SUPREME COURT HOLDS THAT COMPLAINTS INVOLVING ALLEGATIONS OF FRAUD OR HIGHLY DISPUTED QUESTIONS OF FACTS CANNOT BE DECIDED BY A CONSUMER FORUM
A two Judge Bench of the Supreme Court presided by Justice Ajay Rastogi and Justice Bela M. Trivedi passed a Judgment dated 27.03.2023 in The Chairman & Managing Director, City Union Bank Ltd. & Anr. Versus R. Chandramohan., Civil Appeal No. 7289 of 2009 and observed that the present case was mired with allegations of fraud and collusion made by the Respondent herein against the Appellant-Bank, however, the Bench held that the proceedings before a Commission under the Consumer Protection Act, 1986 (the Act) are summary in nature and hence, such allegations involving fraud or cheating, etc or highly disputed questions of facts cannot be decided by the Commission.
In the present case, the Respondent – Original Complainant, R. Chandramohan was the Managing Director of D-Cube Constructions (P) Ltd. (Company). The Company’s other Directors comprised of R. Thulasiram and R. Murali. A Current Account bearing No. 3600 (1st Account) was opened in the name of the said Company with the City Union Bank Ltd. (Appellant Bank) on 13.04.1995 and the Respondent alone was permitted to operate the said Account. During the end of 1996, there were some misunderstandings between the Respondent and the other Director, R. Thulasiram. Therefore, the Respondent had written a Letter dated 08.01.1997 to the Appellant Bank requesting not to allow withdrawals from the said Current Account by any other person other than the Respondent himself.
Further, one Ravindra, an NRI residing in Malaysia had purchased three flats in the Respondent’s projects and had informed the Respondent that he had sent two drafts i.e., Draft bearing No. 166570 dated 28.06.1996 for Rs. 5 Lakhs and the other Draft bearing no. 177923 dated 18.11.1996 for Rs. 3 Lakhs. However, on reconciliation of the accounts, it was found that the said two Demand Drafts were not credited in the 1st Bank Account of the Company. Subsequently through correspondence, it was found that R. Thulasiram opened a separate account bearing Current Account No. 4160 (2nd Account) in the name of “D-Cube Construction” in another Bank and the aforementioned Drafts were credited into the 2nd Account, as the said Demand Drafts were in the name of “D-Cube Construction”.
The Respondent filed a Complaint bearing O.P. No. 103/99 before the Hon’ble State Consumer Disputes Redressal Commission, Chennai (State Commission) alleging collusion and negligence on the part of the Appellant-Bank and further seeking directions against the Appellant-Bank to re-credit Rs.8 Lakhs into the Company’s 1st Bank Account bearing No. 3600. The State Commission, vide Order dated 23.12.2004, allowed the said Complaint and directed the Appellant-Bank to pay the Respondent-Complainant a sum of Rs.8 Lakhs along with compensation of Rs. 1 Lakh.
Aggrieved by the aforesaid State Commission Order dated 23.12.2004, the Appellant- Bank preferred a First Appeal No. 29 / 2005, before the Hon’ble National Consumer Disputes Redressal Commission, Chennai (National Commission). The said Appeal was dismissed, vide Impugned Order dated 01.02.2007.
Aggrieved by the National Commission Order dated 01.02.2007, the Appellant-Bank filed Civil Appeal No. 7289 of 2009 before the Supreme Court. The Apex Court passed a Judgment dated 27.03.2023 and discussed the issues and made the following observations:
Whether State / National Commission under the Act can entertain a complaint involving highly disputed questions of facts or involving allegations of tortious acts, when the proceedings before the Commission are summary in nature?
Supreme Court Observations:
- At the outset, the Supreme Court observed that it is undisputed that the 1st Current Account bearing No. 3600 was opened by the Respondent in the name of the Company, “D-Cube Constructions (P) Ltd.”, whereas the 2nd Current Account bearing No. 4160 was opened by R. Thulasiram on 15.02.1997 in the name of a Proprietorship, “D-Cube Construction”, while he was one of the Directors of “D-Cube Constructions (P) Ltd.”
- Further, the other Bank had opened the 2nd Current Account based on a Letter dated 15.02.1997 written by R. Thulasiram, in the capacity of a Director of the Company, “D-Cube Constructions (P) Ltd.” Thus, the opening of the 2nd Account was lawful.
- Furthermore, the Demand Drafts (DD) were in the name of “D-Cube Construction” and hence, the DD amounts were credited into the said 2nd Such an act of the Bank does not amount to willful default / imperfection / short coming / deficiency in services on the part of the Appellant-Bank within the meaning of Section 2 (1)(g) (definition of deficiency) of the Act.
- The Hon’ble Apex Court further relied upon the case of Oriental Insurance Co. Ltd. vs. Munimahesh Patel, 5 (2006) 7 SCC 655 where it was 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 Hon’ble Supreme Court also observed that 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.
- The Apex Court further observed that as emerging from the records, some disputes were going on amongst the Directors of the Company and in the event that one of the Directors had allegedly committed fraud or cheating, in such a case, the employees of the Appellant-Bank would not be held liable, as they had acted in a bona fide manner.
Thus, based on the aforesaid observations, the Hon’ble Supreme held that the Respondent miserably failed to discharge his burden to prove that there was deficiency in services on the part of the Appellant-Bank within the meaning of Section 2(1)(g) of the Act and hence, his Complaint was dismissed. Therefore, the Apex Court allowed the Appeal filed by the Appellant-Bank and thereby, set aside and quashed the Orders passed by the State Commission and the National Commission dated 23.12.2004 and 01.02.2007 respectively.
The Indian Lawyer
 (g) “deficiency” means 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;