FRAUD, COMPLICATED ISSUES & ambit of consumer
courts
The Consumer Courts are
constituted for redressal of grievances of consumer for deficiency in service
and unfair trade practices. The law has evolved over the years and various
amendments were also made in the Consumer Protection Act 1986. In fact, the Act
is re-written and re-enacted as Consumer Protection Act 2019, thereby, encompassing
comprehensive changes. However, presently, the limited issue that is being
traversed herein is what shall be the ambit of Consumer Protection Act and Consumer
Courts, if complaint involves complicated question of facts and / or fraud.
This has been a vexed issue for quite some time. Whether, the Consumer Courts
shall have the wherewithal of Civil Courts or Criminal Courts to deal with the
issues? Of course, there are very thin
lines between issue of fraud and deficiency in service. It may be interlinked, though,
in some instances, but the matter of pertinence is, whether the element of
fraud or complicated question of facts are so pervasive and ingrained in the
Act itself, so as to not exclude the domain of Consumer Commission and
inherently including those aspect within the meaning of the Act or the Consumer
Commissions shall be altogether excluded from dealing with such issue
irretrievably. The efforts shall be to analyse this. The complaints under the
Consumer Protection Act 1986 as amended from time to time and now under The
Consumer Protection Act 2019 shall be directed at service provider or seller of
products etc. The service provider may be a builder, banker, insurer or such
other entity or agencies. The service, being essence, any deficiency in service
may lead to a complaint under the Act and some deficiency may also be akin to
fraud.
The object of the enactment of
Consumer Protection Act was to accord immediate remedy to a consumer against
deficiency in service or unfair trade practices. The Act has prescribed summary
procedure with a view to provide early redressal of grievances of a consumer.
The provision of evidence by entering in witness box and cross examination of
witness are not the prescribed requisites under the Consumer Protection Act so
as to avoid tardy procedural wrangles. It is in that view of the matter that
complicated question of facts and issues of fraud are generally kept pout of
purview of consumer Commissions. Though, the Supreme Court has held at several
occasions that the National Consumer Commission and State Commissions are
manned by Retired Supreme Court Judge or High Court judges and therefore, it
cannot be fathomed that they cannot deal with the issue of fraud or complicated
issues involved. This is true. However, the answer lies within the prescription
of the Act itself, being summary in nature and as process of trial is not
prescribed, therefore the limitation of summary proceedings loom large.
1.
In this context this may be apt to
refer to Supreme Court judgment reported as JJ Merchant Vs Shrinath Chaturvedi[i]
where their lordship has held as under in para 11:
“11.
Further, under the Act, the National Commission is required to be headed by a
retired judge of this Court and the State Commission is required to be headed
by a retired High Court judge. They are competent to decide complicated issues
of law or facts. Hence, it would not be proper to hold that in cases where
negligence of experts is alleged Consumer should be directed to approach Civil
Courts”.
2.
The hon’ble National Commission in Metropolitan Region Development Authority
Vs Dena Bank [ii]
had relied upon the Division bench of Delhi High Court in a matter reported
as Punjab National Bank Vs Durga Devi
& Ors[iii] while passing judgment in favour of a
customer.
“The hon’ble
Delhi High Court has held that collusion by the bank officials with a view to
benefit a person presenting a forged or materially altered cheque result in
payment being made by the bank against such cheque, such an act of bank
employee being in the course of employment, is binding on the bank at the
instance of the person who is damnified by the fraud of the officials of the
bank. The only remedy of bank is against its officials. But this is between
bank and its officials. The third party who suffers the loss due to the fraud
practiced by the bank officials is entitled to hold the bank liable for the
loss caused to him by the fraud of the officials of the bank.
We think that
banks are public institutions, more so, those which are Nationalised bank. They
owe a duty of fairness to their customers. Once, the banks are convinced that
their employees have acted fraudulently in relation to a customer, the bank
should at once acknowledge the liability, turn such fraud to the customers.
They should not needlessly deny a just claim to customers on frivolous ground…”
3.
In Karur Vysya Bank Ltd Vs Sayed Abdul Sattar Hussaini[iv]
The National Commission has held in paragraph 7 as under:
“7. Having heard the learned
counsel for the parties we are of the considered opinion that admittedly, there
is no dispute that officials of appellant bank while issuing ATM Card in the
name of Naimuthullah Hussaini has not verified the Account Number mentioned in
the application form submitted by Naimuthullah Hussaini as to whether the aid
account number belonged to the applicant or not. They have mechanically issued
ATM card thus giving opportunity to
Naimuthullah Hussaini to withdraw the amount from the bank account of
complainant/respondent at his own wish…..”
Thus,
the bank was held guilty for deficiency in service.
4. The National Commission in M. Sivanandam & Anr Vs State Bank of India & Anr[v]
has held in para 11 that:
“11. Withdrawal
slips cannot be made to use for making payment to third parties. For
withdrawing money through authorized Representative, a Letter of Authority duly
signed should be presented along with the passbook. In the instant case, there
was no such authority letter given by the complainants to the bank to have
released these amounts. It is the case of the complainants that withdrawal
slips was not signed by them”.
The bank was held
guilty for deficiency in service.
5.
The
National Commission in a matter reported as UCO Bank Vs Mala Ram[vi]
has held in paragraph 8 that:
“8. From the above judgments it
is clear that this Commission has taken a view in recent years that where the
case is such that dispute can be resolved on merits within the purview of
Consumer Protection Act, the matter should be decided by the Consumer Forums
and it should not necessarily be relegated to a Civil Court.”
6.
The National Commission in Mohd Ayub Vs Central Bank of India[vii]
has observed as under in paragraph 8:
8….the Apex Court in the celebrated judgment Lucknow Development Authority Vs M.K Gupta[viii]
has held that:
“Today
the issue thus is not only the award of compensation but who should bear the
brunt. The concept of authority and Power exercised by the public functionaries
has many dimensions. It has undergone tremendous changes with passage of time
and change in socio economic outlook. It is unfortunate that matter which requires
immediate attention linger on and the man in the street is made to run from one
end to other with no result. The culture of window clearance appears to be
totally dead.. It is therefore necessary that the commission when satisfied
that a complainant is entitled to compensation for harassment and mental agony
or oppression, which finding of course, should be recorded carefully on
material and convincing circumstances and not lightly, then, it should further direct
the department concerned to pay the amount to the complainant from the public
fund immediately…..”
7.
The National Commission in The Tax Publisher Vs Chairman &
Managing Director, UCO Bank & Anr[ix]
has held in paragraph 15:
“In our opinion finding of Enquiry
Officer returned by him in the departmental enquiry ordered by the Bank on
receipt of complainant by complainants and report of government Forensic
laboratory are sufficient enough to reach the conclusion about deficiency in
service”.
8.
The National Commission in a matter reported
as State Bank of India Vs Anand Prakash & Anr[x]
has held in paragraph no.3-
“ Since the cheque
was handed over for collection by the respondent no.1 to the petitioner bank,
it cannot evade liability for payment thereof with interest. To be only noted that
the respondent no.1 was never informed in writing about the loss of the cheque
by the petitioner bank”
9. That
the National Commission in Abdul Haq Vs
Rajasthan State COPERTAIVE Bank Ltd & Ors[xi]
has held ad under in para 8 by National Commission:
“8. We are of the considered view that that in
such case of undisputed fraudulent withdrawal from an account holder’s account,
in addition to making good the amount fraudulently withdrawn, the bank should,
in all fairness, pay interest at the prevalent rates of interest for fixed
deposit from the date of fraudulent withdrawal till the date of actual payment”.
The compensation for agony and
harassment, hardship and difficulty was also awarded, besides the litigation
costs.
Form
the aforesaid one may peruse that what clearly emerges are the convergence of
views that the fraud or complicated question of facts cannot be inferred in
cases as a matter of course, but, only if such a course is available to the
Consumer Commission then only the matter should be relegated to civil court or
a criminal court. Every allegation of fraud may not be referred to criminal
court or civil court, when ex facie the disputes could be resolved on merit.
Because, if the cases are referred to Civil Courts or criminal courts then the
very object of according speedy remedy to consumer shall be defeated.
In the
above perspective, let us analyse some further judgments from the perspective
of service and deficiency thereof.
The
Supreme Court in case of Ravneet Singh Bagga vs. KLM Royal Dutch Airlines
and Another[xii]
as
under:
“5. Section 2(i)(o) defines “service” to mean service
of any description which is made available to potential users and includes the
provision of facilities in connection with banking, financing, insurance,
transport, processing, supply of electrical or other energy, board or lodging
or both, entertainment, amusement or the purveying of news or other
information, but does not include the rendering of any service free of charge
or under a contract of personal service. Section 2(i)(g) defines
“deficiency” to mean any fault, imperfection, shortcoming or inadequacy in the
quality, nature and manner of performance which is required to be maintained by
or under any law for the time being in force or has been undertaken to be
performed by a person in pursuance of a contract or otherwise in relation to
any service”.
“6.
The deficiency in service cannot be alleged without attributing fault,
imperfection, shortcoming or inadequacy in the quality, nature and manner of
performance which is required to be performed by a person in pursuance of a
contract or otherwise in relation to any service. The burden of proving the
deficiency in service is upon the person who alleges it. The complainant has,
on facts, been found to have not established any wilful fault, imperfection,
shortcoming or inadequacy in the service of the respondent. The deficiency in
service has to be distinguished from the tortious acts of the respondent. In the
absence of deficiency in service the aggrieved person may have a remedy under
the common law to file a suit for damages but cannot insist for grant of relief
under the Act for the alleged acts of commission and omission attributable to
the respondent which otherwise do not amount to deficiency in service. In case
of bona fide disputes no wilful fault, imperfection, shortcoming or inadequacy
in the quality, nature and manner of performance in the service can be informed
(sic) . If on facts it is found
that the person or authority rendering service had taken all precautions and
considered all relevant facts and circumstances during the transaction and that
their action or the final decision was in good faith, it cannot be said that
there had been any deficiency in service. If the action of the respondent is
found to be in good faith, there is no deficiency of service entitling the
aggrieved person to claim relief under the Act. The rendering of deficient
service has to be considered and decided in each case according to the facts of
that case for which no hard and fast rule can be laid down. Inefficiency, lack
of due care, absence of bona fides, rashness, haste or omission and the like
may be the factors to ascertain the deficiency in rendering the service”.
It therefore implies that fault, imperfection, shortcoming or
inadequacy in the discharge of the duty on the part of the employees of the
bank shall have to be willful, if the phrase “deficiency in service” under
Section 2(1)(g) of the said Act. is to be attracted. It thus flow that inter se disputes amongst the Directors of the Company and if one of
the Directors allegedly commits fraud or cheating, the employees of the bank
could not be held liable, provided, they acted bona fide and adhered to the
norms and procedure.
A
Paradigm SHIFT
In Oriental Insurance Co. Ltd. vs. Munimahesh Patel[xiii],
the Supreme Court has held that
the proceedings before the Commission are essentially summary in nature and the
issues which involve disputed factual questions, should not be adjudicated by
the Commission.
The Supreme Court has recently dealt with the
issue in a matter captioned as THE CHAIRMAN & MANAGING DIRECTOR, CITY UNION BANK
LTD. & ANR. versus
R. CHANDRAMOHAN CIVIL APPEAL NO. 7289 OF 2009 [xiv]
It is held in par graph
12 by the Supreme Court:
“The
proceedings before the Commission being summary in nature, the complaints
involving highly disputed questions of facts or the cases involving tortious
acts or criminality like fraud or cheating, could not be decided by the
Forum/Commission under the said Act. The “deficiency in service”, as well
settled, has to be distinguished from the criminal acts or tortious acts. There
could not be any presumption with regard to the wilful fault, imperfection,
shortcoming or inadequacy in the quality, nature and manner of performance in
service, as contemplated in Section 2(1)(g) of the Act. The burden of proving
the deficiency in service would always be upon the person alleging it”.
Whether
in absence of any fault, imperfection, shortcoming or inadequacy in the
performance, which was required to be maintained by it could be presumed that
there was deficiency in service as defined under Section 2(1)(g) of the
Consumer Protection Act, 1986 (hereinafter referred to as the ‘said Act’) The
reference is made to Ravneet Singh Bagga (Supra) and (ii) in Branch
Manager, Indigo Airlines Kolkata and Another Vs. Kalpana Rani Debbarma and Others[xv] it is held that
the complaint may not be maintainable before the Consumer Commission. If any
fraud was committed, whether such disputes pertains to fraud and would not fall
within the jurisdiction of the State Commission or the National Commission to
decide.
In Kerala State Cooperative Marketing
Federation Vs. State Bank of India and Others[xvi] and in case of Indian
Overseas Bank vs. Industrial Chain Concern (1990) 1 SCC 484 the recitations
are on similar line.
CONCLUSION
It thus emerges that the
proceedings before the Consumer Commission being summary in nature, the
complaints involving highly disputed questions of facts or the cases involving
tortious acts or criminality like fraud or cheating, could not be decided by
the Forum/Commission under the said Act. The “deficiency in service”, as well
settled, has to be distinguished from the criminal acts or tortious acts. There
could not be any presumption with regard to the wilful fault, imperfection,
shortcoming or inadequacy in the quality, nature and manner of performance in
service, as contemplated in Section 2(1)(g) of the Act. The burden of proving
the deficiency in service would always be upon the person alleging it. Thus,
the complicated question of facts may inevitably entail leading of evidence and
cross examination of the witnesses and further criminal offences leading to
F.I.R and that may also require a comprehensive trial before judgment on guilt
could be pronounced, may not fall within the domain of consumer courts.
However, what also cannot be lost sight of the fact that in mechanical manner
the cases should not be referred to a Civil Court or on the premise of fraud
entailing criminal trial also, a complaint should not be brushed aside. Only,
if in pith and substance , the wherewithal of consumer courts may not be found
adequate to answer the complaint in a summary jurisdiction, the complaints
could be relegated to other forum or
courts.
Anil K Khaware
Founder &
Senior Associate
Societylawandjustice.com
[i]
III
(2002) CPJ 8 SC
[ii] III (2016) 613 NC
[iii] 13 (1977)DLT 377 DB (Delhi)
[iv] II(2019) CPJ 246 NC
[v] IV (2019) CPJ 172 NC
[vi] I (2019) CPJ 11 NC
[vii] II (2006) CPJ 188 (NC)
[viii] III(1993) CPJ 7 SC
[ix] I (2018) CPJ 86 NC
[x]
III (2007) CPJ 98 (NC)
[xi] III (2019)CPJ 235 (NC)
[xii] (2000) 1 SCC 66
[xiii] (2006) 7 SCC 655
[xiv] 2023 LiveLaw (SC)251
[xv] (2020) 9 SCC 474
[xvi] (2004) 2 SCC 4253
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