Consumer Commission Empowered To Issue Arrest Warrant Against Director For Company's Failure To Comply With Orders: Delhi High Court

The Court stated that the power of Consumer Commissions to issue arrest warrants is derived from Section 71 of the Consumer Protection Act, 2019.

A single judge bench of Justice Sanjeev Narula was considering the petitioner's challenge to the order of the National Consumer Disputes Redressal Commission (NCDRC), which upheld the arrest warrants issued against the petitioner in the capacity of Director of a company, by the State Consumer Disputes Redressal Commission (SCDRC).

Respondent no. 1 had filed a complaint against the Company/VXL Realtors Pvt. Ltd (respondent no. 4), under Section 17 of CPA, alleging deficiency of services and unfair trade practices. SCDRC directed VXL to refund the entire amount paid by respondent no. 1 along with compensation. When VXL did not deposit the amount, respondent no. 1 filed an execution application for enforcement of SCDRC's order.

In the execution proceedings, warrants of arrest were issued against the directors of VXL and the petitioner was named as one of its directors. The petitioner's appeal to NCDRC failed and it upheld the warrant of arrest issued against him.

The petitioner contended that he was not appointed as a Director when the alleged deficiency of service and unfair trade practice occurred and therefore, the execution proceedings would not be applicable to him. The petitioner further contended that he was not responsible for the day to day business affairs VXL at the time of the commission of offence and provided his medical reports to argue that his health prevented him from managing it.

The High Court referred to Section 72 of the CP Act, which provides for penalty in case of non-compliance of a Consumer Commission's order. It noted that Section 72 empowers the Consumer Commissions with authority akin to a Judicial Magistrate and thus, has the authority to issue arrest warrants for any non-compliance of orders.

“Section 72 of the CP Act makes it abundantly clear that the objective of the provision is to enforce the orders of Consumer Commissions, by holding a company and its officers accountable for defying the directions of the Commissions. These Commissions are empowered with judicial authority akin to that of a Judicial Magistrate of the first class for the purpose of executing their directions. Hence, the issuance of arrest warrants against the directors of the Judgment Debtor Company for compelling compliance, is well within the ambit of the statutory framework of the CP Act.”

Here, the Court that the noted that the proceedings of SCDRC and NCDRC did not seek to determine the personal liability of directors, but to hold them accountable for non-compliance of SCDRC's order to pay the required amount and compensation to respondent no.1.

It stated that the petitioner being a director had a legal obligation to ensure VXL complies with the SCDRC's order. It noted that the petitioner's contention that he cannot be liable because he was not a director at the time of original cause of action was flawed because the order was not about his personal liability for acts of deficiency in service.

It thus stated that the issuance of arrest warrant was to ensure that the petitioner meets his legal obligations as a director of the company.

“As a director of the Company at the time of the enforcement proceedings, the Petitioner had a legal obligation to ensure that the Company complies with the SCDRC's directives. Therefore, the issuance of arrest warrants in this context is not an indictment of the Petitioner's personal liability, but rather a procedural mechanism to ensure that the Petitioner, as a director of the Judgment Debtor Company, meets with his obligations.”

With respect to the petitioner's contention that he was not in charge of day to day affairs of VXL, the Court again reiterated that the issue is not whether he was actively managing the company during a specific period, but rather with non-compliance of order. It also noted that petitioner's medical condition does not exempt him from the legal obligation to ensure the execution of SCDRC's order.

The petitioner also challenged the execution proceedings on the ground that the arrest warrants were issued under an incorrect provision of the CPC. The Court however stated that the State Commissions' power to direct enforcement of its orders is derived from Sections 71 and 72 of the CP Act.

Section 71 of the CP Act provides for the enforcement of an order by a Consumer Commission in the same manner as a decree passed by a civil court, incorporating the provisions of Order XXI of the CPC.

Here, the Court stated the issuance of arrest warrants was rooted in the power conferred by Section 72 of CP Act and not by Section 71, which outlines the enforcement mechanism.

The Court thus upheld the orders of SCDRC & NCDRC.

Case title: Rakesh Khanna vs. Naveen Kumar Aggarwal & Ors

Citation: 2024 LiveLaw (Del) 1099