Chit fund dispute maintainable in consumer courts: Telangana High Court

The dispute originated when C Yoga Lakshmi (respondent No. 4), a 55-year-old homemaker and a subscriber to a chit value of Rs 10 lakh, became the successful bidder in May 2020. Despite furnishing the required sureties, the petitioner company postponed the payment of the bid amount on various pretexts. When she approached the District Consumer Disputes Redressal Commission-III, Hyderabad, the petitioner company failed to file a written version or present evidence despite multiple opportunities.

On December 17, 2024, the Commission found the company guilty of unfair trade practices and deficiency in service. It ordered the petitioner to pay a bid amount of Rs 8,90,000 with 12 per cent interest, along with Rs 50,000 for mental agony and Rs 5,000 in costs.

Jurisdictional dispute

The chit fund company challenged this order in the high court, primarily arguing that under Section 64 of the Chit Fund Act, 1982, only the Registrar of Chits has the jurisdiction to arbitrate such disputes. However, the high court rejected this, citing the Consumer Protection Act, 1986, which states its provisions are “in addition to…and not in derogation of, other laws”.

The court emphasised that the Consumer Protection Act is a beneficial legislation intended to address consumer grievances. It noted: “The intent of the legislation is clear that remedy under C.P.A. was in addition to any law in force at that time. The provision of subsequent legislation i.e. CPA in such a situation shall override the provision of older Statute i.e. Chit Fund Act, 1982.”

The bench expressed disappointment over the petitioner’s conduct, underlining that they bypassed alternative remedies and approached the high court with an abnormal delay without explanation. Regarding the impact on subscribers, the court remarked: “Generally, the subscribers of the Chit mostly belong to middle income groups, who invest their hard earned money in chits for the purpose of future needs like education of their children, marriage, health or house construction etc.”

Criticising the company’s evasion of its obligations, the judges stated: “The said findings recorded by the learned respondent No. 2 [Consumer Commission] reflect the attitude of the petitioner in trying to delay the payment in favour of respondent No. 4 [Yoga Lakshmi].”

They further added that “the action of the petitioner having received the subscription amount, failed to pay the legitimate chit amount in favour of respondent No. 4, cannot be sustained”.

Subsequently, the court found no reason to interfere with the original order and dismissed the writ petition.