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Consumer Unity & Tru... v. Chairman & Managing ...
Factual and Procedural Background
The appeal challenged a judgment of the National Consumer Disputes Redressal Commission, New Delhi. The dispute arose when a banking company was unable to provide services to its customers for 54 days because its employees staged an illegal strike over a transfer scheme. During the strike, employees formed a human barricade, mutilated and defaced cheque signatures, and, with the collusion of Reserve Bank of India employees, effectively prevented the bank from offering even skeleton services. A consumer association filed a complaint seeking compensation for customers under the Consumer Protection Act, 1986 (“the Act”). The Commission rejected the claim, prompting the present appeal to the Supreme Court.
Legal Issues Presented
- Whether the bank, as a provider of “service” under Section 2(o) of the Consumer Protection Act, 1986, is liable to compensate customers for loss of service caused by an illegal strike of its employees.
- Whether the resultant non-functioning of the bank constitutes “deficiency in service” within the meaning of Section 2(g) of the Act.
- Whether compensation can be awarded under Section 14(1)(d) of the Act absent any negligence by the bank itself.
Arguments of the Parties
Appellant’s Arguments
- The 54-day strike deprived customers of banking facilities, amounting to deficiency in service.
- Accordingly, the bank should reimburse or pay:
- Interest on overdraft accounts at lending rates for the inoperative period.
- Difference between lending rate and savings interest actually credited.
- Interest at lending rate on negotiable instruments kept in suspense.
- Reimbursement of interest incurred by customers who had to borrow elsewhere.
- Wharfage, demurrage and similar costs on consignments affected by the strike.
- Consequential damages, including mental and physical anguish.
- Any other losses ascertained through an independent assessment.
No specific counter-arguments of the respondent bank were recorded in the provided opinion.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Court acknowledged that banking falls within “service” under Section 2(o) of the Act but emphasised that compensation requires proof of “deficiency” under Section 2(g) and “negligence” under Section 14(1)(d).
Key analytical steps:
- Deficiency analysis: A deficiency must stem from a fault, imperfection or inadequacy attributable to the service provider. The bank’s inability to operate was caused exclusively by employees’ illegal strike and obstructive conduct, not by any failure or omission of the bank itself.
- Negligence requirement under Section 14(1)(d): Compensation is payable only when loss or injury results from the negligence of the opposite party. Negligence denotes absence of reasonable care. The Court found no negligence on the bank’s part; it was physically prevented from functioning.
- Causation: Although customers suffered loss, the losses did not “flow from” the bank’s negligence. Therefore, a statutory prerequisite for awarding compensation was missing.
Holding and Implications
Appeal Dismissed. The Supreme Court upheld the Commission’s refusal to award compensation. No order as to costs.
Implications: Customers cannot claim compensation under the Consumer Protection Act for service interruptions caused by factors beyond the service provider’s control where no negligence or contractual breach by the provider is established. The decision turns on statutory interpretation rather than creation of new precedent.
R.M Sahai, J.— The short question that arises for consideration in this appeal directed against judgment of National Consumer Disputes Redressal Commission, New Delhi, is whether a banking company which renders service within meaning of clause (g) of Section 2 of the Consumer Protection Act, 1986 (referred in brief as “the Act”) is liable to compensate its customers for loss of service due to illegal strike by its employees.
2. Reasons for the strike due to enforcement of scheme of transfer by the Bank and its being illegal due to employees resorting to it during pendency of conciliation proceedings before the Commission have not been assailed in this appeal. Even the finding that the Bank was prevented from rendering any skeleton service to its customers due to unruly behaviour of the employees who not only created barricades by forming human wall before the Bank but even mutilated and defaced the signature on cheques issued by the Bank to cater to urgent demands of its customers by colluding with employees of Reserve Bank of India is well-founded and unassailable. But what was argued was that since the customers of the Bank were deprived of the services due to strike for 54 days, the Bank was liable to pay such amounts as,
“(a) Interest on overdrafts accounts to be reimbursed at lending rate during the period the account was not operative.
(b) Reimbursement of interest at the lending rate less actual rate of interest creditable to the saving deposit account holders.
(c) Interest at the lending rate on the negotiable instruments held in suspense during this period to be reimbursed to the customers.
(d) Reimbursement of interest at which the customers may have borrowed money from elsewhere to meet with their exigencies for the period during which they could not lay hands on their own money lying stuck in or due to the Bank.
(e) Reimbursement of wharfage, demurrage and such other costs on consignments, documents of which were lying in the Bank or could not be delivered to the Bank during this period and the related period before and after this strike.
(f) Such consequential damages and losses incurred by the customers resultant of the strike, including compensation for mental and physical anguish and agony caused due to non-availability of the money or against a limit/loan or overdraft facility with the Bank.
(g) Such other losses and claims, which may arise out of the actual claims to be lodged by the customers and/or assessed for the strike period after making ‘thorough assessment through an independent agency’.”
To determine merits of this submission, it is necessary to advert to certain provisions of the Act. A consumer or any registered voluntary consumer association, like the appellant, is entitled to file a complaint, as provided in sub-clause (iii) of clause (c) of sub-section (1) of the Act for deficiency in service. ‘Service’ has been defined in clause (o) of Section 2 of the Act and reads as under:
“ ‘service’ means service of any description which is made available to potential users and includes the provision of facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, board or lodging or both, housing construction, entertainment, amusement or the purveying a news or other information, but does not include the rendering of any service free of charge or under a contract of personal service;”
The expression “any description” widens the ambit of the section and extends it to any service. Therefore, payment of interest on overdrafts, interest at lending rate, wharfage, demurrage etc. claimed by the appellant may be covered in the expression ‘service’. But ‘deficiency’ in service has been defined in clause (g) of Section 2 of the Act as under:
“ ‘deficiency’ means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service;”
Even though the depositors were deprived of the service of the Bank but the deficiency did not arise due to one of the reasons mentioned in clause (g). The shortcoming in the service by the Bank did not arise due to failure on the part of the Bank in performing its duty or discharging its obligations as required by law. Since the depositors were prevented to avail of the services of the Bank not because of any deficiency on the part of the Bank but due to strike resorted to by the employees who almost physically prevented the Bank from functioning, the failure of the Bank to render service could not be held to give rise to claim for recovery of any amount under the Act. Further, the power and jurisdiction of the Commission is to award compensation under Section 14(1)(d) of the Act as it has been made applicable to the Commission by sub-rule (b) of Rule 19 of the Rules framed under the Act. Clause (d) of sub-section (1) of Section 14 is extracted below:
“to pay such amount as may be awarded by it as compensation to the consumer for any loss or injury suffered by the consumer due to the negligence of the opposite party.”
Each of these expressions used in the sub-section are of wide connotation and are fully comprehended both in common and legal sense. Negligence is absence of reasonable or prudent care which a reasonable person is expected to observe in a given set of circumstances. But the negligence for which a consumer can claim to be compensated under this sub-section must cause some loss or injury to him. Loss is a generic term. It signifies some detriment or deprivation or damage. Injury too means any damages or wrong. It means “invasion of any legally protected interest of another”. Thus the provisions of Section 14(1)(d) are attracted if the person from whom damages are claimed is found to have acted negligently and such negligence must result in some loss to the person claiming damages. In other words, loss or injury, if any, must flow from negligence. Mere loss or injury without negligence is not contemplated by this section. The Bank has not been found to be negligent in discharge of its duties. Therefore, even if any loss or damage was caused to any depositor but it was not caused due to negligence of Bank then no claim of damages under the Act was maintainable.
3. For these reasons, the appeal fails and is dismissed. But there shall be no order as to costs.
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