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Sick company cannot say no to repaying investors’ money: Panel

Sick company cannot say no to repaying investors’ money: Panel
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First Published: Fri, Oct 24 2008. 03 14 PM IST
Updated: Fri, Oct 24 2008. 03 14 PM IST
PTI
New Delhi: Investors in a company declared defunct or sick are entitled to get their money back with interest as such a default on the part of the company amounts to deficiency in service, the Delhi Consumer Commission has said.
“The remedy under Sick Industrial Companies Act is an independent remedy available to a company and not to a consumer and the persons who were issued debentures at the agreed rate of interest are entitled to get an amount in terms of contract between the parties,” the Commission said.
“When the company becomes defunct or sick, it is not attributable to the consumer as they have no role to play in it,” Commission’s President Justice J D Kapoor said.
Cimmco Birla Limited, a S K Birla group company, approached the Commission seeking relief against a district forum’s order to pay the redemption amount alongwith interest to city-resident Anil Sethi who had invested Rs 2,000 in the company’s debentures in 1991.
The Gwalior-based company, which was manufacturing industrial machinery, contended that since it was registered with Board of Industrial and Financial Reconstruction (BIFR), payment could not be made to Sethi.
The Commission, however, said the proceedings before it were different from a suit for recovery of dues and were only for the purpose of compensation for the alleged deficiency in service or unfair trade practices.
“Wherever any company is found guilty for deficiency in service or guilty of unfair trade practice or even restrictive trade practice, it is bound to compensate the consumer in terms of actual losses,” it said.
It held that the company cannot jeopardise the interest of the consumers, adding that the Company and its Directors will be liable for the loss to the consumer.
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First Published: Fri, Oct 24 2008. 03 14 PM IST