Federal Bank Ltd. vs CALCUTTA STORES SUPPLY COMPANY

THIS is an appeal against an order of the Calcutta District Forum in C.D.F. Case No. 547/95 allowing a petition of the complainant-respondent alleging deficiency of service against the O.P. appellant. The allegations of the complainant-giving rise to this appeal are as follows. The respondent-complainants are two brothers forming a partnership firm who in order to avail Cash Credit facilities from the appellant opposite parties assigned two Life Insurance Policies with face value of Rs. 1.60 lakhs, National Savings Certificates of a total value of Rs. 15/375/- and two CC Rs of Rs. 16,000/- in favourer the appellant Bank. The respondents had also deposited title deeds with the Bank as collateral security by way of equitable mortgage and three other Life Insurance Policies. The arrangement between the parties was that while the respondent shall go on repaying the Cash Credit loans in instalments, the appellant Bank shall collect the maturity value of the two Life Insurance Policies assigned in their favour and also value of the N.S.C. and the CCRs amounting to Rs. 50,575/- and Rs. 16,000/- respectively in due time. According to the arrangement the O.Ps. were to collect the maturity value of the two Life Insurance Policies and adjust the same against the Cash Credit loan amount due. It has been alleged that the two L.I.C. policies assigned in favour of the Bank matured for payment on 15.1.91 and 4.6.93 but that the appellant Bank collected the maturity value after a long period i.e., on 21.4.94 and 27.3.94 respectively and by such late collection of the insurance money caused loss of interest to the respondents for a number of years. The respondents attributed this loss to the utter negligence on the part of the Bank in collecting the money and assessed the loss of interest to an amount of Rs. 24,607.65 p for the periods from 15.1.91 to 21.4.94 and 4.6.93 to 26.3.94. The Bank, however, demanded an amount of Rs. 45,359.30 p. shown as due from the respondent for the aforesaid period which was challenged by the respondents by filing a petition of complaint referred to above.

THE appellants as opposite parties had contested the case before the Calcutta District Forum raising the plea that the complaint was not maintainable as the complainants were not consumers. THEy also asserted that there was no negligence on the part of the Bank in collecting the matured value of the relevant Life Insurance Policies and that the claim preferred by the complainants against the Bank was not tenable. The District Forum decided the case after a hot contest. It held that the complainants were consumers under the Consumer protection Act, 1986, and the case was maintainable before the Forum. It further held that the Bank had neglected to collect the matured value of two policies promptly and that there was a deficiency in service in this respect as alleged by the complainants. The District Forum accordingly allowed the complainants, case with a cost of Rs. 5,000/-. The present appeal is against the said order of the District Forum.

The points for determination are - (1) If there was any deficiency in service on behalf of the appellant, as alleged. (2) What relief, if any, the respondents should be entitled to. Decision

AS regards the contention that the respondents were not consumers and were not eligible to file the petition of complaint, the Forum has held the case in favour of the respondents. The reason given by the Forum in this respect appears to be cogent and we accept the same. The appellant Bank has actually not controverted the point of delayed collection of the matured value of the relevant Life Insurance Policies. They have on the other hand laid stress on the technical infirmity of the case. Thus they have referred to Section 67 of the Transfer of Property Act, 1882 and Sections 173 and 176 of the Indian Contract Act, 1872 in support of the action of the Bank. Section 67 of the Transfer of Property Act deals with the right of a mortgagee to foreclose thereby debarring the mortgagor from redeeming a mortgaged property. Sections 174 and 176 of the Indian Contract Act on the other hand deal with a pawnee''s right to retain the pawned goods or to sell the same on giving the pawner reasonable notice of the sale. All these provisions are relevant for the purpose of realising mortgage money or a debt obtained by pawning some movable goods. There is no question of preventing a person from realising the loan from a mortgagee or a pawnee when the same has not been paid according to the terms of agreement between the parties. A Bank in appropriate cases may certainly bring a mortgage suit or a suit for realisation of any debt arising out of the pawning of certain goods. The point raised in the petition of complaint, however, is quite different. It is not a question of the Bank''s right to realise the loan due from its customers. The complainant in this case has referred to the arrangements between the Bank and the complainant regarding the grant of Cash Credit facilities on deposit of adequate security and the manner of repayment of the loan from time-to-time. The arrangement has not been challenged. The allegation of the complainant is that the Bank made willful default in collecting the matured value of two Life Insurance Policies and crediting the same in favour of the complainant in time. The result was that although the money on account of the maturity of the policies was available, it was not credited and simultaneously the complainant was found to be in default of payment of the loan during the entire period. According to the complainant had the value of the Insurance Policies on maturity been credited to his account, he would not have been compelled to pay the penal interest which was levied against him for the alleged non-payment of the loan. As we have already mentioned, the reason for not collecting and crediting the loan immediately on maturity has not been explained by the Bank. The Bank has by-passed this question and has on the other hand laid stress on its right to recover the loan found outstanding in its books as a mortgagee or pawnee. The principle followed in cases of a loan obtained by mortgaging a property is that the loan is always accepted as mortgage money. The dictum ''once a mortgage always a mortgage'' applies in such a case. It is not proper on the part of a mortgage not to credit the repayment of a mortgage loan but to insist on the repayment of the loan threatening penal measures. There is much force in the argument of the respondent-complainant that had the insurance money been credited to the complainant''s account in time, it would have been appropriated towards me repayment of the loan. In that case the burden of penal interest would have been lessened. No particular reason has been shown by the Bank why the money was not credited immediately after maturity.

THE question of the relationship of creditor and debtor between the Banker and its customer in cases of granting a loan by allowing Cash Credit facility has been argued at length by the Bank. Even accepting that such a relationship exits between the parties, it does not help to clarify the question posed by the complainant. Be it a banking service or a financial service, the customer in such a case is a consumer and has a good right to raise the question of non-payment of the loan due from the debtor thereby inflating the amount of interest payable by the debtor. From the stand taken by the appellant Bank, it is clear that they are trying to realise the entire amount of loan with interest from the complainant by filing a suit. A point has been taken that if such a suitis filed before a competent Civil Court for realisation of the mortgage dues against a mortgagor, the latter has no right to stall the same by raising a dispute under the Consumer Protection Act, 1986. The thing to be noted in this connection is that no such suit was filed against the complainant during the period when the matter was pending before the District Forum. From the documents filed along with the memo of appeal it appears that a suit being title Suit No. 34/96 has been filed by the appellant Bank against the respondent-complainant in the 8th Court of the Assistant District Judge at Alipore. From Clause (1) of paragraph 3 of the memo of appeal it appears that the aforesaid suit was filed on 30.3.96 but the order of the District Forum in C.D.F. Case No. 647/95 was passed on 12.3.96. Thus the suit before the Assistant District Judge was filed after the passing of the impugned order. The said suit has, therefore, no bearing on the order appealed against. Under Section 3 of the Consumer Protection Act, 1986 a consumer has an additional remedy under the aforesaid Act and this remedy is available not in derogation of the rights available under other Acts. So in this case the Bank is quite competent to file a suit against the complainant for the realisation of the loan amount, if any, due from the latter. But the suit would be decided on the basis of the facts available at the time of the filing of the same. In other words if any valid order is passed under the Consumer Protection Act, 1986 it will be binding on the parties, although any of them has a right under the Civil Procedure Code to bring a suit to enforce a civil right thereafter. From the above discussions it seems to us that the negligence of the appellant Bank in not collecting the insurance money promptly thereby causing loss to the respondent-complainant is a deficiency in service on the basis of the agreement between the parties. The complainant should, therefore, be entitled to a relief consequent on this deficiency.

TAKING into consideration the entire facts, therefore, we allow this appeal in part. We hold that in calculating the interest payable by the respondent complainant, the Bank shall deduct the amount of penal interest levied on the complainant from 15.1.91 to 24.1.94 and from 4.6.93 to 26.3.94 during which periods the values of two Insurance Policies were not collected by the appellant Bank. We also reduce the amount of costs payable by the appellant Bank to Rs. 2,000/-. Subject to the above modification the impugned order dated 12.3.96 is confirmed. The Bank''s dues against the respondent shall be finally calculated on the basis of the orders passed above. Appeal partly allowed.