Victims of fraudulent default on the part of a Financial Establishment entitled for compensation under Consumer Protection Act

National Consumer Disputes Redressal Commission (NCDRC): In a landmark judgment, while observing that Maharashtra Protection of Interest of Depositors in Financial Establishments Act, 1999 (MPID Act) does not provide for an adequate redressal of the grievances of a person who suffers on account of the fraudulent default on the part of the Financial Establishment, where such defaults also constitutes deficiency in the services rendered by a service provider to its consumer, NCDRC held that investors and depositors have a right to seek compensation under the Consumer Protection Act, 1986 in such cases. The Commission was hearing a complaint filed by 373 investors who invested their hard-earned savings into attractive schemes related to goat farming and allied activities, offered by Shivaji Estate Livestock And Farms Pvt. Ltd. It was alleged in the complaint that the Company assured minimum expected return on the investment, additional bonus if targets were achieved and also pre-mature withdrawals by giving 45 days’ notice, but after making initial payments of some installments, the Company did not fulfill the terms for repayment to investors. It was further alleged that when the investors applied for pre-mature withdrawals, the company failed to honour its commitment. The investors prayed for refund of invested amount with interest and compensation. The Director of the Company, in its defense, contended that in view of the provisions contained in the MPID Act, the NCDRC has no jurisdiction to entertain the complaint, since the Act provides complete machinery for recovery of investors’ deposits. After perusal of material on record and hearing both the parties, Commission noted that the remedy before a consumer forum is primarily a civil remedy; whereas the prosecution before and conviction by a designated court constituted under MPID Act is a criminal remedy available to the victim of a fraudulent default on the part of a Financial Establishment. While observing that the provisions contained in MPID Act shows that the designated court has no power to grant compensation to a person who is a victim of the fraudulent default on the part of a Financial Establishment, NCDRC held that as the complainants were consumers of Shivaji Estate Livestock within the meaning of Section 2(1)(d) of the Consumer Protection Act, the jurisdiction of the consumer forum is not excluded in a case where fraudulent default on the part of the Financial Establishment also constitutes deficiency in the service rendered to a consumer. While allowing the complaint, the NCDRC directed the Company to refund to investors, money deposited in different schemes along with an interest of 9% from the date of filing complaint. “We also direct the said opposite party to pay 10% of the amount invested by the complainants as compensation and Rs.1,000/- each as the cost of litigation to each of the complainants,” the Commission added. (Adelkar Pratibha B. v. Shivaji Estate Livestock And Farms (P) Ltd., 2015 SCC OnLine NCDRC 7, decided on 16-02-2015)