PER: HON’BLE MR. SAMARESH PRASAD CHOWDHURY, PRESIDING MEMBER
The instant appeal Under Section 15 of the Consumer Protection Act, 1986 ( hereinafter referred to as “the Act “) is at the behest of Opposite Party No.5 to impeach the Judgement/Final Order dated 19.07.2017 passed by the District Consumer Disputes Redressal Forum, Kolkata, Unit-III (in short, ‘Ld. District Forum’) in Consumer Complainant No. 496/2016. By the impugned order, the Ld. District Forum allowed the complaint ex-parte against OP Nos. 1 to 4 and on contest against OP No.5 and the OPs were directed to pay Rs.4,50,000/- to the complainant within three months of the order, in default, the amount shall carry interest @10% p.a. from the date of order till realisation.
The Respondent No.1 herein being Complainant lodged the consumer complaint under Section 12 of the Act before the Ld. District Forum stating that in order to purchase of a flat under the MIG Category with open car parking space in the project ‘Shri Bhumi Meghmalhar’ at Mouza – Sankhripota, P.S.- Maheshtala, Dist- South 24 Parganas which is being developed by Shribhumi Realty Pvt. Ltd. (OP No.1), the complainant has paid Rs.5,00,000/- as part consideration amount on diverse dates through cheques. The complainant has alleged that the OPs had assured to complete and to handover the project in the beginning of 2016. The complainant has alleged even after expiry of 26 months, the project site is completely vacant and not even a single pillar has yet been constructed. Finding no other alternative, the complainant through his Advocate dated 01.08.2016 made a representation to the OPs claiming refund of the booking amount along with interest @ 10% p.a. but it turned a deaf ear. Hence, the respondent no.1 approached the Ld. District Forum with prayer for several reliefs, viz. – (a) a direction upon the opposite parties to refund of Rs.5,00,000/- along with interest @ 10% p.a. for 26 months which amounts to Rs.1,08,333/-; (b) compensation of Rs.1,00,000/- for causing harassment and mental agony; (c) to pay litigation cost of Rs.20,000/- etc.
The Respondent Nos.2 to 5/OP Nos.1 to 4 did not appear before the Ld. District Forum to contest.
The Appellant/OP No.5 by filing a written version has stated that he was mere an employee and worked as a working director and drew monthly fixed salary from the company and not a share holder. Due to his personal problem and inconvenience, he resigned from the OP No.1 Company on 23.06.2014 and the resignation letter has been accepted by the Company in a Board Meeting held on 01.07.2014 and the said resignation was duly accepted by the Registrar of the Company. The OP No.5 has submitted that as he has no connection with any other OPs as such he was not at all liable to the complainant for any act of OP No.1 or any other OPs.
On evaluation of materials on record including the pleadings and the evidence led by the parties, the Ld. District Forum by the impugned judgement/final order allowed the complaint with certain directions upon the OPs as recorded above. Being dissatisfied with the said order, the OP No.5 has come up in this Commission with the present appeal.
Undisputedly, Respondent No.2 Company “Shribhumi Realty Pvt. Ltd.” has made wide publication for their upcoming project ‘Shribhumi’ at Mouza – Sankhripota, P. S. – Mahestala, District – South 24 –Parganas. in order to purchase two flats under the MIG Category in the project ‘Shri Bhumi Meghmalhar’ at Mouza – Sankhripota, P.S.- Maheshtala, Dist- South 24 Parganas which is being developed by Shribhumi Realty Pvt. Ltd. (OP No.1), the complainant has paid Rs.5,00,000/- through different cheques on diverse dates. It was stipulated that the construction of the building will be completed in the beginning of the year 2016. However, after expiry of 26 months, it was found that the project site is completely vacant and not even a single pillar has yet been constructed. All these are admitted facts.
The evidence on record goes to show that the respondent no.2 company has accepted the amount from the appellant without obtaining the required sanctioned plan from the competent authority. A developer/builder has no authority to collect any amount from an intending buyer without obtaining sanctioned plan or lay out plan etc. from the competent authority and collection of money from a buyer before obtaining sanctioned building plan amounts not only deficiency in services on the part of developer/builder but also amounts to unfair trade practice in accordance with the definition of Section 2(1)(r) of the Act.
The Respondent No.1 being Complainant has specifically alleged that the Respondent Nos. 2 to 5 and the Appellant being Directors of respondent no.2 Company have always resorted to concocted stories and avoided disclosing the actual fate of the project and estimated time for completion of the construction. The appellants have specifically stated that respondent nos. 3 & 4 are the present directors of respondent no.2 Company and respondent no. 4 and appellant are the erstwhile directors of the said company.
Mr. Pratyush Sarkar, Ld. Advocate for the Appellant has submitted that the appellant was not directly involved with the company and he was working for gain in the company and drew a monthly fixed salary from the company. He has further submitted that the appellant tendered his resignation letter from the company and the same has been accepted by a letter dated 02.07.2014 in a Board meeting held on 01.07.2014 and the said resignation was duly accepted by the Registrar of the company.
Ld. Advocate for the Appellant has referred a decision of the Calcutta High Court reported in 1978 CHN 336 [M/s. Mahalderem Tea Estate Pvt. Ltd. & Ors. – Vs. – D.N. Prodhan & Anr.]. In the said decision, it has been held that under Section 14A of the Employees’ Provident Fund Act, 1952, a company is made primarily liable for an offence committed under the Act. The liability may be extended to other persons vicariously only under the conditions laid down in the Section. A director of a company may be concerned only with the policy to be followed and might not have any hand in the management of its day to day affairs. Such persons must necessarily be immuned from prosecution. Ld. Advocate for the appellant has also drawn my attention to Paragraph-11 of a judgement of Delhi High Court in dated 16.08.2010 in RFA 14/2010 in CM No.495/2010 [Mukesh Hans & Anr. – Vs. – Smt. Uma Bhasin & Ors.] where it has been observed –
“.......... The Company acts through its Board of Directors and an individual Director cannot do the mantle of the Company by acting on its behalf, unless he is so authorised to act by a special Resolution passed by the Board or unless the Articles of Association so warrant. It is equally well settled that a Director of a Company though he owes a fiduciary duty to the company, he owes no contractual duty qua third parties. There are, however, two exceptions to this Rule. The first is where the director/directors make themselves personally liable, i.e. by execution of personal gurantees, indemnities, the second is where a Director induces a third party to act to his detriment by advancing a loan or money to the company. On the third party proving such fraudulent misrepresentation, a Director may be held personally liable to the said third party. It is, however, well settled that this liability would not flow from a contact, but would flow in an action of tort, the tort being misrepresentation and of inducing the third party to act to his detriment and to part with money”.
Expanding his argument, Ld. Advocate for the Appellant has submitted that the Respondent No.1/complainant did not make any averment as to how the appellant was involved in the transaction in between the intending purchaser and the developer company. Referring some relevant portion of the judgement, Ld. Advocate for the appellant has submitted that the Ld. District Forum itself was confused and as such in the judgement, it has been observed that complainant has made several discrepancies by not mentioning OP No.5/appellant as director of the company. Referring to the same, Ld. Advocate for the appellant has also drawn my attention to a decision of Hon’ble National Commission reported in 2017 (3) CPR 707 [M/s. Narne Estate Pvt. Ltd. & Anr. – Vs. – Dr. E. Surender Rao & Anr.] where it has been held that in absence of any plea, by way of oral submission made by Counsel cannot be entertained.
Per contra, Ms. Koyel Senapati, Ld. Advocate for the Respondent No.1 has placed reliance to paragraph – 27 of a decision of Hon’ble Supreme Court reported in 1995 SCC (1) 478 ( New Horizons Ltd. –vs. – Union of India ) and submitted that in passing the impugned order the Ld. District Forum totally ignored the dictum of the Hon’ble Supreme Court. The extract of paragraph – 27 are reproduces below –
“27. The conclusion would not be different even if the matter is approached purely from legal stand point. It cannot be disputed that, in law, a company is a legal entity distinct from its members. It was sole laid down by the House of Lords in 1897 in the leading case of Salomon –vs. – Salomon & Company. Even since this decision has been followed by the Courts in England as well as in this country. But there has been inroads in the doctrine of corporate personality propounded in the said decision by its statutory provisions as well as by judicial pronouncements. By the process, commonly described as “lifting the veil “, the law either goes behind the corporate personality to the individual members or ignores the separate personality of each company in favour of the economic entity constituted by a group of associate companies. This Court is adopted when it is found that the principle of corporate personality is two fragrantly opposed to justice, convenience or the interest of the Revenue. (see: Gower’s Principles of Modem Company Law, 4th Edn, P112) This concept, which is described as “ piercing the veil “ in the United States, has been thus put by Sanborn, J in U.S. –vs. – Milwaukee Refrigerator Transit Co. “ When the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud or defend crime, the law will regard the Corporation as an association of persons”.
The Ld. Advocate for the Respondent No.1/Complainant has also referred paragraph – 23 of a decision of Hon’ble Apex Court reported in AIR 2016 SCC 510 (State of Rajasthan & Ors. –vs. – Gotan Lime Stone Khanji Udyog Pvt. Ltd. & Anr. ) which is reproduces below –
“23. The principle of lifting the corporate veil as an exception to the distinct corporate personality of a company or its members is well recognised not only to unravel tax evasion but also where protection of public interest is of paramount importance and the corporate unity is an attempt of legal obligations and lifting of veil is necessary to prevent a revise to avoid welfare legislation. It is neither necessary nor desirable to enumerate the classes of cases where lifting the veil is permissible, since that must necessarily depend on the relevant statutory or other provisions , the object sought to be achieved, the impugned conduct, the involvement of the element of the public interest, the effect on parties who may be affected etc”.
The Ld. Advocate for the Respondent No.1 has also referred me another decision of Maharshatra State Consumer Commission dated 16.02.2009 in FA/1293/2008 ( Kiron Baliram Saradoe –vs. – Tapi Parashar Urban Cooperative Credit Society Ltd. & Anr. ) where it has been held that the prayer for exoneration from the liability on account of resignation cannot be accepted once complainant/depositor proves that the person who has made a prayer to exonerate him was in the post when deposit was made in the Society, he owes the liability to repay the amount along with other Directors though he has resigned from the post.
Mr. H. Brahmachari, Ld. Advocate for Respondent No.5 has submitted that his client is in equal footing with the appellant and like appellant, his client should also be exonerated.
We have given due consideration to the submissions made by Ld. Advocates appearing for the appellant, respondent no.1 and respondent no.5 respectively. None appears for respondent nos. 2 to 4. We have scrutinised the materials on record.
The materials on record speaks that by filing written version, the appellant/OP No.5 has categorically stated that he was working for gain in Sribhumi Realty Pvt. Ltd. and drew monthly fixed salary from the company as a working Director and was not a shareholder of the Company. In his evidence, the appellant has categorically stated that he had never received any money or cheque from the complainant and was also not the signatory authority of the company. He never issued any money receipt to the complainant on his personal capacity or on behalf of the company. He has further asserted that he was not present at the time of payment made by the complainant. The said evidence was not challenged or contradicted. On the contrary, from the impugned order itself, it appears that the complainant has made several discrepancies by not mentioning the appellant as a Director of the Company. Furthermore, in Paragraph-3 of the petition of complaint, the complainant has mentioned OP No.5/appellant as an erstwhile Director of the Company. The respondent no.5 appears to be on the same footing because the respondent no.1 has stated that at the relevant time respondent no.5 was also an erstwhile director. However, when respondent no.5 did not prefer any appeal by himself, he is not entitled to any relief in this appeal.
Considering the entire facts and circumstances and having heard the Ld. Advocates appearing for the respective parties, it appears to us that the Ld. District Forum has made contradictory observations with regard to the involvement of the appellant/OP No.5 and respondent no.5/OP No.4 in the Company and further when the complainant has failed to make any specific plea showing the involvement of the appellant/OP No.5 with the Company, the impugned order should be modified.
In view of the above, the impugned judgement/final order is modified to the extent that the complaint is allowed against respondent nos. 2 to 5/Opposite Party Nos. 1 to 4 and dismissed against appellant/Opposite Party No. 5. The respondent nos. 2 to 5/Opposite Party Nos.1 to 4 are jointly and severally directed to refund Rs. 5,00,000/- to the complainant/respondent no.1 and also to pay compensation in the form of simple interest @ 9% p.a. from the date of each payment till its realisation. The respondent no.1 is also entitled to litigation cost, which we quantify at Rs.10,000/-. The above amount must be paid within 60 days from date in default the respondent no.1/complainant may put the order in execution before the Ld. District Forum.
With the above observations and directions, the appeal stands disposed of.
The Registrar of the Commission is directed to send a copy of the order to the Ld. District Consumer Disputes Forum, Kolkata, Unit- III for information.
