1994 (5) TMI 168 - SC - Companies Law

Whether the prospective investor could be a consumer within the meaning of the Consumer Protection Act 1986? Whether the appellant-company trades in shares? Does the Consumer Protection Forum have jurisdiction in matters of this kind? What are the guiding principles in relation to the grant of ad interim injunctions in such areas of the functioning of the capital market and public issues of the corporate sectors Whether certain venue restriction clauses would require to be evolved judicially as has been done in cases such as State of West Bengal v. Swapan Kumar Guha and Sanchaita Investments 1982 (2) TMI 301 - SUPREME COURT ? What is the scope of section 14 of the Act? Held that - The appellant has suffered immensely because it has not even been served with a copy of the order of injunction. The application of the respondent is clearly actuated by mala fides. The Forum should have examined whether ex parte injunction without notice to the opposite side could ever be granted at all. The grounds urged in the injunction application were insufficient for the grant of such a relief. There is an increasing tendency on the part of litigants to indulge in speculative and vexatious litigation and adventurism which the for a seem readily to oblige. We think such a tendency should be curbed. Having regard to the frivolous nature of the complaint we think it is a fit case for award of costs more so when the appellant has suffered heavily. Therefore we award costs of 25, 000 in favour of the appellant. It shall be recovered from the first respondent. the writ petition has rightly come to be rejected though in our view it would have been better had the High Court given reasons instead of dismissing it summarily

Issues Involved:
1. Whether the prospective investor could be a consumer within the meaning of the Consumer Protection Act, 1986?
2. Whether the appellant-company "trades" in shares?
3. Does the Consumer Protection Forum have jurisdiction in matters of this kind?
4. What are the guiding principles in relation to the grant of ad interim injunctions in such areas of the functioning of the capital market and public issues of the corporate sectors?
5. What is the scope of section 14 of the Consumer Protection Act, 1986?

Detailed Analysis:

Issue 1: Whether the prospective investor could be a consumer within the meaning of the Consumer Protection Act, 1986?
The definition of "consumer" under section 2(d) of the Consumer Protection Act, 1986, includes any person who buys goods or hires services for a consideration. The court held that shares, until allotted, do not exist and thus cannot be considered "goods." Therefore, a prospective investor applying for shares cannot be deemed a consumer under the Act. The court emphasized that "a share is not a sum of money; it represents an interest measured by a sum of money and made up of diverse rights contained in the contract evidenced by the articles of association of the company." The court concluded that the respondent or the association is not a consumer under the Act.

Issue 2: Whether the appellant-company "trades" in shares?
The court clarified that the appellant-company does not trade in shares. The issuance of shares is for raising capital and not for trading purposes. The creation of share capital without allotment does not bring shares into existence. Hence, the question of the appellant-company trading in shares does not arise.

Issue 3: Does the Consumer Protection Forum have jurisdiction in matters of this kind?
Given the court's conclusions on the first two issues, it follows that the Consumer Protection Forum has no jurisdiction in this matter. The court noted that the forum's jurisdiction is confined to matters involving the sale of goods or hiring of services for consideration, neither of which applies to the prospective investors in this case.

Issue 4: What are the guiding principles in relation to the grant of ad interim injunctions in such areas of the functioning of the capital market and public issues of the corporate sectors?
The court outlined several principles for granting ex parte injunctions, including:
- Whether irreparable or serious mischief will ensue to the plaintiff.
- Whether the refusal of ex parte injunction would involve greater injustice than its grant.
- The timing of the plaintiff's notice of the act complained of.
- Whether the plaintiff had acquiesced for some time.
- The requirement for the plaintiff to show utmost good faith.
- The ex parte injunction would be for a limited period.
- General principles like prima facie case, balance of convenience, and irreparable loss.

The court criticized the Calcutta District Consumer Disputes Redressal Forum for granting an ex parte injunction without adequate reasoning and noted that such orders should be passed only under exceptional circumstances.

Issue 5: What is the scope of section 14 of the Consumer Protection Act, 1986?
Section 14 of the Act deals with the nature of relief that can be granted by the District Forum, which includes removal of defects, replacement of goods, return of price, and compensation for loss or injury. The court observed that there is no provision under the Act for granting interim or ad interim relief. The forum's jurisdiction is limited to final relief as specified in section 14, and thus, the interim injunction granted by the forum was beyond its powers.

Conclusion:
The court set aside the impugned order of the Calcutta District Consumer Disputes Redressal Forum, awarding costs of Rs. 25,000 to the appellant due to the frivolous nature of the complaint. The court also dismissed the civil appeal arising out of the writ petition filed in the High Court of Delhi, noting that the High Court had rightly rejected the writ petition, although it would have been preferable if reasons had been provided.

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