A.P. Chowdhri, President:
1. This order would dispose of seven appeals being appeals registered as A-70, A-206, A-209, A-210, A-211, A-212 and A-286 of 1995. These are directed against order of the District Forum deciding the preliminary objections regarding maintainability against the opposite party, appellant herein.
2. The appellant is a public limited Company incorporated on 13.6.87 under the Companies Act, 1956. The Company had its registered office at Calcutta. The Company made a public issue of shares and partly convertible debentures in terms of prospectus dated 13.6.91 and also issued advertisement inviting applications for the said public issue. Various applicants sent applications for the allotment of shares/partly convertible debentures (PCD) to the petitioner Company at its registered office at Calcutta. It will be convenient to refer to the facts in the complaint filed by Smt. Veena Gupta. She made an application for allotment of shares/PCD alongwith Rs. 4,000/- as application money. The applicant neither received any allotment nor any reply with regard to her application. She wrote to the opposite party on 21.1.92 for refund of the application money. No reply was received thereto. She then wrote to the Securities and Exchange Board of India, Bombay but she failed to elicit any reply. She got served a legal notice on 7.9.92. In reply to the legal notice the applicant was informed that as per the Bank statement the opposite party found that the refund in question did not appear in the unpaid statement furnished by the Bank and therefore inferentially the refund order had already been encashed. The case of the complainant was that she had not received any refund order. She approached the District Forum for a direction to the opposite party to refund the amount alongwith interest @18% p.a. besides Rs. 5,000/- as compensation for mental agony and harassment. On behalf of opposite party, an application was made raising various preliminary objections. The main objection was that the complainant was not a âconsumer within the meaning of that word as defined in Section 2(1)(d) of the Consumer Protection Act, 1986. Reliance was placed on Morgan Stanley Mutual Funds v. Kartick Das, II (1994) CPJ 7 (SC) 654. By order under appeal the D.F.- I sought to distinguish Morgan Stanleys case and held that the complainant was a âconsumer and failure of the opposite party to refund the amount constituted deficiency in service. Accordingly, it was directed that the Company shall make necessary investigation with a view to finding as to who had received the refund voucher encashed. It was further directed that opposite party 2 shall refund the application money to the complainant with 18% p.a. interest w.e.f. ten weeks after the closing date of the issue alongwith Rs. 5,000/- as costs of litigation. Aggrieved by the order the opposite party has preferred this and connected appeals.
3. No one appeared on behalf of the respondents in these appeals when these were called on for hearing. We have, therefore, heard Mr. Anil Sharma, Advocate for the appellants. We have also gone through the reply filed in four other connected appeals on behalf of the respondent. Mr. Anil Sharma brought to our notice decision of the National Commission in Tata Timken Ltd. v. Consumer Protection Council and Ors. II (1995) CPJ 164 (NC). The precise grievance in the complaint giving rise to the aforesaid decision by the National Commission was that the applicants were neither allotted the shares or debentures applied for by them nor were the amounts paid by them towards the purchase price of the shares and debentures refunded to them by the Company. The Company contended before the State Commission by way of preliminary objection that persons who had merely applied for the allotment of shares/debentures were not âconsumers under the Act since un-allotted shares were not âgoodsâ for which any contract of purchase had been entered into by them and there was also no arrangement of hiring of service entered into between the applicants and the Company. It was further contended by the revision petitioner as part of the preliminary objection that in making an offer of allotment of shares or debentures the Company was not conducting any trading activity and hence no question could arise of the adoption of any unfair trade practice by the Company in relation to such activity. The State Commission repelled the contention and held that persons who had applied for the allotment of shares/debentures in the Company were âConsumers and that the default on the part of the Company to carry out its obligation to refund the amount paid by way of price of share/debenture to unsuccessful applicants who had not been allotted shares/debentures constituted âdeficiency in serviceâ so as to warrant a complaint being filed by them before a Consumer Forum seeking relief under the Consumer Protection Act. It was further held by the State Commission that the failure on the part of the Company to refund the purchase price would also constitute âunfair trade practice and on this ground also the complaint petition was maintainable. The Company filed the aforesaid revision against the order of the State Commission. The National Commission held that the various questions raised in the revision had been directly answered by the Supreme Court in Morgan Stanleys case. With regard to Morgan Stanleys case it was observed by the National Commission that prior to the allotment of shares/ debentures investor of future goods and âthere is no purchase of goods for a consideration nor again could he be called the hirer of service of the Company for consideration. The learned Judges of the Supreme Court were outed to explain the legal position in the following words :
âIn order to satisfy the requirement of the above definition of consumer, it is clear that there must be a transaction of buying goods for consideration under Clause 2(i) of the said Act. The definition contemplates the pre-existence of a completed transaction of a sale and purchase. If regard is had to the definition of complaint under the Act, it will be clear that no prospective investor could fall under the Act.â
Proceeding further, the Supreme Court was further quoted to refer to the definition of âcomplaintâ contained in Section 2(c) and extracted the following portion:
This takes us to the definition of complaint under Section 2(c) which reads as follows:
â2(c) âcomplaintâ means any allegation in writing made by a complainant that â
(i) as a result of any unfair trade practice adopted by any trader, the complainant has suffered loss or damage;
(ii) the goods mentioned in the complaint suffer from one or more defects;
(iii) the services mentioned in the complaint suffer from deficiency in any respect;
(iv) a trader has charged for the goods mentioned in the complaint a price in excess of the price fixed by or under any law for the time being in force or displayed on the goods or any package containing such goods, with a view to obtaining any relief provided by or under this Act.â
â16. Certainly, Clauses 2(iii) and (iv) of the Act do not arise in this case. Thereafter, what requires to be examined is, whether any unfair trade practice has been adopted. The expression trade practice as per rules shall have the same meaning as defined under Section 369(a) of Monopolies and Restrictive Trade Practices Act of 1969. That again cannot apply because the Company is not trading in shares. The share means a share in the capital. The object of issuing the same is for building up capital. To raise capital, means making arrangements for carrying on the trade. It is not a practice relating to the carrying of any trade. Creation of share capital without allotment of shares does not bring shares into existence. Therefore, our answer is that a prospective investor like the respondent or the association is not a consumer under the Act.â
It was, therefore, held that the complainants were not consumers entitled to seek relief under the Act, that no arrangement of hiring of service existed between them and the revisional petitioner Company and that no question of unfair trade practice could arise since by offering to the public shares and debentures the Company was not engaging in any trading activity. The preliminary objection raised by the Company was, thus, accepted. Against the said decision of the National Commission SLP No. 20460 of 1995 was dismissed by the Supreme Court on 22nd Sept., 1995.
4. After going through the order of the National Commission in the aforesaid revision petition, we find that the same completely covers the present case. We, therefore, allow these appeals and hold that the respondents in these appeals, who were complainants before the District Forum, were not consumer and that no arrangement of hiring of service existed between them and the appellant which was not engaged in any trading activity. The order under appeal passed by the D.F.-I is, therefore, set aside and the complaint filed by the respondent in each of these cases stands dismissed. In the peculiar facts and circumstances of this case, the parties shall bear their own costs throughout. A copy of this order be placed on the record of connected appeals and a copy of each be communicated to both the parties free of costs as well as D.F.-I.