Cooperative societies involved in activities earning profits for their members cannot claim the status of 'consumers' in litigations before consumer forums, the State Consumer Disputes Redressal Commission has ruled.
The commission has set aside the Kolhapur district consumer forum's orders to the extent of holding 12 directors of the Ichalkaranji Urban Cooperative Bank personally liable for repayment of fixed deposit amounts of six cooperative societies, which are into credit finance and milk collection and supplies in Kolhapur district.
A two-member bench of the commission, comprising Justices R C Chavan and Usha S Thakare, also held in their order on January 14 that it would not be open to the district consumer forum to hold the directors personally liable in the absence of any specific allegation or proof of their complicity in the mismanagement of the bank's affairs. The commission has, however, left intact all orders against the bank, which, as a corporate legal personality, has not challenged those orders.
The bank is going through a liquidation process initiated in March 2010 by the Commissioner of Cooperation and Registrar of Cooperative Societies, after the Reserve Bank of India terminated its banking licence in February 2010.
The directors of the bank had moved a bunch of appeals against the district forum's orders by claiming that the RBI imposed restrictions on the bank's operations on April 20, 2009, and extended them by another order on October 16, 2009. The RBI terminated the banking licence on March 4, 2010, following which the liquidation process was initiated and all affairs of the bank were being looked after by a liquidation committee. They claimed that the fixed deposit amounts would be paid by the liquidator in due course and complaints by the societies were not tenable.
Some of them argued that they were on the board of directors merely as experts or to fill the quota for women and backward class representatives. As such, they should not have been held personally liable. The directors argued that cooperative societies cannot qualify as a 'consumer' as defined under the Consumer Protection Act. Besides, the bank had a legal personality of its own and they cannot be held personally liable merely because they were directors.
The commission did not accept the argument that the directors as experts or women and backward class representatives were not responsible for the affairs of the bank. But on the issue of the status of 'consumer', it relied on a previous judgment in M V Patil vs Mahalaxmi Gramin Bigarsheti Pat Sanstha, which held that the complainant cooperative societies had kept deposits with the bank with the intention to get more interest and therefore the societies cannot qualify as consumers. "In our view, the judgment would apply to the present case as well," the commission ruled.
It also dismissed the societies' argument that they were not in the business of earning profits but were merely providing small credit to their members for dairy business and cultivation.
"It cannot be decisive of the matter as to whether societies provided credit to milkmen or cultivators. (The) fact remains, they would provide credit to their members obviously to earn profit for being shared by its members. The members of such societies invest the amounts with the hope that the borrower members would pay an interest from which they would get returns. Therefore, activities of the complainant societies are obviously commercial activities disqualifying them from claiming the 'consumer' status, The district forum ought to have seen this and held accordingly," the commission ruled.
Article referred: http://timesofindia.indiatimes.com/city/pune/Co-op-societies-cannot-be-consumers-says-state-panel/articleshow/45976976.cms
The commission has set aside the Kolhapur district consumer forum's orders to the extent of holding 12 directors of the Ichalkaranji Urban Cooperative Bank personally liable for repayment of fixed deposit amounts of six cooperative societies, which are into credit finance and milk collection and supplies in Kolhapur district.
A two-member bench of the commission, comprising Justices R C Chavan and Usha S Thakare, also held in their order on January 14 that it would not be open to the district consumer forum to hold the directors personally liable in the absence of any specific allegation or proof of their complicity in the mismanagement of the bank's affairs. The commission has, however, left intact all orders against the bank, which, as a corporate legal personality, has not challenged those orders.
The bank is going through a liquidation process initiated in March 2010 by the Commissioner of Cooperation and Registrar of Cooperative Societies, after the Reserve Bank of India terminated its banking licence in February 2010.
The directors of the bank had moved a bunch of appeals against the district forum's orders by claiming that the RBI imposed restrictions on the bank's operations on April 20, 2009, and extended them by another order on October 16, 2009. The RBI terminated the banking licence on March 4, 2010, following which the liquidation process was initiated and all affairs of the bank were being looked after by a liquidation committee. They claimed that the fixed deposit amounts would be paid by the liquidator in due course and complaints by the societies were not tenable.
Some of them argued that they were on the board of directors merely as experts or to fill the quota for women and backward class representatives. As such, they should not have been held personally liable. The directors argued that cooperative societies cannot qualify as a 'consumer' as defined under the Consumer Protection Act. Besides, the bank had a legal personality of its own and they cannot be held personally liable merely because they were directors.
The commission did not accept the argument that the directors as experts or women and backward class representatives were not responsible for the affairs of the bank. But on the issue of the status of 'consumer', it relied on a previous judgment in M V Patil vs Mahalaxmi Gramin Bigarsheti Pat Sanstha, which held that the complainant cooperative societies had kept deposits with the bank with the intention to get more interest and therefore the societies cannot qualify as consumers. "In our view, the judgment would apply to the present case as well," the commission ruled.
It also dismissed the societies' argument that they were not in the business of earning profits but were merely providing small credit to their members for dairy business and cultivation.
"It cannot be decisive of the matter as to whether societies provided credit to milkmen or cultivators. (The) fact remains, they would provide credit to their members obviously to earn profit for being shared by its members. The members of such societies invest the amounts with the hope that the borrower members would pay an interest from which they would get returns. Therefore, activities of the complainant societies are obviously commercial activities disqualifying them from claiming the 'consumer' status, The district forum ought to have seen this and held accordingly," the commission ruled.
Article referred: http://timesofindia.indiatimes.com/city/pune/Co-op-societies-cannot-be-consumers-says-state-panel/articleshow/45976976.cms
Comments
Post a Comment