In a significant ruling that strengthens consumer rights, the Telangana High Court has affirmed that disputes related to chit funds are maintainable before consumer courts. The judgment came while dismissing a petition by a chit fund company challenging a district consumer commission's order to pay a homemaker her legitimate bid amount of Rs 10 lakh.
A Homemaker's Fight for Her Rightful Win
The case revolved around C Yoga Lakshmi, a 55-year-old homemaker from Hyderabad. She was a subscriber to a chit fund scheme with a total value of Rs 10 lakh operated by M/s Sreenilaya Chit Fund Pvt Ltd. In May 2020, she emerged as the successful bidder. However, despite providing the required sureties, the company repeatedly delayed her payout on various pretexts.
Left with no other recourse, Yoga Lakshmi approached the District Consumer Disputes Redressal Commission-III in Hyderabad. The chit fund company failed to file its written version or present evidence despite multiple opportunities granted by the commission.
On December 17, 2024, the consumer commission found the company guilty of unfair trade practices and a clear deficiency in service. It directed the company to pay Yoga Lakshmi the bid amount of Rs 8,90,000 along with 12% annual interest from the date of the bid. The commission also awarded her Rs 50,000 as compensation for mental agony and Rs 5,000 towards litigation costs.
High Court Rejects Jurisdictional Challenge
The chit fund company challenged this order in the Telangana High Court, primarily arguing that under Section 64 of the Chit Fund Act, 1982, only the Registrar of Chits had the jurisdiction to arbitrate such disputes, not consumer forums.
A division bench comprising Justice Moushumi Bhattacharya and Justice Gadi Praveen Kumar firmly rejected this argument. The court cited the Consumer Protection Act, 1986, which states its provisions are "in addition to and not in derogation of, other laws."
The bench emphasized that the Consumer Protection Act is a beneficial legislation designed to address consumer grievances swiftly. It clarified that any contention that consumer forums lack jurisdiction in chit fund matters "cannot be accepted." The court reiterated that a chit fund falls within the definition of "service" under Section 2(1)(o) of the Consumer Protection Act.
The judgment stated, "The intent of the legislation is clear that remedy under C.P.A. was in addition to any law in force at that time. The provision of subsequent legislation i.e. CPA in such a situation shall override the provision of older Statute i.e. Chit Fund Act, 1982."
A Victory for Middle-Class Subscribers
The court expressed strong disapproval of the petitioner company's conduct, noting it had bypassed alternative remedies and approached the high court with an unexplained delay. The bench upheld the consumer commission's findings, which reflected the company's attitude in trying to delay the legitimate payment.
Highlighting the importance of protecting ordinary investors, the judges observed, "Generally, the subscribers of the Chit mostly belong to middle income groups, who invest their hard earned money in chits for the purpose of future needs like education of their children, marriage, health or house construction etc."
The court concluded that the company's action of receiving subscriptions but failing to pay the legitimate chit amount to Yoga Lakshmi was unsustainable. Finding no merit in the petition, the Telangana High Court dismissed it on December 17, 2024, thereby allowing the consumer commission's order for payment to stand.
This ruling sets a crucial precedent, affirming that chit fund subscribers are consumers entitled to seek speedy redressal under the robust framework of the Consumer Protection Act, a vital safeguard for millions of Indians who participate in such savings schemes.
