A.R. NARAYAN vs MANAGER, U.C.O. BANK

MR. Justice B.S. Yadav, Member - The appellant, A.R. Narayan, had filed the complaint, which has given rise to this appeal, before the State Consumer Disputes Redressal Commission, Tamil Nadu, against the opposite party. According to the allegations in the complaint, the complainant is running a Small Scale Industry under the name and style of M/s. Fast Forward in partnership alongwith his wife and son. It was registered on 6.9.1989 with the Regional Deputy Director of Industries and Commerce to carry on the production and marketing of pre-recorded audio cassettes for all India and export market. The firm approached the opposite party in March, 1989 with a project report requesting for a total credit facility of Rs. 2.75 lacs. After discussions with the Branch Manager, they finally agreed to sanction the limit sought for on condition that the firm provided the following: (a) A fixed deposit for an equivalent amount; (b) Create equitable mortgage by depositing title deeds of land the market value of which will be almost equal to the amount of credit; (c) Executing agreement hypothecating machinery and stock in trade; and (d) Executing demand promote for the total sum of facilities.

AGREEING to the above terms and conditions the Firm started a current account with the Bank on 21st April, 1989. The complainant provided two "Foreign Currency Non-Resident (FCNR) deposits of US $ 18,000 which valued more than 8 lacs at the exchange rates then prevailing, from his brother-in-law, and from one of his friends. Other documents were also executed and those alongwith title deeds of the landed property were submitted to the opposite party. The Manager of the opposite party promised to issue of letter of sanction of credit limit immediately and assured the complainant verbally that the Firm could draw up to Rs. 2.75 lacs as requested for, pending issuance of the sanctioning letter. The complainant started operating the account in the name of the Firm by drawing the cheques. The sanction letter was not issued immediately and cheques issued by the Firm started bouncing. The Bank, however, honoured certain cheques on 2nd or 3rd presentation after pursuing and pestering. The Complainant''s case is that failure to honour the cheques on presentation while the complainant had utilised only a fraction of the total credit facility verbally sanctioned by the Bank was nothing but unfair trade practice. The wrongful dishonouring of the cheques also diminished the credit worthiness of the Firm in the Market and was black listed by the raw material suppliers. The firm also could not pay the salaries in time. The firm sent two letters dated 28th November, 1989; and 31st January, 1990 expressing great concern over the non-sanctioning of the credit limit even after the expiry of nine months of complying with all formalities and conditions stipulated by the opposite party. The complainant has alleged that it was a deliberate fraud played on the firm to obtain the much coveted Foreign Currency Non-Resident Deposits. On receipt of those letters the Bank sent a photostat copy of their Regional Office letter dated 10th January, 1990 sanctioning a credit facility of Rs. 1.50 lacs. From that letter it is also evident that the Branch Manager had referred the proposal to the Regional Office only on 4th January, 1990 i.e. after the lapse of over nine months, after having extracted deposits and all documents and that too recommending for a facility of far less an amount. Thus the Bank is alleged to have committed breach of trust, breach of promise to the detriment of the Small Scale Industry which solely depended on the Bank''s promise. On account of this inordinate delay in sanctioning the limits and that too at a low level, the firm could not implement their project as planned. The firm also lost business, personal goodwill and reputation among the suppliers. As the industry had come to a halt and realising that the firm could not do further business by banking with the UCO Bank, it decided to close the cash credit account with the Bank and start afresh with another Bank. On 21st May, 1990 the complainant approached the Bank Manager offering to close the Account by paying Rs. 2.50 lacs provided the Bank was willing to waive the remaining amount standing as debit in their Account. Having agreed in principle, the Branch Manager required a letter from the complainant to enable him to take up this matter with his higher authorities. The complainant wrote such a letter on 21st May, 1990. The Branch Manager of the UCO Bank informed the complainant that his Divisional Manager had agreed to the proposal and that he might now pay Rs. 2.50 lacs as suggested to settle the Account. On 25th May, 1990, the complainant presented Pay Order of even date from the State Bank of Hyderabad and sought release of the documents. The Manager insisted upon enashing the Pay Order to release the documents. The Manager issued a letter dated 25th May, 1990 to the firm acknowledging the Pay Order. As the Bank Manager never intended to keep up his reciprocal promise, he deliberately added the sentence in the said letter to the effect "regarding your request for waiver of the balance amount in excess of Rs. 2.50 lacs in your cash credit account we have taken up the matter to our Regional Office and this will be conveyed to you in due course." On 28th May, 1990, the complainant approached the Bank to retrieve the documents. The Manager released only the title deed, holding back the demand pronote and hypothecation agreement on the ground that those were with the Field Officer who was on leave on that day and that those would be released on his returning to the office. The complainant also did not pursue the matter thereafter under the impression that the account was fully settled and nothing more was to be done. On 29th August, 1990 the new banker of the complainant, i.e. the State Bank of Hyderabad received a letter from the opposite party stating that a sum of Rs. 39,809.81 was due from the complainant firm and that the complainant had to make arrangement for payment as agreed upon. The State Bank of Hyderabad, respecting the banking norms to curb double financing of industrial units, froze the O.C.C. account of the firm with them. The complainant further alleged that the opposite party had never intended to fulfil its promises and was guilty of misrepresentation, breach of contract and also of unfair trade practice by causing inordinate delay in sanctioning the limit and the reduction in the amount of facilities and that the opposite party has unauthorisedly withheld the demand promissory note, agreement of hypothecation with malafide intention of putting forth a fictitious claim at a later date. The Bank is also said to have violated banking policy of the Government of India. The complainant, therefore, claimed a compensation of Rs. 5 lacs for the loss suffered by his firm.

The opposite party i.e. the UCO Bank contested the complaint and pleaded that the complainant was motivated and contained false and fabricated facts to harass them as they have expressed their inability to waive interest on the amount advanced to the Firm. It was incorrect that the Small Scale Industries should be provided with funds etc. as asked for by the small scale units notwithstanding any law on practice of the Bank. The Bank provides credit facilities on the basis of ''need based'' requirements of Small Scale Industries as assessed on of Banks norms in vogue. There was no fault, imperfection, shortcoming or inadequacy in the performance of the service. The petitioner had approached the Bank on 21st April, 1989 with the intention to open a current account with the Bank and to have a credit facility to the tune of Rs. 1 lac by way of cash credit and another facility of Rs. 1.25 lacs on Bills Purchase to improve his cassette business. The complainant also allured the opposite party by saying that he would arrange an FCNR deposit of US $ 18,500/- and wanted the Manager of the Bank to recommend his case. The complainant on his own accord volunteered the third party deposit and persisted with the Bank Manager on a number of occasions to provide him financial facilities. The Bank Manager expressed his inability and told the complainant that he had no power to provide facilities to him and the facilities could be provided only under the directions of the higher authorities. The complainant requested the Bank Manager to provide him at least some nominal amount to meet his urgent financial requirements otherwise he would be forced to close his business and face liquidation. The complainant also offered some of his properties to be taken as mortgage. On seeing the plight of the petitioner and his difficulties, the Bank Manager agreed to recommend his case to the higher authorities, as he had no power to provide any facilities exceeding Rs. 50,000/-, and asked the petitioner to submit his original title deeds. As the documents were in Malayalam, the Bank Manager got them translated into English and after obtaining legal opinion, he at his own risk, allowed an adhoc or temporary facilities to the extent of Rs. 50,000/- pending ratification by higher authorities. It was made clear to the petitioner that such an adhoc payment did not mean that the credit facilities, as requested by him were sanctioned by the higher authorities. The complainant was never promised either verbally or otherwise that he could withdraw a sum of Rs. 2,75,000/-. The complainant had not complied with all the requirements and even the copy of the Small Scale Industry Certificate was given by him only in November, 1989. The cheques were dishonoured, as the same had exceeded the limit of the facilities provided by the Bank Manager, who had helped the complainant after risking his position. The Bank Manager had repeatedly told the complainant that the loan had not been sanctioned and wanted him not to issue cheques over and above the amount provided by him (i.e., the Bank Manager) on adhoc basis. On receipt of the loan application, adhoc facilities were granted only after discussions with the Divisional Office. The letter of sanction was received on 31st January, 1990.

THE complainant wanted waiver of interest in excess of outstanding dues amounting to Rs. 2.5 lacs and the Bank Manager agreed to forward his letter to the higher authorities. THE Bank Manager never agreed to close the account on receipt of Rs. 2.5 lacs as he had no power to accept the amount in full and final settlement as it was less than the actual amount due. When the complainant paid Rs. 2.50 lacs on 25th May, 1990 and wanted the entire loan amount discharged and documents relating to the loan to be returned to him, the Bank Manager had told him that the document could not be released unless the amount was paid in full to them. THE Bank Manager, after consultation with the higher authorities, released only the title deeds relating to his property as to enable him to redeposit the same elsewhere and to get further advance to discharge the opposite party''s dues and to develop his own business. THE loan documents were retained in the Bank. The issuance of letter dated 27th August, 1991 to the Bank of Hyderabad was admitted by the opposite party and it was pleaded that it was only to inform the new banker about the rights of the opposite party on the goods hypothecated with them. The other allegations of the complainant were also denied.

THE parties only produced documentary evidence before the State Commission. After hearing the parties the Commission formulated the following points for determination: 1. Alleged failure of the opposite party to sanction the credit facility applied for by the complainant inspite of deposit of title deeds & execution of hypothecation bond promissory notes. 2. THE failure of the opposite party to honour several cheques issued by him. 3. THE delay in passing orders on his application for credit facility to the tune of Rs. 2.75 lacs. 4. Breach of promise to waive the debit in excess of Rs. 2.50 lakhs paid by the complainant Points Nos. 1 and 2 were discussed together by the State Commission and it was held that the complainant had no cause for grievance against the sanctioning of the credit facility for a lesser amount or for dishonouring of the cheques as the sanction of loans and the granting of overdraft facilities by the Bank were matters within their exclusive discretion, depending upon the viability of the project, the creditworthiness of the borrower, his sense of honesty in repaying the loans etc. and it was not open to the Forum under the Consumer Protection Act, 1986 to substitute its judgment for the decision of the banks.

Under Point No. 3, it was held that the complainant was normally entitle to claim compensation for the delay in the sanctioning of the credit facilities, if he had suffered any loss or injury. In the present case he had been provided with adhoc credit facilities which swelled well over 2.50 lacs. Thus, this point was also found against the complainant Under Point No. 4, it was held that the Branch Manager of the opposite party could not have made any promise of waiver and thus there was no question of promissory estoppel. Thus, this point was also held against the complainant Accordingly the complaint was dismissed. Feeling aggrieved, the complainant has come before this Commission in appeal. After hearing the parties and going through the records we are of the opinion that there is no merit at all in this appeal. In the complaint it is stated that on 21st April, 1981, a part from Rs. 1 lac cash credit account, he had sought Rs. 1.25 lacs limit against Book Debts and not of bills purchase as claimed by the opposite party and Rs. 1.50 lacs as term loan. This contention of his is belied by his own letter dated the 21st September, 1989 filed as Annexure 3 (Page 9 of the paper book) in which he had requested the Bank to convert the bills discounting limit of Rs. 1.25 lacs sanctioned to him as overdraft against the book debts. This fact has been mentioned only to show that the complainant is not shy of making false allegations.

IT is an admitted fact that the complainant''s request for the sanction of cash credit limit had not been sanctioned till 4.1.1990. The complainant must be knowing that a letter has to be issued about the sanction of cash credit limit. Therefore, till he received the letter, he could not operate his credit account with the opposite party. Till the limit of cash credit was sanctioned there was no question of rendering of service by the Bank. The limit was sanctioned only on 4.1.1990.

THE complainant has complained of dishonouring of the cheques. As is clear from various documents on the file by 16th June, 1990 mere was a debit balance of Rs. 90,647.97 in the account of the complainant. In this respect, reference can also be made to his own letter dated 11th September, 1989 which reads as follows: "Though there had been the untoward happening of returning of the Hundi, I request you to honour the cheques. I requested vide my letter 11.09.1989 because dishonouring of such cheques will affect the reputation of the firm badly especially because it is for rent etc. Kindly help. I shall not issue any more cheques until the present crisis is solved."

THErefore, the complainant must be knowing the reason for the dishonouring of the cheques by the Bank. There is no document on the file to show that the complainant had ever complained of the delay in the sanctioning of the cash credit limit. As noticed earlier, he did not suffer on account of any delay because he was allowed to operate his account up to the adhoc limit sanctioned by the Branch Manager. The next grievance of the complainant is that when the opposite party failed to provide him further facilities he approached some other Bank and at that time the opposite party agreed to accept Rs. 2.50 lacs in full liquidation of the dues and, therefore, he got a pay order for that amount issued from the Bank of Hyderabad. These allegations of his have been controverted by the opposite party. The opposite party''s case is that the complainant was informed that his request for waiving excess over Rs. 2.50 lacs in the cash credit account would be referred to the Divisional Office and to that effect the opposite party had written letter dated 25th May, 1990 to the complainant. The. letter reads as follows: "We are in receipt of your letter dated 21.5.1990 and have noted the contents therein. Regarding your request for waiver of the balance amount in excess of Rs. 2.50 lacs in your Cash Credit Account, we have taken up the matter to our Divisional Office and decision will be conveyed to you in due course. In the meantime, as promised by you, you may remit Rs. 2.50 lacs in your Cash Credit Account with us. We shall hand over the documents relating to the collateral security on realisation of the Pay Order No. 199862, dt. 25.5.1990 for Rs. 2.50 lacs from State Bank of Hyderabad Mylapore."

The complainant''s own case is that on 28th May, 1990 he approached the opposite party for the release of the documents and at that time only the title deeds forming collateral were released and pronote and hypothecation agreement were retained on the ground that those were with the field officer. Before 28th May, 1990, the complainant must have received the letter dated the 25th May, 1990, referred to above. Therefore, it is unthinkable that the complainant expected that till the waiver of the amount in excess of Rs.2.50 lacs was agreed upon by the Divisional Office, the Branch Manager would return the hypothecation deed. It is also surprising that after 28th May, 1990, the complainant did not approach the Branch Manager for the return of the Pronote and the hypothecation deed. He must be requiring these documents urgently because he had already started his business with another Bank viz., the Bank of Hyderabad. The complainant has made many other allegations also but there is no proof in support of those allegations and all those allegations have been controverted by the opposite party.

THE opposite party''s main case is that though the Bank Manager had no power to grant cash credit facilities over Rs. 0.50 lacs but at his own risk, he had allowed the complainant to operate the account much in excess of the limit As noticed earlier, in spite of the absence of the sanction of the credit limit by the higher authorities, the Bank Manager allowed the complainant to operate the account. This shows that the Bank Manager in fact, tried to help the complainant. It appears that the complainant wanted to exceed the limits which he had been sanctioned and the Bank Manager was justified in refusing to acceed to his request.

THE petitioner vehemently argued that the Government of India as well as the Reserve Bank of India have issued guidelines to the various Banks to advance loans etc., to Small Scale Industries according to their needs. THEse directions are in the nature of guidelines only. THE Bank while advancing the loan facilities has to see the viability of the unit and its credit worthiness and its capacity to repay the loan. In the present case, we find that the complainant never tried to reduce his dues. On the other hand, the amount due from him exceeded over Rs. 2.50 lacs. For the reasons given above we do not find that there has been any imperfection, shortcoming or deficiency in the rendering of service by the opposite party. Hence we confirm the Order of the State Commission. We dismiss the appeal with costs which we assess at Rs. 1,000/-. Appeal dismissed.