HP State Consumer Commission Holds Sardar Sarovar Nigam Liable For Unilateral Early Redemption Of Deep Discount Bonds

Brief Facts

The complainant, Chander Paul Sood purchased a redeemable Deep Discount Bond from Sardar Sarovar Narmada Nigam Limited(Opposite party) on 07.01.1995 for Rs. 3,600/-. The bond (Certificate No. 438086) was to mature on 11.01.2014 with a payable amount of Rs. 1,11,000/-, and it also allowed the holder to redeem it after 7, 11, or 15 years from the date of purchase.

After maturity, the complainant submitted the bond along with requisite documents through registered post on 19.12.2015, but was paid only Rs. 45,360 after TDS, instead of Rs. 1,11,000, resulting in a shortfall of Rs. 61,000. The complainant then issued a letter to the OP on 28.12.2016 requesting payment of the balance amount but received no response.

Aggrieved, the complainant approached the District Consumer Commission, Shimla, seeking the unpaid amount of Rs. 61,000/-. The Commission allowed the complaint and ordered the opposite party to pay Rs. 61,000 with 9% interest from the date of filing, along with Rs. 25,000/- for mental harassment and Rs. 20,000/- towards litigation costs. Both parties then filed appeals before the State Commission.

Arguments by the Opposite Party

Sardar Sarovar Narmada Nigam Limited submitted that the bonds, issued at a discounted price of Rs. 3,600/- with a maturity value of Rs. 1,11,000/-, carried an effective interest rate exceeding 18%, which imposed a substantial financial burden on the company. It contended that, to avoid the additional interest liability for the period 2009–2014, the Board of Directors, in its meeting, duly resolved to redeem the bonds prior to their maturity and fixed 10.01.2009 as the date of early redemption with a deemed face value of Rs. 50,000/- per bond.

The company claimed that adequate notice of early redemption was issued to all bondholders, including the complainant, through newspaper publication, its website, and individual notices detailing the redemption procedure.

Observation by the Commission

The State Consumer Commission concurred with the findings of the District Commission, holding that the opposite party failed to obtain the mandatory written consent of at least three-fourths of the bondholders before altering the bond terms through early redemption, as required under Condition No. 7 of the bond certificate.

The commission further observed that the opposite party could not prove that it had delivered the individual notice of early redemption to the complainant, since the only evidence offered was an uncorroborated affidavit of its General Manager, unsupported by postal records or affidavits from other bondholders.

While considering the period for which interest was payable, the Commission found no reason to interfere with the District Commission's direction to award interest from the date of filing of the complaint rather than from the date of maturity and held that this order was correct.

The Commission concluded that there was clear deficiency in service on the part of Sardar Sarovar Narmada Nigam Limited, as it failed both to obtain the required consent of bondholders and to properly inform the complainant of the early redemption.

Accordingly, the Commission dismissed both cross-appeals and affirmed the District Consumer Commission, Shimla's direction to pay the balance amount of Rs. 61,000, along with interest, compensation, and costs.

Case Title: Sh. Chander Paul Sood vs Sardar Sarovar Narmada Nigam Limited F.A.No.05/2024