The Supreme Court has held that consumer complaints involving highly disputed questions of fact or allegations of a criminal or tortious nature, such as fraud and forgery, cannot be adjudicated in the summary proceedings under the Consumer Protection Act, 1986. Such matters are to be decided by a regular civil or criminal court which is equipped to handle complex factual determinations.
While the National Consumer Disputes Redressal Commission’s (NCDRC) reasoning for dismissing the complaint (that earning interest on a deposit automatically makes it a ‘commercial purpose’) was not entirely correct, the ultimate dismissal of the complaint was justified because the dispute centred on allegations of fraud that were outside the scope of the consumer forum’s summary jurisdiction. The Apex Court, however, clarified that this dismissal does not bar the appellant from seeking recourse in an appropriate court or forum.
A Two-Judge Bench comprising Justice Pamidighantam Sri Narasimha and Justice Manoj Misra observed that to determine if a service is availed for a ‘commercial purpose’, one must look at the dominant object or purpose of the transaction. The identity of the person (whether an individual or a body corporate) is not the sole determining factor. The Bench disagreed with the NCDRC’s view that merely because a fixed deposit earns interest, the banking service is availed for a commercial purpose. Rather, it reasoned that there could be various non-commercial reasons for depositing money in a bank, such as statutory requirements or safe-keeping of funds.
However, the Bench distinguished this from situations where a deposit is made specifically to leverage credit facilities for augmenting business. Such a transaction would have a direct nexus with revenue generation and could be considered a commercial purpose. In this case, the transaction was between two business entities (company and bank). The Bank’s defence was that the FDR was pledged to avail a credit facility for business use. The Bench noted that without first determining the truth behind the allegations of fraud and forgery concerning the pledge and loan, it was not possible to ascertain the true purpose of the deposit and, consequently, whether the services were availed for a commercial purpose.
Further, the Bench observed that ‘deficiency in service’ under the 1986 Act must be distinguished from tortious or criminal acts like fraud or cheating. It reiterated that the burden of proving deficiency in service lies on the complainant. Since proceedings before the Consumer Commission are summary in nature, they are not meant to adjudicate complex factual issues, especially those involving criminality.
In the present case, the core of the dispute was the Bank’s claim of a subsequent contract of pledge, which the appellant alleged was fraudulent. The Bank contended that the FDR held by the appellant was forged and that the original was with the Bank as security for the overdraft facility. Thus, the Bench concluded that these allegations of fraud and forgery could not be properly adjudicated in a summary proceeding under the 1986 Act and were more appropriate for a regular civil or criminal court. The complaint as framed was not maintainable before the Consumer Commission.
Briefly, the appellant company filed a consumer complaint against Vijaya Bank (the respondent), alleging that it had invested Rs. 9 Crores in a fixed deposit (FDR) with the Bank for one year, starting from 28 February 2014, for which an FDR was issued on 3 March 2014. The interest on this FDR was credited to the appellant’s account on 26 March 2014 after TDS deduction. However, on 27 June 2014, the appellant received a letter from the Bank regarding the sanction of a loan/overdraft facility of Rs. 8.10 Crores against the said FDR.
Suspecting fraudulent activity, the appellant filed a complaint with the Economic Offences Wing, Crime Branch, Mumbai, on 16 July 2014 and also requested the Bank to reverse the entries for the overdraft account, but the Bank did not comply. Subsequently, on 4 March 2017, the Bank informed the appellant that the overdraft facility had been closed by adjusting the outstanding amount against the maturity value of the FDR, and the remaining balance of Rs. 50.58 Lakhs was remitted to the appellant. The appellant did not accept this adjustment and demanded the full FDR amount. When the Bank failed to pay, a consumer complaint was filed seeking payment of the principal amount of Rs. 9 Crores with interest, compensation, and costs.
The Bank contested the complaint, arguing that allegations of fraud and forgery should be decided by a Civil or Criminal Court, not in summary proceedings under the Consumer Protection Act, 1986. It also contended that the appellant is not a ‘consumer’ under Section 2(1)(d) of the 1986 Act, as the investment was for a commercial purpose to augment profits. The National Consumer Disputes Redressal Commission (NCDRC) dismissed the complaint, holding that the banking services were availed for a commercial purpose, as the deposit had a direct nexus to generating profit, i.e., earning of interest.
Appearances:
AOR T. R. B. Sivakumar, along with Advocates Prashant R Dahat, Shreyas Gacche, Sourabh Gupta, Puneet Yadav, and Priya Mittal, for the Appellant
AOR Amrendra Kumar Mehta, along with Advocates Vaibhav Dang, Ranpal Awana, and D N Ojha, for the Respondent
