Consumer Commissions Can't Decide Complaints Involving Highly Disputed Facts, Criminal Or Tortious Acts: Supreme Court

Consumer courts cannot decide complaints involving highly disputed questions of facts or the cases involving tortious acts or criminality like fraud or cheating, the Supreme Court reiterated recently. It said that the concept of “deficiency in service” under the Consumer Protection Act, 1986 must be distinguished from the criminal or tortious acts.

“The proceedings before the Commission being summary in nature, the complaints involving highly disputed questions of facts or the cases involving tortious acts or criminality like fraud or cheating, could not be decided by the Forum/Commission under the said Act. The “deficiency in service”, as well settled, has to be distinguished from the criminal acts or tortious acts. There could not be any presumption with regard to the wilful fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance in service, as contemplated in Section 2(1)(g) of the Act. The burden of proving the deficiency in service would always be upon the person alleging it”, a Bench of Justices Ajay Rastogi and Bela Trivedi explained.

The Court was deciding an appeal filed by the City Union Bank against the orders of the consumer commissions.

In the case, three drafts were issued by an NRI from Malaysia for the purchase of three flats. Out of three, one draft was for the sum of Rs. 5 lakhs and two drafts were for Rs. 3 lakhs and Rs. 6 lakhs. The latter set were issued in the name of “D-Cube Construction” and not in the name of “D-Cube Constructions (P) Ltd. The account, “D-Cube Construction” was opened by one, R Thulasiram when he was one of the Directors of “D-Cube Constructions (P) Ltd. The appellant Bank had received a letter from the “D-Cube Constructions (P) Ltd.” giving “no objection” for opening the current account in the name of “D-Cube Construction”.

As certain disputes going on between the Directors of the said company, the disputed two drafts in question which were in the name of “D-Cube Construction”, were credited in the account of “D-Cube Construction. Even after the Respondent complainant sought information, the appellant Bank did not furnish it.

Subsequently, the Respondent came to know through Indian Overseas Bank that the demand drafts were presented through the second appellant bank for clearing and it was paid to the City Union Bank, Ram Nagar Branch. The Respondent once again requested the appellant Bank informing it that the amount of the said two drafts were credited in some other accounts and therefore, it had to be re-credited in his current account. It was only then that the Respondent found out about the two different accounts. Alleging collusion and negligence on the appellant’s part, he filed the complaint before the State Commission.

Allowing the complaint with costs on the ground of “deficiency in service”, the State Commission directed the appellants to pay the Respondent Rs. 8 lakhs along with compensation of Rs. one lakh towards mental agony, loss and hardship. Aggrieved, the appellants preferred an appeal before the National Forum which was dismissed. The matter then reached the Supreme Court.

The counsel for the respondent-complainant submitted that when the two forums have consistently held the appellants liable for the deficiency in service, the Court shouldn’t interfere with it. Also, he submitted that the bank would be vicariously liable for the acts of its employees. It could not be said that there was any wilful default or imperfection or short coming so as to term it as the deficiency in service on the part of the appellant-bank within the meaning of Section 2(g) of the said Act.

The Bench viewed that even if the allegations in the complaint are taken on their face value, it clearly shows that there was “no wilful fault, imperfection, shortcoming or inadequacy” in the discharge of the duty on the part of the appellant bank’s employees, which could be termed as “deficiency in service” under Section 2(1)(g) of the said Act.

“As emerging from the record, some disputes were going on amongst the Directors of the Company and one of the Directors, if allegedly had committed fraud or cheating, the employees of the bank could not be held liable, if they had acted bona fide and followed the due procedure”, the Court said.

According to the Court, the respondent-complainant miserably failed to discharge his burden to prove that there was a deficiency in service on the part of the Bank’s employees of the appellants-bank under Section 2(1)(g) of the Act. The Court proceeded to set aside the two orders passed by the Consumer courts.

Case Title:The Chairman & Managing Director, City Union Bank Ltd. & Anr. Versus R. Chandramohan | Civil Appeal No. 7289 Of 2009

Citation : 2023 LiveLaw (SC) 251

Consumer Protection Act 1986- The proceedings before the Commission being summary in nature, the complaints involving highly disputed questions of facts or the cases involving tortious acts or criminality like fraud or cheating, could not be decided by the Forum/Commission under the said Act. The “deficiency in service”, as well settled, has to be distinguished from the criminal acts or tortious acts. There could not be any presumption with regard to the wilful fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance in service, as contemplated in Section 2(1)(g) of the Act. The burden of proving the deficiency in service would always be upon the person alleging it - Para 12

Click Here To Read/Download Judgment