AMIYA KUMAR MONDAL vs W.B.Financial Corporation

THE instant complaint has been filed by one Sri Amiya Kumar Mondal as director of M/s. S.M. Cold Storage (Pvt.) Ltd., hereinafter referred to as company against the opposite parties praying inter alia for direction to pay the sum of Rs. 9.5 lakhs to the company by the West Bengal Financial Corporation the opposite party No. 1 and the Secretary, to the Govt, of West Bengal Commerce and Industries Department, the opposite party No. 2.

THE case of the Complainant, in short is that the company established a Cold Storage by taking loan of Rs. 50 lakhs on interest @ 16.5% per annum from opposite party No. 1 at the industrially backward area in the District of Bankura for which the company is entitled to receive the central subsidy from the Central Government as per present industrial development policy and looking to the said aspect the complaint invested such huge amount by borrowing from opposite party No. 1 in the backward area of Bankura District, and that the opposite party No. 1 sponsored the case of the complainant for grant of subsidy to its assisted unit to the State Level Committee, Govt, of West Bengal which in its 59th meeting held on 30.12.87 recommended sanction of Rs. 23.75 lakhs in favour of the company and the opposite party No. 1 was authorised to disburse the subsidy of Rs. 23.75 lakhs very carefully in accordance with rules. It is further case of the complainant that with a view to start the Cold Storage to store potatoes in the ensuing potato season during March-April 1988 in view that the subsidy amount was not still then disbursed by the opposite party No. 1, sought for a mid-term loan from the opposite party No. 3. THE opposite party No. 3 sanctioned the mid-term loan of Rs. 23.75 lakhs to the company as the opposite party No. 1 stood as guarantor who undertook to repay the loan to the Opposite party No. 3 to the extent of Rs.23.75 lakhs and for that the company however created a second charge on the movable and immovable assets of the company upon consent of the opposite party No. 1 as the first charge of the said assets remained with it, and that the subsidy amount of Rs.23.75 lakhs was lastly disbursed on 22.2.90 after more than 2 years from the date of recommendation on 30.12.87 and for this delay the opposite party No. 3 charged with interest of Rs. 9.36 lakhs on the mid-term loan granted to the company and the company sought for reimbursement of the said interest amount of Rs. 9.36 lakhs from the opposite party No. 1. The Complainant also relied upon letter dt. 13.3.90 written to the opposite party No. 2 Annexure "E" to the petition of complaint and the opposite party No. 2 in reply to the said letter called for an explanation from the opposite party No. 1 to clarify the delay in disbursement of the subsidy by his letter dt. 9.4.1990 being Annexure "F" to the complaint petition and that the complainant also referred to certain letters dt. 20.10.89 Annexure "J" and letter dt. 15.1.90 Annexure "L" to the written version filed by the opposite party No. 1 that the opposite party No. 1 received the reimbursement of the subsidy before disbursement of the subsidy to the industries undertakings who were claimants of the subsidy which is contradictory to the rules and that the complainant further relied on the letters dt. 25.4.90 and 12.6.90 addressed by the opposite party No. 1 to the Dy. Secretary, Ministry of Industries, Govt, of India, New Delhi claiming the interest on the subsidy amount reimbursed in its behalf to the opposite party No. 1 after long delay. The case made out by the opposite party No.1 is that amongst others defences it totally denied its liability to pay any compensation to the company besides raising various points on the point of maintainability of the complaint under provisions of the Consumer Protection Act, 1986 and also contended that neither the complainant nor the company is a consumer within the meaning of the said Act and that collection of subsidy from the Central Govt. Investment subsidy scheme is free service and without any charge and do not fall within services as defined in the said Act and that delay in reimbursement of the Central Investment subsidy is not the fault either of the opposite party No.1 or of the opposite party No.2 and that the complainant is not entitled to file this complaint on behalf of the complainant when the company is separate juristic person and so on.

The opposite party No. 2 did not file any separate version and the opposite party No. 3 in its written version supported the case of the complain-ant.

IN view of the pleadings and counter pleadings and respective submissions and counter submissions put forward by the respective parties the following issues are framed for adjudication of the dispute :- (1) Is the petition of complainant maintainable ? (2) Did the company hire any services from the opposite parties ? (3) Was there any deficiency in service rendered by the opposite party No.1 ? (4) Was there any negligence on the part of the opposite party No.1 to disburse and get reimbursement of the subsidy ? (5) Was there any duty cast upon the opposite party No.1 to disburse the subsidy before taking the reimbursement of the central subsidy ? (6) Is there any obligation on the part of the opposite party No.1 to pay the interest to the company or to the opposite party No. 3 arising out of the guarantee to pay the opposite party No. 3 the sum of Rs.23.75 lakhs ?

That for the sake of convenience all the issues are taken together for decision. But before delving deep into the crux of the problem let us su-up the issue as follows: (1) M/s. S.M. Cold Storage (P) Ltd. (The Company), located in a backward area. (2) It is an assisted unit of WBFC (Vide Page 4, Para 2(c) of the written objection of WBFC). (3) The Directorate of Agricultural Marketing, West Bengal, permitted the Company on 13.1.87 to set up a Cold Storage, with a Capacity of 10,000 M.T. for preservation of Potatoes. (4) Fixed Capital investment was estimated at Rs. 85.01 lakhs. (5) The Company on 4.7.86 made a Loan Application to WBFC for a Loan of Rs. 50 lacs, by way of having their services, inter-alia, on a consideration of payments of interest @ 16.5%. (6) The letter dt. 18.8.86 of WBFC, shows, the Sanction of Loan of Rs. 50 lacs to the Company, on "Condition, of raising Central Subsidy of Rs. 25 lakhs".

(7) Company filed relevant documents of Sanction of Loan by WBFC & payment of interest of a large sum of amount to WBFC. Not denied by WBFC and herein the Company. is the assisted Unit of WBFC (Vide Page 4 Para 2(c) of the written objection of WBFC, as it was submitted. (8) Annex. ''A'' of the Complaint shows, "WBFC who are the disbursing Agent, have recommended for sanction of Rs. 23.75 lakhs to-the Company, as Central INvestment Subsidy for the Project". (9) It was stipulated in the Sanction letter "after Carefully examining the Case, the State Level Committee recommended Central INvestment Subsidy of Rs. 23.75 lakhs for this Company. WBFC was authorised to disburse the amount very carefully in accordance with rules."

(10) Rule 6.1 of the Manual for Central Subsidy provides the disbursing Agency (here the WBFC) "after making the disbursing of Subsidy .... shall prefer claim for reimbursements of Central INvestment Subsidy. The claim shall be in prescribed form, which inter-alia, provides "Details of amount disbursed and dates of disbursement".

(11) As per Rule 6.1, admittedly WBFC did not disburse the subsidy, even though WBFC was legally bound to disburse the Subsidy strictly as per Rules. (Annexure ''A'' of the Complaint). Evidently, WBFC acted Contrary of Rules. (12) Rule 8 of the Central INvestment Scheme is as follows :- Provided, however, if there is any delay in the financial institution concerned getting reimbursement of the subsidy of instalment thereof from the Central Government the financial institution shall be reimbursed by the Central Government of the interest chargeable from the industrial concern for the period between the relevant date of disbursal of the loan by the financial institution to the industrial concern and the date of corresponding reimbursement thereof of the instalment of element of subsidy to the financial institution by the Central Government.

(13) Had the WBFC (Vide Rule 6.1) disbursed the subsidy themselves they were entitled to have interest as per Rule 8, otherwise not. (14) IN the absence of disbursing the Subsidy by WBFC themselves, the Company took "bridge loan" from the Union Bank of Rs. 23.75 lacs, to execute the Project timely, upon undertaking given by WBFC to the Bank to repay of Rs. 23.75 lacs, after receipt of the Subsidy amount from the Central Govt.

(15) WBFC circumvented Rule 6.1, no explanation given, even though they themselves were legally obliged to disburse the Subsidy, as per Rule 6.1. (16) The representation by WBFC to the Bank, is therefore Contrary of Rules i.e. Clause 8 - as WBFC should have stated to the Bank, in case of delay in receipt of Subsidy. (17) WBFC in Law, is not entitled to claim interest from the Govt., inasmuch as, they themselves did not disburse the Subsidy. How, can therefore, they justify claiming interest from the Central Govt. (Vide Annexures ''O'' & ''P'' of the written objection of WBFC). (18) Legally, WBFC is not at all entitled to claim the interest from the Central Govt. IN Law, it is payable by the WBFC to the Bank, who disbursed the "bridge loan". WBFC therefore can not make a wrongful gain.

(19) It is evident thus :- (a) WBFC sanctioned loan of Rs. 50 lakhs to the Company against interest at the rate of 16.5% on 18.8.86, inter-alia, on conduction of raising Central Subsidy of Rs. 25 lakhs. (b) WBFC sponsored and recommended the subsidy for the Company before the State Level Committee, Govt, of W.B. (c) The State Level Committee, sanctioned the Subsidy on 30.12.87 (Annexure A of the complaint). (d) WBFC informed the Company about sanction of the Subsidy by its letter on 8.2.88 (Annexure A of the complaint). (e) Union Bank gave the loan to the Company on 8.3.88 (Annexure ''F'' of the written objection of WBFC). (f) Central Govt, made payment to WBFC on or about 15.1.90 (Vide Annexure L of the written objection of WBFC). (g) The said Annexure ''L'' addressed to WBFC by the Central Govt. - reflects inter-alia, "in settlement of claim for reimbursements of Subsidy disbursed to INdustrial Units". It is therefore WBFC made a representation of Central Govt, that they had disbursed the Subsidy, hence reimbursement and claiming interest also as per Annexure ''L''.

(20) WBFC vide Rule 6.1 should have made available the Subsidy immediately after the sanction on 30.12.87 to the Company. (21) Company availed of the services of WBFC for a loan on or about 18.8.86 against consideration of pay ment of interest vis-a-vis recommendation/sponsoring of the Company''s SLC, for Subsidy. (22) Admittedly WBFC did not act as per Rule 6.1 but they claimed interest from the Government on what authority ? (23) During the entire period of 1988,1989, Subsidy was not disbursed by WBFC. (24) The interest claimed by WBFC from Central Govt, payable to the Bank, because WBFC did not disburse the Subsidy as per Rule.

Now, in this case, Amiya Kumar Mondal in the capacity of a director of the company filed this complaint petition seeking relief in favour of the company but not for his personal gain. It is true that the company is juristic person and can sue and be sued but still it has to act through somebody being an inanimate entity and thus acting through its director for its benefit is in no way improper or illegal. As regards contention of the opposite party No.1 that the complainant or company is neither a consumer nor hired any service for consideration for collection of the central subsidy, it is submitted by Mr. Mukherjee on be half of the complainant that the relation between the company and opposite party No.1 is of borrower and lender in view of grant loan of Rs. 50 Lakhs @ 16.5% interest per annum to the company by the opposite party No. 1 as such the company pays interest and the opposite party No.1 receives interest in consideration thereof. Further one of the condition in the sanction letter dt. 18.8.86 for lending the loan of Rs. 50 lakhs by the opposite party No. 1 to the company was to realise the Central Subsidy of Rs. 25 lakhs and at the 59th State Level Committee Meeting of the Central INvestment Subsidy held on 30.12.87 while the Central Subsidy of Rs. 23.75 lakhs was sanctioned in favour of the company the opposite party No.1 was absolutely authorised to disburse the subsidy amount to the company as per rules. It is relevant to note that the Managing Director of the opposite party No.1 was present at the said State Level Committee Meeting; It is therefore cannot be said that the collection of the central subsidy by the opposite party No.1 is free service or without any charge particularly in view that the sanction letter dt. 18.8.86 where payment of consideration by way of interest is stipulated condi -tion and collection of Central Subsidy is another condition stipulated therein and thus the company definitely hired services of the opposite party No.1 and falls within definition u/Sec. 2(1)(d)(ii) of the C.P. Act, 1986. It is also relevant to the note that when the opposite party No. 1 was authorised to disburse the subsidy to the company in accordance with the rules the opposite party No.1 could have disbursed the subsidy amount of Rs. 23.75 lakhs instead of standing as guarantor to the opposite party No. 3 and could have taken reimbursement of the said subsidy amount from the Central Government in due course as per rules. When the opposite party No.1 stood as guarantor for Rs. 23.5 lakhs it had no doubt in its mind of getting re-inbursement of the subsidy amount from the Central Government. Further in the State Level Committee Meeting the opposite party No.1 was authorised to disburse the subsidy amount in accordance with rules. Further to stand as a guarantor for certain sums involves certain vicarious liability inasmuch as the consequential effect arising out thereof to be borne by the Central Govt, then the opposite party No.1 had to pay the sum of Rs. 23.75 lakhs to the opposite party No. 3 as guaranteed for, similarly where there is no determination of the liability of the parties for payment of interest on the guaranteed sum, obviously it is to be shouldered by the guarantor. 8. Further it is observed that there was a serious negligence on the part of opposite party No.l to collect the subsidy amount of Rs. 23.75 lakhs inasmuch as after recommendation for sanction on 30.12.87 for Rs. 23.75 lakhs as central subsidy it took more than 2 years for collection. Had the opposite party No. l been the diligent and careful after disbursement in its behalf then such discrepency or delay in getting reimbursement would not have arisen, at least no document forth came before this Commission to show their diligence in this regard. The letter dt. 9.4.90 Annexure "F'' written by opposite party No. 2 to the opposite party No. 1 exfacie proves the dereliction of duty on the part of the opposite party No.1 and those facts fall within the ambit of deficiency in service. Moreover, as per Central Govt. Subsidy Scheme the financial agency is to disburse the Subsidy amount before getting reimbursement from the Central Govt, but in the instant case the opposite party No. 1 first got the reimbursement then disbursed on 22.2.90 the subsidy amount to the opposite party No. 3 on behalf of the company for which it stood as guarantor, still in later dates of sanction on 20.10.89 by the Central Govt, and reimbursement on 24.1.90 which are exfacie contrary to the subsidy rules. Further it has been revealed from Annexures "J" & "L" that opposite party No.1 received reimbursement of subsidy amounts in stages from the Central Govt, prior to final receipt on 24.1.90 but no document was produced to show this Commission that how and whom those were disbursed. Overall it stands that there was a serious negligence and/or dereliction of duty on the part of the opposite party No. 1 inspite of the duty cast upon the opposite party No. 1 by the 59th State Level Committee Meeting to disburse the subsidy amount of Rs. 23.75 lakhs to the company and it utterly failed and neglected to do so. 9. It further reveals from the documents that opposite party No.l has already claimed" reimbursement of the interest on subsidy amount for delay in disbursement of the same to the company as per Clause 8 of the Central Government subsidy rules (Vide their letters dated 25.4.90 and 12.6.90 to the Dy. Secretary, Ministry of INdustry, Govt, of INdia), hence the opposite party No.1 has virtually admitted the entitlement to the interest of the company and also there is scope to realise interest from the Central Govt. by the opposite party No.l as per Central Govt, subsidy rules. 10. IN view of the foregoing discussion and upon perusal all the materials on record and considering the facts and circumstances of the case we are of opinion that the obligation of payment for interest amount of Rs. 9.36 lakhs to the opposite party No. 3 on behalf of the company comes upon the opposite party No. 1. 11. Accordingly we direct the opposite party No.1 to remit the interest amount of Rs. 9.36 lakhs to the opposite party No. 3 or to the company within 30 days hereof. 12. There will be no order as to the cost. Complaint allowed.