Litigation Against Company

Who Can Initiate Litigation Against Company ?

1. Consumers

   Consumer in general parlance means "one who consumes". A consumer who buys goods or avails of services of a company, may sue a company for any defects/ deficiency.

   • A consumer may file a complaint before MRTPC, for any "Unfair Trade Practices", adopted by the company (sec. 36 A of MRTP Act)

     The "Unfair Trade Practices" adopted by the company may relate to :

     • Making false representation of quality of goods or services
     • Giving a false guarantee or services.
     • Falsely representing a govt. the price
     • Gives a false advertisement

     (Sec. 10) a consumer may also file a complaint before MRTPC, for any "Restrictive Trade Practice", adopted by company

     The Restrictive Trade Pr actice, means a trade practice adopted by company in such a manner which :

     • Affects the competition,
     • Obstructs the free flow of capital, and
     • Imposes unjustified cost on the consumer. Sec. [2(0)]

     The MRTPC, on receipt of complaints from consumer in record to unfair / Restrictive Trade Practice, may pass such order, as it thinks fit.

   • A consumer may also approach the consumer forum, for any defects/ defeciency in goods brought or services availed from a company. However, under the consumer forum, he has to be a consumer, i.e. he should have bought the goods or hired services for his own personal use, and not for any commercial purpose.

     Example of " Defects in goods" may be :

     • New Television set brought not working properly,
     • New Car brought, not running smoothly

     Examples of " Services availed" may relate to :

     • Delay in allotment of flat,
     • Negligence in conducting operation

     Consumer forum is divided into three parts, according to jurisdiction.

     • Complaint, where value does not exceed Rs. 5 lakhs - District comm.
     • Complaint, where value does not exceed Rs. 20 lakhs, and above Rs. 5 lakhs. - State Commission.
     • Complaint over and above Rs.20 lakhs - National Commission.

     Advantages of consumer forum", is No Govt. fees, quick disposal and no need for lawyer.

   • People Associated With Company

     People, who transact business with the company, can also file a case against the company. Such people may be Sellers, Agents, Distributors, Money Lender etc.

     Many a times, company is not able to, or is unwilling to pay, to the :

     • Seller from whom it brought goods on credit,
     • Money lender from whom it borrowed certain sum of money,
     • Agent or Distributors, their due commission.

     In such circumstances, they can file a simple suit, for recovery in a civil court. If the recovery amount is less than Rs. 20 lakhs ( increased from 5 lakhs), then it has to be filed before district court. If the amount is more than this, then it will be filed before High Court ( In Delhi)

     • These people can also file a criminal case, if they feel they have been cheated by the company, or the company has committed some sort of fraud on them.
     • These people whose claims are due, may also file a wining up petition before High Court. However it is essential, that they should be named or termed as creditors, in the books of account of company.
     • Intent of Agents, Distributors, and even competitions has been also taken care of by MRTP act, 1969

     These people can file a complaint or make a reference to Director General for any restrictive trade practice by the company.

     Restrictive Trade Practice amount to:

     1. Restricting the dealer to deal only with company
     2. Restricting the agent to buy only specific product
     3. Placing a limit of minimum order to be secured by dealer
     4. Forcing the dealer / Agent to sell the product only at a fixed price etc.

     Where a reference is made to Director General, it may investigate into the affairs of company, and if thinks so, file a complaint before MRTPC.

   • Shareholders / Members

     Shareholders are integral part of the company. They have a right to participate in the General Meeting of the company, and in the general affairs of business.

     Shareholders can initiate a complaint before Company Law Board (C.L.B) for any of the following :

     1. Default in calling General Meeting of company
     2. Default in paying dividend, which has been declared.
     3. Default in transfer of shares
     4. Default in further allotment of shares.
     5. Any sort of oppression or Mismanagement committed upon minority
     6. Any other act in contravention of companies Act.

     Members can themselves wind up the company by passing a special resolution. Such an order of winding up shall be made by High Court.

     Members can also file a criminal complaints, before a criminal court, alleging misappropriation of money, any forgery committed, any fraudulent act.

   • Government

     In all the above noted points/ modes, the central / state government may suo moto initiate complaint, against the company before various tribunals/ courts.

     For example the Government may, make a reference to ;

     • Board for Industrial & Financial Reconstruction, for declaring the company to be " sick company".
     • Director General, under the MRTP Act, for any alleged unfair / Restrictive / Monopolistic Trade Practice.
     • Consumer forum, for any complaint regarding defects in goods or deficiency in services.
     • For winding up, in case of complaint received from minority members with respect to mismanagement, or oppression.

     ARBITRATION

     In recent years, to avoid litigation, there has been a general tendency and inclination towards, resolving the dispute before an independent ARBITRATOR.

     An Arbitration clause is incorporated in agreement, and any dispute, will be referred to Arbitrator, whose decision shall be final and finding.

     • If the company is unwilling to abide by Arbitration clause, then an application may be filed in High Court for Directing the company, to appoint an Arbitrator, and resolve the dispute.
     • Final order passed by Arbitrator, is called on " Award", and it is final and binding on parties. Appeal lies to High Court, only if, Arbitrator has acted malafide, biased, or failed to perform the duties