INTRA-DEPARTMENT MOOT COURT COMPETITION, 2013

BEFORE THE CHANDIGARH CONSUMER COURT

In the matter of : CASE NO. .OF 2012

POSITION

OF P A R T I E S :

Ashok Kumar............................................................................................................COMPLAINANT

VERSUS

Bank Manager, IBI Bank, Chandigarh IBI Bank, Head office, Mumbai (Through its Chairman).........................................RESPONDENT

MOST RESPECTFULLY SUBMITTED COUNSEL FOR THE COMPLAINANT

CODE:

B7

W R I T T EN S U B M IS S IO N

ON

B E HA L F

O F T HE

C OM P L AIN AN T

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TABLE OF CONTENTS

INDEX OF AUTHORITIES ........................................................................................ 2

STATEMENT OF JURISDICTION ............................................................................... 4

STATEMENT OF FACTS .......................................................................................... 5 STATEMENT OF ISSUES .......................................................................................... 6 SUMMARY OF ARGUMENTS ............................................................................ 7 ARGUMENTS ADVANCED ....................................................................................... 9
I. WHETHER MISLEADING AND FRAUD BY MR. X AMOUNTS DEFICIENCY OF SERVICE? 9 The Principle Of Utmost Good Faith : ............................................................................... 9 Fraud as per Law of Torts : .............................................................................................. 10 Unfair Trade Practices ..................................................................................................... 10 Insurance- Contractual Obligation ................................................................................... 11 II. WHETHER IBI BANK
WAS RIGHT IN MAKING THE DEDUCTIONS WHEN THE POLICY

WAS RETURNED ON THE ACCOUNT OF FRAUD AND MISREPRESENTATION? ....................... 12

Free Look Clause : ........................................................................................................... 12 Fraud Vitiates Everything ................................................................................................ 12 III. WHETHER
THE

IBI BANK

IS LIABLE TO PAY INTEREST ON THE DELAY CAUSED IN

REFUNDING, COMPENSATION FOR MENTAL AGONY AND LITIGATION FEE OF THE COMPLAINANTS? .................................................................................................................. 14

Interest for Delayed Refund ............................................................................................. 14 Mental Agony .................................................................................................................. 15 Litigation Fee ................................................................................................................... 15

PRAYER ..................................................................................................................... 16

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INDEX OF AUTHORITIES
BOOKS: Dr. Avtar Singh, Law Of Consumer Protection, 4th Edition, Eastern Book Company, Lucknow Dr. Durga Das Basu, The Law Of Torts, 12th Edition, 2006, Kamal Law House , Kolkata Justice M.B. Shah, Landmark Judgments On Consumer Protection, 2005, Universal Law Publishing Co. Mallick, Indian Contract Act, 2nd Edition, 2008, Kamal Law House Kolkata, Mark Lunney and Ken Oliphant, Tort Law-Text And Materials, 1st Edition, 2008, Oxford University Press P.C. Markanda, The Law Of Contract, 1st Edition, Volume2, 2006, Wadhwa & Company Nagpur, India P.K. Majumdar, Law Of Consumer In India, 6th Edition, Volume 2, 2010, Orient Publishing Company Prof. K. Elumalais, Consumer Protection Act And Banking Service, 1st Edition, 2008, Law Publishers Pvt. Ltd S.M. Suri and Pradeep Bahl, Consumer Protection Judgments, Volume I, II, III, 2012, D.L.T. Publications S.Malik, Commentries on The Consumer Protection Act, 1986, 2nd Edition, 2002, Law Publishers Pvt. Ltd. Surendra Malik and Sudeep Malik, Supreme Court ON Contract And Specific Relief, Volume 2, 2009, Eastern Book Company

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CASES:

Derry v. Peek, (1889) 14 AC 337 Brownlie v. Campbell, 1880), 5 App Case 925 The United India Insurance Company v. M/s. M.K.J. Corporation, 1996, (2) CPC 310 Kandla v. Essar Oil Ltd. Lazarus Estate Ltd. Vs. Beasley, (1956) 1 QB 702 Budh Ram and others v. State of Haryana and Others

CONSTITUTION: The Constitution of India, 1950

STATUTES: The Consumer Protection Act, 1986 The Indian Contract Act, 1972 The Interest Act ,1978 The Insurance Act,1938 Law of Torts

MISCELLANEOUS:

Insurance Regulatory and Development Agency Guidelines (IRDA)

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STATEMENT OF JURISDICTION

It is most humbly submitted before this Honble Court that in pursuant to section 11 of the Consumer Protection Act, 1986, a complaint shall lie to the District Consumer Forum when the value of goods does not exceed twenty lakhs, neither the value of the policy not the claim exceeds twenty lakhs. The jurisdiction of the above said forum is even territorially completed as for a complaint to lie in the Chandigarh District Forum according to section 11(2)(b) any of the opposite parties, where there are more than one, at the time of institution of complaint, actually or voluntarily resides, or carries on business or has a branch office within the local limits of the Forum. The instance case is where IBI Bank has a branch office and carries on its business within the local limits of the jurisdiction. This Forum has the jurisdiction to decide the instant case. The complaint according to section 12(1)(a) shall only be filed by the consumer to whom such goods are sold or delivered or agreed to be sold or delivered or such a service provided or agreed to be provided. The instant matter is even maintainable before this forum as the complainants have approached this forum for the compensation to be paid and the amount to be refunded where there is a deficiency of service by the bank for which the there was a consideration for that service. It is further provided under section 12, the admissibility of a complaint to be decided within 21 days from the date on which the complaint was received. Provided under section 12 of the act where a complaint has been admitted by this forum, it shall not be transferred to any other court or tribunal or any other authority set up by or under any other law for the time being in force. This court has the jurisdiction under section 14(1)(c) to return to the complainant the price, or, as the case may be the charges paid by the complainant and under section 14(1)(d) to pay such amount as may be awarded by it as compensation to the consumer for any loss or injury suffered by the complainant due to the negligence of the opposite party.

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STATEMENT OF FACTS
Ashok Kumar is a retired Chief Engineer and is a resident of Chandigarh. He has maintained a savings account with IBI Bank since 2000 and routinely invested in their investment schemes. On his retirement he received retiral benefits which he wished to invest in IBI Bank as an old age guarantee. Mr. X (Investment Manager at IBI) used to advise him about his investment decision. Mr. X advised Ashok to invest in a policy where he had to invest Rs.50,000 only once and would get at least 45% return after 10 years. He further advised him to disinvest from his present policy where he invested Rs.25000 for 3 years and an year was still left. On cancellation he received Rs.24,300 on October 7,2010 as he was penalised by investment fund manager. Ashok Kumar purchased the policy on October 10, 2010 where he was made sure that Rs.50,000 had to be paid only once. Based on his understanding he signed the policy document. On receiving the policy document after a fortnight on October 22, 2010 he was shocked to find out that he had to deposit Rs.50,000 every year for 10 years. As per the free look clause the policy could be returned within 15 days of receiving the same if the investor was not satisfied. The refund was subject to the deductions of administrative charges and stock market fluctuations as the bank invests the money in private securities. Wasting no time he returned the policy document to the head office requesting the amount to be refunded without any deduction as he was cancelling the policy on the ground of being misled which was conveyed to the bank in his request letter on October 23, 2010. The same was acknowledged by the bank on October 28, 2010. On not getting refund for three months he sent a reminder to the bank shortly after which on February 3, 2011 bank refunded a sum of Rs.48,500. The refund was accompanied with a letter explaining deduction due to stock market fluctuations. Mr. Ashok Kumar in order to redress his grievance filed a case in consumer court and wished to punish the bank for cheating and monetary loss.

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STATEMENT OF ISSUES
1 Whether misleading by Mr. X amounts to fraud and thus deficiency of services. 2 Whether IBI Bank was right in making the deductions when the policy was returned on the account of fraud and misrepresentation. 3 Whether the IBI Bank is liable to pay interest on the delay caused in refunding, compensation for mental agony and litigation fee of the complainants.

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SUMMARY OF ARGUMENTS
1. Whether misleading and fraud by Mr. X amounts deficiency of service?

The act of IBI Bank amount to deficiency of service as Deficiency defined under section 2(1)(g) of the Consumer Protection Act, 1986 .The basic principle or doctrine of insurance policy is uberrima fides which is the doctrine of utmost good faith. It is the duty of the insurer to disclose all material facts truly to the person getting the policy. Mr. X made a false representation of the policy telling Ashok Kumar to be one time investment policy instead it being an annual premium policy. Clause (r) of the consumer protection act defines unfair trade practices as a trade practice which, for the purpose of promoting the sale, use or supply of any good or for provision of any service. Insurance policy being a contractual obligation and the policy in the instant case being made to sign by fraud. The suggestion should be as to a fact which in the instant case was concerning the most important fact of premium which Mr. X stated to be one time premium instead of being an every year payment of Rs.50,000. Thus it can be clearly made out that the intention of Mr. X was to induce Ashok Kumar to sign the policy which he did sign, which amounts to deficiency of service by IBI Bank.

2.

Whether IBI Bank was right in making the deductions when the policy was returned on the account of fraud and misrepresentation?

The policy that was entered into by Mr. Ashok Kumar contained a free look period clause according to which if the investor is not satisfied with the terms and conditions of the policy, he could return the policy within fifteen days of receiving the policy and get his principle investment back subject to deduction of administrative charges and any fluctuations in stock market. The question of not being satisfied with terms and conditions of the policy does not arise as the payment of premium is the basic essence and fact of any policy. Fraud being committed by Mr. X by wrong statement of this fact was the only reason which led Ashok Kumar to return the policy.

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Denning LJ in one the case observed, "I cannot accede to this argument for a moment, no Court in this land will allow a person to keep an advantage which he has obtained by fraud. No judgment of a Court, no order of a Minister, can be allowed to stand if it has been obtained by fraud. Fraud unravels everything. The Court is careful not to find fraud unless it is distinctly pleaded and proved; but once it is proved it vitiates judgments, contracts and all transactions whatsoever." It is even general principals of equity that in case of fraud the benefit arising to the benefactor must be restored back to the deceived party. With Mr. X committing fraud, the complainant suffered a damage of Rs.1,500 on the new policy and Rs.700 the interest or maturity amount on the old policy which Mr. Ashok Kumar had cancelled so as to take up the new policy. So IBI Bank is liable to refund the whole amount.

3.

Whether the IBI Bank is liable to pay interest on the delay caused in refunding, compensation for mental agony and litigation fee of the complainants?

Complainant had purchased the policy only when he was fraudently made to understand by Mr. X that the premium had to be paid just once i.e. Rs.50,000 to be paid one time instead on paying Rs.50,000 annually. The refund was made after more than three months of the acknowledging the request. The refund was demanded on 23 rd October,2010 but the same was refunded on 3rd feburary,2011 and that too with deductions of Rs.1,500 made wrongly. When the earlier policy was cancelled the amount for the same was credited to the complainants account within 3 days, though the refund demanded for a policy which did not have a valid consent, and was still in free look period took three months is unreasonable and arbitrary. The Interest on the amount refunded should be paid. The compensation for the mental agony caused to the complainant should also be paid as Mr. X, knowing that the money Mr Ashok Kumar was investing was out of his retiral benefits and he was in great need of the money.

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ARGUMENTS ADVANCED

I.

WHETHER MISLEADING AND FRAUD BY MR. X AMOUNTS DEFICIENCY OF

SERVICE?

Deficiency according to section 2(1)(g) of the consumer protection act, 1986 means any fault, imperfection shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service.1 The Principle Of Utmost Good Faith : The basic principle or doctrine of insurance policy is uberrima fides which is the doctrine of utmost good faith. It is the duty of the insurer to disclose all material facts truly to the person purchasing the policy. The advice given to the investor or the policy purchaser is included in the service that the company/bank provides. It is the duty of the agent/servant of that company to see into the requirements of the person and advice him accordingly. Mr. X in the instant case instead of disclosing full and correct information about the policy advised him to invest in a policy fraudently. Further in the matter of The United India Insurance Company v. M/s. M.K.J. Corporation2 Honble Supreme Court held that both parties have a duty to disclose all material facts within their knowledge as insurance policy is a contract of good faith.

1 2

S. 2(1)(g), Consumer Protection Act, 1986 1996, (2) CPC 310

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Fraud as per Law of Torts : Fraud according to law of torts is committed when (i) the defendant makes a false representation, (ii) the defendant made it fraudently i.e. knowing it to be false or not knowing it to be true, (iii) the plaintiff made it with an intent that the plaintiff should act on it, (iv) the plaintiff by acting on it sustains damage3. Mr. X made a false representation about the policy telling Ashok Kumar to be one time investment policy instead it being an annual premium policy. Mr. X being an employee of IBI bank has a job to advice the policy takers and it is the most reasonable and implied presumption that he knew the true terms about the policy. He knew the exact type of policy Mr. Ashok Kumar wanted and suggested this policy misrepresenting the terms with an intention that Ashok Kumar will act upon his understanding and sign the policy. In Derry v. Peek4, it was held In an 'action of deceit the plaintiff must prove actual fraud. Fraud is proved when it is shown that a false representation has been made knowingly, or without belief in its truth, or recklessly, without caring whether it be true or false. In the case of Brownlie v. Campbell5, if one knows any circumstance at all which may influence the underwriters opinion as to the risk he is incurring, there is an obligation to disclose. Unfair Trade Practices Clause (r) of Section 2 ,Consumer Protection Act defines unfair trade practices as a trade practice which, for the purpose of promoting the sale, use or supply of any good or for provision of any service. As per S. 2(1)(r)(1) the practise of making any statement, whether orally or in writing or by visible misrepresentation which as per (ii) falsely represents the services of a particular standard, quality or grade and as per (vi) makes a false or misleading representation concerning the need for and usefulness of, any goods or services.
3 4 5

Deciet, Law of torts (1889) 14 AC 337 (1880), 5 App Case 925

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Mr. X for selling the policy to Mr. Ashok Kumar falsely represented the policy to be a one time investment policy and mislead Mr. Ashok Kumar to take up a policy which he would not have taken if the true facts were stated by Mr. X. Further Mr. Ashok Kumar would not have cancelled the policy he took up two years earlier.

Insurance- Contractual Obligation Insurance policy being a contractual obligation and the policy in the instant case being made to sign by fraud, the essentials of fraud and misrepresentation under the contract act are important to be looked into. In accordance with section 17 of the Indian contract act fraud means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent with an intent to deceive another party or his agent, or to induce him to enter into contract when there is a suggestion, as a fact, which is not true, by one not believing it to be true6. Mr. X in the instant case did suggest Ashok Kumar to enter into a policy stating the facts which were not true knowing it not to be true. The suggestion should be as to a fact which in the instant case was concerning the most important fact of premium which Mr. X stated to be one time premium instead of being an every year payment of Rs.50,000. Thus the fact suggested was not true and it was made by Mr. X which did not believe it to be true. The intention of Mr. X was to induce Ashok Kumar to sign the policy which he did sign. Moreover the relationship between investment manager and the complainant is a fiduciary relationship and the breach of trust by such a person is arbitrary. It is the duty of the bank to disclose correct facts about the service being purchased. On investing Rs.50,000 in the policy suggested by Mr X, the consideration for the services of Mr X has been paid. Thus committing fraud on the terms of the policy amounts to deficiency of service.

Section 17, Indian Contract Act

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II.
THE

WHETHER IBI BANK

POLICY WAS

WAS RIGHT IN MAKING THE DEDUCTIONS WHEN ON THE ACCOUNT OF FRAUD AND

RETURNED

MISREPRESENTATION?

Free Look Clause : The policy that was entered into by Mr. Ashok Kumar contained a free look period clause according to which, if the investor is not satisfied with the terms and conditions of the policy, he could return the policy within fifteen days of receiving the policy and get his principle investment back subject to deduction of administrative charges and any fluctuations in stock market. The question of not being satisfied with terms and conditions of the policy does not arise as the payment of premium is the basic essence and fact of any policy is not agreed with. Fraud being committed by Mr. X by wrong statement of this fact was the only reason which led the complainant to return the policy. Ashok Kumar even accompanied his cancellation request with a letter stating his reason for cancellation of policy to be fraud and misleading by Mr. X about the most material fact about the policy. Fraud Vitiates Everything It is a well-established fact that fraud vitiates everything. Hon'ble Supreme Court in Commissioner of Customs, Kandla v. Essar Oil Ltd. was cited to point out from paragraph 31 of the judgment that fraud vitiates every solemn act. Fraud and justice never dwell together and that fraud is anathema to all equitable principles.

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Moreover in the case of Lazarus Estate Ltd. Vs. Beasley7, A fraud is an act of deliberate deception with the design of securing something by taking unfair advantage of another. It is a deception in order to gain by another's loss. It is a cheating intended to get an advantage." Denning LJ further observed, "I cannot accede to this argument for a moment, no Court in this land will allow a person to keep an advantage which he has obtained by fraud. No judgment of a Court, no order of a Minister, can be allowed to stand if it has been obtained by fraud. Fraud unravels everything. The Court is careful not to find fraud unless it is distinctly pleaded and proved; but once it is proved it vitiates judgments, contracts and all transactions whatsoever." It was held by the Honble Punjab and Haryana High Court "No judgment of a Court, no order of a Minister, can be allowed to stand if it has been obtained by fraud. Fraud unravels everything." Also In the ordinary course, once the mistake caused by fraud or otherwise is corrected, the benefits flowing from such mistake must also be reversed and restored to the benefactor. 8 All benefits gained by the bank for the fraud committed by Mr X must thus be restored to Ashok Kumar and all contracts and transactions must be vitiated. When consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused. A party to contract, whose consent was caused by fraud or misrepresentation, may, if he thinks fit, insist that the contract shall be performed, and that he shall be put in the position in which he would have been if the representations made had been true. It is even general principals of equity that in case of fraud the benefit arising to the benefactor must be restored back to the deceived party. IBI bank is thus liable to refund the full amount to Mr Ashok Kumar. Moreover the complainant cancelled the earlier policy on the fraudulent understanding made by Mr. X that new policy is a much better one and the policy was cancelled with the sole intention of talking the new policy where a premium of Rs.50,000 to be paid once. With Mr. X
7 8

(1956) 1 QB 702 Budh Ram and others v. State of Haryana and Others

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committing fraud, the complainant suffered a damage of Rs.1,500 on the new policy and Rs.700 and the interest or maturity amount on the old policy which Mr. Ashok Kumar had cancelled so as to take up the new policy.

III.

WHETHER

THE

IBI BANK

IS LIABLE TO PAY INTEREST ON THE DELAY

CAUSED IN REFUNDING, COMPENSATION FOR MENTAL AGONY AND LITIGATION FEE OF THE COMPLAINANTS?

Interest for Delayed Refund Complainant had purchased the policy only when he was fraudently made to understand by Mr. X that the premium had to be paid just once i.e. Rs.50,000 to be paid one time instead on paying Rs.50,000 annually. Thus fraud committed by Mr. X was the only and the prime reason for which the complainant cancelled the policy. The refund was made after more than three months of the acknowledging the request. The refund was demanded on 23rd October,2010 but the same was refunded on 3rd feburary,2011 and that too with deductions of Rs.1,500 made wrongly. When the earlier policy was cancelled the amount for the same was credited to the complainants account within 3 days, though the refund demanded for a policy which did not have a valid consent, and was still in free look period took three months is unreasonable and arbitrary. The IBI Bank should thus be liable to pay interest on Rs.50,000 at the rate this court may deem fit for the three months unreasonable delay that was caused. The complainant would earn a reasonable income on his investment if he had invested somewhere else or the fraud on the part of IBI Bank had not been committed. According to the Interest Act,1978 Section 3 clause (1) In any proceedings for the recovery of any debt or damages or in any proceedings in which a claim for interest in respect of any debt or damages already paid is made, the court may, if it thinks fit, allow
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interest to the person entitled to the debt or damages or to the person making such claim, as the case may be, at a rate not exceeding the current rate of interest, for the whole or part of the following period.9 Further court as per Section 2(1) of the Interest Act,1978 defines it to be a court of law, a tribunal and an arbitrator. Thus the definition is exclusive and the present forum has the jurisdiction to consider the act. Mental Agony The compensation for the mental agony caused to the complainant should also be paid as Mr. X, knowing that the money Mr Ashok Kumar was investing was out of his retiral benefits and he was in great need of money. The IBI Bank even caused a delay in refund which was unreasonable and the amount was refunded after a reminder being sent to the bank as well as to Mr X. The complainant was a retired chief engineer and any person at that stage would be in a need of money for consumption or for investing so as to use that in future. Adequate compensation for the mental agony caused to Mr Ashok Kumar for the fraud committed is humbly demanded from IBI Bank. Litigation Fee IBI Bank Should also be liable to pay litigation fee of the counsel for the complainant as the litigation fee is also the damage suffered by Mr Ashok Kumar as to the fraud committed by Mr X.

Section 3, Intrest Act, 1978

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PRAYER

Wherefore in light of the issues raised, arguments advanced and authorities cited, it is humbly prayed that this Honble Court may be pleased to: Order IBI Bank to grant a full refund of Rs50,000 by paying Rs.1,500 more which they had wrongfully deducted Declare interest on the delayed refund of principal amount, compensation for mental agony and litigation fee of complainants counsel. Order IBI bank to restore the positions of parties as on 30th September, ask IBI bank to refrain from such practices and decide the issue in favor of the Mr. Ashok Kumar on merits. And pass any other order that this Honble Court may deem fit in the interests of justice, equity and good conscience. All of which is humbly prayed, B7, Counsel for the Complainant.

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