BIOPOLYMER SYSTEMS vs Haryana Financial Corporation

M/s. Biopolymer Systems through its partner Dr. Mahesh C. Jain has filed this complaint under Section 17 of the Consumer Protection Act, 1986 against Haryana Financial Corporation through his Managing Director, S.C.O. No. 17-19, Sector 17A, Chandigarh and Branch Manager, Haryana Financial Corporation, House No. 449, Sector 14, Sonepat (hereinafter to be referred in short as H.F.C.) praying that the respondents should be directed to levy interest at the rate leviable from time to time during currency of loan with half yearly rests. Interest tax should be levied as applicable and penal interest may be dispensed with. It has further been prayed that the respondents should bear the costs of delay in auction sale of the unit and should not penalize the complainant firm for its own fault. Refund of a sum of Rs. 11,37,435/- along with interest at the rate of 24% to be compounded after every 6 months from the date this amount became due. A sum of Rs. 50,000/- has also been claimed as compensation.

THE complainant has made the following averments in the complaint case : THE complainant M/s. Biopolymer Systems is a registered partnership firm having its office at C-4/18, Model Town, New Delhi and Dr. Mahesh C. Jain and Mr. Manish Mittal are its partners. Annexure P-l is the copy of the partnership deed and Annexure P-2 is the Certificate of Registration issued by the Registrar of Firm, Delhi. THE complainant-firm decided to set up an industrial unit for manufacturing release paper at Village Ferozepur Bangur, Tehsil Kharkhoda, District Sonepat and applied before the respondent No. 2 for grant of term loan which was sanctioned vide letter No. HFC/SLTF/ 95 dated 27.11.1995 for a sum of Rs. 19 lacs. THE interest was chargeable @ 17.5% per annum repayable with half yearly rests. As per the stipulation contained in the letter of sanction, the rate of interest could be revised till the loan is adjusted by the Corporation. A copy of the sanction letter has also been enclosed as Annexure P-3 with the complaint. THE complainant had deposited a sum of Rs. 39,000/- as processing fee and to cover various other expenses. It was alleged that the respondents changed the rate of interest with effect from various dates. It was @ 19% in July, 1996 whereas the rate of interest w.ei. 18.12.1996 was 18.5% which was enhanced again to 19% w.e.f. 12.5.1997. It was reduced to 16.75% w.e.f. 1.11.1997 and was further reduced to 16.5% on 18.12.1997. THE rate of interest was enhanced to 17.5% on 19.1.1998 but was reduced again to 16.5% on 20.4.1998. THE complainant alleged that the respondents could charge interest from the firm only on the basis of the revised interest rates'' of H.F.C. THE complainant has further averred that charging compound interest at enhanced rate is penal and contrary to law as contained in Section 74 of the Contract Act and, therefore, the complainant firm should be relieved against payment of penal interest that has been levied @ 3% per annum with quarterly rests in addition to usual stipulation about the interest rate. The complainant firm, however, was unable to manage the unit. It was on 4.8.1998 that the complainant firm transferred possession of the unit to H.F.C. for being sold by auction to settle the dues found outstanding against complainant firm. A copy of the letter sent in this regard on 4.8.1999 has been placed on record as Annexure P-4 with the complaint. The H.F.C. invited final bids on 1.2.1999 after a lapse of about 6 months since the date of possession of the unit and received highest offer of Rs. 28,25,000/-. After a lapse of further 40 days, the H.F.C. executed mortgage deed in favour of the highest bidder and transferred possession of the unit. It was alleged that the H.F.C. has taken 7 months and 8 days to dispose of the unit by auction sale after having taken possession of the unit from the complainant firm way back on 4.8.1999. It has been urged that the complainant firm could not be held liable to pay interest for the period of 7 months and 8 days which the H.F.C. took to dispose of the unit by auction sale. The H.F.C. had charged interest till 17.3.1999 though the mortgage deed in favour of the highest bidder was executed on 12.3.19997 The complainant firm contended that as per the agreement and as per the prevailing rate of interest of the HFC. and outstanding balance amount with the H.F.C. was Rs. 11,37,435/- as on 1.2.1999. The loan account was issued by the H.F.C. and the same has been annexed as Annexure P-5. This was done without any prejudice to the right of the complainant firm to relieve in expenses or the period or rates for which interest should have been leviable on the firm. The complainant firm wrote several letters for the refund of the outstanding amount along with interest but the respondents have not paid any heed to it. A copy of the letter dated 27.9.1999 in this regard was placed on record as Annexure P-6. Annexure P-7 is the copy of another letter dated 12.8.1999. It was after receipt of letter dated 12.8.1999 that the respondents admitted that they were liable to pay Rs. 8,85,668/- being excess bid amount but they failed to refund this amount even after the lapse of eight months. A copy of the reply sent by the respondents regarding the aforesaid balance amount of Rs. 8,85,668/- was also placed on record as Annexure P-8. The contention of the complainant is that the respondents cannot charge interest arbitrarily and illegally and beyond the terms and conditions of the sanction letter Annexure P-3 and the delay in payment of admitted surplus amount resulted in deficiency in service on the part of the respondents. The complainant also contended that the equity demanded that the complainant firm should be paid interest at the same rate at which the H.F.C. is charging from the complainant on advances. The interest tax till 1.6.1997 has been levied @ 3% and, thereafter, it has been levied @ 2% The basis for this needs clarification and adjustment. It was also claimed that the respondents should indemnify the complainant firm for any sales tax liability arising out of the auction sale of the unit. The complainant firm suffered due to the unfair trade practice and deficiency in service on the part of the respondents and claimed a sum of Rs. 50,000/- as compensation for mental agony and harassment on this account.

The notices were sent to the respondents who put in appearance through Mr. Kamal Sehgal, Advocate and filed reply and took a preliminary objection that the complainant was not a consumer under the C.P. Act and the relationship between the complainant and the respondents was that of lender and borrower. The dispute regarding the interest levied by the H.F.C. and even the interest tax has been challenged by the complainant and the complaint is misconceived and deserves to be dismissed. The complaint involved adjudication of complicated issues of facts and the same could not be adjudicated by this Commission. The reply on merit is one of denial of complainant''s case regarding the interest etc. It was contended that the rate of interest as 19% per annum in the mortgage deed dated 16.7.1996 and the complainant cannot avail the loan in the stipulated period, hence the permission to avail the balance amount was granted at 1% higher rate of interest and in this regard a supplementary deed dated 9.4.1994 was also executed. It was, however, not disputed that the unit was finally auctioned for a sum of Rs. 28.25 lacs of deferred payment basis to the highest bidder who paid only 25% of the bid money and the rest of the amount was payable within certain period in equal instalments. In the present case, the rest of the amount is payable within three years. It was denied that the H.F.C. wasted any time in disposing of the unit. The H.F.C. adopted the procedure to dispose of the unit as per the guidelines given by the Apex Court in Mahesh Chandra''s case and the time was only spent in advertising of the unit and in communicating the proposed sale to the borrower. The agreement to sell was executed with the auction-purchaser on receipt of 25% of the bid money. The respondents submitted that the interest had been debited up to 11.3.1999 instead of 17.3.1999 as was alleged by the complainant. The Corporation had debited the security agency charges and advertisement charges incurred on the unit of the complainant and the interest will be charged as per the agreement executed by the complainant. The letters said to have been sent by the complainant were duly received by the respondents and it was contended that the excess amount will be refunded only after receiving the full amount of bid money from the auction-purchaser and satisfaction of 2nd and 3rd charge holders, if any.

THE complainant firm filed affidavit of Dr. M.C. Jain in support of the case of the complainant while the respondents filed the affidavit of Shri Ashok Pahwa, Deputy General Manager (L), Haryana Financial Corporation, Chandigarh which is almost the copy of the written statement filed by the respondents. We have heard Mr. Suman Jain, Advocate learned Counsel for the complainant firm and Mr. Kamal Sehgal, Advocate learned Counsel for the respondents. We have perused the evidence in the shape of affidavits of Dr. M.C. Jain partner of the complainant firm and Sh. Ashok Pahwa, Deputy Genera! Manager (L), H.F.C., Chandigarh.

THE learned Counsel for the complainant firm submitted during the course of his arguments that as per the communication received from the respondents on 24.8.1999 (Annexure P-8), a sum of Rs. 8,85,668/- was admitted to be lying with the H.F.C. for payment. THE letter (Annexure P-8) which is addressed to the complainant firm M/s. Biopolymer Systems reads as under : "Dear Sir, Re : Balance Amount of Bid. As desired in your letter dated 12.8.1999 this is to inform you that your unit was sold on deferred payment for Rs. 28.25 lacs in February, 1999. THE outstanding dues in loan """account amounting to Rs. 19,39,332/- have been adjusted and a sum of Rs. 8,85,668/- (Rupees eight lacs eighty five thousand six hundred sixty eight only) being excess bid amount is pending decision for adjustment by the Corporation. Your request for refund of the excess amount has been forwarded to head office for consideration. A copy of loan account has already been given to Dr. Jain, one of the partner of the concern. Yours faithfully, Sd/- Branch Manager."

This communication was sent by the H.F.C, 449, Sector 14, Sonepat. THE contention of the learned Counsel for the complainant firm was that when the amount of Rs. 8,85,668/- has been admitted to be due towards the complainant firm as the excess amount left after adjustment, there was no valid reason for the respondents to withhold the payment thereof. Mr. Kamal Sehgal, Advocate, learned Counsel for the respondents, on the other hand, contended that since the unit had been handed over to the highest bidder on deferred payment and possession of the unit had been handed over to the highest bidder after the receipt of 25% of the bid money, the H.F.C. has not even received the full payment of the bid money and as such it cannot pay to the complainant firm the excess amount of Rs. 8,85,668/-. Mr. Kamal Sehgal, Advocate was, however, unable to validly and legally justify as to under what circumstances, the respondents could withhold the payment of the excess amount of the bid when the H.F.C. had adjusted its dues from the bid money of Rs. 29.25 lacs. It may be pointed out that the complainant firm was not a party to the. terms and conditions settled between the H.F.C. and the highest bidder at the auction bid of the unit. It was the decision of the respondents to allow time to the highest bidder for making the balance amount and to hand over the possession of the unit of the complainant''s firm to the highest bidder who had paid only 25% of the bid money. THE matter regarding the recovery of the balance amount of the bid money is between the respondents-H.F.C. and the highest bidder and not between the complainant firm on one hand and the H.F.C. and the highest bidder on the other hand. In our considered view, the mere fact that the respondents have withheld the payment of the excess amount of Rs. 8,85,668/- and have not paid the same to the complainant firm, which has been deprived of the said sum clearly amounted to deficiency in service. At this stage, the learned Counsel for the complainant firm contended that in case this Commission considers the case of the complainant only for the refund of the said excess amount of the auction bid the complainant be permitted to raise the remaining pleas before an appropriate Forum. We are of the considered opinion that the deficiency in service in this case is mainly regarding the non-refund of the excess bid money to the complainant. So far as the other issues raised in the complaint are concerned, this Commission upholds the contention of the respondents and finds that these issues can be appropriately and effectively dealt with by a Competent Authority. Accordingly the complainant would be at liberty to file appropriate proceedings against the respondents before a Forum competent to deal with the same. The preliminary objection regarding complainant firm not being a consumer under Section 2(1)(d) of the C.P. Act was not urged before us during the course of hearing of arguments and in our view rightly so. The complainant is, in our opinion, duly covered by the definition of consumer under Section 2(1)(d) of the C.P.C. Act and this Commission has requisite jurisdiction to deal with the complaint case. Section 2(1)(d) of C.P. Act may be reproduced for appropriately considering the objection raised only in the reply. It reads as under : "Section 2(1)(d) : "consumer" means any person who- (i) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or (ii) [hires or avails of] any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who [hires or avails of] the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person. ["Explanation" For the purposes of Sub-clause (i) "commercial purpose" does not include use by a consumer of goods bought and used by him exclusively for the purpose of earning his livelihood, by means of self-employment;]"

IN view of our foregoing discussion, this complaint is allowed to the extent that the respondents-HFC are directed to refund the excess bid amount as admitted to them, i.e. Rs. 8,85,668/- with interest @ 12% per annum with effect from the date it fell due for payment to the complainant firm up to the date of its actual payment. The refund shall be made to the complainant within two months from the date of receipt of copy of this order. Copies of this order be supplied to the parties free of charges. Complaint allowed.