Case Study: Shivaji Estate Livestock & Farms invited people to invest in its goat farming and allied activities by purchasing units of several schemes floated by it. The company's brochure stated it was arranging 25 to 50 sheds, each housing 500 goats. The animals would be looked after by experienced vets. The entire livestock would be insured, which would guarantee 100% safety of the invested amount. Additionally, the investors would also have a hypothetical charge on 1,000 sqft of land owned by the company. The projected growth target was to have 25 such rearing centres in Maharashtra and Madhya Pradesh in five years.
There were several types of schemes to suit various investor budgets, with different frequency for returns. All the schemes assured that a one-time investment through purchase of units would give consistently attractive returns over a period of 15 years. Over and above the minimum expected yield, the investor would also be entitled to bonus if the scheme performed well and the desired targets were achieved. An investor wanting to opt out could apply for premature withdrawal by giving a 45-day notice.
Several gullible consumers fell for the scheme. Initially the company gave some returns to the investors, but later failed to keep their commitment. Disillusioned, investors applied for premature withdrawal from the scheme, but the company failed to repay the amount. The firm did not even return the principal amount. A group of 373 investors then filed a joint complaint before the national consumer commission, alleging deficiency in service.
The company objected, saying that the consumer fora would not have the jurisdiction to decide the dispute. It argued that proper remedy would be under the MPID Act, which provides for a complete machinery for recovery of deposits made by investors. The company also claimed that the case was sub-judice as the crime branch had filed a chargesheet against it and nine of its officers on the basis of an FIR lodged by one of the investors, and the matter was pending before a designated court. The company, however, did not dispute the facts or merits of the case.
The commission observed that by taking money from people and investing it on their behalf into its own schemes was a service being rendered to them. Such depositors and investors are consumers, and hence would be entitled to file a consumer dispute for deficiency in services. Advocate Shirish Deshpande, who appeared on behalf of the investors, argued that the MPID Act ousts the jurisdiction of other courts and provides for criminal prosecution and punishment of officials who defraud the investors. The designated court under the MPID Act does not have the power to compensate the investor. In contrast, the consumer forum is not a court, and provides an additional remedy to the aggrieved consumer. It also has the power to grant compensation for deficiency in services.
The national commission, in its judgment of February 16, delivered by Justice V K Jain on behalf of the bench with Dr B C Gupta, observed that the designated court under the MPID Act cannot provide adequate redressal as it does not have the power to grant compensation to the victim. Hence, the national commission concurred with Deshpande that the consumer forum was the appropriate civil remedy available to such investors to claim compensation for deficiency in services.
Upholding maintainability of the complaint, the national commission directed the company to repay the investment along with 9% interest from the date of filing of the complaint till the amount is refunded. Additionally, compensation to the tune of 10% of the investment amount was also awarded, along with costs of Rs 1,000 to each of the 373 complainants.
Impact: This pathbreaking judgment will help victims of fraudulent schemes get justice through the consumer fora.
(The author is a consumer activist and has won the government of India's national youth award for consumer protection. His email is jehangir.gai.articles@hotmail.com)
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