Protecting The Investor As Consumer

Case: The National Consumer Disputes Redressal Commission, New Delhi, in a decision on August 26, 1993 clearly laid down that fixed deposit holders are consumers under the CPA. They can file a complaint in the consumer fora if there is a delay in the repayment of the principal and/ or the interest because it constitutes a deficiency in service. Laying down broad guidelines which may be equally applicable to cases of stock and shares/debentures etc, the order said that while interpreting a social welfare legislation, instead of a narrow approach one should be guided by the principles of benevolent interpretation which will help to promote and achieve the object and purpose of the Act namely, to protect the interests of consumers and suppress the evil sought, to be remedied by the statute namely the unscrupulous exploitation of consumers.

 

The Commission also referred to the amendments made in 1993 in the CPA, saying that while earlier under the Act compensation was the only relief that could be granted by a consumer forum for such a service, the situation had substantially changed after the amendment. A direction can now be issued by the Consumer Redressal Forum calling upon the opposite party to rectify the defect or deficiency in the service.

Thus, it can be reasonably concluded that debentures and stocks are within the ambit of the CPA. Accordingly, an aggrieved investor is advised to insist on getting a written order from the redressal forum in such cases. If the order is not in his favour, it can be contested in the state commission and later on in the National Commission.

Amendment: Since its enactment, there have been conflicting decisions that debentures are not goods under the CPA. But after the above recent Supreme Court decision, the CPA has to be interpreted in its widest possible terms. Some consumer fora have started taking the view that even debentures are covered by the definition of goods as given in section 2(1)(i) of the CPA. UTI and other mutual funds also issue units. It is, therefore, suggested that the following explanation be added to the definition of goods in section 2(1)(i): Bonds, debentures, whether convertible or non-convertible, scrips issued by mutual funds, units issued by Unit Trust of India, are goods for the purpose of this Act.

Prospective investor: The definition of goods in the Monopolies and Restrictive Trade Practices Act, 1969, includes the issue of shares before allotment in section 2(e). It is not understood as to why the same definition of goods has not been adopted by the CPA. In fact, under the CPA, a prospective investor is not a consumer as per a Supreme Court judgement (see Caveat Emptor, July 3, 1996). Since both the MRTP Act and the CPA protect the public interest and the consumers interest, it will also be appropriate to bring the prospective investor within the ambit of the CPA by way of an amendment to it.