CORPORATION BANK vs SOMENATH GUPTA

THIS is an appeal against the order of the State Commission dated 7.2.1997 by which Corporation Bank, the appellant has been directed to pay the complainant a compensation of Rs. 12.88 lakhs on account of loss caused to the complainant by not financing a project of Prawn Fish Farm and a sum of Rs. 5,000/- have also been awarded as cost.

THE main point of the complaint Shri Somnath Gupta, Proprietor, Bengal Marine Products and others is that they had applied for a loan for the purpose of setting up a Prawn Fish Farm. THE loan was sanctioned by the Branch Manager of the Corporation Bank, Rash Behari Branch, Calcutta. On the strength of this sanction, Brackish Water Fish Farmers'' Development Authority (a financial body set up by the Government of West Bengal) gave a subsidy of Rs. 1.20 lakhs. THE amount of subsidy was paid to the Bank for disbursement to the complainant. By its failure to pay the sanctioned amount of Rs. 4.50 lakhs and also the subsidy amount provided by BFDA the Corporation Bank has caused considerable loss and damage to the complainant for which compensation is to be paid. The complainant, however, has not annexed its application for loan or the letters sent by the Corporation Bank to the complainant sanctioning the loan application. Before proceeding the case, the State Commission should have verified these vital documents. The case of the Corporation Bank before us is that the complainant had made an application on 20.3.1995 for a loan of Rs. 7.80 lakhs which was not sanctioned at all.

A copy of the application for the loan has been annexed to the appeal petition which clearly shows that the complainant had made an application on 20th March, 1995 for a loan of Rs. 7.80 lakhs. The relevant part of the application is as under : "Dear Sir, I/We hereby apply for a loan of Rs. 7.80 lakhs (Rupees seven lakhs eight thousand only) for the following purpose and furnish below the necessary particulars : Amounts (Rs.) 1. Production Credit* (a) Seed : 2,25,000.00 (b) Fertilizers/manures : 18,150.00 (c) Feed : 60,000.00 (d) Others (specify) wages, Harvesting and Maintainence :97,000.00 Total : 4,00,150.00 *Enclose quotations/invoices 2. Term Loan (Indicate purpose) (a) Earth work and Pond preparation : 2,27,000.00 (b) D.G. Sets and Pump Sets. : 2,98,000.00 (c) Pipes, Nets and Accessories. : 50,000.00 Total :5,75,000.00 3. Particulars of the applicant/co-obligent/Guarantor Name And Address age Father''s name Status Annual income and source of income Experience in the Line*- Depe-ndant Net Worth Amount of Income tax paid Applicant(s) Somenath Gupta, Prop. Bengal Marine Products, 13/IE, B.T.Road, Calcutta-2. 40yrs. Late Ajoy Gupta Married Rs. 1.5 lacs Business Over 10 yrs. in Export & Import Wife & Child Rs. lacs 7,000/-1993-94 Syamal Gupta 123/3/IGLT Road. 46yrs. -do- -do- Rs. 1.0 lacs Business 5 yrs. -do- Rs. 11.0 lacs 5,000/-1992-93 Co-obligant(s)/ Guarantor(s) 6,000/-1993-94 *Enclose true coy of Govt. Training Certificate, if any. Enclose Assessment copy. xxx xxx xxx xxx xxx xxx xxx xxx"

THE application also contains particulars about types of land, measurement of land assets and liabilities of the applicant, particulars of which are not necessary for the purpose of this case. But the fact is the loan application of the complainant was for a sum of Rs. 7.80 lakhs which could not be sanctioned by the local Branch Manager of the Bank at Calcutta. In the complaint, the complainant has wrongly stated that he has made an application for a bank loan of Rs. 4.50 lakhs which was sanctioned by the local Branch Manager, Rash Behari Avenue, Calcutta. No copy of any application for grant of a loan of Rs. 4.50 lakhs has been annexed to the complaint or produced before us. THE second important point to note in this case is the sanction for the loan of Rs. 4.50 lakhs has also not been annexed to the complaint nor produced before us. The application for a loan of Rs. 7.80 lakhs was lodged at the Rash Behari Branch of the Bank at Calcutta. The Branch Manager is not authorised to sanction a loan of this magnitude. He forwarded the loan proposal vide letter dated 21.3.1995 to the Head Office of the Bank at Mangalore in the State of Karnataka. The relevant part of his forwarding is as under : "Dear Sir, Sub. : Application for financing Brackish Water Fisheries Received from M/s. Bengal Marine Products. We herein enclosing herewith the project report received from the captioned party together with the application in the prescribed format supplied by our Rural Banking Dept., H.O. Mangalore. We further wish to inform you the following : 1. xxx xxx xxx 2. xxx xxx xxx 3. xxx xxx xxx 4. xxx xxx xxx 5. xxx xxx xxx 6. xxx xxx xxx In view of the above, we hereby recommend for sanction of the loan of Rs. 7.75 lakhs for the following prupose : I. (a) Seeds ... Rs. 2.25 lakhs (b) Fertilizers Rs. 0.18 lakhs (c) Feeds ... Rs. 0.60 lakhs (d) Others ... Rs. 0.97 lakhs Rs. 4.00 lakhs II. Term Loan (a) Earth work and Pond Preparation ... Rs. 2.27 lakhs (b) D.G. Sets and Pump Sets. Rs. 2.98 lakhs (c) Pipes/Nets and Rs. 0.50 lakhs Accessories Rs. 5.75 lakhs Total Rs. 7.25 lakhs The above cost would be shared as under: (a) Bank Loan Rs. 7.75 lakhs (b) Subsidy Rs. 1.20 lakhs (c) Capital Rs. 0.80 lakhs Rs. 9.75 lakhs The captioned party has agreed to give collateral security to the extent of Rs. 3 lakhs in the form of KCC Deposit A/c for a period of 5 years. We hereby once again recommend for sanction of loan limit of Rs. 7.75 lakhs at an early date. Thanking you, Yours faithfully, Sd/- Senior Manager" On 26.4.1995, the Regional Branch Manager of the Corporation Bank wrote a letter to the Deputy General Manager of the Bank at Mangalore, which is as under : Dear Sir, Subject : Bengal Marine Products - New proposal for Financing Brackish Water Fishery. We are forwarding herewith a proposal received from our R.B. Avenue, Calcutta Branch for financing of Brackish Water Fishery Project. The proposal was received by us on 25.3.1995 and after calling for additional particulars, we recommend that the proposal of the Company for setting up the above project be sanctioned on the terms and conditions agreed to and recommended by the Branch on 21.3.1995 vide their letter OR : RBA : 184 : 95. The following additional particulars are enclosed. 0.1 Confidential opinion from the Company''s Bankers; 0.2 Assets and liabilities statement of both the proprietor and guarantors; 0.3 Letter from the B.D.O., Canning, 24, Parganas South, West Bengal; 0.4 Regarding Bank loan; 0.5 Application in our prescribed format together with quotations etc. 0.6 Certificate of enlistment; 0.7 Blue print of the proposed project site; For the following reasons and facts, the proposal may be considered on merits : 0.1 To enable the Region to achieve the targeted flow of credit to Agriculture; 0.2 To improve the Credit-Deposit ratio of the Region; 0.3 The project is one among the few, which, according to the promoters, is looked upon as a model project in the canning area; 0.4 Scope for Agriculture projects is less because of our limited presence in the rural areas of West Bengal, Orissa and Bihar States and the proposed project is in hi-tech Agriculture Category; 0.5 The proposal has adequate collateral security support and deposit potential; 0.6 The project is technically feasible and economically viable which is indicated by the release of subsidy amount of Rs. 1.20 lakhs held by the Branch in sundry deposit account; 0.7 The project is under implementation and though the promoters are little behind schedule, civil works on the ponds, etc. is reported to be completed. Post-sanction super- vision at a frequency as may be stipulated for such activity, would be arranged by the party. As the promoters desire to have the Term Loan component released at the earliest, we request you to give an expeditious sanction. Yours faithfully, Sd/- Regional Manager E Encls : (A/A) cc. to : The Senior Manager R.B. Avenue Branch." This loan for one reason or the other was not ultimately sanctioned. On these facts, we fail to see how the compensation can be given to the complainant for the alleged loss of profit suffered by him.

THE case of the complainant has really been founded on the fact that an amount of Rs. 1.20 lakhs was given by BFDA by way of subsidy to the Bank for disbursement to the complainant. This subsidy amount under the scheme evolved by the Government of West Bengal is given only if the Bank regarded the project of the complainant as viable and decided to finance it. It is only on the strength of the sanction given by the Bank that the subsidy amount is usually released by BFDA for payment to the applicants. The complainant''s argument really is, the subsidy was granted therefore the loan must have been sanctioned. In order to sustain this argument, the complainant should have been in a position to show an application for a loan of Rs. 4.5 lakhs and the letter sanctioning the loan applied for by it. From the facts produced before us it appears that after receipt of the application for a loan of Rs. 7.80 lakhs, then the Branch Manager of Rash Behari Branch assured him verbally that the loan would be sanctioned and gave the complainant a form for claiming subsidy. The complainant submitted in duplicate a claim for subsidy on 28.1.1995. On 30.1.1995, the Branch Manager forwarded the form to the CEO, BFDA for necessary action. BFDA issued a cheque for Rs. 1.20 lakhs as subsidy for the project. The amount, was paid to the Branch Office of the Bank in the name of the complainant. As the loan had not yet been sanctioned by the Head Office of the Bank, the subsidy amount was kept in a suspense account till the loan was sanctioned. There is no dispute, the subsidy amount was to be paid only if and when the Bank sanctioned the loan. Ultimately in spite of the recommendation by the Branch Manager, Rash Behari Calcutta Branch and also the Regional Branch of the Bank at Calcutta, the loan was not sanctioned by the Head Office at Mangalore. Various reasons were given for not sanctioning the loan. One of the reasons was that sufficient security was not offered by the complainant for the grant of loan. An offer was made to mortgage the land on which the Prawn Fish Farm was to take place. On behalf of the Bank, it was pointed out that the land was only a leasehold property of 5 years. This sort of security was not acceptable to the Bank. Whether a loan is to be given or not is a decision to be taken by the Bank. This Commission cannot direct the Bank to grant the loan. The State Commission has also taken the same view. But it has concluded that because the subsidy was given, the loan must have been sanctioned. Non-disbursement of the subsidy and the amount of the loan sanctioned amounted to deficiency of service.

THE State Commission has further gone on to say that by not disbursing the sanctioned loan and the subsidy, the loss suffered by the complainant must be compensated. This argument proceeds on the hypothesis that a loan was sanctioned in the first instance. THEre is a word of difference between a Branch Manager recommending sanctioning of a loan and a loan being actually sanctioned. THE complainant''s case that the Bank Manager has sanctioned a loan of Rs. 4.50 Lakhs is not supported by any document. It is difficult to understand if the application for loan is for Rs. 7.80 lakhs why should the Bank Manager sanction Rs. 4.50 lakhs only without any reason and that too even before forwarding the application to the Head Office at Mangalore.

THE complainant''s case is that the Bank Manager had sanctioned a loan of Rs. 4.50 lakhs and on that basis, a form to claim subsidy from the Government had been given to the complainant and the subsidy was released by BFDA to the Bank for disbursement to the complainant. Now, the question arises that did the complainant made two separate applications for Bank loan ? THE claim form for subsidy was given to the complainant by the Branch Manager on 28.1.1995. On 30.1.1995, the Branch Manager forwarded the form to BFDA. But the application for a loan of Rs. 7.80 lakhs made by the complainant is dated 20.3.1995. THE Branch Manager forwarded it to the Head Office with the recommendation on 21.3.1995. This was followed up by a further letter of recommendation by the Regional Manager of the Bank on 26.4.1995. THE Branch Manager in his letter had mentioned that the total cost of the project would be Rs. 9.75 lakhs which had to be made by a Bank loan of Rs. 7.75 lakhs, subsidy of Rs. 1.20 lakhs and capital contribution by the complainant to the tune of Rs. 0.80 lakhs. In the background of these facts, it is difficult to believe that the Corporation Bank- had already sanctioned a loan of Rs.4.50 lakhs in January, 1995, on the strength of which subsidy amount of Rs. 1.20 lakhs was released by BFDA. THE Bank Manager''s letter recommending the sanction of the loan application for Rs. 7.80 lakhs does not contain even a whisper that a loan of Rs. 4.50 lakhs has already been sanctioned to the complainant. However, the release of this subsidy is a fact which cannot be disputed. The Senior Branch Manager of Rash Behari had a role to play in that but from this, it cannot be inferred that the Bank must have sanctioned a loan in January, 1995 even before the formal application for a loan of Rs. 7.80 lakhs was made by the complainant on 20.3.1995 which was forwarded by the Branch Manager on 21.3.1995 and recommended by the Regional Branch Manager on 26.4.1995.

There is also letter on record by the Corporation Bank, Agriculture Finance Section dated 19.5.1995 in which the Senior Manager, Rash Behari Avenue - Calcutta Branch was informed that the project report submitted for loan was very vague. Particular of experience of the complainant in export/import business had not been given, the lease period of the land offered as security was only 5 years which was inadequate, the lease agreement was in Bengali and English versions was not sent, proper security for loan had not been given. The confidential report was also wanted about the complainant''s assets and liability statement and also that of the guarantor. The Branch Manager was informed that the proposal would be taken up for consideration "after receipt of satisfactory reply from your end. Please note if we do not receive your reply by 7.6.1995, the proposal will be lodged at our end."

ALTHOUGH the particulars were not furnished, the applicant wrote to the Senior Branch Manager at Calcutta on 12.7.1995 thanking him for his visit to the project site and the interest he had shown in that. He stated in the letter that you are asking for clarifications on the points raised. He ended the letter by say "Looking forward to an immediate response from your end." On 22.8.1995, The Chief Manager of the Corporation Bank wrote to the Senior Manager, R.B. Avenue-Calcutta Branch, that the proposal for loan to M/s. Bengal Marine Products could not be sanctioned for the following reasons : 1. The activity is proposed on a lease land. The lease period is for a period of 5 years. The repayment sought is in 3 years. The lessor is not ready to give longer lease. 2. You have not furnished the applicant''s profile, viz. name of the present company, its present position and working results. 3. The leased land is not available as security. The applicant is not ready to give any other collateral security in the form of land and building. 4. The proposed farm does not come under the service area of our Bank.

The gist of this letter was communicated on 25.8.1995 by the Senior Manager, Rash Behari Avenue Branch, Calcutta to M/s,. Bengal Marine Products. He categorically informed the complainant that the proposal for loan had not been considered favorably by the Bank.

THE fact that no formal sanction of the loan applied by the petitioner was ever given will be apparent from the additional affidavit in reply filed in this Commission in opposition to the appeal filed by the appellant. Shri Somenath Gupta, the complainant, has stated in the additional reply that he filed, inter alia, as under : "4. That following the respondent''s application for loan made to the Bank, one of the Senior Managers of the Bank, visited the site of the project and after satisfying himself of the viability of the project, advised the respondent to finalise the lease and go ahead with the project. THE Bank also advised the respondent to start the project work from his own sources pending formal sanction of the loan. 5. That following the Bank''s assurance, the respondent finalised the lease and also paid lease rent for the first year. 6. That on January 28,1995, Senior Manager of the Bank informed the respondent orally that the Bank would sanction a sum of Rs. 4.5 lakhs towards the project. 7. That on January 30, 1995, the Bank forwarded the claim form for obtaining State subsidy and in that form specifically mentioned that the Bank would grant a loan of Rs. 4.5 lakhs. THE respondent craves leave to refer to and rely upon the said form at the time of hearing of the appeal. It is submitted that the sanction of the loan from the Bank was a condition precedent to grant of subsidy by the Government and the Bank was aware of the same." 17. From these averments, it will be abundantly clear that apart from verbal assurance of the Branch Manager the complainant had not received any formal sanction of the loan application. 18. THErefore, on these facts, it is difficult to upheld the contention of the complainant that a loan of Rs. 4.50 lakhs was sanctioned by the Senior Branch Manager, Rash Behari Avenue Branch and by not disbursing the loan amount together with the subsidy given by the BFDA, the Bank had failed to do its duty of the banker and because of deficiency of service on the part of the Bank, the complainant had suffered a great financial loss. 19. If the loan was sanctioned in January, 1995, what was the purpose of all these correspondence that were carried on between March and August, 1995 ? THEre could be no occasion for formal application of a loan of Rs. 7.80 lakhs by the complainant on 20.3.1995. 20. THEre is another aspect of the case. THE complainant filed a writ petition in Calcutta High Court under Article 226 of the Constitution for a writ in the nature of Mandamus directing the respondent Bank to release forthwith the sanctioned loan of Rs. 4.50 lakhs alongwith the said subsidy of Rs. 1.20 lakhs in favour of the petitioner. THE first order of the Calcutta High Court dated 1.4.1996 on this writ petition is stated as under : "THE respondents are directed to conclude the proceedings with regard to the sanctioning of the loan within a period of two weeks from today and not by a speaking order. Let this matter stand over four weeks, hence when the respondents are directed to produce the records including the orders passed in this matter. Sd/- (B.P. Banerjee, J.)"

This means that the loan had not yet been sanctioned. THE order was that the proceedings for sanction of loan must be completed within a period of 2 weeks. That was the order of the High Court. 21. It appears that pursuant to the order of the High Court, a meeting for grant of the loan took place between the complainant and the representative of the Bank on 2.5.1996 at 11.30 a.m. at the Office of Regional Manager of the Bank at Calcutta. In that meeting, the Bank agreed to sanction and disburse Rs. 2.50 lakhs as loan alongwith said subsidy of Rs. 1.20 lakhs within 7 days subject to compliance of certain formalities relating to furnishing of security by the complainant for the loan and also withdrawing of the writ petition pending in the High Court on the basis of the compromise on the above terms between the two parties. Formal minutes of the meeting were drawn up and signed by the complainant on 3rd May, 1996 which are as under : "1 In view of the fact, duly submitted in the meeting, that M/s. Bengal Marine Products have invested approx. Rs. 3.0 lacs in the Brackish Water Shrimp Firm in question, instead of Rs. 0.77 lacs as envisaged in the Project Report, the requirement of Bank''s financial participation in the project cost i.e. Rs. 4.53 lacs has now been reduced approximately on pro-rata basis to the extent of additional investment made by the borrower- entrepreneur and the present requirement of Bank''s loan thereby is Rs. 2.50 lacs instead of Rs. 4.53 lacs alongwith the whole part of the W.B. State Government subsidy of Rs. 1.20 lacs lying with the Bank. 2. Bank has promised to sanction and disburse the renewed requirement of loan of Rs. 2.50 lacs alongwith the State subsidy of Rs. 1.20 lacs within seven days from the date i.e. 3.5.1996 from the Bank Branch from where the proposal was initiated, subject to the compliance of the following terms for disbursement : (i) THE borrower shall arrange to mobilise fixed deposit of Rs. 2.0 lacs over which the Bank shall have paramount lien till repayment of the loan amount and payment of interest accrued thereon. (ii) THE entire loan with interest is repayable in three years, at half-yearly rest, without any repayment holidays. (iii) THE borrower shall furnish to the Bank a report showing the utilisation of the borrower amount of Rs. 2.5 lacs and State subsidy of Rs, 1.2 lacs as soon as would be convenient. (iv) THE writ petition, pending before the Hon''ble High Court, being C.O. No. 212 (W)/96 shall be withdrawn, as compromised in the above terms. For Bengal Marine Products Sd/- Somenath Gupta Proprietor"

THE writ petition was taken up for hearing again on 18.12.1996 in which the following order was passed : "18.12.1996 : "It is stated by the learned Counsel for Corporation Bank that pursuant to the order dated 1.4.1996 this has been offered to the petitioner who has refused to accept the same and in the meantime has filed an application before the Consumer Forum. As no body appears on behalf of the petitioner when the matter is called on, the writ application is dismissed for default. THE learned Counsel for the respondent is permitted to take down the gist of this order Sd/- (S.B. Sinha, J.)"

THEre is no explanation from complaint why he abandoned the writ proceedings at that stage and have come to the Consumer Courts for relief even when this writ proceeding was pending. 23. On the facts stated herein above, we do not find that this is a case of deficiency of service on the part of the Bank. He applied for a loan which was officially rejected by the Bank. He had friendly relationship with the then Branch Manager who induced BFDA to grant a subsidy which could only be released alongwith the Bank loan. He lodged his complaint while the writ petition was pending. An order had been passed by the Writ Court for disposal of the application for the loan within a period of two weeks. This order was passed because the Writ Court must have been of the view that the loan application was still pending. No leave was obtained from the Writ Court for instituting an alternative proceeding. In fact, the complainant failed to appear and inform the Court that he was withdrawing the petition for pursuing another remedy. 24. THE only basis on which the subsidy was released was the assurance of the Bank Manager that the loan would be granted by the Bank. THE State Commission overlooked all the material facts. THE main points which were before it were also before the High Court. THE High Court wanted the loan application to be finally disposed of. THE complainant after participating in a meeting with the Bank representative failed to turn up at the hearing before the High Court on the final date of hearing. THEre is no explanation for this. THE High Court did not keep the points open when it finally disposed of the case. THE High Court was informed of the final sanction given by the Bank subject to certain conditions. It was dismissed for default of appearance of the writ petitioner. THE State Commission completely overlooked all these facts. Having regard to all these facts, we are of the view that the complainant has failed to establish any case for relief in this case. THE order of the State Commission is set aside. THE complaint is dismissed. THEre will be no order as to costs. Complaint dismissed. ___________