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PRIMUS CHEMICALS LTD. v. IFCI LIMITED & 3 ORS.

National Consumer Disputes Redressal Commission

Jan 20, 2017

Judgment

CaseIQ

Smart Summary (Beta)

Factual and Procedural Background

The appellant, Primus Chemicals Ltd., obtained a term loan of Rs. 400 lakhs from the opposite parties (financial institution). The sanction was granted on 07.07.1994 and the appellant delivered documents to the OPs for mortgage and hypothecation. OP No.4 disbursed only part of the sanctioned amount. In 1999 the OPs revoked the sanction and demanded refund of the partly disbursed amount, which led to DRT proceedings and other litigation between the parties.

During the pendency of those proceedings the parties entered into a settlement and the appellant paid the settlement amount in full on 31.03.2010. Despite full payment, the OPs did not return mortgage, pledge and allied documents of the complainant despite repeated requests. A legal notice was served on 12.01.2015; the documents were still not returned and the appellant filed a consumer complaint (No. 07/2016) before the Madhya Pradesh State Consumer Disputes Redressal Commission.

The State Commission, by order dated 03.09.2016, dismissed the complaint at the admission stage holding (i) the complainant was not a “consumer” and (ii) the complaint was barred by limitation. The appellant challenged that order by filing the present appeal (First Appeal No. 1305 of 2016) before the National Consumer Disputes Redressal Commission. The appeal was heard and decided by Hon'ble Mr. Prem Narain, Presiding Member, with the order dated 20 Jan 2017.

Legal Issues Presented

Whether the complainant (Primus Chemicals Ltd.) is a "consumer" under the Consumer Protection Act, 1986 given that the loan was taken for a commercial/industrial purpose.
Whether the complaint alleging non-return of mortgage/pledge documents is maintainable under the Consumer Protection Act as a deficiency in service.
Whether the complaint is barred by limitation, i.e., when the cause of action is deemed to have arisen and whether the complaint filed on 28.01.2016 was time-barred.

Arguments of the Parties

Appellant's Arguments

The State Commission erred in finally deciding the matter at the admission stage by holding that the complainant was not a 'consumer' and that the complaint was time-barred.
Although the loan was repaid pursuant to the settlement dated 31.03.2010, the grievance before the Forum relates only to the OPs' failure to return the pledged/mortgaged documents — which the appellant characterised as a deficiency in service independent of any commercial purpose.
Reliance was placed on Punjab National Bank vs. M/s. Parveen Dari Industries (2002 NCJ 272) to support the proposition that non-delivery/ non-return of documents after repayment can amount to deficiency in service.
The appellant submitted that whether the transaction was for a commercial purpose is a question of fact and cited Laxmi Engineering Works vs. R.S.G. Industrial Institute (1995) 3 SCC 583 to show that commercial purpose must be decided on facts and cannot be presumed at the admission stage.
The appellant also cited Poonam Chambers "B" Commercial vs. Navin Keswani (2013 CPJ (2) 254) to contend that complaints should not be dismissed at the admission stage on the ground of commercial purpose without examining evidence and hearing the parties.
On limitation, the appellant argued that the cause of action and the running of limitation ought to be determined with reference to communications and demands made after the settlement; reliance was placed on Transport Corporation of India Ltd. vs. Veljan Hydrair Limited (2007 (3) SCC 142) concerning when a cause of action accrues for limitation purposes.

Respondents' / State Commission's Position (as recorded)

The opinion does not contain a detailed account of the Respondents' oral or written arguments. The State Commission's recorded findings (which provided the basis for dismissal) were:

That Primus Chemicals Ltd. is a commercial organisation and the transaction with the OPs (a term loan for establishing an industry) was commercial in nature.
That the cause of action arose on 31.03.2010 when the settlement payment was made but documents were not returned, and therefore the complaint filed on 28.01.2016 was barred by the two-year limitation period.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Punjab National Bank vs. M/s. Parveen Dari Industries (2002 NCJ 272)	Non-delivery or non-return of documents by a bank after payment can constitute a deficiency in service under the Consumer Protection Act.	The appellant relied on this case to argue that failure to return pledged/mortgaged documents after repayment is a deficiency. The National Commission recorded the citation but did not accept that the non-return constituted an independent non-commercial service separable from the loan transaction.
Laxmi Engineering Works vs. R.S.G. Industrial Institute, (1995) 3 SCC 583	Whether a transaction is for a "commercial purpose" is a question of fact; services availed for making profit fall within "commercial purpose" and thus fall outside the definition of "consumer".	The Court relied on this authority to conclude that obtaining a term loan to establish a manufacturing unit is a commercial purpose; consequently the complainant was not a "consumer" under the Act.
Poonam Chambers "B" Commercial vs. Navin Keswani (2013) CPJ (2) 254	At the admission stage, a complaint should not be dismissed on the ground that services were availed for commercial purposes without prima facie examination; respondent may raise such objections in written statement and the forum should decide after hearing evidence.	The appellant cited this to contend that the State Commission should not have dismissed at admission stage. The National Commission noted the authority but, on examining the facts, found that the loan transaction and attendant services (including return of documents) formed part of a commercial service.
Transport Corporation of India Ltd. vs. Veljan Hydrair Limited, (2007) 3 SCC 142	Clarifies the concept of "cause of action" for limitation purposes and that limitation may begin at different points depending on context; limitation may be postponed where parties have asked the other to wait or where communications alter accrual.	The appellant relied on this to argue that limitation should be considered in light of communications and demands. The Commission noted the citation but observed that, since the complainant was held not to be a consumer, the limitation question became immaterial to the maintainability under the Consumer Protection Act, though prima facie the complaint appeared time-barred from 31.03.2010.

Court's Reasoning and Analysis

The National Commission analysed the two primary grounds on which the State Commission dismissed the complaint.

First, on the question whether the complainant was a "consumer", the Court considered the nature and purpose of the loan: the company availed a term loan of Rs. 400 lakhs for manufacturing chemicals, i.e., to establish an industry. The Court applied the principle from Laxmi Engineering Works that services availed for making profit constitute a commercial purpose and therefore fall outside the scope of "consumer". The Court reasoned that the loan transaction comprises four components: sanction, disbursement, repayment and return of documents. It held that return of the documents is not an independent service separable from the loan transaction but is integrally connected to the overall commercial service for which the loan was availed. On that basis the Court concluded that the complainant had availed services for a commercial purpose and therefore was not a "consumer" within the meaning of the Consumer Protection Act, 1986.

Second, on limitation, the Court noted the State Commission's finding that the cause of action arose on 31.03.2010 (the date of settlement and payment when documents were not returned) and that the complaint filed on 28.01.2016 was beyond the two-year limitation period. The appellant argued that limitation ought to be considered with reference to subsequent communications and relied on Transport Corporation of India Ltd. to show that accrual can be context-specific. The Court observed that, while extension of limitation may be possible in exceptional cases, since it had already concluded that the complainant was not a consumer (and thus the complaint under the Consumer Protection Act was not maintainable), it was unnecessary to finally adjudicate the limitation point. Nonetheless, the Court observed prima facie that the complaint appeared to be time-barred.

The Court therefore upheld the State Commission's order for the reasons given: the transaction was commercial in nature and the complaint was, at prima facie view, barred by limitation. The Court found no illegality or material irregularity in the State Commission's reasoning and outcome.

Holding and Implications

Holding: The appeal is dismissed and the order dated 03.09.2016 of the Madhya Pradesh State Consumer Disputes Redressal Commission is upheld.

Implications:

Direct effect on the parties: The consumer complaint filed under the Consumer Protection Act, 1986 is not maintainable because the appellant was held not to be a "consumer" given the commercial purpose of the loan transaction; the appeal to the National Commission is dismissed in limine.
Limitation: The National Commission noted that, prima facie, the complaint appears to be time-barred with cause of action from 31.03.2010, though it did not finally decide the limitation point because of the primary finding on non-consumer status.
Remedy left open: The Court granted liberty to the appellant to approach the appropriate court of law for redressal of his grievance regarding non-return of documents.
Precedential effect: The decision applies the existing authorities cited in the opinion but the National Commission did not purport to lay down any new legal principle beyond applying established jurisprudence; no new binding precedent was announced by this order.

Show all summary ...

NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION

NEW DELHI

FIRST APPEAL NO. 1305 OF 2016

(Against the Order dated 03/09/2016 in Complaint No. 7/2016 of the State Commission Madhya Pradesh)

1. PRIMUS CHEMICALS LTD.

DIRECTOR SANJEEV RAWAT S/O. DR. BHALCHANDRA

JI RAWAT, RESIDENT AT VISHWA GULAB, 28,

DASSERA MAIDAN, UJJAIN

(M.P.)-456010 ...........Appellant(s) Versus

1. IFCI LIMITED & 3 ORS.

THROUGH ITS GENERAL MANAGER, HAVING

ADDRESS AT IFCI TOWER, 61, NEHRU PLACE,

NEW DELHI

2. IFCI LIMITED

THROUGH ASSISTANT, GENERAL MANAGER, SHRI

MOHINDER SHRAMA, HAVING ADDRESS AT IFCI

TOWER, 61, NEHRU PLACE,

NEW DELHI-

3. IFCI LIMITED

THROUGH ASSISTANT GENERAL MANAGER HAVING

ADDRESS AT PARYAVAS BHAWAN, ARERA HILLS,

JAIL ROAD,

BHOPAL ...........Respondent(s)

BEFORE:

HON'BLE MR. PREM NARAIN,PRESIDING MEMBER For the Appellant : Mr. Sanjeev K. Rawat, Advocate For the Respondent :

Dated : 20 Jan 2017

ORDER

1. The present appeal has been filed by the Appellant/complainant, seeking to challenge the order dated 03.09.2016 passed by the Madhya Pradesh State Consumer Disputes Redressal Commission, Bhopal, (in short 'the State Commission') passed in Complaint Case no, 07/2016.

2. The brief facts of the case are that the complainant Company approached O.Ps. for a loan of Rs. 400 Lakhs. The same was sanctioned on 7.7.1994. Accordingly, certain necessary documents pertaining to the complainant Company for mortgage and hypothecation were handed over to the O.Ps by the complainant. However, O.P. No.4 disbursed only a portion of the sanctioned loan. In the year 1999, the O.Ps. revoked the sanction granted and demanded the refund of the partly disbursed loan amount. Consequently, DRT proceedings were initiated against the complainant. The complainant filed cases against the O.Ps. for the irregularities in the execution proceedings. During the pendency of the cases, the complainant and the O.Ps.

entered into an agreement for settlement of all dues on certain terms and conditions. Accordingly, the complainant settled the dispute with the O.Ps. and payment of settlement amount was made on the fixed date 31.3.2010 in accordance with the terms and conditions of the settlement. However, despite the full and final receipt of the settlement amount, the O.Ps. failed to return the mortgage and pledge deeds and all documents relating to the complainant Company despite repeated requests from the Complainant. Consequently, the Complainant served a legal notice dated 12.01.2015 yet the O.Ps. failed to return the relevant documents of the complainant till date.

3. Aggrieved by the act of the O.Ps., the complainant approached the State Commission and filed a consumer complaint No.07/2016. The State Commission vide order dated 03.09.2016 dismissed the complainant at the admission stage as follows:

"5. For the reasons aforesaid, we are of the opinion that the complaint is not maintainable firstly for complainant not being a 'consumer' and secondly it being barred by the period of limitation. It is accordingly dismissed".

4. Aggrieved by the aforesaid order of the State Commission, the Complainant has knocked the doors of this Commission by way of the present appeal.

5. Heard the learned counsel for the appellant and perused the records.

6. The learned counsel for the appellant stated that the State Commission has decided the case finally at the admission stage and has held that the complainant was not a 'consumer' and the complaint was barred by limitation provided under the Consumer Protection Act, 1986. It was stated that the loan taken from financial institution has already been re-paid as per the settlement entered between both the parties on 31.3.2010 and now the question before this Forum was in respect of the deficiency on the part of the OPs since the documents which were deposited under mortgage or hypothecation have not been returned by the OPs. This deficiency has nothing to do with the commercial purpose. The learned counsel referred to the case of

Punjab National Bank vs. M/s. Parveen Dari Industries, 2002 NCJ 272 9(NC) to support his contention that non-delivery of documents after the repayment of loan is a clear deficiency. It has been held that:

"Consumer Protection Act, 1986-Section 2(1)(g) - Deficiency in service- Banking- Release of documents to be negotiated only upon receiving payment by the bank without receiving such payment- Plea of loss of document by postal authorities not tenable - Is deficiency in service.

"Consumer Protection Act, 1986-Section 14(1)(d) - Complaint -Banking -Release of documents to be negotiated only upon receiving payment by the bank without receiving such payment - Amount required to be received Rs.27,690/-, costs Rs.1,000/- and compensation Rs.3,000/- allowed."

7. The learned counsel further emphasized that the State Commission has held only on presumption that the complainant was not a 'consumer'. The learned counsel cited the case

Laxmi Engineering Works vs. R.S.G. Industrial Institute (1995) 3 SCC 583 decided by the Hon'ble Supreme Court and stated that this case has analyzed the commercial purpose in its

various dimensions and finally held that:

"11 (ii). Whether the purpose for which a person has bought goods is a "commercial purpose" within the meaning of the definition of expression "consumer" in Section 2(d) of the Act is always a question of fact to be decided in the facts and circumstances of each case."

8. Further, the learned counsel referred to the case of Poonam Chambers "B" Commercial vs. Navin Keswani, Managing Director, Auplex India Pvt. Ltd. & Anr.,(2013) CPJ (2) 254

to emphasise that the decision of the State Commission to declare the complainant not a consumer at the admission stage without appreciating the evidence on record is not sustainable. The National Commission has observed as under:

"In such circumstances, prima facie, complaint cannot be dismissed at admission stage on this ground that services were availed for commercial purposes. Respondent may raise objection in written statement before the State Commission and State Commission will decide any such objection after hearing both the parties. Consequently, appeal is accepted and impugned order dated 20.4.2011 is set aside and learned State Commission is directed to proceed with the complaint and decide it on merits after taking written statement, evidence, etc., of the parties."

9. Coming to the question of limitation, the learned counsel pointed out that the settlement was reached on 31.3.2010 and since then the complainant was pursuing the OPs to get his documents back. However, when his personal efforts could not bring any result, a legal notice dated 12.1.2015 was given. When the documents were not returned even after legal notice, the complaint was filed. The State Commission has wrongly assumed that there has been substantial delay in filing the complaint from the date of cause of action. The learned counsel referred to the case "Transport Corporation of India Ltd. vs. Veljan Hydrair Limited, 2007

(3) SCC 142 wherein the following has been observed:

"The term "cause of action" is of wide import and has different meanings in different contexts, that is when used in the context of territorial jurisdiction or limitation or the accrual of right to sue. It refers to all circumstances or bundle of facts which if proved or admitted entitles the plaintiff (complainant) to the relief prayed for. In the context of limitation with reference to a contract for carriage of goods, the date of cause of action may refer to the date on which the goods are entrusted, date of issue of consignment note, the date stipulated for delivery, the date of delivery, the date of refusal to deliver, the date of intimation of carrier's request to wait for delivery as the goods are being traced, the date of intimation of loss of goods, or the date of acknowledgement of liability.

In fact in view of the request of the appellant to the respondent to wait till the consignment was traced, the limitation for an action would not start to run until there was a communication from the appellant either informing about the loss or expressing its inability to deliver or refusal to deliver, or until the respondent makes a demand for delivery or payment of value of the consignment after waiting for a reasonable period and there is non-compliance. Therefore, the complaint is not barred under section 24A of

CP Act."

10. I have carefully considered the arguments advanced by the learned counsel for the appellant and have examined the record. The State Commission has dismissed the complaint at the admission stage basically on two grounds. In first ground, the State Commission has held that the complainant is not a 'consumer' and in this respect, following observation of the State Commission is relevant:

"It is apparent that Primes Chemical Ltd. is a commercial organization. The Company had entered into an agreement with the IFCI for term loan of Rs.400/- lacs for a project, the total cost of which had been Rs.1317.981 lacs. From the documents filed by the complainant it is revealed that on occurrence of a dispute between the two parties a settlement was reached between them, under which the complainant proposed to pay Rs.60 lacs towards the dues. As per terms of settlement on 31.3.2010 all the due amount was paid and the documents and shares etc. were asked to be released. In these circumstances, it stands clearly established that the complainant is a commercial organization and the transaction between it and the opposite parties is commercial in nature."

11. From the facts of the case, it is borne out that the complainant company availed the services of the OPs for obtaining loan of Rs.400 lakhs for manufacturing various chemicals. It is clear that loan was taken for establishing the industry and industry is a commercial venture with a motive of profit. As per the interpretation given in Laxmi Engineering Works vs. R.S.G. Industrial Institute (supra), a service availed for making profit will come under the definition of commercial purpose. In this judgment, it has been observed:

"Going by the plain dictionary meaning of the words used in the definition section the intention of Parliament must be understood to be to exclude from the scope of the expression 'consumer' any person who buys goods for the purpose of their being used in any activity engaged on a larger scale for the purpose of making profit."

12. From the above, it is clear that activity of availing term loan from the OPs was definitely for commercial purpose. The contention of the complainant is that present complaint is only for returning of documents and, per se, it is not any commercial activity and therefore, complainant is a 'consumer'. I am of the view that returning of documents in the present case is not an independent service which has been availed by the complainant. In fact, availing the services of a financial institution for loan have all the four components, namely, sanction of loan, disbursement of the loan, re-payment of loan and then return of documents. As the main service availed was for getting the loan for the industry which was a commercial purpose, all the four components of this service, including the return of documents shall be considered for commercial purpose. In the present case, thus, I find that the complainant has availed services of the OPs for a commercial purpose, hence the complaint filed under the Consumer Protection Act, 1986 is not maintainable. In this respect, I find no illegality or material irregularity in the order of the State Commission dated 3.9.2016.

13. So far as the question of limitation is concerned, the State Commission has observed as follows:

" 4. It is apparent in the case that cause of action for the complainant occurred after 31.3.2010 when the opposite parties did not return/release the documents of the complainant. As such the limitation period available to complainant for filing the complaint was only two years, butt the complaint has been filed on 28.1.2016. Merely, by sending a notice through an Advocate on 12.1.2015 the period limitation cannot be deemed to have been extended. On the face of it, the complaint filed in the year 2016 is not maintainable as barred by limitation."

14. From the above, prima facie, it seems that the complaint is barred by limitation because the cause of action started from 31.3.2010 when the settlement was reached and payment was made but the documents were not returned and the complaint has been filed on 28.1.2016. Obviously, in the exceptional circumstances, if the Forum is satisfied, it can extend the period of limitation in genuine cases but in the present case as has been seen in the preceding paragraph that the complainant is not a 'consumer', it does not really matter whether the question of limitation is finally decided or not by this Commission.

15. Based on the above discussion, I find no merit in the appeal and accordingly, the order dated 3.9.2016 of the State Commission is upheld and the appeal stands dismissed in limini. However, the complainant apparently seems to allege having not received back his documents relating to pledge/mortgage/hypothecation even after full settlement of loan amount, I feel it appropriate to grant liberty to the appellant to approach the appropriate court of law for redressal of his grievance.

......................

PREM NARAIN

PRESIDING MEMBER