16 October 2024 Civil Revision >> Civil & Consumer Law   |   Consumer Law >> Civil & Consumer Law  

The National Consumer Disputes Redressal Commission (NCDRC) has partly allowed a revision petition filed by a holding company, U.P. Electronics Corporation Ltd., clarifying that it cannot be held jointly and severally liable for the liabilities of its subsidiary, M/s. Uplease Financial Services Limited, in a consumer dispute case. This decision comes in light of the Supreme Court's ruling upholding the principle of separate legal existence for holding and subsidiary companies in financial matters.

The case originated from a complaint filed in 2000 by Mr. Rishi Agarwal with the District Consumer Disputes Redressal Commission-I, Lucknow, against M/s. Uplease Financial Services Limited for non-payment of a deposit of Rs. 1,00,000/- upon maturity and the subsequent dishonoring of a cheque. The District Commission ruled in favor of Mr. Agarwal in 2002, awarding him Rs. 1,13,441/- with interest and costs.

U.P. Electronics Corporation Ltd., the second opposite party in the original complaint, challenged this order before the State Commission, while M/s. Uplease Financial Services Limited did not. The State Commission dismissed the appeal in 2008, upholding the District Commission's order which held both entities jointly and severally liable.

Subsequently, U.P. Electronics Corporation Ltd. filed a Writ Petition before the Allahabad High Court, which was also dismissed in 2013 on the grounds of an available alternative remedy of revision under the Consumer Protection Act, 1986. This led to the present Revision Petition before the National Commission.

Despite repeated opportunities, none appeared for the respondents, including Mr. Rishi Agarwal and M/s. Uplease Financial Services Limited, before the National Commission after 2021. The Commission noted the continuous absence and proceeded with the hearing ex parte.

The primary contention raised by Ms. Lalita Kohli, the counsel for the petitioner, U.P. Electronics Corporation Ltd., relied on a Supreme Court judgment in the case of Regional Provident Fund Commissioner & Ors. v. ABS Spinning Orissa Ltd. & Anr. This judgment affirmed the Orissa High Court's decision that a holding company cannot be held liable for the provident fund dues of its subsidiary company, emphasizing the independent legal existence of each entity.

The National Commission, presided over by the bench, acknowledged this precedent. The order highlighted that there was no dispute regarding U.P. Electronics Corporation Ltd. being a holding company and M/s. Uplease Financial Services Limited being its subsidiary with a separate legal status. Furthermore, no evidence was presented to suggest any obligation or inherited liability on the part of the petitioner concerning the disputed amount.

The Commission also noted that it had previously permitted the executing court to proceed with attachment proceedings against M/s. Uplease Financial Services Limited, and it appeared that Mr. Rishi Agarwal might have received the decreed amount, although no formal confirmation was on record. The continuous absence of the respondent/complainant further supported this presumption.

Considering the legal precedent set by the Supreme Court and the apparent satisfaction of the decree against the subsidiary company, the National Commission partly allowed the revision petition. The order of the District Commission holding U.P. Electronics Corporation Ltd. jointly and severally liable was modified. The liability for the decreed amount now rests exclusively with the respondent no. 2, M/s. Uplease Financial Services Limited, which had not challenged the original order or contested the revision petition.

This order underscores the principle of distinct legal identities for holding and subsidiary companies in consumer dispute matters, aligning with established jurisprudence on corporate liability.

  Consumer Protection Act, 1986