State Consumer Disputes Redressal Commission
Sri M.Ashok Kumar vs Smt.K.Shobha on 7 December, 2023
1
BEFORE THE STATE CONSUMER DISPUTES REDRESSAL
COMMISSION OF TELANGANA AT HYDERABAD
RP.NO. 26 OF 2022
AGAINST THE ORDERS IN
IA.NO.173 OF 2021
IN
EA.NO.31 OF 2016
IN
CC.NO.858 OF 2009,
DISTRICT CONSUMER COMMISSION-II, HYDERABAD.
Between:
M.Ashok Kumark S/o.Thimmaiah Gupta,
Aged 50 years, Occ: Business,
1-6-40/3, Station Road,
Mahaboobnagar - 509001.
M/s.Prestige Avenue Ltd.,
Rep. by its Director Mr.M.Ashok Kumar (wrongly mentioned)
Rep. by its Managing Director (correct one) is
Registered office at 4th Floor,
H.No.3-6-262, Thirumala Estates,
Himayatnagar, Hyderabad - 500 029.
...Revision Petitioner/Opposite Party No.1
And :
1.Smt.K.Shobha, W/o.K.Krishna Reddy, Aged about 36 years, Occu: NRI, Presently residing at Chicago USA, Permanently residing at H.No.2-3-677/1, Road No.3, Sainagar Colony GSI Post, Nagol Hyderabad Rep. Through her Father Mr.K.Mohan Reddy.
....Respondent/Complainant
2. M.Venkateswara Rao, S/o.Venkataratnam, Managing Director of M/s.Prestige Avenue Ltd., Occ: Business, A-101, Sri Balajiindraprasta, 1-1-508/01, Gandhinagar, Hyderabad - 500080.
...Respondent/Opposite Party No.2
3. J.R.V.Sivarama Krisna S/o.J.R.K.Murty, whole time Director of M/s.Prestige Avenues Ltd., Flat No.303, 1-2-24, Himayatnagar, Hyderabad - 500029.
...Respondent/Opposite Party No.3
4. P.Ravi Kumar, S/o.P.Raja Gopal, Whole time Director of M/s.Prestige Avenues Ltd., B-402, Srinivas Apartments, 1-2-343, Street No.6, Domalguda, Hyderabad - 500029.
...Respondent/Opposite Party No.4 2
5. R.Govinda Reddy, S/o.R.Raghava Reddy, Whole time Director of M/s.Prestige Avenues Ltd., Plot No.61, Siddhardha Colony, Sainikpur, Secunderabad - 500016.
...Respondent/Opposite Party No.5
6. A.Narahari, S/o.Venkanna, Whole time Director of M/s.Prestige Avenues Ltd., B-26, Madhuranagar, Hyderabad - 500038.
...Respondent/Opposite Party No.6
7. Sri M.Thimmaiah Gupta, S/o.M.Seshaiah Gupta, Director of M/s.Prestige Avenues Ltd., 104, Jagannadh Residency, Atchuta Reddy Marg, Street No.6, Vidyanagar, Hyderabad - 500004.
...Respondent/Opposite Party No.7
8. M.Krishna Gupta, S/o.M.S.M.Gupta, Director of M/s.Prestige Avenues Ltd., 98, MLA's Colony Road No.12, Banjara Hills, Hyderabad - 500034.
...Respondent/Opposite Party No.8
9. B.V.Raja, S/o.B.C.Veeranna, Director of M/s.Prestige Avenues Ltd., Raja State Co. 189, Mamapet, Bangalore - 560053.
...Respondent/Opposite Party No.9
10. J.Madhusudhan, S/o.J.Seshachalam, Director of M/s.Prestige Avenues Ltd., 5-210, Bangalore Road, Bellary, Karnataka.
...Respondent/Opposite Party No.10
11. J.Lakshmi Narayana, S/o.J.R.K.Murthy, Director of M/s.Prestige Avenues Ltd., Flat No.506, Venkata Kripa Apartments, 1-2-24, Domalaguda, Hyderabad - 500029.
...Respondent/Opposite Party No.11
12. P.Chandrashekar, S/o.P.Srinivasulu, Whole time Director of M/s.Prestige Avenues Ltd., 15/122, R.J.Street, Guntakal - 515801.
...Respondent/Opposite Party No.12 (Respondents 2 to 12 are not necessary parties in this appeal) 3 Counsel for Revision Petitioner/Opp. Party 1: M/s.M.Hari Babu Mr.P.Lakshman Goud Counsel for Respondent/Complainant: Sri A. Naveen Kumar - R1 QUORUM:
HON'BLE SMT. MEENA RAMANATHAN, IN-CHARGE PRESIDENT & HON'BLE SRI K. RANGA RAO, MEMBER-JUDICIAL THURSDAY, THE SEVENTH DAY OF DECEMBER TWO THOUSAND TWENTY THREE ****** Order: (Per Hon'ble Smt.Meena Ramanathan, I/c President)
1. This Revision Petition is filed by the Petitioner/Opposite Party No.1, under Section 47(1) (b) of Consumer Protection Act, 2019, praying this Commission to set aside the impugned order dated 18.04.2022 in IA.No.173 of 2021 in EA.No.31 of 2016 in CC.No.858 of 2009 on the file of District Consumer Forum/Commission-II, Hyderabad, consequently to quash the penal proceedings in the said E.A. and pass such further or other orders as this Commission may deem just and proper.
2. The complaint was initially filed vide CC.No.858 of 2009 on the file of District Commission-II, Hyderabad and the learned Forum after hearing both sides and upon perusal of the material on record, partly allowed the complaint directing Opposite Parties No.1 to 12 jointly and severally to:
return Rs.4,25,000/- to the Complainant along with simple interest @ 8% p.a. since two years prior to filing of the complaint on Rs.4,25,000/- till filing of the complaint and subsequent simple interest @ 9% p.a. from the date of filing of the complaint till the date of realization on Rs.4,25,000/-; to pay costs of Rs.5,000/- each to the Complainant; rest of the claim is dismissed. Time for compliance is 30 days from the date of receipt of the order.
3. Aggrieved by the above order, the Appellants/Opposite Parties No.3,4,6 to 8 and 10 to 12 preferred an appeal vide 4 FA.No.330/2017 against CC.No.858/2009. The following order was passed by the State Commission in FA.No.330/2017:
"This Commission directs only Opposite Party No.1 & 2 to reimburse the amount as has been awarded by the District Forum. The liability on the other Directors is expunged as they are no longer part of the company and their liability does not continue in view of their resignation/retirement."
4. The Complainant filed EA.No.31 of 2016 in CC.No.858/2009 against the Respondents/Opposite Parties based on the order passed in CC.No.858/2009 against all the Respondents/Opposite Parties dated 12.05.2016. The docket order was passed in EA.No.31/2016 in CC.No.858/2009 on 24.08.2021 and reads as follows:
"Father of the Petitioner present. Respondents not reported any improvement and negotiations done. The Petitioner's father reports that the Respondents are not even talk with them. Simply dragging the matter under pretext of reporting settlement. Hence, issue NBWs against the Respondents No.1 & 2. Call on 24.09.2021."
Against this order, the Appellant/Opposite Party/Mr.Ashok Kumar preferred an appeal vide FA.No.502/2021 and this Commission passed the following direction:
"In the result, the appeal is allowed and the order is set aside. Both the parties are directed to appear before the District Forum on the date when the matter is listed. The arrest warrant, if issued, shall stand recalled forthwith even without insisting for the presence of the warrantee. The appeal is disposed of accordingly. It is needless to say that it is open to the District Forum to consider the matter in all aspects and dispose of the same in accordance with law."
The above order was passed on 05.10.2021.
55. The Petitioner/Opposite Party No.1 preferred IA.No.173/2021 in EA.No.31/2016 in CC.No.858/2009 with a prayer to relieve/discharge the Petitioner from the criminal proceedings in EA.No.31/2016 in CC.No.858/2009. The District Commission discharged the application with an observation that the original order in CC.No.858/2009 became final against the Petitioner/Respondent No.1/Opposite Party No.1.
6. The present Revision Petition is preferred by the Revision Petitioner/Opposite Party No.1 against the order dated 18.04.2022 in IA.No.173/2021 in EA.No.31/2016 in CC.No.858/2009.
7. The following grounds are urged by the Revision Petitioner in this petition:
The District Commission failed to consider the E.A. with wrong cause title and prosecution, even after knowing about the order in FA.No.330/2017 of this Commission, wherein it is clearly held that the Company and its Managing Director alone are liable but no other directors of the Company. The District Commission received the complaint and penalty proceedings without considering the fact that the Appellant resigned long back i.e., prior to filing of the complaint itself, but the Forum erroneously held that he was the director of the Company as on the date of complaint, as such penal proceedings itself is not sustainable and liable to be quashed.
The District Commission failed to consider the orders in FA.No.330 of 2017 wherein it is clearly held that the directors are not liable except the Company and its Managing Director.
8. At the outset, it is necessary to point out that the order passed in FA.No.330/2017 attained finality and the Complainant ought to have filed the execution proceedings based on the order dated 09.04.2021 in FA.No.330/2017 against CC.No.858/2009.
69. This order was not challenged by the Complainant, as such the same attained finality and the EA proceedings should have been filed according to the implicit directions given by this Commission vide its order dated 09.04.2021 in FA.No.330/2017 in CC.No.858/2009.
10. The letter and spirit of the order expresses that the Complainant is no doubt entitled to the relief as awarded to him by the District Commission in their order dated 12.05.2016 in CC.No.858/2009 but he/she can only proceed against Opposite Party No.1 and 2 in the main complaint, viz., the Company and its present Managing Director. The order also expressly discussed the legal proposition that the corporate veil cannot be unveiled insofar as the matters of the Company are concerned.
11. Directors may come and go but the liability, if any, will be on the Company and the Company is represented by its Managing Director. This aspect unfortunately was never understood by the District Commission and they have gravely erred in observing that the original order in CC.No.858/2009 became final.
12. The Revision Petitioner has submitted the true extract of the certified copy issued under provision 1 (b) of Section 610 of the Companies Act, 1956, wherein the Revision Petitioner Mr.Ashok Kumar is not associated with the Company with effect from 27.12.2008 due to 'Resignation'. When the Revision Petitioner is obviously not the Managing Director of the Company/Opposite Party No.1, the Complainant ignored the order passed by this Commission and the learned District Commission also ignored the finality of the order as attained in FA.No.330/2017.
13. The liability of a Director after resignation is to be understood by the Commission below. Once the Director has resigned and the Board has accepted his resignation, the Director is not liable for any liabilities that are incurred by the Company after the date of acceptance of the resignation.
714. The Hon'ble Supreme Court in the case of Shiv Kumar Jatia Vs. State of NCT, Delhi passed orders on 23.08.2019 in Crl.Appeal No.1263/2019 to 1267/2019, laid down the tests to determine whether a Director of a Company can be held criminally liable if he/she did not play an active role in a criminal act submitted by the Respondent/Complainant and/or its employees.
There must be:
Necessary evidence to prove the person's role in the act along with criminal intent.
Direct nexus of the criminal intent with the accused.
15. The grounds urged in this Revision Petition are valid and have been considered elaborately in the above discussions. The Respondent/Complainant has to initiate the EA proceedings against Opposite Party No.1 as represented by Opposite Party No.2-the Managing Director presently representing the Company.
16. The past Directors cannot be proceeded against and the order passed in FA.No.330/2017 has to be followed by the Respondent/Complainant and the Commission below.
17. The Revision Petitioner/Opposite Party No.1 relied on the following judgments:
The State Consumer Disputes Redressal Commission, Maharashtra, Mumbai in the case of Mr.Bhavesh Goswami Vs. Harishchandra Narayanrao Arya and another passed orders on 02.02.2016 in First Appeal No.A/16/274 and held that:
"Perused record of the case. On perusal of the same, it has become clear that the Complainants had filed consumer complaint No.62/2013. The same was filed against M/s.Oren Kitchen Appliances Pvt.Ltd. Same was filed through Managing Director, Bhavesh Goswami. It came to be decided on 19.03.2014. On perusal of order passed by the Learned District Forum in consumer complaint No.62/2013, it has become clear that the order was passed against the company, M/s.Oren Kitchen Appliances Pvt.Ltd. It was not passed against the appellant Bhavesh Goswami 8 personally. Complainants have filed execution application for non- compliance of the order passed by the Learned District Forum against M/s.Oren Kitchen Appliances Pvt.Ltd. Hence, it has become clear that execution application has been filed against the company who has not complied the order passed by learned District Forum as he was not director of the company. We are of the opinion that for non-compliance of the order by the company, the directors of the company are responsible. However, it is contention of the appellant that he resigned from the company on 06.05.2013. He has filed documents about the same on record. Hence, it has become clear that on the date of passing of order of conviction, he was not director of the company. Hence, he cannot be held responsible for compliance of the order passed by the Learned District Forum. It cannot be said that he willfully avoided to comply the order passed by the Learned District Forum as he was not director of the company. We are of the opinion that the Complainants were required to bring the present directors of the company on record of the execution application and to proceed against them for non-compliance of the order passed by the Learned District Forum against the company. However, it appears that the Learned District Forum without considering all these facts, had wrongly convicted appellant accused under sec.27 of the Consumer Protection Act, 1986 for willful avoidance of order passed by the Learned District Forum. We are of the opinion that as the appellant accused is not the present director of the company he cannot be held responsible for willful avoidance of the order passed by the Learned District Forum and cannot be convicted under sec.27 of the Consumer Protection Act, 1986. Hence, we are of the opinion that appeal filed by the appellant is to be allowed by setting aside order passed by the Learned District Forum and he be acquitted. The complainants are at liberty to take necessary action against the present directors of the company who are responsible to comply the order passed by the learned District Forum which was against the company. Hence, we proceed to pass the following order:
1) Appeal is hereby allowed.
2) Order passed by the Learned District Forum in Execution Application No.04/2015 is hereby set aside.9
3) Appellant accused is hereby acquitted. Bail bond given by the accused shall stand cancelled. Amount of cash surety deposited by the appellant accused be refunded to him.
4) Complainants are at liberty to file execution proceedings in respect of non-compliance of the order passed by the Learned District Forum in consumer complaint 62/2013 against M/s.Oren Kitchen Appliances Pvt.Ltd. against the present directors of the company.
5) Free certified copy of this order be furnished to the parties forthwith."
18. In Rajiv Thapar and others Vs. Madal Lal Kapoor, (2013) 3 SCC 330, the Apex Court held:
"Hence, in view of the fact the Petitioners were not the Directors of A1 Company on the date of offence, this Court opines that continuation of proceedings against the Petitioners would only be an abuse of process of law and the proceedings are liable to be quashed."
19. In view of the foregoing discussions and the judgments relied upon the Revision Petition is liable to be allowed and the Order passed by the District Commission-II, Hyderabad in IA.No.173/2021 in Execution Application No.31/2016 is liable to be set aside.
20. In the result, the Revision Petition is allowed and the Order passed by the District Commission-II, Hyderabad in IA.No.173/2021 in Execution Application No.31/2016 is set aside. The Complainants are at liberty to file execution proceedings in respect of non-compliance of the order passed by the District Commission-II, Hyderabad in Consumer Complaint No.858/2009 against M/s.Prestige Avenue Limited against the present director/s of the Company.
Sd/- Sd/-
I/C PRESIDENT MEMBER-J
Date: 07.12.2023
*UC