FUEPROS vs KARNATAKA STATE FINANCIAL CORPORATION

THIS petition under Section 21 of the Consumer Protection Act, 1986 by M/s. Fuepros is directed against Karnatka State Financial Corporation, M/s. Indian Institute of Technology, M/s. Bio-mass Energy Systems (P) Ltd. and M/s. Spectrum Unitop (Pvt.) Ltd.

IT is unnecessary to notice the facts in detail for the view which we have already taken and are now taking by this order. Briefly, the complainant alleged that he came across in 1982 a notification issued by I.I.T., second opposite party, in respect of the machinery and the technical know-how designed and developed by them in the manufacture of "Smokeless Briquetted Fuel" from out of agricultural waste, that the complainant undertook venturing the project after getting the letter and literature regarding the approved technology and the economical and commercial viability of the project from the second opposite party, that the machinery relating to the project was manufactured by the third opposite party and that second opposite party advised the complainant to purchase the machinery from the third opposite party. It is further alleged that the complainant approached the first opposite party seeking financial assistance for installation and erection of the machinery and the sanctions were duly granted by the first opposite party and after availing the financial assistance the complainant approached the third opposite party for the supply of machinery, the installation, erection of the unit on the production side and commissioning. It is then alleged that after installation and erection of the unit on the production side, the complainant was not able to make any headway because of the non-commissioning of the unit by the third opposite party in accordance with the contract as also because of defective plant and technology and the project being non-viable economically. The grievance is that because of the technology itself not having been completely developed besides being defective technology and economically non-viable, the complainant''s industry suffered an infantile mortality. Upon the plant being commissioned during the trial production certain deficiencies in the plant were observed and that required redesigning, modification and alterations but the third opposite party could not rectify those defects resulting in the plant being shut down. The relief claimed against the third opposite party is for a direction to pay all the money received by them while supplying the machinery, with interest @21% per annum from the date of receipt of the money in lieu of supply of machinery with liquidated damages of Rs. 5.00 lakhs. The grievance further is that first opposite party on their own volition engaged the fourth opposite party to inspect the complainant''s unit to find out the possibility of reviving the unit and a report was submitted by the fourth opposite party after which a consortium meeting was arranged on 13th June, 1988. It is alleged that in that meeting the complainant had categorically submitted his distress conditions and his inability to venture any project because of the serious loss and mental agony sustained by him but the first opposite party because of being hand in glove with the fourth opposite party thrust the new venture on the complainant and as a sequel to the same, the first opposite party engaged and deployed fourth opposite party to supply the machinery and equipments on "turn key basis". It is alleged that the project never readied the stage of commercial production and the key of the project was neither turned nor handed over to the complainant, that the first opposite party except making payment to the fourth opposite party never responded to the earnest request of the complainant for monetary support for the maintenance of the new unit and that by the new project the complainant has been made to shoulder the liability of more than twenty lakhs.

IT is also averred that the complainant while availing financial assistance from the first opposite party had hypothecated the land, the building, all its appurtenances along with the machinery and other ancillaries with the first opposite party, that the said land, building and all its appurtenances are hard earned by the complainant which has got not only the monetary value but also the sentimental value, that the first opposite party is completely aware of the fact that the ventures undertaken by the complainant ended in complete failure and the fourth opposite party has also not handed over the industry by way of turn-key mode to the complainant as agreed by them and that the act of the first opposite party in invoking Section 29 of State Financial Corporation Act, 1951 is completely unfair, unreasonable, unjust, unilateral and arbitrary in the presence of the complete failure of the projects due to the clear act of collusiveness between the first opposite party and the fourth opposite party.

IT is unnecessary to notice the proceedings under Section 29 of the State Financial Corporation Act, 1951 in this order as the complaint against the first opposite party was dismissed on 4th May, 1995 by a detailed order reading as follows: "Counsel appearing for the complainant made a request for an adjournment of this case in order to enable the complainant to be present and instruct him properly in the hearing of the case. A telegram has also been received from the complainant stating that he is not keeping well and hence is unable to travel and pray for an adjournment of this case in July, 1995 on the said ground. Mr. K.N. Bhatt, Counsel appearing for the opposite party No. 1 submitted before us that even going by the allegations contained in the original petition no deficiency in service can be said to be made out as against the Karnataka State Financial Corporation and hence the Corporation need not be put to a necessity of coming again for the purpose of defending this case. We have gone through the records of the case in the context of the said submission made by the learned Counsel Mr. K.N. Bhatt and we agree with the point raised by him that the Karnataka State Financial Corporation which has only advanced amounts to the complainant in order to enable him to purchase machinery and set up a small scale industry within the State, cannot be said to have committed any deficiency on its part so as to warrant grant of any relief as against the said Corporation. Hence, we discharge the Karnataka State Financial Corporation from the party array. The petition so far as it is directed against the remaining opposite parties will be posted for hearing during the last session of sittings of this Commission in July, 1995."

The reliefs claimed against the second opposite party is that it had committed grave error in patenting and designing the faulty machinery and consequently they are liable to compensate all the loss and agony suffered by the complainant calculated at Rs. 35 lakhs. The prayer made against the 4th opposite party is to pay all the money received by them while supplying the machinery, with interest @ 21% together with liquidated damages of Rs. 20 lakhs.

THE second opposite party pleaded that I.I.T. has only developed the process technology at bench scale which was taken by M/s. Farm Implement to develop it to a commercial unit, give satisfactory demonstration to prospective buyers and then supply on turn-key basis or any other basis which is solely a contract between the manufacturer and supplier and I.I.T. is not a party to this agreement. The contention is that the complainant should have satisfied himself about the performance in terms of output/input yields either by studying the manufacturer''s demonstration plant and any other plant supplied by the manufacturers and that since the plant supplied to the complainant was not as per recommendations of I.I.T. the institute cannot be held responsible for failure of the unit.

THE fourth opposite party pleaded that an agreement was made on 6th November, 1988 between the complainant and SUPL in favour of the first opposite party regarding supply of pelletising plant and the machinery and equipment in relation thereto on the terms and conditions contained therein, and in accordance with the said agreement the plant and machinery were supplied and commissioned by the 4th opposite party in November, 1989. However, the complainant failed to successfully run their business seemingly on account of mismanagement and improper handling of their enterprise. This resulted in closure of their unit which was later on auctioned by the first opposite party through public notice. The fourth opposite party denied that the plant and machinery were either defective or not commissioned. It is pleaded that at the auction of the unit belonging to complainant by the first opposite party the same was purchased by one Mr. Tanveer Sait, proprietor of M/s. Abba Fuels, Mysore who is stated to be continuously manufacturing fuel pellets out of the same plant without any change or modification and is reportedly doing regular business and have achieved good business with renowned buyers like, Nestle, I.T.C. etc. The complaint was filed on 22nd February, 1993. The third opposite party has not filed any version but the allegation is that the machinery supplied by the third opposite party in the year 1987 is a scrap. The process of erection of the new plant was initiated in the year 1987 and entrusted to the 4th opposite party. The plant and machinery was supplied in pursuance of the agreement dated 6th September, 1988 and commissioned by the 4th opposite party in November, 1989. The complaint was filed after the expiry of the period of three years which is the normal period allowed under the Limitation Act for making a claim. The alleged defects and deficiency in the plant and machinery supplied by the 3rd opposite party in 1987 and that supplied by 4th Opposite Party in 1988/89 and the commissioning of the plant was in November, 1989. We, therefore, decline to entertain this stale claim and dismiss the complaint on this short ground.