the office and thereby he has cheated the complainant.  Hence the complainant has filed this complaint.
6. In response to the notice, opposite party appears and files version.
7. It is the case of the opposite party that the complaint is not maintainable either in law or on facts and liable to be dismissed.  The opposite party has admitted that the complainant has paid Rs.1,32,500/- and he has denied other allegations made in the complaint.  
8. It is further case of the opposite party that their company is the reputed chit company registered under the companies act 1956, having their registered office at Basavanagudi, Bangalore and they are in the business of promoting and conducting chits as per the provisions of Chit fund act 1982.  
9. It is the case of the opposite party that the complainant herein subscribed for a chit which was promoted by the branch of the opposite party after obtaining necessary permission from the competent authority.  At that time both the parties were entered the registered chit agreement as per section 6 of the Chit fund act.  Therefore both the parties are binding to follow the terms and conditions mentioned in the said registered agreement.  
10. It is further case of the opposite party that the complainant has paid Rs.1,32,500/- in three installments as against 24 installments and then he failed to pay the remaining installments.  Hence the opposite party issued the NPRL(Non prized removal letter) to intimate the fact to the complainant and then without alternative option the opposite party herein issued MRCL (Member removal confirmation letter) and intimate to remove the complainant herein in the said chit.  Hence the question of deficiency would not arise.  
11. It is further case of the opposite party that the complainant herein violated the terms and conditions of the registered agreement annexure R1 and hence the opposite party company imposed the penalty of 5% of the chit value in the above case and hence the question of refund of Rs.1,32,500/- with interest @ 24% would not arise.  As per the chit agreement by and between the above parties if any one violated the agreement they have to pay the penalty.  Further as per the clause F1 c) defaulted subscriber or cancelled subscriber is entitle to the amount actually subscribed by him exclusive of dividends less 5% of the chit amount towards damages for breach of contract.  
12. The opposite party has clearly stated clause F1 c) of chit agreement, which is as follows;

A cancelled subscriber is entitled to the amount actually subscribed by him exclusive of dividends less 5% of the chit amount towards damages for breach of contract. This amount is payable on application at the end of chit period or earlier if the vacancy is substituted.

13. It further case of the opposite party that the complainant has joined the chit for an amount of Rs.12,00,000/- and paid an amount of Rs.1,32,500/-  towards three installments.  Thereafter the complainant defaulted in payment of chit installments.  As per the chit agreement and chit funds act 1982 the respondent company will deduct 5% amount on the chit value towards breach of contract and incidental charges amounting to Rs.60,000/-  further after statutory deduction the subscription refundable deposit amount of Rs.72,500/- lying credit to the chit account which was actually paid by the complainant excluding dividends.  
14. This opposite party paid the amount to the complainant through cheque on 22.02.2022 drawn on Punjab and Sind Bank.  As per the orders passed by the Hon’ble Andhra Pradesh State Commission on 17.03.2004 in Sriram Chits Ltd., and another –vs- Poluri Sharath Reddy and another, wherein the Hon’ble State Commission held that 5% is to be deducted on the total chit value but not on the amount actually paid by the subscriber.  As per the orders passed by the Hon’ble Andhra Pradesh State Commission in M/s Kapil Chit funds pvt. Ltd., -vs- R.Krishna Reddy wherein “a subscriber removed from the chit before termination of any reason is entitled for a refund of only the net amount of subscription deposited by him less 5% of chit amount towards damages for breach of contract.”  This refund will be made after the substituted subscriber draws the price amount or at the close of the group.  
15. It is further case of the opposite party that the transaction between the opposite party and the complainant is a special form of contract which is governed by a special enactment i.e., the chit funds act 1982 and chit fund rules.  The management of the chit business between the complainant and opposite party is governed by sec 64 of the Chit fund act.  Therefore if any grievance is caused to either of the party the same shall be raised before the competent authority under the chit fund act 1982 as per sec 64.  Hence in view of the provisions contemplated under sec 64 of the Chit fund act 1982 the jurisdiction of the Consumer District forum is barred with regard to the management of the chit business.
16. The definition of the deficiency defined u/s 2(1)(g) of the C.P. Act does not cover the claim arising under the present dispute. Taking the advantage of the beneficial provisions of the consumer protection act the complainant has come forward with a false frivolous and vexatious complaint.  Hence the opposite party prays for dismissal of the complaint.
17. The complainant has filed his affidavit evidence and relies on 05 documents.  Affidavit of evidence of opposite party has been filed and relies on 07 documents
18. Heard the arguments of the complainant.  Opposite party has not addressed any oral argument and they have submitted written arguments.
19. The following points arise for our consideration:-

1. Whether the complainant proves deficiency of service on the part of opposite party?
2. Whether the complainant is entitled to relief mentioned in the complaint?
3. What order?

20. Our answers to the above points are as under:

       Point No.1:  Affirmative

      Point No.2 : Affirmative in part

      Point No.3 : As per final orders

REASONS

21. Point No.1 AND 2: We carefully perused the pleadings and evidence of both the parties. It is undisputed fact that the opposite party is a registered company and running the chit business in Bangalore and they are in the business of promoting and conducting the chits as per the provisions of Chit fund act 1982.
22. The complainant joined the company as a subscriber to pay the monthly installments.  The complainant subscribed for chit group No. 12L24M-17 in the opposite party for a chit value of Rs.12,00,000/- payable at Rs.50,000/- for 24 months.  The complainant has paid three installments amounting to Rs.1,32,500/- as against the 25 installments.  After that the complainant has approached the opposite party without paying the subscription amount and requested them to refund the money paid by him.  The opposite party has informed him that the amount will be refunded only after completion of duration of the entire chit.  
23. It is the specific grievance of the complainant that the opposite party has not bid the chit and not paid any amount to the complainant and he has stopped the payment to the opposite party and they have not returned the deposited amount.  Even though the opposite party office is open and it is run by some office staff they are not taking any steps to refund the amount paid by this complainant and the opposite party is also not received the phone calls made by the complainant and he is also not available in the office and thereby the opposite party has cheated this complainant.  
24. The complainant in support of his contention has filed his affidavit evidence and produced Ex.P1 to P5.  The complainant has reiterated all the allegations made in the complaint. Ex.P1 and P2 are the two receipts for having deposited Rs.50,000/- for two months. Ex.P4 and 5 are the transaction successful copy dated 13.10.2021 and 19.11.2021.  The complainant has paid totally Rs.1,32,500/- to the opposite party towards subscription amount.  
25. On the other hand, the contention taken by the opposite party is that the complainant has made three installments as against 24 installments and paid only Rs.1,32,500/-.  After that when the complainant failed to pay the remaining installments they have issued NPRL (Non Prized Removal Letter) by intimating the fact to the complainant and then without alternative option they have issued MRCL(Member Removal Confirmation Letter) and thereby intimated the complainant that they have removed him from the said chit.  It is also the case of the opposite party that as per sec 28 of the Chit fund act 1982 the membership will be removed if the complainant failed to pay the subscription.  Hence this opposite party has taken action and removed the membership of the complainant and intimated the same by sending the letters but they have not produced the letters. The opposite party has produced the certified copy dated 30.09.2022 as Ex.R1 for having started the chit of this group.  Ex.R2 is the permission issued by the Deputy Registrar of Chit funds.  Ex.R3 is the original chit agreement. Ex.R4 is the letter written by the complainant dated 07.01.2022 requesting the opposite party to refund the amount. Ex.R5 is the copy of the cheque issued to the complainant refunding Rs.72,500/- dated 22.02.2022.  Ex.R6 is the bank statement and Ex.R7 is the account statement maintained by the opposite party company for cancel member account copy.  
26. It is further case of the opposite party that as per the chit agreement and chit fund act 1982 this opposite party company will deduct 5% amount on the chit value towards breach of contract and incidental charges amounting to Rs.60,000/-.  After statutory deduction the subscription refundable deposit amount of Rs.72,500/- lying credit to the chit account, which was actually paid by the complainant excluding dividends.  This opposite party has paid the amount to the complainant through cheque dated 22.02.2022.
27. The complainant herein violating the terms and conditions of the chit agreement and hence the opposite party company imposed penalty of 5% of the chit value and hence the question of refund of Rs.1,32,500/- with interest at 24% would not arise.  
28. It is further contention taken by the opposite party that as per the chit agreement by and between the above parties if any one violating the agreement they have to pay penalty further as per the clause F1C defaulted subscriber or cancelled subscriber is entitled to the amount actually subscribed by him exclusive of dividends less 5% of the chit amount towards damages for breach of contract.  
29. On these back ground, we have also gone through clause F1C of the chit agreement and the relevant portion is as follows;

A cancelled subscriber is entitled to the amount actually subscribed by him exclusive of dividends less 5% of the chit amount towards damages for breach of contract. This amount is payable on application at the end of the chit period or earlier if the vacancy is substituted.

30. We have also gone through the decisions referred by the opposite party in M/s.Kapil Chit Funds Pvt. Ltd. vs. R.Krishna Reddy.
31. It is clear from this decision that “A subscriber removed from the chit before termination for any reason is entitled for a refund of only the net amount of subscription deposited by him less five percent of chit amount towards damages for breach of contract.  This refund will be made after the substituted subscriber draws the prized amount or at the close of the group”.
32. The only grievance of the complainant is that he is entitled for the entire subscription amount of Rs.1,32,500/-.  The opposite party has deducted an amount of Rs.60,000/- and it is the unfair trade practice and deficiency of service on the part of the opposite party. 
33. It is undisputed fact that the complainant has made payment of 3 installment amounting to Rs.1,32,500/- and he failed to make the further installments and he has become a defaulted subscriber.  The opposite party has deducted Rs.60,000/- i.e. 5% of Rs.12,00,000/- of the total chit amount from the subscription amount paid by the complainant.  As per Ex.R6 and R7 the opposite party have show the details of the payment made by the complainant and deductions made by them.   Out of the said amount totally Rs.17,500/- was deducted towards dividend and Rs.1,32,500/- is shown as net amount. 
34. The opposite party has not produced any document to show that the payment details and deduction made by them towards 3^rd payment but admitted about the 3^rd payment made by the complainant.  Hence, the total net amount is taken as Rs.1,32,500/- (Rs.50,000/- for each month after deducting dividend of Rs.17,500/- for each month).  As per the Agreement Ex.R3 the opposite party has to deduct only 5% of the amount on net amount Rs.1,32,500/- when the complainant was removed from the membership as per the clause F1C of the Chit Agreement Ex.R3 and also as per the decisions of the Hon’ble State Commission Andhra Pradesh in M/s.Kapil Chit Funds Pvt. Ltd vs. R.Krishna Reddy the complainant is entitled for the net amount actually subscribed by him exclusive of dividends less 5% of the Chit Amount towards damages for breach of contract.  The opposite party instead of deducting 5% of the amount from the net amount of subscription made by the complainant Rs.60,000/- has deducted 5% of the amount on the total chit amount of Rs.12,00,000/- and he has send intimation to the complainant that he is entitled for only Rs.72,500/-.
35. The conduct of the opposite party in calculating and in deducting 5% on the entire chit amount from the very subscription made by the complainant amounts to unfair trade practice.  There is no evidence placed before this Commission whether the opposite party company has already substituted another subscriber in place of the complainant.  The opposite party has got right to collect 5% of the commission of the Forman after completion of the chit period on the total chit amount.  They cannot deduct 5% of the amount on the very subscription made by the complainant before completion of the chit period.  The opposite party cannot recover 5% of the entire chit amounting to Rs.60,000/- amount out of Rs.1,32,500/- as a penalty and it is exorbitant and illegal.  The opposite party can deduct 5% of the amount only on net subscription of Rs.1,32,500/- which is the net amount as per Ex.R7 amounting to Rs.6,625/- and not more than that. 
36. The opposite party company can collect the remaining commission amount of 5% on the total chit amount from the subsequent subscriber who is substituted in the place of the complainant.  Hence, the amount deducted by the opposite party company and refunding of only Rs.72,500/- amounts to unfair trade practice and also amounts to deficiency of service on the part of the opposite party. Hence, the complainant is entitled for net amount of subscription of Rs.1,32,500/- and less 5% of chit amount towards damages for breach of contract amounting to Rs.6,625/-. Hence, the complainant is entitled for Rs.1,08,375/- after deducting the dividend amount of Rs.17,500/- with interest at the rate of 10% p.a. from the date of complaint till realization.  The complainant is also entitled for compensation of Rs.10,000/- for the damages caused to the complainant.  The complainant is also entitled for Rs.10,000/- towards cost of litigation expenses.  Hence, we answer the above point No.1 in the Affirmative and Point No.2 Partly in the Affirmative.
37. POINT NO.3: Having regard to the discussion made, we are of the opinion that complaint requires to be allowed in part.  The opposite party is directed to pay Rs.1,08,375/- along with interest at the rate of 10% per annum from the date of complaint till realization, pay Rs.10,000/- as compensation and Rs.10,000/- as cost of litigation expenses to the complainant. Hence, we proceed to pass the following;

ORDER

         The complaint is allowed in part.

         The opposite party is directed to pay Rs.1,08,375/- (Rupees One Lakh Eight Thousand Three Seventy Five only) along with interest at the rate of 10% per annum from the date of complaint till realization to the complainant.

         The opposite party is also directed to pay Rs.10,000/- (Rupees Ten Thousand only) towards compensation and Rs.10,000/- (Rupees Ten Thousand only) towards cost of litigation expenses to the complainant. 

         The opposite party is directed to comply the direction within 60 days from the date of this order.

         Supply free copy of this order to both the parties.

         Return spare copies of the pleading and evidence to the parties.

 (Dictated to the Stenographer, got it transcribed and corrected, pronounced in the Open Commission on this 23^RD day of November, 2022)

Documents produced by the Complainant-P.W.1 are as follows:

Documents produced by the representative of opposite party – R.W.1;