A.R. NARAYAN vs STATE BANK OF HYDERABAD

THE appellant A.R. Narayan is the managing partner of the Firm, carrying on business under the name and style of "Fast Forward". THE business of the firm is the production and marketing of pre-recorded audio cassettes. According to the allegations contained in the complaint, filed by the present appellant before the State Commission of Tamil Nadu, the said firm was originally having account with the United Commercial Bank (for short ''UCO'' Bank), Madras. As the said Bank failed to give the complainant need based finance, he approached the opposite party, the State Bank of Hyderabad, on 1st May, 1990 for getting credit facilities to the extent of Rs. 3 lakhs. THE opposite party agreed to give those facilities and took over the account of the UCO Bank and also agreed to obtain, "No Dues Certificate" from that Bank. THE amount due from the complainant to the UCO Bank was Rs. 2.50 lakhs after deducting penal interest. THE opposite party on the very date of sanctioning of the credit facilities, issued a pay order for Rs. 2.50 lakhs in settlement of the complainant''s dues to the UCO Bank. Later on the UCO Bank further claimed a sum of Rs. 39,809.81 paise as due from the complainant and informed the opposite party accordingly. THE opposite party called upon the complainant to get clearance from the UCO Bank and obtain "No Dues Certificate". THE complainant contacted the UCO Bank for payment of his balance in instalments but the opposite party did not advance any further amount. In February, 1991 the complainant again requested the opposite party to help him with an advance of Rs. 20,000/- at least but the request was turned down. THE business of the complainant had come to a stand still since September, 1990. THE complainant''s grievance in the complaint was that the opposite party was guilty of unfair trade practice and had failed to obtain "No Dues Certificate" from the UCO Bank and also failed to sanction further advances. He therefore, claimed Rs. 6 Lakhs as compensation.

THE opposite party contested the complaint and averred that when the complainant had failed to get further facilities from the UCO Bank the opposite party afforded the credit facilities to the complainant to the tune of Rs. 3 lakhs. THE Manager of the opposite party was given to understand that the amount due from the UCO Bank was only Rs. 2.50 lakhs and accordingly a pay order for that amount was issued by the opposite party on the date of sanctioning loan facilities. Even thereafter funds were provided to the complainant for the conduct of his business and he had fully utilised the facilities and his indebtedness at present to the opposite party come to Rs. 3.73 lakhs. THE complainant was frequently exceeding his credit limit and was assuring that he would bring it down to Rs. 3 lakhs but failed to do so. THE contention of the complainant that he had settled with the UCO Bank for the payment of the balance dues in instalments was found false. In view of the claim made by the UCO Bank, the opposite party insisted upon the complainant to furnish from UCO Bank the "No Due Certificate" which the complainant failed to produce. THEre was no obligation on the part of the opposite party to get the "No Dues Certificate" from the UCO Bank. It was also denied that the opposite party took over the entire liabilities of the complainant from the UCO Bank. As the complainant had exceeded his limit, further operation of the account was stopped and further facilities were denied. Thus, according to the opposite party, there was no deficiency in the rendering of service by them. The State Commission of Tamil Nadu, as noticed earlier, before whom the complainant filed the complaint, vide their impugned order came to the conclusion that there was no default or deficiency in the rendering of service on the part of the Bank and it was, in fact, the complainant himself who had been overdrawing in his account with the opposite party. Accordingly the complaint was dismissed with costs which were assessed at Rs. 500/-.

Feeling aggrieved with the dismissal of his complaint, the claimant has come before us in appeal. After hearing both the parties we are of the opinion that the appeal has no force as the complaint filed by the appellant before the State Commission was frivolous.

THE complainant''s case is that on 1st May, 1990 he had approached the opposite party with proposal for credit facilities for Rs. 3 lakhs and for taking over the existing liabilities with the UCO Bank and the Manager of the opposite party contacted the Manager of the UCO Bank and after being satisfied with the amount due from the complainant to the UCO Bank, after deducting the penal interest which was to be waived, was Rs. 2.50 lakhs only and sanctioned the credit facilities of Rs. 3 lakhs on 25th May, 1990 and issued a pay order on the same day for settlement of their (UCO Bank''s) account. No evidence was led by the complainant to show that the Branch Manager of the UCO Bank had agreed to waive the penal interest. There is also no evidence to show that the opposite party had agreed to take over of the existing liabilities of the complainant with the UCO Bank. There is also no evidence to show that the pay order of Rs. 2.50 lakhs issued by the opposite party to the UCO Bank on 25th May, 1990 was in full and final settlement of the latter Bank''s dues.

THERE was also no evidence to show that it was for the opposite party to obtain the "No Dues Certificate" from the UCO Bank. While sanctioning the credit facilities vide condition No. 10 it was intithated to the complainant that he should not have any outside liabilities and all his business transactions should by dealt with them (i.e. opposite party). It is also in confirmity with banking norms that the person having credit facilities with one bank should conduct all his business through them and should have no outstanding liabilities with any other Bank. It is also not understood why the opposite party would undertake to obtain the "No Dues Certificate" from the UCO Bank in respect of the account of the complainant It was for the complainant himself to see that the account with the UCO Bank was cleared. The opposite party has filed a copy of the Account of the complainant which shows by the end of June, 1990, the complainant had exceeded the cash credit limit of Rs. 3 lakhs. In spite of that the opposite party honoured the cheques issued by the complainant On 25th July, 1990 Rs. 3,15,563.10p. was due in the account of the complainant.

IN fact, the whole trouble appears to have arisen, when on 27th August, 1989 the complainant wrote to the opposite party to grant an ad-hoc overdraw of Rs. 75,000/- over and above the sanctioned limit. This limit was not sanctioned perhaps in view of the other developments.

OH the 27th August, 1990 the UCO Bank wrote a letter to the complainant which reads as follows : "We have to advise you that your CC a/c shows a balance of Rs. 39,809/81 (Debit balance) as on 25.8.1990. In this connection we have to inform you that your request regarding the waiver of interest is yet to be decided by our higher authorities. Meanwhile we request you to start repayment of the dues within the stipulated time as committed by you. Further you are hereby advised to submit the stock statement for our records. Please also note that as all your stocks/machines have been hypothecated to our Bank, you have not been permitted to re-pledge/hypothecate the same to any other Banker without liquidating our dues."

A copy of this letter was forwarded to the opposite party by the appellant. On the 4th September, 1990 the opposite party wrote a letter to the complainant requesting him to arrange for the settlement of the dues of the UCO Bank and also to comply with the other instructions to obtain the full clearance from the above bank. These letters are on the file. The complainant did not object to the demand made by the UCO Bank nor to the letter of the opposite party that he was to obtain "No Dues Certificate" from the UCO Bank.

On the 16th October, 1990 the UCO Bank wrote a letter to the opposite party about the cash credit account of the complainant. Its relevant portion reads as follows: "In this connection, we write to inform you that the firm''s CC account shows a debit balance of Rs. 39,809/- (Rs. Thirty-nine thousand eight hundred and nine only) on date exclusive of interest from 26.9.1990. We are in correspondence with our controlling office to quantify the amount of penal interest which is likely to be waived. We shall advise you as soon as we hear from them in this regard. In the meantime, we suggest that you may take-over the entire liability to Rs. 39,809/- plus interest from 26.9.1990 to enable us to issue "No Objection Certificate and release our lien on the stocks of the firm."

A copy of that letter was forwarded to the complainant. On the 30th October, 1990 the complainant wrote a letter to the opposite party intimating that the UCO Bank have expressed its willingness to waive the penal interest which was yet to be quantified and has granted his request for payment of the amount due in 12 monthly instalments. According to the complainant, as mentioned in that letter, out of Rs. 39,809/- claimed by the UCO Bank the amounts were Rs. 30,000/- after deducting the amount that stands to be waived. The complainant vide this letter requested the opposite party to provide an undertaking to the UCO Bank to pay the monthly instalments of approximating Rs. 3,000/- on his behalf for the next 12 months. It was also intimated that the UCO Bank was willing to afford no objection to the financing of the complainant by the opposite party if such an undertaking was given. In this letter the request for grant of ad-hoc additional over draft of Rs. 75,000/- for a period of 3 months was again repeated. The opposite party on the 8th November, 1990 wrote a letter to the complainant requesting him to arrange for early settlement of dues with the UCO Bank and obtain "No Dues Certificate" from them to enable smooth conduct of the account. It was also intimated that the request for additional facility of Rs. 75,000/- was being referred to the Regional Office. It is not clear, if there was any exchange of correspondence between the parties thereafter till 15th February, 1991 on which date the complainant''s firm wrote a letter to the opposite party requesting to release at least Rs. 20,000/ more immediately vide letter dated 16th February, 1989 the opposite party informed the complainant that the request for further drawing of Rs. 20,000/- in the cash credit account could be considered subject to his production of "No Dues Certificate" or at least "No Charge Certificate" from the UCO Bank. Upto that date there was no complaint by the complainant that the opposite party was guilty of any unfair trade practice or there was deficiency in rendering of service. No further credit was allowed to the complainant as he had already overdrawn cash credit limit and moreover he was not clearing the dues of UCO Bank and obtain "No Dues Certificate".

THE appellant argued that this unit was a Small Scale Industry and as it was sick, it was the duty of the opposite party to extend need-based financial facilities in accordance with the guidelines issued by the Government of India as well as the Reserve Bank of India in respect of such units. Those guidelines have been issued for helping Small Scale Sick Industries, but the Bank concerned has to exercise its own judgment. It has to see whether the unit to whom the credit facility is to be given is a position to repay. When the complainant was already in default in the repayment of his dues to the opposite party it would have been foolishness on the part of the opposite party to endanger their money by advancing further loans to the complainant. In the circumstances narrated above, the refusal by the opposite party to permit the complainant to further draw in his account was justified. For the reason given above we do not find any force in the present appeal and the same is hereby dismissed with costs which we assess at Rs. 1,000/-. Appeal dismissed.