Supreme Court Stays Imprisonment of Society Secretary in Consumer Case: H.K. Singla vs. Avtar Singh Saini & Ors. (2018) INSC 997 (14 December 2018)

Date of the Judgment: 14 December 2018
Citation: (2018) INSC 997
Judges: Uday Umesh Lalit, J., R. Subhash Reddy, J.
Can a person be imprisoned for the default of a society they represent, without a specific order imposing personal liability? The Supreme Court addressed this crucial question in a consumer dispute case, where the secretary of a cooperative society was sentenced to imprisonment for the society’s failure to repay a deposit. The bench, consisting of Justices Uday Umesh Lalit and R. Subhash Reddy, delivered the judgment, with Justice R. Subhash Reddy authoring the opinion.

Case Background

The case revolves around a dispute between Avtar Singh Saini (the first respondent) and the Chandigarh State Bank of Patiala Employees Co-operative USE Thrift & Credit Society, where H.K. Singla (the appellant) served as Secretary. Saini had deposited money with the society, which failed to repay the maturity amount along with interest as promised. This led Saini to file a complaint before the District Forum.

The District Forum ruled in favor of Saini, directing the society to pay the maturity amount with 10% interest, along with compensation and costs. The society’s appeal to the State Commission was dismissed, and the order of the District Forum became final. However, the society did not comply with the order.

Subsequently, Saini filed an application under Section 27 of the Consumer Protection Act, 1986, seeking action against the society for non-compliance. The District Forum then sentenced H.K. Singla, in his capacity as Secretary, to two years of simple imprisonment and imposed a fine. This order was challenged before the State Commission, which granted interim relief subject to the condition that the society deposit the entire amount. Aggrieved by this conditional order, the society approached the National Commission, which upheld the State Commission’s order.

Timeline

Course of Proceedings

The District Forum initially ordered the society to pay the maturity amount with interest, compensation, and costs. After the society’s appeal was dismissed by the State Commission, the respondent filed an application under Section 27 of the Consumer Protection Act, 1986, leading to the imprisonment order against the appellant. The State Commission stayed this order conditionally, requiring the deposit of the entire amount. The National Commission upheld this conditional stay. The Supreme Court heard the appeal against the National Commission’s order.

Legal Framework

The core legal provision at play is Section 27 of the Consumer Protection Act, 1986, which empowers consumer forums to impose penalties for non-compliance with their orders. This section states that if a trader or a person against whom a complaint is made fails to comply with any order, the authorities can punish them with imprisonment for a term not less than one month and up to three years, or with a fine.

Section 27 of the Consumer Protection Act, 1986 states:
“Where a trader or a person against whom a complaint is made [or the complainant] fails or omits to comply with any order made by the District Forum, the State Commission or the National Commission, as the case may be, such trader or person [or complainant] shall be punishable with imprisonment for a term which shall not be less than one month but which may extend to three years, or with fine which shall not be less than two thousand rupees but which may extend to ten thousand rupees, or with both”

Arguments

The appellant argued that the order of imprisonment was passed against him in his capacity as Secretary of the society, and not in his individual capacity. The appellant contended that, without any personal liability imposed on him, he could not be imprisoned for the default of the society. The appellant further argued that the State Commission’s interim order, which required the deposit of the entire amount as a condition for stay, was unjust.

The respondent contended that the society failed to comply with the order of the District Forum and therefore, the District Forum was right in passing the order of imprisonment under Section 27 of the Consumer Protection Act, 1986.

Issues Framed by the Supreme Court

The Supreme Court did not frame specific issues but considered the following:

1. Whether the appellant, as Secretary of the society, could be imprisoned for the society’s default without any personal liability imposed on him.
2. Whether the interim order passed by the State Commission was justified.

Treatment of the Issue by the Court

The following table demonstrates how the Court dealt with the issues:

Authorities

The Supreme Court did not cite any specific cases or books in this judgment. The Court primarily focused on the interpretation of Section 27 of the Consumer Protection Act, 1986.

Judgment

The Supreme Court suspended the order of the District Forum to the extent of imprisonment of the appellant. The Court directed the State Commission to consider whether the appellant could be imprisoned in the absence of any order imposing personal liability on him. The Court also allowed the respondent to take necessary steps to recover the amount from the society, which was in liquidation.

How each authority was viewed by the Court?

The Court interpreted Section 27 of the Consumer Protection Act, 1986 to mean that imprisonment can only be imposed if there is a personal liability on the individual. The Court held that, prima facie, the appellant could not be imprisoned for the society’s default as no personal liability was imposed on him.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the principle that an individual cannot be imprisoned for the default of a society they represent unless there is a specific order imposing personal liability on them. The Court emphasized that the appellant was acting as Secretary of the society, and the order of imprisonment was not directed at him in his individual capacity. The Court’s reasoning was also swayed by the fact that the society was in liquidation and a liquidator was appointed, suggesting that the respondent could recover the amount from the society through legal means.

The Court reasoned that since there was no specific order passed against the appellant in his individual capacity, it was doubtful whether he could be imprisoned under Section 27 of the Consumer Protection Act, 1986. The Court stated, “In this case, it is to be noticed that there is no order passed against the appellant herein by the District Forum in its individual capacity.”

The Court further observed, “Prima facie, we are of the view that for the default committed by the society no order for imprisonment can be ordered against the appellant herein.”

The Court also noted, “It is open to the State Commission to consider the plea whether the appellant can be imprisoned or not in absence of any order by the District Forum imposing personal liability on the appellant.”

Key Takeaways

• An individual cannot be imprisoned for the default of a society they represent unless there is a specific order imposing personal liability on them.
• Consumer forums must ensure that orders imposing penalties are clear about the liability of individuals, especially when they represent a larger entity.
• The judgment emphasizes the importance of distinguishing between the liability of an organization and the liability of its representatives.
• The judgment also highlights that a person cannot be imprisoned for the default of a company, society, etc. unless a specific order has been passed against that person in their individual capacity.

Directions

The Supreme Court directed the State Commission to consider whether the appellant could be imprisoned in the absence of any order by the District Forum imposing personal liability on him. The State Commission was requested to dispose of the appeals expeditiously. The first respondent was also given the liberty to take necessary steps to recover the amount from the society, which was in liquidation.

Development of Law

The ratio decidendi of this case is that an individual cannot be imprisoned for the default of a society they represent unless there is a specific order imposing personal liability on them. This judgment clarifies the interpretation of Section 27 of the Consumer Protection Act, 1986 and emphasizes the need for clear and specific orders imposing personal liability before imprisonment can be ordered.

Conclusion

The Supreme Court’s decision to suspend the imprisonment order against the Secretary of the cooperative society underscores the importance of individual liability in consumer disputes. The Court’s emphasis on the absence of a personal liability order against the appellant highlights a critical aspect of the Consumer Protection Act, 1986. This judgment ensures that individuals are not held accountable for the defaults of the organizations they represent unless explicitly stated in the order.

Category

Parent Category: Consumer Protection Act, 1986

Child Category: Section 27, Consumer Protection Act, 1986

Parent Category: Consumer Law

Child Category: Consumer Disputes

Parent Category: Cooperative Society

Child Category: Society Secretary

FAQ

Q: Can I be imprisoned if the company I work for fails to comply with a consumer court order?
A: Not necessarily. The Supreme Court has clarified that you can’t be imprisoned for the company’s default unless there’s a specific order stating your personal liability. The order should clearly state that you, in your individual capacity, are liable for the non-compliance.

Q: What does personal liability mean in this context?
A: Personal liability means that the consumer court’s order must specifically state that you, as an individual, are responsible for the non-compliance. It’s not enough that you are an officer or representative of the company. The order must clearly impose a personal obligation on you to comply.

Q: What should I do if I am facing imprisonment for my company’s default?
A: If you are facing imprisonment for your company’s default, you should immediately consult a lawyer. This judgment of the Supreme Court provides a strong legal basis to challenge such an order if it does not specifically impose personal liability on you. You can argue that you cannot be imprisoned for the default of the company unless there is an order passed against you in your individual capacity.

Q: What is the significance of this judgment?
A: This judgment is significant because it protects individuals from being held liable for the defaults of the organizations they represent, unless there is a specific order imposing personal liability. It emphasizes the need for consumer forums to be clear and specific in their orders, especially when imposing penalties on individuals representing larger entities.