Unregistered Chit Funds Amount To Unfair Trade Practice, Hyderabad Commission Orders Sai Veda Chit Fund Company To Refund Rs. 1 Lakh, 10k Compensation And 20k Costs

Recently, the Hyderabad District Consumer Disputes Redressal Commission-III bench comprising of Ram Gopal Reddy (President), D. Sreedevi (Member) and J. Shyamala (Member) imposed punitive damages on M/s Sai Veda Chit Fund Pvt. Ltd. for operating unregistered chits and for violating provision of Chit Fund Act, 1982. The bench noted that company's actions amounted to unfair trade practices by operating unregistered chits, which not only constituted a deficiency in services but also violated regulations. Brief Facts of the Case: G. Thimma Reddy (“Complainant”), a 45-year-old private employee residing in Kukatpally, Hyderabad, had participated in two chits operated by M/s. Sai Veda Chit Fund Pvt. Ltd. (“Chit Fund Company”). The first chit had a value of 5 lakhs, while the second had a value of 10 lakhs. The complainant diligently paid regular instalments for several months under the belief that the chit fund company was operating in accordance with the Chit Funds Act, 1982 (“the Act”). However, the complainant later discovered that the chit fund company was conducting its business in violation of the Act. Alarmed by this revelation, he filed a consumer complaint in the Hyderabad District Consumer Disputes Redressal Commission-III (“District Commission”) to seek a refund of his invested amount and compensation for the losses he had suffered due to the company's fraudulent practices. The complainant’s contention was that he had joined the chits based on assurances that the chit fund company was operating within the bounds of the Chit Fund Act, 1982. He paid regular instalments for both chits and received dividends. However, upon learning about the company's unlawful operations, he registered a complaint with the Registrar of Chits seeking clarification. The response from the Registrar indicated that the chit in question was not registered. The complainant subsequently sent a legal notice to the chit fund company, demanding the repayment of his invested amount and compensation for the losses he had incurred due to the company's deceptive practices. The chit fund company contested the complainant’s claims, arguing that he had joined the chits midway through their cycles. They asserted that he had paid only partially for the first chit and subsequently failed to make payments for the second chit, citing financial constraints caused by the COVID-19 pandemic. The chit fund company further claimed to have refunded the subscription amount and adjusted the remaining balance to close both chits. They also presented evidence to show that the complainant had issued a cheque that was dishonoured due to insufficient funds. The chit fund company further argued that the complainant had received a refund of his paid amount and acknowledged the same, effectively nullifying his claims for further compensation. Observations by the District Commission: After thorough examination of the evidence and hearings from both parties, the District Commission ruled in favour of the complainant. It concluded that the chit fund company had engaged in unfair trade practices by operating chits that were not registered, constituting a deficiency in the services provided. Consequently, the chit fund company was directed to pay an interest at a rate of 12% per annum on the refunded amount of Rs.1,02,500/- for the period spanning from June 2021 to July 2022. The District Commission further ordered the chit fund company to compensate the complainant with an amount of 10,000 rupees for the financial losses he had incurred due to the company's actions. Additionally, an amount of 2,000 rupees was directed to be paid towards covering the expenses associated with the complaint. In addition to compensation, the District Commission imposed punitive damages of 10,000 rupees to be transferred to the Consumer Legal Aid Account. Case: G. Thimma Reddy vs Sai Veda Chit Fund Pvt. Ltd. Case No.: C.C. No.581 of 2022 Advocate for the Appellant: K. Vijayender Reddy Advocate for the Respondent: V. Srinivasa Rao Click Here To Read/Download Order

Unregistered Chit Funds Amount To Unfair Trade Practice, Hyderabad Commission Orders Sai Veda Chit Fund Company To Refund Rs. 1 Lakh, 10k Compensation And 20k Costs

Smita Singh

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