Closure Of Chit Fund Company Without Notice Is Deficiency In Service: Kerala Consumer Commission Orders ₹8.25 Lakh Refund
Pranav B Prem
The District Consumer Disputes Redressal Commission, Ernakulam, has held that the abrupt closure of a chit fund company and its offices without any prior notice to subscribers amounts to deficiency in service and unfair trade practice under the Consumer Protection Act. The Commission directed a Kodungallur-based chitty company, along with its Managing Director and Board of Directors, to refund ₹8.25 lakh collected from a subscriber over several years, along with compensation and costs. A Bench comprising D.B. Binu (President), V. Ramachandran, and Sreevidhia T.N. ordered the opposite parties to refund the instalments amounting to ₹8.25 lakh with 12% interest, pay ₹25,000 as compensation for monetary loss, mental agony, hardship and harassment, and ₹5,000 as costs. The liability was made joint and several.
The complaint was filed by a senior citizen and professional drama artist, who had joined a chitty scheme of the first opposite party company in 2011 at the request of one of its directors. The kuri scheme was for an amount of ₹16.5 lakh and was scheduled to mature in the year 2030. As per the scheme, the complainant was required to remit monthly instalments of ₹7,500.
After joining the chitty, the complainant regularly paid 110 instalments, amounting to a total of ₹8.25 lakh, through the company’s bank account over a period of nearly 11 years. However, when he approached the bank in 2021 to remit the 111th instalment, he was informed that the chitty company’s bank account had been closed.
The complainant attempted to contact the company and its directors, but received no response. He subsequently learnt that the company had closed down its offices and branches without issuing any notice or explanation to subscribers. A lawyer notice sent by the complainant was returned unserved. Alleging cheating, deficiency in service and unfair trade practice, the complainant approached the Consumer Commission.
In support of his case, the complainant produced his passbook, relevant documents and filed a proof affidavit. Despite service of notice, including substituted service through newspaper publication, the opposite parties failed to appear before the Commission and were therefore set ex parte.
The Commission relied on the Supreme Court decision in Shriram Chits (India) Pvt. Ltd. v. Raghachand Associates, to hold that a chit subscriber is a “consumer” and a chit company is a “service provider” within the meaning of the Consumer Protection Act. It found that the complainant had clearly established payment of instalments and the abrupt closure of the company without settlement of accounts.
The Bench held that shutting down offices and discontinuing operations without any intimation to subscribers constituted a clear deficiency in service and unfair trade practice. It observed that such conduct amounted to a complete failure to perform the basic contractual obligation of conducting the kuri till maturity or settling the subscriber’s account, an imperfection and inadequacy in service falling within the definition of “deficiency” under Section 2(11), and an unfair trade practice under Section 2(47) of the Act.
In a strongly worded observation, the Commission noted the human impact of the opposite parties’ actions, stating that the complainant was not a seasoned investor but an elderly drama artist who had entrusted his hard-earned savings with the hope of security in his later years. It observed that the sudden closure of offices without notice, silence from the company, and denial of promised benefits caused severe mental agony and hardship, which could not be measured merely in monetary terms.
Holding that the complainant was entitled to refund of the entire amount paid along with interest, compensation and costs, the Commission allowed the complaint in full. The opposite parties were directed to refund the instalments with 12% interest, pay compensation and costs, jointly and severally, thereby reaffirming that chit fund companies are bound by standards of transparency, accountability and fair dealing towards their subscribers.
Cause Title: Sathish Sangamithra v. Finisyer Kuries Pvt. Ltd. and Ors.
Case No: C.C No. 496 of 2022
Coram: D.B. Binu (President), V. Ramachandran, Sreevidhia T.N.
