C.C.No.10 of 2010

Between:

1. Sri Shivraj M.Girglani

    R/o.H.No.8-2-309/7/2

    Plot No.301, Banjara Hills,

    Road No.14,

    Hyderabad.

2. Smt.Gunwanti Girglani

    W/o.Sri Shivraj M.Girglani

    R/o.H.No.8-2-309/7/2

    Plot No.301, Banjara Hills,

    Road No.14,

    Hyderabad.

3. Mrs.Hira Kartar Dalwani

    S/o.Sri Shivraj M.Girglani

    R/o.H.No.8-2-309/7/2

    Plot No.301, Banjara Hills,

    Road No.14,

    Hyderabad.

4. Smt.Devika Girglani

    D/o.Sri Shivraj M.Girglani

    R/o.H.No.8-2-309/7/2

    Plot No.301, Banjara Hills,

    Road No.14,

    Hyderabad.                                                                                                      ..Complainants

                   And

    The Telegraph Traffic Employees Co-operative.

    Credit Society Ltd., Reg.No.T.A.206,

    R/p. Personal Incharge/Special Officer,

    C/o.Central Telegraph Office,

    Koti, Hyderabad, A.P.State.                                                                                     ..Opp.party.

Counsel for the Complainants:Mr.K.Parandhamachari

Counsel for the Opposite party: Mr.N.Rajeswar Rao

 QUORUM:   THE HON’BLE SRI JUSTICE D.APPA RAO, PRESIDENT                                                                    

AND

SMT.M.SHREESHA,  MEMBER

.

MONDAY, THE TWENTY SECOND DAY OF NOVEMBER,

TWO THOUSAND TEN

(Typed to the dictation of Smt.M.Shreesha, Hon’ble Member)
***

        The complainant No.1, Shivraj M.Girglani was authorized to file this case on behalf of himself and his family members.  He submitted that himself and his family members i.e. complainants 2 to 4 deposited their heard earned earning in different denominations in the opposite party c-op. society  at varied rates of rates with maturity period of one year each as follows:

                                                                              ---------------

                                                        Total Rs.      33,50,000/-

                                                                                      ---------------

The first complainant submitted that before depositing his money with the society, he enquired with the Person Incharge/Special Officer of the society whether there is any restriction about accepting of deposits from Non Members of the society and the officer assured that there is no such rule or restriction and who ever is interested in getting higher rate of interest on their deposits can deposit the money.  As  promised the opposite party society paid the interest mentioned in the fixed deposits to complainants 1 to 4 on their deposits upto August, 2008 and the same has been noted on the over leaf of each FD deposit.  Complainant No.1 submitted that he went to the opposite party society and requested for payment of the accrued interest but it was postponed time and therefore he complained with other depositors to the Registrar of Co-op. society and also to Deputy Commissioner of Police.  The action initiated by the Registrar of the Co-operative societies is slow and trying to satisfy the depositors by superseding the earlier society and transferring the power and authority into the hands of present body by enacting a special Government Order 1229 dated 08-10-2009.  It is the case of the complainant that the Government or police are not taking any effective steps to save the depositors and that they are running from pillar to post and that the opposite party society is liable to pay the following amount:

a) Principal Amount of          Rs.33,50,000/-

        b) Total interest on all F.Ds.   Rs. 6,29,707/-

        c) Principle + Interest          Rs.39,79,707/-

        d) Damages                        Rs.  2,50,000/-

                                                ----------------

                        Total amount of  Rs.42,29,707/-

                                                ----------------

The complainant No.1 submitted that inspite of repeated demands for payment of the deposits, opposite party neither refunded principle amount nor the accrued interest thereon and hence approached this Commission for a direction to the opposite party to pay Rs.42,29,707/- together with damages of Rs.2,00,000/- for mental agony and costs of the complaint.

        Opposite party filed its counter statement denying the allegations made in the complaint.  It submitted that the complaint is filed by complainants 1 to 4 against the opposite party claiming that they deposited Rs.33,50,000/- by way of F.D.Rs. from 31-12-2003 to 02-11-2007 and the same was not refunded on its maturity and sought for refund of the amount along with interest of Rs.6,29,707 @ 24% p.a., damages of Rs.2,50,000/- and thus a total of Rs.42,29,707/- is claimed.  The allegations with regard to deficiency and negligence in service are denied and submitted that the opposite party society is registered under the APCS Act and governed by the provisions of the Act and Bye-laws.  It further submitted that the complainants are non members of the society and had deposited the amounts with the ex-Secretary of the society at their own risk and costs and hence the opposite party society cannot be held responsible.  The Telegraph Employees Co-op. credit society was registered under the provisions of APCS Act, 1964 and the society consists of members and then President and Secretary viz. Mr.Ramachandra Reddy and others collected the amounts from the Members of the society promising higher rate of interest on the deposits and also collected amounts from the non members of the society.  Finally the Secretary of the society after collecting huge amounts absconded by cheating the depositors.  After closure of the society, besides filing criminal cases against the committee and the Secretary, the Government also appointed an enquiry officer to conduct an enquiry into the affairs of the society U/s.51 of the APCS Act, 1964 and the enquiry is completed and report has been submitted.  The Government after superseding the committee  of the society, pending further action appointed the opposite party/PIC committee U/s.32(7) of APCS Act, 1964 to look after the affairs of the society and for preparation of the list of depositors and the borrowers of the society pending enquiry.  It submitted that there is no service rendered by the fraud committed by the Managing Committee of the society, the PIC of opposite party came into picture for protection of the Members in accordance with the APCS Act and as per the guidelines and instructions issued by the Government from time to time.  Therefore, the complainant cannot allege any deficiency and negligence in service and hence the complaint before the Forum is not maintainable.  They denied the allegations the PIC before depositing the FDRs with regard to restrictions on the deposits and they were assured by the PIC that there was no such rule of restrictions is totally false and submitted that PIC came into existence only in September, 2008 after super cession of the Management of the Telegraph Society and therefore the contention of the complainants is totally false and incorrect.  It further submitted that as per the particulars given in para 1 of the complaint all the deposits said to have been made from 31-12-2003 to 02-11-2007 and the deposits with the Secretary of the society is contrary to the byelaws and the guidelines issued by the Registrar on 28-2-2001 and the deposits of the complainants do not contain the signatures of the other officer bearers as required under byelaws.  Therefore, it cannot be said that the FDRs collected from the non-members are binding on the society and in view of the fraud committed by the Secretary and other Directors of the society, the opposite party which is represented now by the PIC, Chairman as a whole cannot be held responsible for payment of the deposits to the non-members in the absence of any sufficient deposits with the society.  Further so far as the society is concerned there is no jural relationship with the non members and no service as such rendered by the society to the non members and hence the complaint is liable to be dismissed.  

It also submitted that some of the non-members of the society formed a Forum called the Telegraph Traffic Society Depositors Forum, which is represented by its President, Dr.Yadagiri, who filed a Writ Petition before the High Court in W.P.,No.21858/2009 questioning the appointment of PIC to the society and consequently sought for a direction to liquidate the society.  The complainants herein are also Members of the said Forum whose Membership is at Sl Nos. 134 to 137 and the complainants filed the above Writ Petition filed the present complaint pending Writ Petition before High Court and the complainants intentionally suppressed the fact and therefore the complaint is liable to be dismissed.

It submitted that the Management of the society committed misappropriation of the deposits collected illegally from the Members and Non Members contrary to bye-laws and rules in force on account of the fraud the Govt., appointed the PIC committee to enquire U/s.51 of APCS Act and the report has been forwarded to the Registrar for further action as per rules.  Further basing on the inspection report, surcharge proceedings Dt.23-7-2009 have been initiated U/s.60 of APCS Act and the Directors of the Ex. Management submitted their explanations on 14-9-2009 and 25-10-2009 and the same are pending for consideration.  Further the Government initiated criminal action as per the procedure completed under Depositors Protection Act, 1999 before the MSJ Court and hence the consumer Forum has no jurisdiction to entertain the dispute.  The enquiry report furnished by the Enquiry officer U/s.51 reveals that the society is not visible and there are more liabilities than the assets of the society and finally recommended for liquidation.  In view of the report, it is for the Government to take appropriate decision for settlement of claims to the depositors as per their entitlement as provided under the APCS Act, 1964 under the APCS Act.  The complainant is aware that the erstwhile management of the society misappropriated the amounts and committed fraud against the depositors and the petitioners through their Forum approached the High Court for liquidation of the society and the same is pending for consideration.  It further submitted that the society is governed by the provisions of the APCS act and even in the event of liquidation U/s.65, the claims of the depositors has to be settled U/s.66 of the APCS Act.  It further submitted that the complainant are non members of the society and have deposited the amounts with the Secretary by way of cash and have taken risk by depositing their amounts in cash and obtaining FDR receipts only with the signature of the Secretary and without any counter signatures of the society Members or Committee Members and the transaction between the complainant and the Secretary who misappropriated the amounts without making any entries in the books of acts is established during the course of enquiry U/s.51 of APCS Act.  It further submitted that this Commission may be pleased to consider how the non members who made deposits with the Secretary have to be compensation in the event of misappropriation of funds

as the APCS Act contemplates certain restrictions so far as the deposits of non members are concerned.  It relied on Sections 39, 47, 48 and Rule 42 and submitted that O.P. was appointed as PIC Chairman, U/s.32(7) of APCS Act in supersession of the previous management and therefore there is no service rendered by the opposite party.  It further submitted that the opposite party initiated action as per the provisions of APCS Act and pending further action, the deposit amount cannot be refunded to the complainants alone adverse to the interest of  other nearly 2400 members of the society and submitted that there are 4 categories of Members as under:

        a) Members                               114                   Rs.3,44,65,600

        b) Members (Retired)           (166)        

        c) Non Members                  2,340                Rs.52,12,89,150 

        d) Kith and Kin of members                          --------------------

                                Total         2,454                  Rs.55,57,54,650/-     

                                                                        --------------------

and in view of the above prayed for dismissal of the complaint.

        In support of their case, the complainant No.1 filed his affidavit and filed Exs.A1 to A11 and the opposite party filed its affidavit and relied on Exs.B1 to B7 and reiterated the same contentions raised in the complaint as well as counter statement.

        Ex.A1 to A11 are the fixed deposit receipts made by the complainants.

        Ex.B1 is the attested copy of the Bye-laws of the society.  Ex.B2 is the proceedings issued by the Registrar.  Ex.B3 is the Surcharge notice to the Ex.Directors.  Ex.B4 is explaination submitted by the Ex.President.  Ex.B5 is explanation submitted by the secretary.  Ex.B6 is the depositors forum list.  Ex.B7 is W.P.No.21858/2009 filed by the Non members depositors forum for liquidation.

The facts not in dispute are that the complainants deposited an amount of Rs.33,50,000/- on 2-5-2006 with the Telegraph Traffic Employees Co-operative Society Ltd., evidenced under Exs.A1 to A11 with varied rates of interest.   It is the complainant’s case that interest was paid upto August, 2008 i.e. 30-8-2008 and thereafter the society defaulted in paying the interest amount.  It is the further case of the complainants that when the refund of the FDR amount was requested, the society did not respond and subsequently was closed and opposite party was appointed to enquire and manage the affairs of the  as the Secretary of the Telegraph Traffic Employees Co-operative Society Ltd., collected the F.D.Rs., irregularly and did not account for  the amounts collected and caused deficit to the assets of the society.  An enquiry was ordered U/s.51 of APCS Act 7 of 1964    authorizing the Sub Divisional Co-operative Officer to conduct an enquiry.  Inspite of repeated requests the amounts due to the complainant were not paid.  The learned counsel for the opposite party contended that W.P.No.21858/2009 marked as Ex.B7, the Co-operative Society depositor’s Forum filed a writ before the High Court seeking direction to pay the amounts to all the depositors and to stay the payments made by the Person In charge Committee of the society to any depositor.  The learned counsel for the opposite party further contended that the complainants are non members and have deposited the FD amounts without the sanction of the Registrar and this is contrary to the rules and bye-laws and also the guide lines issued by the Registrar on 28-2-2001.  The learned counsel further contended that the complainants are not consumers as their deposits itself are contrary to the bye-laws.  There are several writs filed by the Members and the Non Members.

This Commission while dealing with a similar complaint C.C.No.57/2008  once again with respect to deposits made with the Telegraph Traffic Employees Co-operative Society Ltd., had addressed itself to the jural relationship and relied on the decision of the Apex Court in Secretary, Thirumurugan Co-op. Agricultural Credit Society v. M.Lalitha reported in I (2004) CPJ 1 SC and held that this Commission has jurisdiction to adjudicate on the dispute of co-operative societies also. We also rely on the decision of the Supreme Court in Civil Appeal No.92/1998 dated 11/12/2003 reported in Volume-I, 2004 CPJ P-1 SC in which the Apex court held as follows:

‘Dispute between Members and Management of Co-op.

Society can be adjudicated by the Consumer Fora’.

We also rely on the decision of the National Commission reported in II (2008) CPJ 114 NC in which it was held as follows:

        “Co-operative Societies fall within the entity of being person

          and the consumer under the Consumer Protection Act, 1986 is

          competent to file this complaint’.

The next contention of the learned counsel for the opposite party is that several writ petitions are pending before the Hon’ble High Court i.e. W.P.No.7430/09, 1734/09, 12928/09, 15333/09 and 21858/09.

        The learned counsel for the complainants in W.P.No.7430/2009 there is a prayer to implement the District Forum order and the High Court has given an interim order for implementation of the District Forum  order.  It is pertinent to note that the stay has not been vacated by the appellant/opposite party and is still pending before the High Court.   In the absence of any specific stay, we are of the considered view that this Commission has jurisdiction to adjudicate this complaint.  The learned counsel for the complainant submitted that the bye-laws say that non members are permitted to deposit money and hence it cannot be construed that this society can issue deposits only to members.  A brief perusal of the bye-laws of the Telegraph Traffic Employees Co-op. Society Ltd., Regd. No.TA 206 Ex.B1, does not anywhere state that deposits should be issued to Members only. 

        The learned counsel for the opposite party contended that the provisions of APCS Act in Sections 39, 47, 48 and in Rule 42 state that priority should be given to Members and that no society will enter into any transaction with a person other than the Member unless the bye-laws of the society permit it.  Now to understand whether these Sections apply to the instant case or not, a brief reading of these sections is essential. 

Section 39: The share or interest, of a member, in the capital of the society or of an employee in the provident fund established U/s.49 or in the contribution made by a Member or past member or from the estate of a deceased or by any officer or former officer U/s.66 or the reserve fund of the society shall not be liable for attachment or sale under any decree or order of a court, in respect of any debt or liability incurred by such member, or officer; and an official assignee or a receiver under any law relating to insolvency shall not be entitled to or have any claim on such share, interest, contribution or fund. 

Section 47(i): A society shall receive deposits and raise loans only to such extent and such conditions as may be specified in the bye-laws. 

Section 47(ii):A society shall not grant a loan to any person other than a Member, but it may grant loans to another society with the general or special sanction of the Registrar or to its employees on such terms as may be specified in the bye-laws.

Section 48: Same as otherwise provided in Section 47, the transactions of a society with persons other than members shall be subject to such restrictions as may be prescribed.

Rule 42: No society shall enter into any transaction with a person other than a Member unless:

a)    the bye laws of the society permit it to enter into such transaction and

b)    the previous sanction of the Registrar has been obtained by the society for entering into such transaction.

The learned counsel for the opposite party contended that the non members deposited the amounts with the Secretary contrary to the bye-laws.  It is pertinent to note that in para 10 in (FA 280/10 filed commonly in all batch cases) of his written arguments the opposite party himself stated that he was appointed under Section 32(7) of APCS in super session of the previous management of the society in view of the fraud and misappropriation committed by the previous secretary of the society against whom a criminal case is pending.  When the opposite party himself is admitting that there is fraud and mis-appropriation they cannot turn around and say at this belated stage that the deposits made by the non members is against the bye laws.  When the bye laws themselves did not specifically exclude deposits to be given to non members.  If the secretary has committed fraud or mis appropriation, the complainants in these cases cannot be made to suffer.

        The learned counsel for the opposite party also relied on the decision of the National Commission in II (2007) CPJ 175 NC between Registrar of Co-op. Societies & Anr. v. Tamilnadu Consumer Protection Council, Trichy and others.  In this decision, the National Commission observed that a person who presents a document for registration and pays stamp duty is not a consumer and that the Registrar discharges statutory duty and the Special Officer who is appointed for administration of the Co-op Societies U/s.88 cannot be made personally liable for acts or misdeeds of Co-op. Societies.

        In that case the principal amount was paid to the complainants but without interest.  The rate of interest also was decided at 8% p.a. The only question that arose for consideration is whether the Special Officer could be personally liable?  In this case the National Commission while observing that the principal amount was already paid and that interest was decided to be paid at 8% observed that the Special Officer would make efforts to sell the immovable property and pay the amounts as suggested by the Members of the society and held that the co-op. society would be liable for refund of the deposit with accrued interest.    The direction in the previous cases was for the principal amounts to be paid while the interest and compensation would be fixed as per the directions of the High Court.

We also rely on the decision of the National Commission in 2008 –NCDRC-0-31 2008(TLS) in R.P.No.2591/2007 dated 24-7-2008 between RBI v. Eswarappa in which the National Commission reiterated Section 3 of the Consumer Protection Act, 1986 stating that it is in addition to and not in derogation of other provisions of law and further held as under:

        To say that to mitigate the hardship in hard cases, a Committee is

          appointed and that Committee grants some relief to the depositors

          depending upon their requirement is, in our view, a vicious circle.  For

          getting refund of their money, they have to go begging from one place

          to another, file one application after the other, wait for long for their

          turn.  All this can be avoided if proper orders are passed expeditiously. 

          Finally, to see that some amount paid to the consumer/depositor on the

          basis of the insurance cover, as the order of winding up passed, we heard

          the learned counsel Mr.Anand on behalf of the DICGC.  He submitted that

          the DICGC would pay the amount when it is crystallized by following the

          procedure prescribed under Section 17 of the Deposit Insurance and

          Credit Guarantee Corporation Act, 1961.  In our view, such a stand creates

hurdles and obstructions in getting the refund of the money invested.  The Liquidator takes years for crystallizing the amount payable by the bank and the purpose of Insurance cover is frustrated. It is very difficult

for the consumer to cross such hurdles easily.

In our view, considering the delay in litigating from one fora to the other

fora and suffering by small investors it is apparent that, the observation

made by the Apex Court in the case of Lucknow Development Authority vs. M.K.Gupta (1994) I SCC 243 would aptly apply to the present case.  The Court, inter alia, observed: “an ordinary citizen or a common man is

hardly equipped to match the might of the State or its instrumentalities”.

The Court further observed, “ in fact, to meet the long felt necessity of

protecting the common man from such wrongs for which the remedy under

ordinary law for various reasons has become illusory; the importance of the Act lies in promoting the welfare of the society, which enable the consumer to participate directly in the market economy”.

In our view, we would add that the dream of enabling the consumer to

participate directly in the market economy can be fulfilled only if there

is awareness on the part of the persons who are discharging their statutory powers.

Considering the aforesaid situation, there is no alternative but to direct the Liquidator to abide by the final order passed by the Consumer Fora,

namely the District Forum or the State Commission and to make payment

of the amount which is crystallized by the said Fora, within a period of six weeks from today”.

        We also observe from the record that in CC No.57/2008 this Commission has directed the opposite party i.e. the society to pay the principal amount and that the interest and compensation would be payable subject to the orders of the Hon’ble High Court.  Aggrieved by this order, the opposite party preferred an appeal before the National Commission and the National Commission vide its order dated 01-10-2010 directed the opposite party to deposit half the amount awarded by this Commission and allowed the complainant to withdraw Rs.5,00,000/- on furnishing personal bond and surety.  It is also pertinent to note that the Division Bench of High Court in its order dated 5-10-10 in W.P.No.23933/10 held that they are not satisfied with the merits of the case in passing the orders directing the respondents not to proceed further in F.A.No.828 and 829/2010 which is pending before this Commission and dismissed the writ petition. 

        We rely on the decision of the National Commission in R.P.No.1768/2000 and 1769/2000 and 2886/2005 dated 3-4-2007 in which they observed as follows:

        “In view of the matter, particularly when liquidation petition for winding

          up is pending before the High Court of Bombay and the fact that a

          Special Committee is appointed and functioning under the High Court and

          that it has drawn a plan for repayment to the depositors/investors as

quoted, we hereby direct that neither the State Commissions nor the Dist. Forums, would proceed further with the dispute which are pending against Lloyds Finance Ltd.,  However, it would be open to the Dist. Forums or the State Commissions to finalize the amount payable by the company (payment of interest and compensation would be subject to final orders of the special committee or the liquidator) and/or to direct the investors to lodge a claim bta1 efore the Special Committee.  These directions shall be abided by Consumer Fora all over the country”.

Keeping these aforementioned judgements in view and also the judgement of the Division Bench dated 05-10-2010 of A.P.High Court, we are of the considered view that Consumer Commission/Fora have jurisdiction to entertain this complaint and in the absence of any specific stay from the High Court, we rely on the decision of the National Commission and we direct the opposite party to pay the principal amount as evidenced under F.D.R.  and the interest and compensation would be payable subject to the orders of the Hon’ble High Court. 

In the result this CC is allowed in part directing the opposite party to pay the principal amount of Rs.33,50,000/- out of which an amount of Rs.17,00,000/- is to be paid to the first complainant, an amount of Rs.12,00,000/- to be paid to the second complainant, an amount of Rs.2,50,000/- to be paid to the third complainant and Rs.2,00,000/- to the fourth complainant respectively as evidenced by the FDRs., and the interest and costs would be payable to the complainants herein  subject to the orders of the Hon’ble High Court.  Time for compliance four weeks.

Sd/-PRESIDENT.

                                                                                                        Sd/-MEMBER.

JM                                                                                                             Dt.22-11-2010

//APPENDIX OF EVIDENCE//

For complainants                                               For Opp.party

Affidavit of 1^st complainant.                    Affidavit of S.Nagendra Prasad,

Chairman PIC of Opp.party filed

Witnesses examined

For complainants                                               For Opp.party

NIL                                                                                NIL

Exhibits marked on behalf of complainants:

Ex.A1 to A11 are the fixed deposit receipts made by the complainants.

Exhibits marked on behalf of opp.parties:

Ex.B1-Attested copy of the Bye-laws of the society. 

Ex.B2-Proceedings issued by the Registrar. 

Ex.B3-Surcharge notice to the Ex.Directors. 

Ex.B4-Explaination submitted by the Ex.President. 

Ex.B5-Explanation submitted by the secretary. 

Ex.B6-Depositors forum list. 

Ex.B7-W.P.No.21858/2009 filed by the Non members depositors forum for 

         liquidation.

Sd/-PRESIDENT.

                                                                                                Sd/-MEMBER.

JM                                                                                                     Dt.22-11-2010