1993 (10) TMI 234 - Commission - Companies Law

Shareholder purchasing shares qualifies as consumer under Consumer Protection Act

The Commission held that the complainant, as a shareholder who purchased shares, qualified as a consumer under the Consumer Protection Act. They ... Consumer - Meaning of - Whether those who purchase shares/debentures from existing shareholders and seek transfer from company in their name are persons who have hired services of company for consideration, consideration being value of shares/debentures and they are, therefore, consumers within meaning of section 2(1)(d) - Held, yes Issues:Determining whether the complainant is a consumer as defined in the Consumer Protection Act, 1986.Analysis:The complainant purchased shares from a seller, but the share-scrips were allegedly lost. The complainant filed a Civil Suit and obtained a stay order to prevent the transfer of shares. Bonus shares and right issues were subsequently issued by the company, but the shares were sent to the seller instead of the complainant. The complainant requested the shares to be transferred to him, but the seller refused. The complainant sought damages and costs of litigation from the company. The District Forum dismissed the complaint on the grounds that the complainant was not a consumer under the Act as he had not paid consideration for hiring the company's services.The main issue before the Commission was whether the complainant qualified as a consumer under the Consumer Protection Act. The complainant argued that as a shareholder who purchased shares, he should be considered a consumer. The Commission considered the arguments and acknowledged the complexity of the issue. They highlighted that shareholders contribute to the company's capital by purchasing shares, and in return, receive dividends and other benefits. The Commission concluded that the complainant should be considered a consumer under the Act based on the consideration involved in purchasing shares.In support of their decision, the Commission referenced a previous judgment by the Madras State Commission which stated that the transfer of shares by holders to purchasers constituted services rendered by the company. The Madras State Commission's observation emphasized that those purchasing shares and seeking transfers are consumers under the Act. The consideration for purchasing shares was deemed to qualify as value for services received, thus falling within the Act's definition of consumers.Ultimately, the Commission allowed the appeal, set aside the District Forum's order, and remanded the case for further consideration on its merits. The parties were directed to appear before the District Forum for further proceedings.