It was lastly contended that the transaction was between the co-operative credit societies and the complainant members. As such, the members of the managing committee of the co-operative societies cannot be held to be personally liable in their individual capacity. Counsel for the petitioners submitted that a co-operative society, like a company, is a legal person and members of the managing committee of a society, like the directors of a company, are not personally responsible for the debts and liabilities of the society. The petitioners who were the members of the managing committees of the different co-operative credit societies, like the directors of a company, were not personally responsible for the debts of the co-operative society. The orders passed by the State Commission regarding the repayment of the deposits by the co- operative societies can be enforced against the respective co- operative societies but in any event, the orders passed by the District Consumer Forum directing the petitioners as members of the managing committee of the co-operative societies to repay the deposits was illegal. Since the decision of House of Lords in Soloman Vs. Soloman & Co. 1897 A.C. 22, the position is well established that the corporation or a company is a separate legal entity and its directors are not liable for the liabilities of the company. However, over the last century, the Courts have invented and applied the doctrine of lifting corporate veil in appropriate
cases. By lifting the corporate veil, in many cases the Courts have passed orders against the directors of the company. When and how the corporate veil is to be lifted is a matter which would be required to be decided on the facts of each case. Needless to say that the doctrine of lifting the corporate veil would be equally applicable in respect of a co-operative society where the members seek a direction or order against the members of the managing committee on the ground of fraud or other well recognised grounds.
Bombay High Court
Mandatai Sambhaji Pawar And Anr vs The State Of Maharashtra And ... on 3 May, 2011
Bench: D.G. Karnik
In this group of writ petitions, the petitioners who are members of the managing committees of the Co-operative Credit Societies, have challenged the jurisdiction of the District Consumer Disputes Redressal Forum under the Consumer Protection Act, 1986 (for short "the Act") to pass orders against them in the complaints filed by the depositors against cooperative credit societies on the following grounds:
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(i) Firstly because such Co-operative Credit Societies do not provide any service as contemplated by
the provisions of the Consumer Protection Act, and even if such activities are treated as services being rendered, such services are not being rendered for remuneration or charge and
therefore, the Co-operative Credit Societies cannot come within the purview of the Consumer
Protection Act.
(ii) Secondly, it is contended that the complainants are members of the Co-operative Credit Societies
and, therefore, the competent forum to entertain
the complaints of members against their
cooperative societies of would be the Co- operative Courts under section 91 of the Maharashtra Co-operative Societies Act and not
the Forum under the Consumer Protection Act.
(iii) Thirdly, it is contended that in any view of the matter, since the transaction was between a Co-
operative Credit Society and the complainant, the
members of the Managing Committees of the Co-
operative Societies cannot be held to be liable in their individual capacity.
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2. On the other hand, Mr. Nargolkar, learned Additional Government Pleader as well as Mr. Ingle, learned counsel appearing for some of the complainants have opposed the writ petitions and submitted that the petitioners have an equally efficacious remedy available to them under the Consumer Protection Act. It is submitted that either the petitioners can go back to the District Consumer Redressal Forum and raise the contentions which are now sought to be raised in these writ petitions or the petitioners can go before the State Commission under section 17(1)(b) of the Consumer Protection Act.
3. Though in some of the petitions, the petitioners have challenged the validity of the Act and in particular the proviso to section 15, which provides that no appeal shall be entertained by the State Commission unless the appellant has deposited in the prescribed manner 50% of the amount awarded or Rs.25,000/- whichever is less, the point was not urged before us, and in our view rightly so, in view of the decision of the Supreme Court in the case of Shyam Kishore and Others Vs. Municipal Corporation of Delhi and Anr, (1993) 1 SCC 22. Therein, the Supreme Court was inter alia considering the validity of section 170 of the Delhi Municipal Corporation Act which provides that no appeal against an assessment of any tax shall be heard or determined unless the amount, if any, in dispute in the appeal has been deposited by the appellant in the office of Corporation. The challenge to the provision on the ground that it was harsh and violative of Article 14 of the Constitution of India was repelled by the Supreme Court 5 WP 117/11
holding that the appellate authority may admit the appeal and grant adjournment in appropriate cases to enable the appellant to deposit taxes but cannot commence the hearing without pre-deposit of the tax. So interpreted, the provision would not be harsh and violative of Article 14. In Dinkar Bapuso Patil & ors. Vs. The State of Maharashtra & ors. (Writ Petition No.5881 of 2010), following the above mentioned decision of the Supreme Court, a Division Bench of this Court has repelled the challenge to the constitutional validity of the second proviso to section 15 of the Act. Consequently, the issue does not survive and was not rightly urged before us.
4. The first contention of the petitioners is that the co-operative credit societies take deposits only from the members and grant loans only to the members and in doing so, no service is provided by the Society to the depositors. In the absence of any "service" the District Consumer Forum did not have any jurisdiction to entertain and try the complaints filed by the depositors - members for non- payment of the deposits on maturity. In our view, the contention has no merit for the reasons indicated below.
5. The petitioners in the present case are divided into two classes. The first class consists of the petitioners who are the members of the managing committee and against whom disputes were filed along with the co-operative credit societies in the District Consumer Forum and the orders for repayment of deposits have been passed against the societies as well as the petitioners. The second class of petitions consists of the petitioners against whom the similar disputes have been filed along with co-operative credit 6 WP 117/11
societies but the disputes are not yet adjudicated upon and are pending in various District Consumer Forums. In the petitions falling under first category, the petitioners could have filed an appeal within 30 days of the decision to the State Commission. They however have chosen not to file an appeal and have approached this court for quashing the orders of the District Consumer Forum only after the orders of the District Consumer Forum were sought to be executed against them. In our view the objection to the jurisdiction of a District Consumer Forum to entertain and try the dispute could have been and ought to have been raised before the District Consumer Forum itself. In some cases it was not done. However, in some of the cases the objection to its jurisdiction was raised but was negatived by the District Consumer Forum. If the objection was negatived, appropriate remedy for the petitioners was to challenge the order of the District Consumer Forum before the State Commission. Counsel for the petitioners contended that since the decisions of the District Consumer Forum are without jurisdiction they are nullity and can be challenged at any time before any forum including in a petition under Article 227 of the Constitution of India. Assuming that a petition under Article 227 is maintainable, we would proceed to examine the contention of lack of jurisdiction in District Consumer Forum.
6. Reliance was placed upon the definition of a "complaint" under section 2(c) and the definition of a "service" under section 2(o) of the Act and it was contended that since by accepting deposits, no service was rendered to the depositor. District Consumer Forum lacked inherent jurisdiction to entertain the 7 WP 117/11
complaint under the Act. Whether in a given case, the co-operative credit society renders any service to the depositor is a question of fact. In our view, that question of fact can be and is required to be adjudicated upon by the District Consumer Forum. Every Court or Tribunal before whom a contention is raised that it lacks jurisdiction on account of an existence or non existence of a jurisdictional fact would be required to adjudicate upon the question of the existence or non existence of the fact on which its jurisdiction depends. For example, in a suit by an owner of the property for eviction of an occupier of immovable property on the ground that he is a trespasser, an objection to the jurisdiction of an ordinary civil court is raised by the occupant alleging that he is not a trespasser but is a tenant and therefore, not the Civil Court but the Rent Court constituted under the Rent Control Act only would have the jurisdiction, the Civil Court before whom the suit is pending would have to adjudicate upon whether there exists a relationship of a landlord or tenant. If it comes to the conclusion that the relationship of landlord and tenant exists, then it would stay its hands and would not proceed further with the adjudication. On the other hand, if it comes to the conclusion that there is no relationship of a landlord or tenant then it may proceed further consider the other defences, if any, of the occupier defendant and then pass or refuse a decree for eviction. We are fortified in this view by the decision of the Supreme Court in Natraj Studios Vs. Navrang Studios, 1981(1) SCC 523, wherein the Supreme Court has observed:
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"18. ................. Exclusive jurisdiction to entertain and try certain suits, to decide certain applications or to deal with certain claims or questions does not necessarily mean exclusive jurisdiction to decide jurisdictional facts also. Jurisdictional facts have necessarily to be decided by the court where the jurisdictional question falls to be decided, and the question may fall for decision before the court of exclusive jurisdiction or before the Court of ordinary jurisdiction. A person claiming to be a landlord may sue his alleged tenant for possession of a building on grounds specified in the Rent Act. Such a suit will have to be brought in the Court of Small Causes, which has been made the Court of exclusive jurisdiction. In such a suit, the defendant may deny the tenancy but the denial by
the defendant will not oust the jurisdiction of Court of Small Causes. If ultimately the court finds that the defendant is not a tenant the suit will fail for that reason. If the suit is instituted in the ordinary Civil Court instead of the Court of Small Causes the plaint will have to be returned irrespective of the plea of the defendant. Conversely a person claiming to be the owner of a building and alleging the defendant to be a trespasser will have to institute the suit, on the plaint allegations, in the ordinary Civil Court only. In such a suit the defendant may raise the plea that he is a tenant and not a trespasser. The defendant's plea will not straight away oust the jurisdiction of the ordinary Civil Court but if ultimately the plea of the defendant is accepted the suit must fail on that ground. So the question whether there is relationship of landlord and tenant between the parties or such other jurisdictional questions may have to be determined by the court
where it falls for determination - be it the Court of Small Causes or the ordinary Civil Court. If the jurisdictional question is decided in favour of the Court of exclusive jurisdiction the suit or proceeding before the ordinary Civil Court must cease to the extent its jurisdiction is ousted."
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Consequently, there is no merit in the contention that the District Consumer Forums lacked inherent jurisdiction to entertain and try the complaint. On facts, the District Consumer Forums have held and could have held there existed some service to the depositors and hence they had the jurisdiction to entertain the dispute. The decisions cannot be held to be null and void as being without jurisdiction.
7. At this stage, we may also refer to the contention, that is often raised, that the issue of maintainability/jurisdiction ought to be decided by the District Consumer Forum as a preliminary issue. In Ramesh Chandra Sankla and ors Vs. Vikram Cement and others, (2008) 14 SCC 58, the Supreme Court, while considering the contention by a company (employer) that the courts below committed an error in not deciding the issue as to the maintainability of the claim petition as a preliminary issue on the ground that relationship of master and servant had come to an end and therefore, it was not open for the employee to invoke the provisions of the Act, held that courts committed no error of jurisdiction in not deciding an issue as to the maintainability as a preliminary issue. In our view, it was open to the District Consumer Forum to decide the issue regarding its jurisdiction (on the ground that there was no service) at the time of final decision because often the preliminary issue requires evidence to be adduced and more often than not is raised only to delay the final decision. If the issue regarding maintainability of the complaint is wrongly decided or undecided, it is always open to the petitioners to challenge the 10 WP 117/11
decision before the State Commission. In respect of second category of petitions where the disputes are pending before the District Consumer Forums also it would not be necessary for the District Consumer Forum to decide the issue as to the maintainability of the complaint and/or jurisdiction as a preliminary issue but decide it at the time of final adjudication and it would be open to the petitioners to challenge the decision before the State Commission.
8. Reference must also be made to a recent unreported decision of the Supreme Court in M/s.Advance Scientific Equipment Ltd. & Anr Vs. West Bengal Pharma & Photochemeical Dev&An, (Appeal (Civil) Nos.17068 - 17069/2010 decided on 9 July 2010). In that case, the petitioners before the Supreme Court had supplied certain equipment to the respondent. The respondent alleged that the equipment did not work properly and filed an application under section 17 of the Act. The petitioners filed a reply but thereafter did not appear before the State Commission. The State Commission directed rectification of the defects and also ordered providing of a bank guarantee equivalent to the total cost of the equipment. The petitioners did not challenge the order before the National Commission but raised an objection to the maintainability when an execution petition was filed by the respondent. The State Commission overruled the objection. The petitioners challenged the order of the State Commission by filing a petition under Article 227 of the Constitution of India. The High Court initially passed an interim order but ultimately dismissed the petition with an observation that the petitioners' contention on the issue of maintainability of the complaint was untenable and the only remedy 11 WP 117/11
available to it was to file an appeal under section 23 of the Act. Thereafter, the petitioners approached the National Commission along with an application for condonation of delay. The National Commission refused to condone the delay and dismissed the appeal. Against that decision, the petitioners filed a Special Leave Petition in the Supreme Court. While dismissing the petition, the Supreme Court observed:-
"We are further of the view that the petitioners' venture of filing petition under Article 227 of the Constitution was clearly an abuse of the process of the Court and the High Court ought not to have
entertained the petition even for a single day because an effective alternative remedy was available to the petitioner under Section 23 of the Act and the orders passed by the State Commission did not suffer from lack of jurisdiction".
The present petitions consequently are misconceived and are liable to be dismissed.
9. The second contention of the petitioners is that section 91 of the Maharashtra Co-operative Societies Act confers an exclusive jurisdiction on the co-operative court to decide all issues between the society and its members touching the business of the society. It is contended that the co-operative credit societies accept deposits only from the members and all complainants before the District 12 WP 117/11
Consumer Forum were the members of the respective societies. The disputes raised before the District Consumer Forum were thus a disputes between the member and the co-operative credit society touching the business of the society and therefore, the Co-operative Court had an exclusive jurisdiction to decide the issue and jurisdiction of the District Consumer Forum was excluded by necessary implications. Firstly, the Maharashtra Co-operative Societies Act is a general law governing all co-operative societies in the State. Section 91 of the Maharashtra Co-operative Societies Act is a general provision regarding adjudication of any dispute between a co-operative society and its members. Consumer Protection Act is a special enactment which relates only to a specific classes of disputes concerning an unfair trade practice, defects in the goods or defect in a service (see section 2(c) of the Act). Only those disputes which can be a matter of the complaint under section 2(c) of the Act can go to the District Consumer Forum. When a special provision is made for adjudication of specific class of disputes, the provision would ordinarily override the general provision regarding adjudication of disputes contained in a general law like in section 91 of the Maharashtra Co-operative Societies Act. We however, need not express any final opinion as to the exclusion of jurisdiction of a co-operative court in respect of consumer disputes between a co- operative society and its members as it is not necessary for us to do so in this case in view of the decision of the Supreme Court in Secretary, Thirumurugan Co-operative Agricultural Society vs. M. Lalitha, 2004(1) SCC 305. Therein, the respondents before the Supreme Court being the members of the appellant society had pledged paddy bags for obtaining loans. The appellant society 13 WP 117/11
issued notices to the respondents demanding payment of loan with interest. The respondents filed petition in District Consumer Forum seeking direction to the appellant to release the paddy bags pledged on receipt of the loan amount. The appellant contested the claims of the respondents before the District Consumer Forum raising preliminary objection that the District Consumer Forum had no jurisdiction to decide the dispute between the co-operative society and the claimants who were its members in view of section 90 of the Tamil Nadu Co-operative Societies Act (which is pari materia with section 91 of the Maharashtra Co-operative Societies Act). District Consumer Forum rejected the contention of the appellant that it had no jurisdiction and allowed the complaint. On appeal, the State Commission allowed the appeal holding that in view of section 90 of the Tamil Nadu Co-operative Societies Act, District Consumer Forum had no jurisdiction to entertain the complaint. On further appeal, the National Commission reversed the decision of the State Commission. Upholding the decision of the National Commission, the Supreme Court held that having regard to the scheme of the Tamilnadu Act and the object sought to be achieved to protect the interest of the consumers better, provisions were to be interpreted broadly, positively and purposefully and in the context together meaning to the additional/extended jurisdiction (in the Consumer Forums), particularly when section 3 of the Act seeks to provide remedy in addition to the other remedies provided under other Acts. In our view, in the light of the decision of the Supreme Court in the case of Secretary, Thirumurugan (supra) it must be held that a remedy under Consumer Protection Act is a remedy in addition to the remedy provided under section 91 of the Co-operative Societies 14 WP 117/11
Act and the jurisdiction of the District Consumer Forum and other authorities under the Consumer Protection Act is not excluded expressly or by necessary implication by section 91 of the Maharashtra Co-operative Societies Act.
10. It was lastly contended that the transaction was between the co-operative credit societies and the complainant members. As such, the members of the managing committee of the co-operative societies cannot be held to be personally liable in their individual capacity. Counsel for the petitioners submitted that a co-operative society, like a company, is a legal person and members of the managing committee of a society, like the directors of a company, are not personally responsible for the debts and liabilities of the society. The petitioners who were the members of the managing committees of the different co-operative credit societies, like the directors of a company, were not personally responsible for the debts of the co-operative society. The orders passed by the State Commission regarding the repayment of the deposits by the co- operative societies can be enforced against the respective co- operative societies but in any event, the orders passed by the District Consumer Forum directing the petitioners as members of the managing committee of the co-operative societies to repay the deposits was illegal. Since the decision of House of Lords in Soloman Vs. Soloman & Co. 1897 A.C. 22, the position is well established that the corporation or a company is a separate legal entity and its directors are not liable for the liabilities of the company. However, over the last century, the Courts have invented and applied the doctrine of lifting corporate veil in appropriate 15 WP 117/11
cases. By lifting the corporate veil, in many cases the Courts have passed orders against the directors of the company. When and how the corporate veil is to be lifted is a matter which would be required to be decided on the facts of each case. Needless to say that the doctrine of lifting the corporate veil would be equally applicable in respect of a co-operative society where the members seek a direction or order against the members of the managing committee on the ground of fraud or other well recognised grounds. The issue raised in the present petition, in the absence of all material facts before us cannot be decided in a petition under Article 227 of the Constitution of India. We therefore do not intend to go into the merits of the contention no.3 raised in all the petitions.
11. For these reasons, having heard the learned counsel for the parties, we do not find any merit in contention nos.1 and 2. As far as contention no.3 is concerned, in our view, the petitioners have an equally efficacious alternative remedy available to them either by raising such contention before the District Consumer Redressal Forum or by approaching the State Commission under section 17(1) (b) of the Consumer Protection Act, 1986 and hence, we do not consider these to be fit cases for exercise of our extraordinary writ jurisdiction under Article 226 or 227 of the Constitution of India.
12. Accordingly, we dismiss these writ petitions with a clarification that we have not gone into the merits of contention no. 3 raised in all these petitions.
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In order to enable the petitioners to avail of such equally efficacious alternate remedy, we continue the ad-interim relief granted earlier for a period of eight weeks from today.
(CHIEF JUSTICE)
(D.G.KARNIK, J)
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