BRANCH MANAGER, ALLAHABAD BANK vs RAJENDRA PRATAP SINGH

THIS is an appeal against the judgment and order dated 20.2.2001 passed by District Consumer Forum, Sonebhadra in Complaint Case No. 31/99.

THE complainant Rajendra Pratap Singh had preferred an application before the Fish Farmer Development Agency, Sonebhadra (hereinafter called as FFDA) for recommending loan for pisci-culture. THE loan under the scheme had a provision of 25% of the total amount sanctioned as grant of the Government through FFDA. THE application for loan was considered alongwith the other applications of the selected applicants in the District and the complainant was one of them. In favour of those selected for sanction of loan, the necessary papers were sent by FFDA to the Allahabad Bank, Salkhan Branch. THE complainant pursued his case for disbursement of loan for 7/8 months but the opposite party, Allahabad Bank ultimately refused to sanction the loan and sent back the file of the complainant on 1.2.1999 with the observations that the complainant and the members of his family have already taken loan on different counts and this resulted into difficulty in the recovery. A copy of this intimation sent to the FFDA was also endorsed to the complainant. THE complainant has alleged that he has been taking crop loan from 1990 onwards and has been clearing dues by 30th June every year. THE complainant is not a defaulter of the Bank. THE complainant gave a legal notice to the opposite party also but the opposite party simply did not do anything. THEreafter the complainant lodged a claim before the District Forum praying for direction to be given to the opposite party for sanction of loan already recommended by FFDA. A compensation of Rs. 50,000/- was also prayed to be awarded for mental torture, running here and there and for cost of the litigation. In the written version before the District Consumer Forum, the opposite party, Allahabad Bank admitted that recommendation for sanction of loan was sent to it but the function of the FFDA is to select the eligible applicants and the rest work in regard to sanction of loan was to be done by the Bank. The Bank has a definite procedure to sanction the loan thereafter and it is the responsibility of the Bank to sanction the loan to the right person. The loan recommended to be sanctioned was for the purposes of improvement of pond and pisci-culture but the letter of recommendation did not contain the title and details of the pond to be improved for pisci-culture purposes. The complainant had also not given such details to the Bank. The officers of the Bank were also deputed for site inspection but the pond in question was not shown to those officers. If there is no pond on which the pisci-culture is to be done, there is no question of improvement of the same. The complainant was not found eligible for sanction of loan. The grand-mother of the complainant had taken a loan for the tractor and the same has not been fully recovered. The brother of the complainant had been sanctioned crop loan which too has not been recovered. The complainant was also given agricultural loan. Thus the members of the family are in the habit of taking loans from the Bank from time to time. The Bank is not bound to provide the credit facility in every case and, therefore, there has been no deficiency in service on the part of the Bank specially when no consideration has been paid by the complainant and does not become the consumer of the Bank unless the loan is sanctioned. The complainant is not entitled to any compensation etc.

The District Consumer Forum after hearing both the parties, decreed the claim of the complainant and directed the opposite party to pay to the complainant an amount of Rs. 50,000/- as compensation for physical and mental torture and Rs. 2,000/- as cost within a period of one month.

AGGRIEVED of this order of the District Consumer Forum, the appellant, Allahabad Bank has come in this appeal. We have heard the arguments of the learned Counsels of the two parties. The learned Counsel for the appellant has argued that the complainant was not a consumer of the Bank as the loan has not been sanctioned to him and the relationship of the consumer and service provider does not come into existence. The Department of Fisheries had recommended the case of the complainant but the title of the pond along with the details were not given by the Department. On spot inspection also the pond could not be located. He further argued that the Bank is not bound to sanction loan to every person recommended and the Bank has to see the viability as to the recovery of the loan as per banking practice. The Branch Manager has right to reject or accept the loan, therefore, there was no deficiency on the part of the Bank. On the other hand, the learned Counsel for the complainant has argued that the FFDA, Sonebhadra had scrutinised the eligibility aspects of the loan and the complainant was found suitable for being sanctioned loan to the extent of Rs. 2,45,000/- against which 25% was to be treated as grant and this grant was to come from the FFDA and he has been deprived of this scheme for fish farming and, therefore, the fault was on the part of the Bank in not having sanctioned and disbursed the loan to the complainant. This resulted into financial loss to the complainant and he could not implement the scheme of fish farming. It was further argued by the learned Counsel that the complainant was not a defaulter of the Bank and had been making timely repayments of the loan from time to time.

WE have also seen the entire record of the appeal. The FFDA, Sonebhadra had written a letter of recommendation to the opposite party that the complainant be sanctioned a medium term loan of Rs. 3,45,000/- for which necessary formalities were completed by the complainant and the same were also communicated to the Bank, the opposite party. This letter also indicates that 25% of the amount of loan was to be treated as a grant or subsidy and same was to be treated as margin money. A perusal of this letter goes to show that it is in the nature of recommendation and it is not in the nature of an order. It is the duty of the Bank to see that the loan sanctioned by it to the person concerned is recovered as per stipulated norms and as per the principle of banking. No doubt the loan also included 25% subsidy but that does not mean that loan had to be sanctioned by the opposite party. The Bank needs security or guarantee for advancing credit and this letter of FFDA is not in the form of a guarantee or security. No doubt the scheme has been sponsored by the Government but in any case recovery has to be made from the complainant of rest of the amount of 75% along with interest that might be applicable as per Rules. The complainant has also admitted in the complaint that he has been taking loans from the Bank from the year 1990 onwards. Even if presuming that the complainant and members of his family are not defaulters it has been established that they have been borrowing money from the Bank for different purposes from time to time. The Bank has, therefore, to see before a huge amount is sanctioned as loan there is guarantee of its timely repayment. The mere fact that the FFDA had recommended the sanction of loan for improvement of pond and further pisci-culture operations did not necessarily mean that the complainant was having a pond on which improvement of fisheries operations were to be made. The satisfaction of FFDA is not necessarily for the satisfaction of the Bank. The Bank being a commercial institution has a right to refuse the loan to the habitual borrowers. The apprehension of the Bank that the money advanced for the scheme may not be recovered appears to be reasonable and even if the loan sought to be sanctioned comprised 25% of the Government subsidy that needed to be sanctioned and disbursed with caution otherwise public money so advanced may not be recovered. The sound principles of banking do not allow disbursement of loan to each and every person whosoever is recommended unless the Bank itself is satisfied that the amount sanctioned is utilised properly and the payment along with interest made in time. In this process the Bank naturally does not give preference to the habitual borrowers. In the circumstances, there appears to be no deficiency on the part of the Bank and the conclusion arrived at by the District Consumer Forum is not based on solid reasons. The appeal is, therefore, liable to be allowed and the judgment and order of the learned District Consumer Forum are liable to be set aside. ORDER The appeal is allowed. The judgment and order of the learned District Consumer Forum are set aside and the complaint is dismissed. There will be no order as to cost. Let copy of this order be made available to the parties as per rules. Appeal allowed.