Sucheta Dalal :A consumer welfare fund to appropriate people’s money
Sucheta Dalal

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A consumer welfare fund to appropriate people’s money  

March 19, 2010

Binty, a Delhi-based voluntary consumer organisation, has formulated a draft Consumer Welfare Fund Act, which aims at "recovery and consolidation of unclaimed and un-remitted money of consumers lying in waste in various commercial set-ups, e.g., banking, insurance, telecom, pharmaceutical companies, airlines, and State sales tax departments.”


It has proposed the creation of a Consumer Welfare Fund, which is separate from the one that already operates under the Consumer Affairs Ministry. According to its background paper, "the proposed Fund need not have any bearing/linkage with the Planned and Unplanned Revenue/Expenditure, Consolidated Fund and the existing CWF Fund under the Central Excise Act. The proposed Fund could be created under an Act of Parliament with special provisions for its management—assisted by staff nominated by consumer organisations in the Central Consumer Protection Council by rotation, supervised by an officer of the level of Additional Secretary, and audited annually by (the) Comptroller & Auditor General of India—and utilisation.”


Binty claims a mandate from the Ministry of Consumer Affairs to draft such an Act.

It had organised a competition to gather ideas on how to recover money from these government agencies and ministries. On 30 January 2010, it held a meeting in Delhi to discuss what it calls the draft ‘Consumer Welfare Fund Bill’ under the ‘guidance of Dr Raghubir Singh, former law secretary to the government’.


Since this round did not cover the ‘recovery’ of funds lying unclaimed/unremitted for over five years from the Income-Tax department and the Provident Fund Commissioner, it plans a second round of discussions which will be held on 20th March to figure out how to get these funds credited to the Consumer Welfare Fund, writes G C Mathur, Convenor-Trustee Treasurer of Binty. 


It has proposed that that the Central government must pass orders to transfer all such monies to the Consumer Welfare Fund. These include:
• Amounts recovered from pharmaceutical companies by the National Pharmaceutical Pricing Authority for overcharging consumers
• Unclaimed deposits, by whatever name called, lying with a banking company for not less than ten years
• Unclaimed deposits or claim proceeds lying with an insurance company for not less than ten years
• Any commission charged by an airline from the customers and not actually passed on to the commission agents
• Any other amount which may be prescribed.


In addition, it wants State governments to transfer any excess sales tax or value-added tax or any other amount as may be "prescribed.”


According to the draft, “the money credited to the Fund shall be utilised by the Trustee Committee for the welfare of the consumers in accordance with such rules as the appropriate Government may make in this behalf.” 

A similar attempt to seize and utilise unclaimed dividends and redemption money belonging to investors under the Investor Education & Protection Fund (IEPF) has ended up with the Consolidated Fund of India (CFI). The Finance Ministry demanded that nearly Rs400 crore collected by companies through an amendment to the Companies Act (under section 205C) would have to be transferred to the CFI and the IEPF could draw only as much as it hoped to spend in a given year.

The Binty Bill tries to get around this by prescribing that "The Trustee Committee" set up to administer this fund "shall be a body corporate having perpetual succession and a common seal with power to acquire, hold and dispose of property and shall, by the said name, sue and be sued.”


It will be packed by the usual government officials from the ministry and will have a three-year term. It specifically provides that all money collected under the Fund shall be deposited "in any scheduled bank or invest the same in debt instruments of any corporation owned or controlled by the appropriate Government or in loans floated by the appropriate Government or in any other manner as the appropriate Government may, from time to time, direct.”


The proposed legislation also provides to bar actions under this Bill from the jurisdiction of civil courts.

Stunningly, the Trustee Committee will also have enforcement powers to ensure transfer of funds by investing it with the "power to summon witnesses and take evidence" including enforcement of attendance, requirement of documents and examination of witnesses etc.


Interestingly, the transfer of funds sought under this Act as well the extraordinarily wide-ranging powers demanded are completely at variance from the background paper. This paper is all about companies bilking consumers under the bland "local taxes extra" legend printed on all price tags.


The convener of Binty is before the National Consumer Disputes Redressal Commission (NCDRC) (Case No.OP-65/2003) on the claim that such over-charging adds up to a stupendous Rs50,000 crore every year. Similarly, it claims funding of VAT charged to consumers, but doesn't say how the funds can be transferred to the government unless the Trustee Committee ends up as another investigation agency to go after the fudging of bills and invoices by traders.


What is astonishing about this exercise, which is apparently being encouraged by the Ministry, is that it completely ignores the fact that large sums of money belonging to individuals, traders and businesses are appropriated by the government and remain impounded with it because of slow, corrupt and inefficient processes.


Deposits with nationalised banks are often unclaimed because succession laws are faulty and the depositors or their heirs are locked in legal battles for decades. The five-year or 10-year period for transfer of money is ridiculously short, when an average civil dispute takes 25 years for ultimate resolution.


Instead of examining ways of making the system more efficient, the government is keener to grab these funds and transfer them, eventually, to the consolidated fund of India.—Sucheta Dalal

-- Sucheta Dalal