M. Jagannadha Rao, J.
(1) The 1st petitioner is Mr. Ravi Kant and his wife is the 2nd petitioner, they seek issue of a Writ of Certiorari quashing the orders of the National
Consumers Disputes Redressal Commission, New Delhi (herein called the ""National Commission"") dated 8.12.1995 in First Appeal No. 666 of
1993 and the orders of the State Consumer Disputes Redressal Commission, New Delhi (hereinafter called the ""State Commission"") dated
15.10.1993 in 4 cases viz. Case Nos. C-242, C-243, C-255 of 1992 and C-82 of 1993.
(2) By orders dated 15.10.1993 passed u/s 27 of the Consumer Protection Act, 1986 (hereinafter called ""the Act""), the State Commission
imposed a sentence of 1 year simple imprisonment on the 1st petitioner and a fine of Rs. 5,000.00 in each of the 4 cases (or in default, simple
imprisonment of 3 months). The 2nd petitioner being a lady was directed to pay a fine of Rs. 10,000.00 in the Case No. C-243 of 1992. The
above said order was confirmed by the National Commission on 8.12.1995.
(3) The petitioners floated two companies, one in 1987 called the Instant Growth Funds (Pvt.) Ltd and the other in 1989 called the I.G.F. Leasing
(Pvt.). They were the two directors in each of these companies. Members of the public invested huge sums in these companies. It is revealed from
the Bankers that Instant Growth Funds (P) Ltd received an amount of Rs. 50.18 lakhs, while I.G.F. Leasing (P) Ltd. received Rs. 45.57 lakhs.
The 1st petitioner issued post-dated cheques for principal interest. Clause 2 of the agreement required that the loan - trust money be invested in
hire purchase business in 30 days. Clause 3 stated that hire purchase agreement should be entered between the investor/Shareholder, hirers and
company, and the original hire purchase agreement will be supplied to the investor/shareholder. These two clauses were not implemented. The
claimant in Case No. 242, who is a housewife obtained decrees from the State Commission for Rs. 1 lakh in Case No. 242, Rs. 1,94,000.00 in
Case No. 82/93. One Amritlal, a retired official, obtained decree in Case No. 243 for Rs. 1,70,000.00 and one Deepak Chopra obtained decree
in Case No. 335/92 for Rs. 1 lakh.
(4) The above claimants, who obtained decrees from the State Commission, could not realise their monies u/s 25 of the Act. Therefore, they
moved the State Commission u/s 27 of the Act. The State Commission - after applying the principle of ""lifting the veil"", held the two petitioners
personally liable as they were the persons actually controlling and running the companies and passed the impugned order of imprisonment for one
year and fine on the 1st petitioner and fine on the 2nd petitioner, which order was confirmed by the National Commission.
(5) The petitioners 1 & 2, after State Commission had passed decrees on 10.2.1992, 4.2.1992 and 29.5.1992 as aforesaid, moved the Company
Court on 2.6.1992 for winding up of M/s I.G.F. Leasing (P) Ltd. The Court appointed a provisional liquidator. The investors anticipated a similar
winding up petition for M/s Instant Growth Funds (P) Ltd. and filed a caveat averting appointment of a provisional liquidator. The Official
Liquidator filed 2 reports in C.P. 122/92. In para 4 of the 1st report dated 8.11.1993, he stated that vital books of account and other records,
such as minutes book, shareholders register, Board''s minutes book, title deed etc. were not available.
(6) Initially the 1st petitioner, Mr. Ravi Kant filed C.W.P. No. 3858/94 and a Division Bench of this Court passed orders on 1.5.1995 directing
the petitioners to appear before the National Commission and by that order the writ petition was disposed of.
(7) Meanwhile, in the Company Court, the petitioners filed C.A. 572/95 for disposal of assets of the Company. After some hearings, the
Company Court ordered on 30.11.1995 a Cbi inquiry. The Cbi has submitted a report and it is before the Company Court. A charge sheet has
been filed. It appears that the Company Judge stayed execution against the company''s assets on 15.2.1994 and 17.2.1994 and directed execution
on 8.8.1994 in other respects. Present writ petition was filed on 12.1.1996.
(8) According to the respondents, the 1st petitioner was evading arrest in spite of the orders of the State Commission on 15.10.1993 and of the
National Commission dated 8.12.1995. We directed on 9.5.1996 that the 1st petitioner must be present in Court on 16.5.1996. It was only
thereafter that the 1st petitioner was arrested on 15.5.1996.
(9) The learned counsel for the petitioners has raised the following questions before us :-
(1)Section 27 of the Act permitting penalties to be imposed by the Commission does not apply to a ""Company"" in view of the definition of
person"" in Section 2(1)(m) and also because Section 27 refers to a ""person"" and not to a company and this is in contrast to Section 25 which
refers to a company. (2) The principle of ""lifting the veil"" applies only if the concerned statute creates a penal liability against a company and
permits action against those who are in charge of the affairs or in control of the actions of the company. (3) As the case of the petitioners is that
they have no money to pay the decrees passed by the Commission the detention of the 1st petitioner in Jail is vocative of Article 21 of the
Constitution of India and in view of Jolly George Varghese and Another Vs. The Bank of Cochin, . The liability of the petitioners is only up to the
value of shares held by them. Any recovery of monies against the company could be only through the winding up proceedings which are pending in
respect of the two companies.
(10) Point 1 : Section 27 of the Act deals with penalties to be imposed against a ""trader"" or ""person"" who ""fails or omits to comply"" with any order
passed by the District Forum, the State Commission or the National Commission, as the case may be Learned counsel submits that this section
does not refer to action against a ""company"". Reference is also made to Section 2(m) :-
SECTION 2(m) : ""Person"" includes (i) a firm whether registered or not; (ii) a Hindu Undivided Family; (iii) a cooperative society; (iv) every other
association of persons whether registered under the Societies Registration Act, 1860 or not; It is argued that neither section 27 nor Section 2(m)
refer to a company, and hence Section 27 does not apply to a ""Company"".
IN our view, this contention cannot be accepted. The definition of person in Section 2(m) is an ""inclusive"", definition and not an exhaustive
definition. Question arises whether, in such a situation, we can bring in the definition of ""person in Section 3(42) of the General Clauses Act, 1897.
That provision defines ''person'' as follows: ""Person"" shall include any company or association or body of individuals, whether incorporated or not.
HERE it may be noticed that the definition of ""person"" in the General Clauses Act is also an ""inclusive"" definition, even so, in our view, the said
definition can be resorted to inasmuch as the definition of ""person"" in the Act before us is an ""inclusive"" one and not an exhaustive one. Section 3 of
the General Clauses Act clearly says, that ""in this Act, and in all Central Acts and Regulations made after the commencement of this Act, unless
there is anything repugnant in the subject or context, the definitions given in the General Clauses Act"" would apply.
(11) A question arose before the Supreme Court in M.M. Ipoh and Others Vs. Commissioner of Income Tax, Madras, as to whether the
definition of `person'' in the General Clauses Act can be applied in a case where another statute contained an inclusive definition of the word
''person''. It was held that it was permissible to do so. The Supreme Court observed : ""The expression ""person"" is defined in Section 2(9) of the
Income Tax Act, 1922 as including ""a Hindu undivided family and a local authority"". The definition is inclusive and resort may appropriately be had
to the General Clauses Act to ascertain the meaning of the expression ""person"". Clause (42) of Section 3 of the General Clauses Act defines a
person"" as inclusive of any company, association or body of individuals whether incorporated or not and that inclusive definition in the General
Clauses Act would also apply under the Income Tax Act. A firm is, Therefore, a ""person"" within the meaning of the Income Tax Act, and a firm
and an individual or a group of individuals may form an association of persons within the meaning of section 3 of the Indian Income Tax Act.
Following the aforesaid precedent, we hold that ""person"" in Section 2(m) under the Act can be construed as cluding a ""company"" by resorting to
Section 3(42) of the General Clauses Act even though definition in Section 2(m) of the Act is in inclusive definition and does not included a
`Company''.
(12) Further, as per the principle laid down in Motipur Zamindari Co. Ltd. Vs. The State of Bihar and Another, , the question whether the word in
a statute can be treated as including a category referred to in a corresponding definition of the word in the General Clauses Act depends on a
consideration of the object of the statute and of the enactments passed, and the Court has to construe the words ""with a view to carry that object
into effect"".
(13) Now the Act in question before us has been passed by Parliament, as stated in the preamble, to provide for the better protection of the
interests of consumers and for that purpose to make provision for the establishment of consumer councils and for matters connected therewith.
Parliament, in our view, was surely aware that substantial part of consumer goods or services to the consumers were rendered by ""companies
incorporated under the Companies Act and action was necessary u/s 27 of the Act against companies. There is also evidence in section 25 of Act
in this behalf because section 25 states that the District Forum, State Commission and National Commission shall execute their respective orders in
the same manner as in suits, and in case of inability to execute, send the execution proceedings to the civil courts in whose jurisdiction the
registered office of a company is situate or where the judgment-debtor (""any other person"") is residing or carrying on business or is personally
working for gain. This section makes it clear that orders passed under the Act could be orders against a company. When we come to Section 27,
it refers to failure or omission to comply with an order passed by the District Forum, State Commission or National Commission against a trader or
person i.e. u/s 25. By reading Section 25 and section 27, it is clear that the word ""person"" in Section 2(m) must necessarily include a company
against which orders could be executed as stated in Section 25. Therefore, going by the object and purpose of the Act, it is clear that Section 27
of the Act applies to failure or omissions on the part of a ""company"" to comply with the provisions of orders passed. Point I is decided against the
petitioners.
(14) Point 2 : It is argued that the principle of ""lifting the veil"" as applied to companies is attracted only to cases where the concerned statute
contains specific provisions for penal action against those in charge of or controlling the affairs of a company. Reference in this connection is made
by the petitioners counsel to the specific provisions in section 141 of the Negotiable Instruments Act, section 10 of the Essential Commodities Act,
1955, Section 371 of the New Delhi Municipal Council Act, 1994 and other statutes. It is argued that there is no similar provision in the Act
before us.
(15) It is true that certain statutes contain specific provision for criminal prosecution of persons in charge or controlling companies. But, that in our
opinion, makes no difference. For example, the Contempt of Courts Act, 1952 did not contain any provision like Sub-Clauses (4) or (5) of
Section 12 of the new Contempt of Courts Act, 1971. The latter made specific provision for contempt action against persons in charge or the
management or control of companies. Even though, in the 1952 Act, there was no specific provision, it was held by the Supreme Court in The
Aligarh Municipal Board and Others Vs. Ekka Tonga Mazdoor Union and Others, that :
Acommand to a Corporation is in fact a command to those who are officially responsible for the conduct of its affairs. If they after being apprised
of the order directed to the Corporation, prevent compliance or fail to take appropriate action, within their power, for performance of the duty of
obeying those orders, they and the corporate body are both guilty of disobedience and may be punished for contempt.
IN our view, likewise a penal provision which as stated above is applicable to a `company'' by the Commission in Section 27 must be treated as
applicable to those who are officially responsible for the conduct of its affairs. Here, the two petitioners are the directors of each of the two
companies. We may also point out that in the Supreme Court Judgment aforementioned though on facts, the Executive Officer of the Corporation
was exonerated, that was not because he could not be legally made liable but because he was factually not proved to be responsible for not
obeying the command of the Court. In our view, as per the principle laid down in the above ruling of the Supreme Court, the penal provisions in
Section 27 of the Act can be applied to the Directors of the Companies, not withstanding the absence of a specific provision for action against
those in charge of or in control of the affairs of the company.
(16) The same conclusion can be reached by applying the principles of lifting the veil explained in the recent Judgment of the Supreme Court in
Delhi Development Authority Vs. Skiper Construction Company (P) Ltd. and another, . If the corporate personality is used as cloak for fraud or
improper conduct, the court can go behind the veil. Where the protection of public interests is of paramount importance the court is entitled to go
behind the corporate personality. The principle was laid down by Sanborn, J. (see para 24 of Supreme Court Judgment) that ""when the notion of
legal entity is used to ....defend crime, the law will regard the corporation as an association of person"" (1990) (53 Mod. L. R 338, Prof. S.
Ottolenghi, ""From keeping Behind the Corporate Veil, to ignoring it completely). The Supreme Court also referred to Prof. L. Maurice Wormser''s
article `Piercing the veil of Corporate entity) (1912) (12 C L R496 that ''where the concept of corporate entity is employed to...... protect crime,
the Court will draw aside the web of the entity, will regard the corporation or company as an association of live, up and doing, men and women
shareholders, and will do justice between real persons.
(17) In By Ford Leasing Ltd. Vs. Union of India and Others, a Division Bench of this Court held that u/s 27 of the Act, the Chairman and
Managing Director of a company can be proceeded against, he being in charge of the management and control of the affairs of the company. We
respectfully agree with this view.
(18) The case in Surinder Nath Khosla Vs. Excise and Taxation Officer (1995) 4 Comp. Lj 343 (P&H) relied upon for the appellants deals with
recovery of Sales Tax from the assets of the company and not from its Directors and merely deals like Section 25 of this Act with mode of
recovery of money from a company and does not with a penal provision like Section 27 and is distinguishable.
(19) Following the above principles of law, we hold that the State Commission and the National Commission were right in refusing to permit the
two petitioners - the two sole directors of the two companies, being husband and wife to defend themselves under the cloak of corporate entity -
and the Commissions were right in lifting the veil and identifying the petitioners as the persons who were responsible for committing the statutory
offences referred to in Section 27 of the Act. Point 2 is held against the petitioners.
(20) Point 3 : The contention is that the petitioners has no wherewithal to obey the orders passed by the State and National Commissions and
hence its petitioner cannot be detained in prison by passing an order for simple imprisonment. Reliance is here placed upon certain observations in
the judgment of the Supreme Court in Jolly George Varghese and Another Vs. The Bank of Cochin, . In that case, the Supreme Court was dealing
with Section 51 and Order 21 Rule 37 of the CPC permitting arrest of a person who does not obey a decree for money based on contract passed
by a civil court. Reference was made to Article 11 of the
INTERNATIONAL Covenant on Civil and Political Rights"" which contains a prohibition : ""No one shall be imprisoned merely on the ground of
inability to fulfill a contractual obligation"". and reference was also made to Article 21 of the Constitution of India. On the facts of the case, the
properties of the judgment debtors stood attached and the detention was ordered because earlier a similar warrant was issued. The Supreme
Court set aside the order and directed inquiry into the means of the judgment debtors. Though the Supreme Court referred to Article 11 of the
Covenant to which India is a party, the Court said (para 6 ) that even so, until the municipal law is changed to accommodate the covenant, what
binds the Courts is the former, not the latter."" Their Lordships quoted A.H. Robertson on `Human Rights - in National and international Law"" (p.
13) to the effect that ""International Conventional Law must go through the process of transformation into municipal law before the international
treaty can become an internal law and they refused to strike down Section 51 as being vocative of Article 21.
(21) In fact, Section 27 of the Act has created a statutory offence the non-compliance of on order of a duty constituted Tribunal under the
Consumer Protection Act 1986 - and has made the said non - compliance an offence punishable with simple imprisonment or fine. A statute can
create a Tribunal and might say that non - compliance with the orders of the Tribunal is an offence and is punishable by the way of imprisonment or
fine (as in Section 27) and this penal provision can be in addition to any other mode of recovery (as in Section 25). Section 25 permits recovery as
a civil court and may also permit arrest u/s 51 and Order 25 Rule 37 as a mode of recovery. But u/s 25 no statutory offence is created; while u/s
27 a separate offence is created if Section 25 order is not implemented. We are, Therefore unable to hold that Section 27 is either bad or that the
order of punishment of simple imprisonment passed against the petitioner is vocative of Article 21. Point 3 is held against the petitioners.
(22) Point 4 : The contention is that the liability of the company or of the petitioner is to be restricted to the value of the shares held by them or has
to be dealt with only during the winding up proceedings of the two companies is again untenable. It may be that the proceedings for recovery u/s
25 of the Act may on the facts, require the taking into account of the pendency of the winding up proceedings but the penal provisions u/s 27 of the
act are in addition to the mode of recovery contemplated by Section 25 and, Therefore, the pendency of winding up proceedings will not come in
the way of the Commission passing orders u/s 27 of the Act.
(23) Petitioners counsel also relied upon Chairman, thiruvalluvar Transport Corporation Vs. Consumer Protection Councel, to contend that the
Companies Act is a special Act and the Consumer Protection Act is a general one. The Supreme Court was there dealing with a claim under the
Motor Vehicles Act and said that the parties must pursue remedy under the special law, Motor Vehicles Act. There the Supreme Court was not
dealing with any order of the Consumer Court creating an offence or penalty such as Section That decision is Therefore, clearly distinguishable in
Byford Leasing (supra), a Division Bench of this Court had also held that the Commission is to evolve its own procedure without reference to the
Criminal Procedure Code. Point 4 is decided against the petitioners.
(24) Learned counsel for the appellants has circulated further submissions a few days back. Learned counsel has quoted some judgments of the
Supreme Court in regard to interpretation of statutes. In view of the judgments of the Supreme Court referred to us in particular in M.M. Ipoh and
Others Vs. Commissioner of Income Tax, Madras, we do not think necessary to deal with the rulings quoted in the additional written submissions
furnished by the counsel.
(25) A point has been raised that Section 27 is vocative of the Article 14 of the Constitution of India. But we did not think that there is any merit in
this contention. It cannot be said that the provisions which permit punishment to be imposed for not complying with orders of the State Forum or
National Forum are arbitrary. This contention is to be rejected as being totally unsubstantiated.
(26) For the aforesaid reasons, the Civil Writ Petition is dismissed.
