Sunday, April 8, 2012

A complaint under the MPID Act would not debar the filing of a consumer complaint

Can an investor use 2 laws to recover money?

Subject : A complaint under the MPID Act would not debar the filing of a consumer complaint

Backdrop: The middle-class tries to save for its old age. They invest their savings in schemes, which appear to be most remunerative. Taking advantage of this, many unscrupulous organisations float dubious fixed deposit schemes promising attractive returns and then default in paying interest or even in returning the principal amount invested.

Investors who lose their hard-earned money are worried and try to exploit all possible avenues to recover their money. The Government of Maharashtra has specially enacted a legislation known as Maharashtra Protection of Interests of Depositors (MPID) Act. Investors often file a complaint both under the MPID Act as well as the Consumer Protection Act (CPA), hoping that somehow the former or the latter will help in recovering their money. But companies try to argue that if one remedy is availed of, the other remedy would be barred.
Is this contention correct? Does a complaint under the MPID Act bar the filing of a complaint under the CPA and vice versa? This issue has been resolved in a recent judgment of the National Commission in the case of Arun Kashinath Pingale (Wani) & Ors v/s Madhukar Sonanis & Ors in Revision Petition No 1510 of 2009 decided on April 1, 2010 [ V-2010 (2) CPR 261 (NC)
Case Study: Pingale, along with some others, was running Suyog Departmental Store. They floated a scheme called "Suyog Thev Yojgana" where their customers could place deposits and earn interest thereon at 2% per month (24% annually). The interest earned could be received either in cash or by way of discount on purchases. Initially, this scheme functioned properly, luring more customers to invest the monies. Thereafter, the store owners defaulted in payment of interest. Several of the aggrieved consumers came together and filed a consumer complaint.
This was objected to by shop owners on various grounds, viz (1) that the complaint was filed belatedly; (2) the total value of the principal and interest claimed was Rs 21 lakh, which was beyond the jurisdiction of the district forum(3) the consumer forum would not have jurisdiction as the same dispute was pending before the special court under the MPID Act and (4) the transaction created a debtor-creditor relationship and did not constitute a consumer dispute.
The matter ultimately reached the National Commission in a revision petition filed by the shop owners. Reasoning of the National Commission: All the defences of the shop owners were rejected by the commission. Although the agreements were executed in July 2001, the scheme continued to function smoothly till 2003 after which the payment defaults were committed. Hence, the cause of action would have to be computed from the date of default and not from the date of deposit. So, the complaint was held to be within time. The principal value of the deposits made (excluding the interest) aggregated to Rs 17 lakh only. The district consumer fora can adjudicate disputes up to Rs 20 lakh. It was ruled that the dispute would be within the pecuniary limit of the district forum.

The proceedings under the MPID Act were criminal proceedings for punishing the wrong-doer. It was held that such criminal proceedings would not debar the filing of a consumer complaint for recovery of the amount. The dispute about deposits was a consumer one. The liability was admitted by the shop owners, but they pleaded their inability to pay the amounts due in view of attachment of their property. The commission observed that no such order was filed, but even assuming that such an order was in force, it would not absolve the shop owners from discharging their liability towards the depositors. Accordingly, the revision petition was dismissed and the order holding the shop owners liable to repay the depositors was upheld.
Impact: It is unfortunate that traders and service providers often float schemes, which are attractive rather than economically viable, with a view to dupe gullible consumers. Thereafter, they waste money on futile litigation rather than gracefully pay up when caught on the wrong foot.
(The author is a consumer activist and has won the government of India's National Youth Award for Consumer Protection. His e-mail id is

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