1994 (4) TMI 237 - Commission - Companies Law

Conversion of debentures into shares without consent not a violation

The Commission held that the respondent did not qualify as a consumer under the Consumer Protection Act, rendering the complaint not maintainable within ... Consumer dispute Issues:1. Whether the respondent qualifies as a consumer under the Consumer Protection Act.2. Whether the conversion of debentures into shares without the respondent's consent constitutes a violation of the redemption clause.3. Jurisdiction of the District Forum in consumer disputes involving debentures and shares.Analysis:Issue 1: Consumer QualificationThe primary contention was whether the respondent could be considered a consumer under the Consumer Protection Act. The appellant argued that the respondent did not meet the definition of a consumer, as no defect in goods or deficiency in services was alleged. The appellant relied on previous judgments, including Sqn. Ldr. Gurdial Singh v. United Land & Housing Ltd., to support their position that the respondent did not fall within the Act's ambit. The Commission referred to precedent cases, such as Pfizer Ltd. v. Hansraj Singh Barak and Braham Dutt Agarwal v. San Tubes Ltd., to conclude that purchasing shares in a public issue did not constitute a consumer dispute. Ultimately, the Commission held that the respondent was not a consumer under the Act, rendering the complaint not maintainable within consumer jurisdiction.Issue 2: Violation of Redemption ClauseThe respondent's grievance stemmed from the conversion of debentures into shares by the appellant without the respondent's express consent. The District Forum found this action unjustified due to the lack of explicit consent from the respondent. Consequently, the District Forum ordered the refund of the debenture value with interest. However, the appellant argued that a meeting was held where debenture holders were offered equity shares as redemption, and the respondent failed to exercise the option to retain the debentures. The appellant contended that no cause of action arose for the respondent, as the decision was communicated to all debenture holders, including the respondent.Issue 3: Jurisdiction of the District ForumThe appellant raised a preliminary objection regarding the jurisdiction of the District Forum, arguing that the dispute did not fall within the consumer jurisdiction as the respondent was not a consumer under the Act. The Commission referred to various precedents, including Neela Vasant Raje v. Amogh Industries and N. Maduram Financial Services (P.) Ltd v. Modern Woollens Ltd., to analyze the consumer status in cases involving debentures and shares. Ultimately, the Commission relied on Sqn. Ldr. Gurdial Singh's case and previous decisions of the Commission to establish that the respondent's complaint was not maintainable within the consumer jurisdiction. The Commission allowed the appeal, setting aside the District Forum's order and dismissing the respondent's complaint.In conclusion, the Commission held that the respondent did not qualify as a consumer under the Act, and the complaint was not maintainable within the consumer jurisdiction. The conflict of precedents and the complex legal question led the Commission to leave the parties to bear their own costs.