HP State Consumer Commission Upholds Order Against Sardar Sarovar Nigam for Unilateral Early Redemption of Deep Discount Bonds
Pranav B Prem
The Himachal Pradesh State Consumer Disputes Redressal Commission, Shimla, comprising Justice Inder Singh Mehta (President) and Yogita Dutta (Member), has upheld the finding of deficiency in service against Sardar Sarovar Narmada Nigam Limited (SSNNL) for unilaterally altering the terms of its Deep Discount Bonds and redeeming them prematurely without obtaining the mandatory consent of bondholders. The Commission confirmed that the complainant, Chander Paul Sood, had a vested contractual right to receive the maturity amount of ₹1,11,000 and that SSNNL’s decision to redeem the bond in 2009 at a reduced value of ₹50,000, without written approval of the required number of bondholders, was illegal and contrary to Condition No. 7 of the bond certificate.
The complainant had purchased the Deep Discount Bond on 07.01.1995 for ₹3,600, with a maturity value of ₹1,11,000 on 11.01.2014. The bond permitted redemption only at the option of the bondholder at the end of 7, 11 or 15 years, and did not confer any right on SSNNL to enforce early redemption on its own. After maturity, the complainant submitted the bond and requisite documents through registered post on 19.12.2015, but SSNNL paid only ₹45,360 (after TDS), resulting in a deficiency of ₹61,000. Upon receiving no response to his written request seeking the balance amount, the complainant moved the District Consumer Commission, Shimla, which directed SSNNL to pay ₹61,000 with 9% interest from the date of filing of the complaint, along with ₹25,000 for mental harassment and ₹20,000 towards litigation costs.
SSNNL challenged the order before the State Commission and contended that the high interest liability exceeding 18% annually compelled the Board of Directors to redeem the bonds before their maturity. It maintained that the Board, through its resolution dated 03.11.2008, fixed 10.01.2009 as the redemption date with a deemed face value of ₹50,000 and asserted that sufficient notice was issued to all bondholders through newspaper publication, its website, and individual communications. It was further argued that the complainant had accepted the redemption payment without protest and could not subsequently raise a dispute.
Rejecting this defence, the State Commission examined Condition No. 7 of the bond certificate, which mandated the written consent of at least three-fourths of the bondholders before any modification of the terms attached to the bond. The Commission categorically held that “consent of bondholders is also required to modify the conditions of the bond, but in the instant case, the opposite party has nowhere stated either in its reply or affidavit that any consent was taken from the bondholders to redeem the bonds before the maturity date,” and concluded that such unilateral alteration constituted clear deficiency in service.
The Commission further noted that SSNNL failed to substantiate its claim of having issued individual notices regarding early redemption to the complainant. The only proof offered was the affidavit of the company’s General Manager, without postal delivery records or supporting affidavits of other bondholders. In contrast, the complainant had consistently denied receiving any redemption notice. The Commission, therefore, held that SSNNL had failed to prove communication of early redemption and could not rely on newspaper publication alone to bind bondholders.
On the question of territorial jurisdiction, SSNNL argued that the complaint was not maintainable in Shimla because its registered office is located in Gandhinagar. The Commission rejected this contention, observing that the complainant was a resident of Shimla, had sent the bond and notice from Shimla, and received SSNNL’s communication there; hence, a part of the cause of action arose within Shimla, making the complaint maintainable.
The complainant had also sought modification of the District Commission’s award to grant interest from the date of maturity of the bond in 2014 rather than the date of filing of the complaint. The State Commission declined to interfere with this finding, holding that the District Commission had correctly granted interest from the date of filing of the complaint and not from the date of maturity.
Ultimately, the State Commission dismissed both cross-appeals filed by SSNNL and the complainant and affirmed the District Commission’s direction to SSNNL to pay the balance amount of ₹61,000 along with interest from the date of filing of the complaint and compensation and litigation costs.
Cause Title: Sh. Chander Paul Sood vs Sardar Sarovar Narmada Nigam Limited
Case No: F.A.No.05/2024
Coram: Justice Inder Singh Mehta (President), Yogita Dutta (Member)
