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A curious case of erroneous verdicts, wrong interpretations and arzi-farzi proxy counsels

Human progress is neither automatic nor inevitable... Every step toward the goal of justice requires sacrifice, suffering, and struggle; the tireless exertions and passionate concern of dedicated individuals.

~ Martin Luther King, Jr

Imagine this: A fraudulent organization takes your money as a deposit with the promise of higher returns and later fails to return even the principal amount. You will surely sue the person, file a complaint in consumer forum, and hope for speedy redressal of the case. However, what if the accused person keeps on appealing against the verdicts of all forums – district, state and national – and finally gets relieved without any penalty, fine or punishment from Supreme Court. Yes, this too can happen in exceptional cases, especially where the accused person’s role, authority and obligations are not clearly defined or backed up with enough evidences in your complaint. There is an important lesson there and we explain this through a case that did the rounds of several courts.

– Dr PremLata, Consumer Awakening

Former Member, CDRF-Delhi

In December last year, Supreme Court turned down the orders of district and state consumer forums against HK Singla, secretary of Chandigarh State Bank of Patiala Employees Co-operative USE Thrift & Credit Society, and stayed his arrest. These orders apparently had been upheld by the National Consumer Disputes Redressal Forum while denying the appeal request of the accused.

However, the Supreme Court found one technical error with regard to the identification of the accused. It stated that the case was against the society and therefore could not be forced upon its secretary alone, and also that he could not be jailed for the society’s failure to refund/repay the depositors’ money.

While the apex court’s reasoning may seem reasonable, the question lingers: where should the aggrieved depositors go? In this particular case, the society in question has been declared bankrupt and is under liquidation. So, an independent court-appointed arbitrator is assessing the organization’s assets and liabilities and will gradually pay back the depositors – whether it will be the principal amount, the promised amount, or just a part of the deposit is another matter though.

The Case in the Consumer Courts

One Avtar Singh Saini, among a few others, had filed a complaint against the secretary of Chandigarh State Bank of Patiala Employees Co-operative USE Thrift & Credit Society, claiming the maturity amount along with interest on his deposit with the society.

Section 27

Section 27 of Consumer Protection Act, 1986, empowers the district forum, the state commission and the national commission to impose penalties. It empowers the authorities to pass an order to punish a person with imprisonment for a term which shall not be less than one month but which may extend to three years or with a fine, in case a trader or a person against whom the complaint is made fails or omits to comply with any order passed by the authorities.

It came across as a simple case of delay in disbursal of maturity amount and the district forum passed an order in favour of the consumer and also directed the society to pay to the complainant the maturity amount with interest of 10 per cent per annum, along with compensation of Rs 10,000.  

Since the society was already under liquidation, it appealed before the Chandigarh State Commission. The commission dismissed the appeal, finding no error in the district forum’s order.

Knowing that the appeal had been dismissed, the complainant reached out to the district consumer forum for execution of the order under Section 27 of Consumer Protection Act. (Consumers need to know that after the order has been passed by the consumer forum, they have to reach out to the same and make a request for ‘execution’ of that order as well.)

As the accused had failed to pay the decretal amount, the district forum ordered two years’ imprisonment and a fine of Rs 5,000. Aggrieved by this order, the respondent again appealed to the state commission for staying the imprisonment order. The commission passed an interim order staying the imprisonment on the condition that the decretal amount would be paid within eight weeks.

However, the defendants failed to comply with this order also and instead took their appeal to the national commission.

The national commission confirmed all the orders of the lower courts and stated that the district forum rightly ordered for imprisonment under Section 27 of the Act for non-compliance with its order. The state commission had given an opportunity to the opposite party to pay the decretal amount within a specific period and conditionally stayed the operation of imprisonment.

The order passed by the national commission reads as under:

“Appellant had shown his inability to pay the decretal amount. Under the circumstances, the district forum convicted the appellant and sentenced him to simple imprisonment of two years. Appellant filed the appeal before the state commission. State commission by an interim order stayed operation of the order of the district forum subject to deposit of the entire decretal amount. We do not find any infirmity in the interim order passed by the state commission. The decree passed against the appellant attained finality. Under the circumstances, district forum under Section 27 of Consumer Protection Act, 1986, had no option other than to convict the appellant. The state commission has rightly stayed the operation of the impugned order subject to deposit of the entire decretal amount. Dismissed.”

With this observation, the national commission dismissed the appeal.

Turnaround at Supreme Court

The case reached Supreme Court and was studied and analysed by Justice R Subhash Reddy. On 14 December 2018, Justice Reddy stated that the Supreme Court, while looking into the matter closely, found errors committed by the courts.

Firstly, the district forum in its order fixed the liability of the secretary, Chandigarh State Bank of Patiala Employees Co-operative USE Thrift & Credit Society, to repay the deposited amount with interest to the complainant, but it did not make the secretary liable in his individual capacity. Hence, he could not be imprisoned under Section 27 of the Act unless he was made party by name or on behalf of the society, fixing ‘personal’ liability.

Secondly, the state commission, while staying the order of imprisonment in 2013 with condition to pay the decretal amount, did nothing to correct the error though this interim order continued from time to time. It was for the state commission to decide there and then as to whether any order for jail could be passed against the society’s secretary for non-compliance with the order.

Lastly, although the national commission did not interfere in the order passed by the lower courts, it did not specify who should be sent to jail.

The Supreme Court suspended the order of the district forum and stayed the imprisonment of the society’s secretary. The court also observed that as the society was under liquidation and a liquidator had been appointed, the complainant was at liberty to take necessary steps to recover the decretal amount in accordance with law and as ordered by the district court.

Lesson Learnt

As per the practice under law, in cases of suits, claims and complaints filed by corporates, authorities, societies, or other such units, they are to be filed through proper name and person authorized by the authority under the document ‘power of attorney’ to sign documents, etc. Further, it needs to be supported by a ‘resolution’ passed by the authorities, directors or the board/management, or whosoever legally owns and controls such organizations.

In the case discussed here, nothing had been brought on record and the case was not filed through an individual name. Secretary is an office and officer may change, and the next man cannot be held responsible in his individual capacity for the deeds of his predecessor.

Proxy Counsels?

At courts, if you see some proxy counsel appearing on behalf of your opponent or his lawyer just to get the court adjourned or get an additional date, etc., you can appeal against the same and cite a judgement from Supreme Court.

A three-judge Supreme Court bench comprising BS Chauhan, J Chelameswar and MY Eqbal, while listening to the special leave petition in the matter of Sanjay Kumar versus State of Bihar, had ordered:  

“In the instant case, the counsel appearing in the court for the petitioner has designated himself merely as a proxy counsel. The advocate- on-record (AOR) had no courtesy to send at least a slip mentioning the name of the counsel who has to appear in the court. Thus, in such a fact-situation, we had no advantage even to know the name of the counsel who was appearing in the court.

“In such a chaotic situation, any Arzi, Farzi, half- baked lawyer under the label of proxy counsel, a phrase not traceable under the Advocates Act, 1961, or under the Supreme Court Rules, 1966, etc., cannot be allowed to abuse and misuse the process of the court under a false impression that he has a right to waste public time without any authority to appear in the court, either from the litigant or from the AOR, as in the instant case.”


Divya Patwal


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