SARLA JAIN Vs. UNIT TRUST OF INDIA

JUDGEMENT

(1.) Since common questions of law are involved in these two complaints, they are being disposed of by a single judgment. The complaints have been filed on the allegations that the complainants on the dates mentioned in the complaints advanced amounts mentioned in the complaints to one Shri Prem Parkash Gupta, R/o 66, Model Basti, New Delhi against the units issued by the Unit Trust of India (hereinafter called the Trust) belonging to him and also to his clients with transfer deeds over which Shri Gupta stated to have complete ownership, with full powers to pledge or sell the same at his will and discretion. The unit certificates were given as security for the loan advanced by them to Shri Prem Parkash Gupta who defaulted in the repayment of the loans advanced to him. The complainants approached the Unit Trust of India to verify the genuinness of the units pledged as security to the complainants, when news in the press appeared of shady dealings of the said Shri Prem Parkash Gupta. According to the complainants, the Trust to the query made by them replied that the units of large denominations offered as security by Shri Gupta have been tampered with and forged and that number of units with the Unit Certificate covered were inflated both in figures and words to a very high number. The complainants case is that because of the unit certificates having been inflated they are unable to recover the loans by means of the security offered to them. In the premises the complainants contend that they have suffered the loss mentioned in the respective complaints as a result of deficiency in the services offered by the Trust to the beneficiary of such service in that the Trust failed to observe and follow the elementary rules of caution and safety by simply typing by an ordinary commercial typewriter, the number of units, in figures and words on the unit certificates issued by them which were tampered with and forged in such a manner that it was undetectable by the naked eye, causing financial loss to the complainants who reasonably believed that they could rely on the genuinness of the unit certificates on the basis of which they advanced the loans, The complainants accordingly pray that they be awarded appropriate damages on account of financial losses suffered by them due to the negligence of the Trust.

(2.) The respondent in its reply by way of preliminary objection urge that the complaints are barred under Sec.37 of the Unit Trust of India Act, 1963 (hereafter called the Act) that the transfer of the unit certificates in question is not valid and, therefore, no right accrues to the complainants to file the present proceedings; further under the Act the Trust is empowered to impose conditions subject to which a unit holder can transfer units, and that such condition is printed at the bottom of the certificates in question. The complainants having failed to comply with the said condition have no right whatsoever to allege 'deficiency' in service on behalf of the Trust. The respondent further allege that there is neither any deficiency as envisaged in the Act nor any negligence in the unit certificates in question and therefore the complaints against the trust are misconceived in law. Besides, the units are not goods and cannot be pledged and, therefore the entire premises of the complaints are wrong. According to the trust the stage of rendering service to the complainants did, not arise in the instant cases because the complainants have not approached/filed any application for registration of the units in the prescribed form. The complainants are not entitled to recover any amount on the basis of the forged unit certificates, as they have failed to make any query about the genuinness of the certificates. The respondents deny any loan having been advanced by the complainants for want of knowledge. The trust denies that the complainant is a beneficiary of any service of the trust as a consumer or otherwise.

(3.) The complainants in their counter to the reply reiterating the averments made in the complaints allege that under the Unit Trust Scheme they are not debarred from holding units on blank transfer forms as security for any advance; that the certificates are normally to be presumed as proof of the number of units mentioned in the certificates; and that the units are taken as standard security even by the Banks who accept them on blank transfer forms as pledge. The complainant's case is that it was not obligatory for them to approach the trust for transfer of the ownership of the units as the same remain property of the borrower of funds and that this is an accepted universal practice for raising commercial loans.