Chapter: 3.1.3 Consumer Disputes relating to Defective Goods

Consumer Disputes relating to Defective Goods:

Supreme Court has in the MORGAN STANLEY case considered and has laid down the law on the question whether 'SHARES' for which application is made for allotment would be goods, whether a "PROSPECTIVE BUYER" of SHARES before ALLOTMENT could be called a consumer and whether an interim stay can be granted under Section 14 of the Act.

A. Supreme court has relied upon the definition of shares provided by the court in Commissioner Of Income Tax (Central) Calcutta v/s Standard Vaccum Oil Co. AIR 1996 S C1897:

"A SHARE IS NOT A SUM OF MONEY, IT REPRESENTS AN INTEREST MEASURED BY A SUM OF MONEY AND MADE UP OF DIVERSE RIGHTS CONTAINED IN THE CONTRACT AND EVIDENCE BY THE ARTICLES OF ASSOCIATION OF THE COMPANY."

The meaning of goods in COPRA is the same as defined under Sale of Goods Act 1930 which covers 'Shares' as well. 'Goods' means every kind of moveable property other than actionable claim and money and includes stocks and shares, growing crops, grass and things attached to and forming parts of the land which are agreed to be severed before sale or under the contract of sale. The Supreme court critically examined whether the 'Shares' for which an application is made for allotment would be 'Goods'.

HELD: "TILL THE ALLOTMENT OF SHARES TAKES PLACE, THE SHARES DO NOT EXIST AND THEREFORE THEY CAN NEVER BE CALLED AS GOODS"

B. At the stage of application, shares are not goods and a prospective buyer before allotment of shares cannot be called a ' Consumer A company building-up it's capital by issue of shares is not trading in such shares and therefore cannot be said to be engaged in unfair trade practices.