Who said chit fund companies aren’t answerable?

Pushpa Girimaji

Six months ago, I joined a chit fund scheme that requires my paying Rs 5,000 a month for 25 months. However, the chit fund company is yet to give me the mobile phone worth Rs 5,000 that was promised as a ‘welcome gift’ on joining. Can I lodge a complaint against the chit fund company before the consumer court?

The company obviously promised the gift to lure people to join the scheme. Like you, there must be many others who were made similar promises and not given the gift. So, please do find out if there are others in your group, who have been cheated of the mobile phone. All of you can jointly send a letter to the company demanding that the gift be given immediately or else you will go to the consumer court and seek compensation for the unfair trade practice indulged in by the company. Under the Consumer Protection Act, not giving the promised gift constitutes unfair trade practice and, in the recent years, the courts have been taking a serious view of such malpractices and awarding hefty compensation.

However, if the company fails to respond positively, all of you can file a class action suit before the consumer court. I would also suggest that you check the track record of this company. Talk to friends and relatives and the police too. You can also search on the internet for any consumer complaints against the company. If there are any indications of the company being fraudulent or dishonest, it’s better to withdraw from the scheme now and try and get your money back, rather than repent later.

Do chit fund companies come under the Consumer Protection Act?

Yes, they do. In Narinder Kumar and others Vs Sanjiv Kumar (R P no 299 of 2000), the apex consumer court or the National Consumer Disputes Redressal Commission rejected the contention of a chit fund company that the consumer courts were prohibited from taking cognizance of any dispute arising under the Chit Fund Act, 1982 and that such disputes could be entertained only by the Registrar of Chit Funds.

In this case, the Commission specifically addressed the question of consumer courts’ jurisdiction in such cases, with specific pointer to Section 64 of the Chit Fund Act, which provides for reference of any dispute touching the management of a chit fund business to the Registrar of Chit Funds for arbitration. And the Commission held that there was nothing in the Section, which barred the jurisdiction of consumer courts. The Commission pointed out that Section 64 only barred civil courts from adjudicating over these disputes. As consumer courts are not civil courts, the bar did not apply to them.

The Chit Fund Act may provide for the Registrar to arbitrate over disputes, but in view of Section 3 of the CP Act, which clearly says that the provisions of the Act are in addition to and not in derogation of the provisions of any other law for the time being in force, the forums are not prohibited from resolving such complaints, the Commission said.

The dispute in this case was about a chit fund company’s refusal to pay the maturity amount to the complainant. His contention was that even though he had paid 25 installments of Rs 5,000 each, the company was not paying Rs 1,25,000 due to him on the ground that it was adjusted towards a loan taken by his father, who was also a member of the chit fund company.

The District Consumer Disputes Redressal Forum, which first heard the case, dismissed the complaint on the ground that it was not maintainable under the Consumer Protection Act. The State Consumer Disputes Redressal Commission, however, disagreed and said that the Chit Fund Act did not prevent consumer courts from hearing the complaint and asked the chit fund company to pay the complainant Rs1,25,000 with 18 per cent interest from the date of maturity till the date of payment. It also awarded costs of Rs 2,000.

The National Commission, before which the chit fund company filed a revision petition, agreed with the State Commission’s view that the complainant was wrongfully denied the amount that was due to him and the amount could not have been adjusted against the loan taken by his father in his own name and in the name of Highway Goods Carrier, of which his father was the proprietor.