Commercial Transactions Outside Purview Of Consumer Protection Act 1986: Supreme Court

The Supreme Court held that complaints seeking recovery of the investment from which the complainant is deriving benefit in the form of interest cannot be entertained under the Consumer Protection Act of 1986.

“It was a commercial transaction (investment) and therefore also would be outside the purview of the 1986 Act. Commercial disputes cannot be decided in summary proceeding under the 1986 Act but the appropriate remedy for recovery of the said amount, if any, admissible to the complainant respondent No.1, would be before the Civil Court. The complaint was thus not maintainable.”, the Bench comprising Justices Vikram Nath and Satish Chandra Sharma said.

The aforesaid observation in the Judgment authored by Justice Vikram Nath while deciding the civil appeal preferred by the appellants (Legal heirs of the partner of the firm) against the decision of the National Consumer Dispute Redressal Commission (NCDRC).

The case relates to the alleged non-payment of the respondent no.1 investment amount by the appellant(s). The respondent had invested Rs. 5 lakhs in the partnership firm, wherein the appellant's husband was a partner to be repayable after 120 months with interest @ 18% per annum. Respondent No. 1 sought the premature release of the invested amount but was asked to wait till the maturity period. However, when the amount was not returned even after the end of the maturity period, he filed a consumer complaint claiming the said amount.

Forums at various levels allowed the respondent No. 1 complaint, following which the appellant approached the Supreme Court.

Arguments

Before the Supreme Court, it was contended by the appellants that the transaction to invest in the partnership firm was commercial, therefore the consumer complaint seeking recovery of the investment made by respondent no. 1. wouldn't be maintainable under the 1986 Act.

The appellants also contended that the complainant could not seek the recovery of the investment because when the investment was made by respondent no.1, he was the partner of the firm.

On the contrary, it was contended by respondent no.1 that the refusal of the appellants to return the investment amounted to a deficiency of service and therefore, the complaint was maintainable. It was also the case of respondent No.1 that the appellants herein inherited the estate of the Managing Partner Basavaraj Uppin, and hence cannot escape the liability of making the payment due to respondent No.1.

Supreme Court's Observation

Finding force in the appellant's contentions, the court held that the complaint seeking recovery of the investment wouldn't be maintainable under the old act.

The court noted that respondent no.1 wouldn't benefit from the complaint as he was the partner of the partnership firm during the period of the investment made by him.

“In our considered opinion, once there was a registered partnership deed dated 27.05.1996, there is no further document placed on record by the complainant-respondent No.1 regarding the dissolution of the said registered deed which continued till the time when the investment was made by the complainant respondent No.1 on 21.05.2002 and hence the complainant respondent No.1 would be deemed to be partner of the firm.”, the court observed.

Deceased Partner Liability Do Not Passes Upon Its Legal Heirs

Also, the court rejected respondent no.1/complainant argument that being the legal heirs of the Managing Partner of the firm, the appellants cannot escape from the liability owed by the Managing Partner. The court stated the legal heirs of a deceased partner do not become liable for any liability of the firm upon the death of the partner.

“there was no evidence on record to show that a fresh partnership deed was executed reconstituting the firm in which the present appellants had become partners so as to take upon themselves the assets and liabilities of the firm. The law is well settled that legal heirs of a deceased partner do not become liable for any liability of the firm upon the death of the partner.”, the court observed.

Based on the above premise, the appeal was allowed, and the complaint preferred by the complainant/respondent No. 1 was set aside.

Counsel For Petitioner(s) Mr. C.B.Gururaj, Adv. Mr. Prakash Ranjan Nayak, AOR Mr. Animesh Dubey, Adv. Mr. Debendra Ghosal, Adv.

Counsel For Respondent(s) Mr. Chinmay Deshpande, Adv. Mr. Anirudh Sanganeria, AOR

Case Title: ANNAPURNA B. UPPIN & ORS. VERSUS MALSIDDAPPA & ANR.

Citation : 2024 LiveLaw (SC) 284

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