2014(5) ALL MR (JOURNAL) 59
CONSUMER DISPUTES REDRESSAL COMMISSION, MAHARASHTRA STATE, MUMBAI

R.C. CHAVAN AND DHANRAJ KHAMATKAR, JJ.

Mr. Sham Kamlakar Gite & Ors. Vs. Smt. Shilpa Shantilal Oswal & Ors.

First Appeal No.909 of 2009,First Appeal No.910 of 2009,First Appeal No.27 of 2010,First Appeal No.28 of 2010

20th August, 2014

Petitioner Counsel: V.S. TALKUTE
Respondent Counsel: RAJIV P. GANDHI, R.V. SATAM, SHRIPAD B. KHURJEKAR

(A) Consumer Protection Act (1986), S.2 - Consumer complaint - Alleged deficiency in service on the part of Co-operative Bank - Directors of the Bank, whether personally liable - Complainants sought for pre-mature encashment of deposit receipts - Refusal by Bank due to liquidity crunch - Legal notices issued only to Bank and not to its office-bearers - Held, for holding the directors personally liable for deficiency in service, it is necessary to establish that even after being made aware of lapse on the part of Bank, said directors failed to act - In absence of the same, directors cannot be held personally liable. (Para 11)

(B) Consumer Protection Act (1986), S.2 - Banking Regulation Act (1949), Ss.35, 35A - Consumer complaint - Complainant sought for pre-mature encashment of deposit receipts - Bank went into liquidation - RBI issued direction to Bank not to incur any liability or discharge liability except in accordance with direction dt.22/9/2004 - However, said directions came into operation after said complaints were filed and before the same were decided - They may not have any bearing on liability of persons concerned on the date of filing of complaints. (Para 18)

JUDGMENT

MR. R. C. CHAVAN, Hon'ble President :- These four appeals filed against the orders passed by the District Consumer Disputes Redressal Forum, Satara allowing Consumer Complaints bearing Nos.75 of 2009 and 76 of 2009 before it are being disposed of by this common order since they involve common questions. Appellants in these appeals are stated to have been the Directors of Shri Laxmi Sahakari Bank Ltd., in which the original Complainants (Respondent No.1 in all these appeals) had kept certain amounts in fixed deposits.

2. Facts, which are material for deciding these appeals are as under:-

Smt. Shilpa Shantilal Oswal, Complainant in Consumer Complaint No.75 of 2009 claimed to have deposited a sum of Rs.6,00,000/- in ten fixed deposit receipts of Rs.60,000/- each. These amounts were deposited on 01/01/2008 and the deposits were to mature on 30/06/2008. These deposits were to bear interest @ 10.5% p.a. The depositor was in some financial difficulties and, therefore, wanted to withdraw the amount of deposits. Therefore, before the date of maturity, on 06/05/2008, the Complainant demanded said amounts by issuing a notice through a lawyer after having failed to secure repayment by oral requests. The Complainant, thereafter, filed a consumer complaint claiming refund of a sum of Rs.6,81,067/- together with interest thereon @ 18% p.a. and further compensation quantified at Rs.15,000/-. Consumer complaint was filed on 21/02/2009.

3. Mr. Popatlal Chunilal Gandhi, Complainant in Consumer Complaint No.76 of 2009 claimed to have similarly deposited a sum of Rs.6,00,000/- in ten fixed deposit receipts of Rs.60,000/- each. These amounts were deposited on 01/01/2008 and the deposits were to mature on 30/06/2008. These deposits were to bear interest @ 10.5% p.a. He too has stated that he was in some financial difficulties and, therefore, wanted to withdraw the amount of deposits. Therefore, before the date of maturity, on 06/05/2008, the Complainant demanded said amounts by issuing a notice through a lawyer after having failed to secure repayment by oral requests. The Complainant, thereafter, filed a consumer complaint claiming refund of a sum of Rs.6,00,000/- together with interest thereon @ 18% p.a. and further compensation quantified at Rs.25,000/-. Consumer complaint was filed on 21/02/2009.

4. Notices were served on the Appellants and the other Opponents viz. the Bank and its Directors. Bank claimed inability to repay the amounts promptly because of liquidity crunch. Appellants herein (except Dr. Nagesh Sarjerao Ingle) had claimed to have resigned from their positions as the Directors of the Bank and, therefore, stated that they had nothing to do with the transactions in question. Appellants had also claimed that they had not received notices from the Complainants and they have been unnecessarily impleaded as the parties to these complaint proceedings. It is also stated that the deposits were in the joint names of the Complainants and some other family members of the depositors and, therefore, the Complainants alone did not have right to file complaints.

5. After considering rival contentions, the District Forum came to pass impugned orders directing the Appellants as well as the Bank to repay amounts in deposits together with interest thereon @ 9% p.a. and also to pay compensation of Rs.2,000/- towards mental harassment besides costs quantified at Rs.1,000/-. Aggrieved thereby, the Appellants are before us.

6. We have heard learned counsel for the Appellants in all these appeals as well learned counsel for the original Complainants. We have also heard learned counsel for some of the Respondents who were Co-Opponents alongwith the Appellants herein in these two consumer complaints. With the help of learned counsel, we have carefully perused the material placed on record.

7. Learned counsel for the Appellants contended that consumer complaints filed by only one of the depositors without joining co-depositors were not tenable when the deposit receipts were in joint names. We would reject this contention since the deposit receipts clearly show that the amounts were deposited by two depositors in each receipt and were payable to either or survivor as can be seen by use of the word 'or' in the deposit receipts. Therefore, even one of the depositors could have filed a consumer complaint.

8. Learned counsel for the Appellants next submitted that the depositors in both these consumer complaints had sought pre-mature encashment of the deposit receipts. The term of deposits was to end on 30/06/2008. However, encashment was sought only in the month of May-2008. Learned Counsel for the Appellants, therefore, submitted that there could not be allegations of deficiency in service and no such conclusions can be drawn since there was no obligation for the Bank to allow such pre-mature encashment of the fixed deposits without following relevant rules, which would have possibly entailed reduction of interest payable to the Complainants. Again, on this count, we are not with the Appellants in entirety because it is not that a depositor could not at all claim pre-mature encashment of the deposit receipts. Bank could have clarified that the depositors would get some less interest and could have processed the claims accordingly. In fact, the Bank did not do so because of the liquidity crunch, which the Bank faced. Therefore, it cannot be said that there was no deficiency in service only because pre-mature encashment was sought by the depositors.

9. Learned Counsel for the Appellants next submitted that the Appellants were a few of several Directors, none of whom were connected with day-to-day functioning of the Bank like receiving deposits or making payment to the depositors and, therefore, could not be held personally liable. Learned counsel for the Appellants, therefore, submitted that fastening personal liability on the Appellants was not proper. Learned Counsel for the Respondent No.1/original Complainants, on the other hand, submitted that inability of the Bank to pay the amounts due was obviously on account of mismanagement by the Directors and, therefore, there was nothing wrong in the order holding the Appellants/Directors personally liable to pay these amounts.

10. We have carefully considered these contentions. Learned counsel for the Appellants may be right in submitting that the Appellants could not be held liable for running day-to-day business of the Bank. They also may be right in submitting that if by their mismanagement the Bank has been pushed into a position where it was unable to meet its obligations, it would be necessary to establish this mismanagement in appropriate proceedings before an appropriate forum like the authorities under the Maharashtra Cooperative Societies Act, 1960. It was submitted that there is nothing on record to show that the Appellants have been ordered by the Registrar of Cooperative Societies under Section-88 of the Maharashtra Cooperative Societies Act, 1960 to pay any damages on account of mismanagement of the Society. Therefore, Appellants could not have been made personally liable.

11. Rather than going into question of whether it was mismanagement on the part of the Appellants which led to failure of the Bank to discharge its obligations, we would look at the problem from another angle. In order to make the Directors personally liable, it should have been necessary for the Complainants to establish that the failure of the Bank to discharge its obligations was brought to the notice of the Appellants when the Complainants issued notices through an advocate. There is nothing on the record to show that notices dated 06/05/2008, in both these consumer complaints, addressed to Shri Laxmi Sahakari Bank Ltd., and its 13 office-bearers, were actually sent to each of these Directors. Postal acknowledgement receipts show that notices in question were sent only to the Bank. Therefore, had the Complainants desired to make the Appellants/Directors personally liable for deficiency in service, it would have been necessary for the Complainants to establish that even after being made aware of the lapse on the part of the Bank, the Appellant, as the Directors, failed to act and thus, were personally responsible for deficiency in service. Since, such is not the present case it would be difficult to uphold the orders passed by the District Forum in so far as it fastens liability on the Appellants personally.

12. Learned Counsel for the Appellants next submitted that in fact, the Appellants had already resigned from the posts of Directors in the said Bank and were not the Directors when the deposits were made or became due for repayment. Therefore, according to the learned counsel for the Appellants, the Appellants could not have been held personally responsible. This aspect had been raised before the District Forum. But the District Forum held in respect of Appellants, Mr. Sham Kamlakar Gite and Mr. Kedar Shalgar that their resignations as the Chairman and Vice-Chairman respectively were accepted and not resignations from the posts of the Directors. The District Forum also seems to have held on the basis of the information by District Deputy Registrar of Cooperative Societies that the Appellants had not resigned as Directors of the Bank. This information was provided in the month of April-2009 by District Deputy Registrar of Cooperative Societies. The District Forum held that as per Maharashtra Cooperative Societies Act, 1960 question as to who are the Directors of a cooperative bank could be conclusively decided only by the District Deputy Registrar of Cooperative Societies and, therefore, since the District Deputy Registrar of Cooperative Societies held that the Appellants were still the Directors, they could not escape the liability.

13. Learned counsel for the Appellants pointed out that by a letter dated 28/07/2008, the District Deputy Registrar of Cooperative Societies had written to the Bank in respect of resignations of the Appellants, Mr. Sham Kamlakar Gite, Mr. Kedar Dinkar Shalgar, Mr. Jayant Govind Thakkar and Mr. Ajit Kondiba Bhilare (Appellants in first appeals bearing Nos.909 of 2009 and 910 of 2009). Letter dated 28/07/2008 mentions that resignations were accepted by the Board on 14/12/2007 and 21/02/2008. Therefore, it is clear that the information allegedly furnished by the District Deputy Registrar of Cooperative Societies, on which the District Forum had placed reliance, was incorrect.

14. Learned counsel for the Respondent No.1/original Complainants submitted that proceedings of the meetings held on 14/12/2007 and 21/02/2008 were in all probability cooked-up and did not actually reflect any decisions taken in these two meetings on those dates. He drew our attention to the Proceeding Book, which had been called for by us, to point out that the Proceeding Book was signed by one Mr. Desai from almost beginning till end when Mr. Desai was not the Chairman on several dates when he signed as Chairman. Learned Counsel for the Complainants also pointed out that in fact, the District Deputy Registrar of Cooperative Societies had pointed out some discrepancies in the working of the Bank and had observed that proceedings had also been not properly written. He submits that proceedings were possibly thereafter drawn up. It is true that in fact, the proceedings were possibly attested by Mr. Desai subsequently. However, it does not appear that the Appellants had not resigned from the various posts, which they held or that some of them had resigned only from the post of Chairman or Vice-Chairman of the Bank. Letters written by the Appellants, Mr. Sham Kamlakar Gite and Mr. Kedar Shalgar clearly show that they wanted to be relieved from all the posts, which they held. These letters were sent in the month of November-2007 and, therefore, it is doubtful whether the Appellants could at all be held responsible for the activities in the Bank after their resignations.

15. As far as Appellant, Dr. Nagesh Sarjerao Ingale in appeals bearing Nos.27 of 2010 and 28 of 2010 is concerned, it is not his case that he had submitted his resignation from the post of Director. However, he states that he did not participate in day-to-day working of the Bank.

16. As already observed, since the Appellants could not have been made personally liable for the alleged deficiency without first calling upon them by a notice to ensure that the Bank fulfilled its obligation, the Appellants could not be held liable in their personal capacity. Therefore, absence of resignation of the Appellant, Dr. Nagesh Sarjerao Ingale too may not matter. As far as Appellants in other two appeals are concerned, it is clear that they were not the Directors at the relevant time and, therefore, could not have been fastened with this responsibility to repay the amounts of deposits.

17. There is another aspect of the matter to which learned counsel for the Appellants drew our attention. Each of the deposit receipts was for a sum of Rs.60,000/-. These amounts are shown to have been paid to the Complainants by the Liquidator on being paid by Deposit Insurance and Credit Guarantee Corporation (DIGC). Thus, in fact, the claims of the Complainants have been fully satisfied. Learned Counsel for the Complainants submitted that the Complainants had accepted these amounts only in partial satisfaction of their claims as could be seen from the discharge receipts signed by the Complainants. Therefore, these receipts may not be of much help.

18. Learned counsel for the Appellants next submitted that since the Bank went into liquidation. Before that the Reserve Bank of India had placed certain restrictions on the activities of the Bank. So, there could be no further action against the Bank and consequently against the Directors. Learned counsel for the Appellants drew our attention to provisions of Sections 35 & 35-A of the Banking Regulation Act. Since the Reserve Bank of India had issued such directions and had cancelled the banking licence, there was no further question of Complainants being in a position to claim any further sums. It appears that the Reserve Bank of India vide its letter dated 23/06/2009 had directed the Bank not to incur any liability or make any payment or discharge any liability except in accordance with the directives dated 22/06/2009, which enabled the Bank only to pay sums not exceeding an amount of Rs.1,000/-. Since these directions came into operation after these two consumer complaints were filed, but before the complaints were decided, they may not have any bearing on the liability of persons concerned on the date of filing of these two consumer complaints.

19. However, as indicated earlier in the foregoing discussion since the Appellants in appeals bearing Nos.909 of 2009 and 910 of 2009 had already resigned before the deposits were accepted, they had absolutely no liability. Appellant in appeals bearing Nos.27 of 2010 and 28 of 2010 could not have been made personally liable since he was not served with any notice pointing out to him as a Director, the lapse on the part of the Bank in not honouring a claim for pre-mature encashment.

20. In view of this, we allow all these four appeals and set aside the orders passed by the District Forum, Satara in Consumer Complaints bearing Nos.75 of 2009 and 76 of 2009 in so far as they fasten personal liability on the Appellants. Parties shall bear their own costs.

Appeals allowed.