Commercial disputes cannot be decided in summary proceeding under Consumer Protection Act, 1986; Appropriate remedy for recovery of amount would be before the Civil Court: Apex Court
Justices Vikram Nath & Satish Chandra Sharma [05-04-2024]

Read Order: Annapurna B. Uppin & Ors v. Malsiddappa & Anr [SC- CIVIL APPEAL NO. 4729 OF 2024]

Tulip Kanth

New Delhi, April 6, 2024: While allowing the appeal against the judgments of the District Forum, State and National Consumer Commissions, the Supreme Court has opined that the investment made by the complainant was for profit/gain and being a commercial transaction, it was outside the purview of the Consumer Protection Act, 1986.

The respondent No.1, in this case, had filed a complaint before the DCDRF(District Consumer Disputes Redressal Forum) alleging that he had invested Rs. 5 Lakhs in the partnership firm M/s Annapurneshwari Cotton Co., Amargol, Hubli in 2002 which was repayable after 120 months with interest @ 18% per annum. The respondent No.1 sought for premature payment but it was denied on the ground that the same would be paid upon maturity. The respondent No.1 waited for the maturity and he again claimed but still the payment was not made compelling him to issue a notice calling upon the opposite parties to make the payment. However, as the payment was not made, a complaint was filed before the DCDRF alleging deficiency in service.

Before the DCDRF, the respondent No.2 herein was arrayed as OP No.1 as partner of the firm and the appellants herein were arrayed as respondent Nos.2 to 5 being the legal heirs of one Basavaraj Uppin (since deceased). The appellant No.1 is the widow of said Basavaraj Uppin and appellant Nos. 2 to 4 are his sons. The DCDRF allowed the complaint directing OP Nos.1 to 5 therein to pay the sum of Rs.5 lakhs with 18% simple interest along with compensation of Rs.2,000 and costs of Rs.1,000.

Aggrieved, present appellant Nos.1 to 4 filed an appeal before the SCDRC, Bangalore which was allowed and the matter was remanded. The order passed by DCDRF was set aside on the ground of denial of opportunity to the opposite parties and the matter was remitted back for a fresh decision.The same procedure of appeal and remand followed. The appellants then preferred a Revision Petition before the NCDRC which came to be dismissed by the impugned order giving rise to the present appeal before the Top Court.

It was the case of the appellants that they were never a part of the partnership firm either as partners or in any other capacity. By an unregistered deed of partnership, the firm was constituted which included the complainant (respondent No.1), husband and father of the appellants, and three others. The fact as stated by the appellants with respect to the complainant- respondent No.1 being a partner to the firm was clearly borne out from the reading of the said documents.

The respondents contended that the present appeal was not maintainable in view of the recent judgment of this Court in Universal Sompo General Insurance Company Ltd. vs. Suresh Chand Jain and Another wherein it has been held that the remedy of Article 226 of the Constitution before the High Court would be available to an aggrieved party where the NCDRC has decided an appeal or a revision but no such remedy would be available where it was an original complaint before the NCDRC.

It was also submitted that the contention of the appellants with respect to the registered partnership deed would not be of any help to the appellants in as much as there was an intervening unregistered partnership and therefore, no reliance could be placed on the registered one.

The Division Bench of Justice Vikram Nath and Justice Satish Chandra Sharma was of the view that once there was a registered partnership deed dated 27.05.1996, there was no further document placed on record by the complainant-respondent No.1 regarding dissolution of the said registered deed which continued till the time when the investment was made by the complainant respondent No.1 on 21.05.2002 and hence the complainant respondent No.1 would be deemed to be partner of the firm. It was only upon the death of the Managing Partner Basavaraj Uppin in March 2003, that the status of the firm would cease to exist or would stand dissolved, it added.

It was further opined that the investment made by the respondent No.1 complainant was for deriving benefit by getting an interest on the same at the rate of 18 % per annum, therefore, it would be an investment for profit/gain.

“It was a commercial transaction and therefore also would be outside the purview of the 1986 Act. Commercial disputes cannot be decided in summary proceeding under the 1986 Act but the appropriate remedy for recovery of the said amount, if any, admissible to the complainant- respondent No.1, would be before the Civil Court. The complaint was thus not maintainable”, the Bench asserted.

The Bench also noticed that there was no evidence on record to show that a fresh partnership deed was executed reconstituting the firm in which the present appellants had become partners so as to take upon themselves the assets and liabilities of the firm. It was reiterated that legal heirs of a deceased partner do not become liable for any liability of the firm upon the death of the partner.

The Top Court discarded the contention of the respondents that the appellants had an alternative remedy of approaching the High Court under Article 226 of the Constitution as no directions were issued in Universal Sompo General Insurance (supra) for the pending matters being either dismissed on this ground or being transferred to the High Court. The Bench opined that it would apply prospectively for fresh matters coming up before this Court after the said judgment.

 Thus, allowing the appeal, the Bench held, “For all the reasons recorded above, we are of the view that the District Forum, the State and the National Commissions fell in error in allowing the complaint and upholding it in appeal and revision.”