Can an investor use 2 laws to recover money

Jehangir B Gai

Subject:

A complaint under the MPID Act would not debar the filing of a consumer
complaint

Backdrop:

The middle-class tries to save for its old age.They invest their savings in schemes,
which appear to be most remunerative. Taking advantage of this,many
unscrupulous organisations float dubious fixed deposit schemes promising
attractive returns and then default in paying interest or even in returning the
principal amount invested.
Investors who lose their hard-earned money are worried and try to exploit all
possible avenues to recover their money. The Government of Maharashtra has
specially enacted a legislation known as Maharashtra Protection of Interests of
Depositors (MPID) Act. Investors often file a complaint under the MPID Act as
well as the Consumer Protection Act (CPA),hoping that somehow the former or
the latter will help in recovering their money.But companies try to argue that if
one remedy is availed of,the other remedy would be barred.
Is this contention correct Does a complaint under the MPID Act bar the filing of a
complaint under the CPA and vice versa This issue has been resolved in a recent
judgment of the National Commission in the case of Arun Kashinath Pingale
(Wani) & Ors v/s Madhukar Sonanis & Ors in Revision Petition No 1510 of 2009
decided on April 1,2010 [ V-2010 (2) CPR 261 (NC)

Case Study:

Pingale,along with some others,was running Suyog Departmental Store.They

floated a scheme called Suyog Thev Yojgana where their customers could place
deposits and earn interest at 2% per month (24% annually).The interest earned
could be received either in cash or by way of discount on purchases. Initially, this
scheme functioned properly, luring more customers to invest the monies.
Thereafter, the store owners defaulted in payment of interest. Several of the
aggrieved consumers came together and filed a consumer complaint.
This was objected to by shop owners on various grounds, viz (1) that the
complaint was filed belatedly;(2) the total value of the principal and interest
claimed was Rs 21 lakh , which was beyond the jurisdiction of the district forum
(3) the consumer forum would not have jurisdiction as the same dispute was
pending before the special court under the MPID Act and (4) the transaction
created a debtor-creditor relationship and did not constitute a consumer dispute.
The matter ultimately reached the National Commission in a revision petition filed
by the shop owners. Reasoning of the National Commission: All the defences of
the shop owners were rejected by the commission. Although the agreements
were executed in July 2001,the scheme continued to function smoothly till 2003
after which the payment defaults were committed. Hence, the cause of action
would have to be computed from the date of default and not from the date of
deposit. So, the complaint was held to be within time. The principal value of the
deposits made (excluding the interest ) aggregated to Rs 17 lakh only. The district
consumer fora can adjudicate disputes up to Rs 20 lakh. It was ruled that the
dispute would be within the pecuniary limit of the district forum.
The proceedings under the MPID Act were criminal proceedings for punishing the
wrong-doer. It was held that such criminal proceedings would not debar the filing
of a consumer complaint for recovery of the amount. The dispute about deposits
was a consumer one. The liability was admitted by the shop owners, but they
pleaded their inability to pay the amounts due in view of attachment of their
property. The commission observed that no such order was filed, but even
assuming that such an order was in force, it would not absolve the shop owners
from discharging their liability towards the depositors. Accordingly, the revision
petition was dismissed and the order holding the shop owners liable to repay the
depositors was upheld.

Impact:
It is unfortunate that traders and service providers often float schemes, which are
attractive rather than economically viable,with a view to dupe gullible
consumers.Thereafter,they waste money on futile litigation rather than gracefully
pay up when caught on the wrong foot.

(The author is a consumer activist and has won the government of Indias
National Youth Award for Consumer Protection.His e-mail id is jehangir-
gai@indiatimes.com)