JIGNISHABEN SHITALKUMAR PATEL vs IDBI BANK LTD.

THE dispute involved in this case falls in a narrow compass i.e., whether the IDBI Bank should have given seven days written notice before the shares pledged by the complainant/borrower were disposed off to make good the deficit in the security which was increasing day by day. Submission of the learned Counsel for the complainant :

THE complainant Mrs. Jignishaben Shitalkumar Patel is the individual investor in the shares and security having an account with the respondent bank and had approached the bank to provide loan of Rs. 20 lakhs against placement of shares and securities which was sanctioned with a margin of 50% or 35% of the market value of shares subject to changes in the bank''s policy from time to time. Complainant has stated that loan has been taken by pledging shares and signing money equity application form (Loan against Demat Shares). He stressed upon the first clause of the agreement which reads as follows : The overdraft limit shall not exceed the said amount. However, the actual overdraft facility would depend upon the value of the securities at the time of grant of the said facility. The valuation of securities, margin money and actual overdraft facility would be exclusive decisions of the bank and will be binding on the parties. The facility is repayable unconditionally on demand at the bank''s absolute discretion. The bank would give seven days written notice to the borrower to repay the amount due. He submitted that the bank has obviously not given this notice. He has also stated that Clause 19, which reads as follows : The borrower as well as the Guarantor also undertake to give irrevocable power of attorney in favour of the bank to authorise the bank to sell or transfer the said pledged securities for the purpose. This power of attorney was not given at the time of sale of shares.

Because of the hasty decision of the bank to sell the pledged shares, the complainant has lost heavily. Hence, he submitted that he may be made good the following amount with 18% p.a. interest from the date of disposal of shares till the date of payment : 1. Loss on account of distress selling 30,27,486 2. Complainant for mental stress and strain 5,00,000 3. Cost of the litigation 50,000 35,77,486 Case of the Bank :

DURING March 2001, when there was a steep fall in the share prices the deficit in the margin went on increasing. The bank asked the complainant over phone to arrange for additional securities to off set the deficit or pay cash to the bank and reminded the borrower on 27.3.2001 and 4.4.2001 to which Mrs. J.D. Patel replied over phone that she will arrange to pay interest within 3 to 4 days and further promise that all the three accounts will be regularized, which did not happen. Accordingly, the bank officers reminded Mrs. J.D. Patel on phone on four occasions from 7.4.2001 to 10.4.2001. On 11.4.2001 the bank officials informed Mrs. Patel about the increasing deficit in margin in three accounts of the complainant due to thse panic situation in the market due to Ketan Parikh scam in Madhavpura Mercantile Co-op Bank and further told that the present opponent will be forced to sell the securities if market goes down on that day. Mrs. J.D. Patel showed her inability to pay any cash or offer the securities but she gave her consent over telephone that the bank may sell the securities if situation warrants. Present opponent further informed Mrs. J.D. Patel that the representative of the opponent will meet her on 12.4.2001 in the morning but Mrs. J.D. Patel refused to meet while telling that she cannot arrange the fund and hence the bank is free to take the decision to sell out the securities to recover bank''s dues on 12.4.2001. When the representatives of the bank visited Mrs. J.D. Patel''s house at around 0930 hours, and informed her the seriousness of the situation looking to the panic situation in the market, complainant along with Mrs. J.D. Patel and family members cried before the representative of the bank and further shown their inability to do anything to make deficit and gave their consent to sell the securities. The bank informed Mrs. J.D. Patel that the present opponent have sold out the shares and on 13.4.2001, 17.4.2001 and 23.4.2001. The sale proceeds received by the bank comes to Rs. 53,95,686.09 which were duly credited in the complainant and relatives Saving Bank account and out of the same a sum of Rs. 52,09,697.77 was adjusted towards the dues of the bank under the said loan accounts and thereby leaving a surplus amount of Rs. 1,85,98.32 which was lying in the aforesaid saving bank account and bank vide letter dated 3.5.2001 informed the complainant that the statement of account was attached and the said amount has been withdrawn by keeping small amount in the said saving account with the opponent. Submissions of the learned Counsel for the Bank :

THE learned Counsel pointed out Clause 7 of the agreement-cum-pledge signed on 20.1.2001 that the borrower shall within three days of notice from the bank, shall make good of the short fall failing which the bank has the right to dispose off the pledged securities. Further, the learned Counsel of the bank brought to our notice the irrevocable undertaking given in the money equity application form by the complainant where she undertakes to make good the short fall in the margin within 7 days of receipt of intimation from the bank either by post, telephone or oral. Further by signing this clause, the complainant has authorised the bank to sell the pledged shares to make good in the deficit in the short fall of margin. This notice has been given to the complainant. The learned Counsel submitted that they have filed the affidavit of the Bank Manager who has sanctioned the loan and also the affidavit of Mr. Ashvin T. Panchal, who had gone to the house of the borrower asking her to pay all the dues. The learned Counsel has stated that they made all out efforts to sort out this issue and adequate opportunity was given to the borrower either make good the security by either pledging additional securities or either bringing more money which the borrower has not done. There has been no deficiency in service on the part of the bank. Findings :

APPLICATION Form : The borrower has filed the duly signed APPLICATION Form called the Money Equity APPLICATION Form (Loan Against Demat Shares) a printed document of the IDBI Bank which has been duly filled in by the borrower and signed by the borrower/complainant. There is an irrevocable undertaking which reads as follows : I/we note that the prescribed margin will always be maintained on the value of the sahres calculated at weekly interval. Shorfall if any, as company within advance value of these shares, drawing power and actual outstandings in my/our overdraft account at any time will be made good by me/us in seven days of receipt of intimation from the bank in whichever mode by post, telephone, personal. I/we hereby irrevocably authorise IDBI Bank to sell or otherwise dispose off these shares in full or part as may be decided by the bank at any time during the currency of the loan account in the event of my/our loan account runs irregular and is called up for repayment and appropriate the sale proceeds net of expenses to repay the loan together with interest in full including penal interest due it any. Shortfall if any will be immediately made good to you by me/us together with interest.

THIS clearly spells out that the borrower/complainant undertakes to maintain margin on weekly interval. Shortfall if any as compared with advance value of shares will be made good by the complainant in seven days of receipt of information by the bank in whichever mode by post/telephone/personal. It is clear from the visit-cum-follow-up report of the Branch Manager who himself visited the house of the complainant and gave the chronological statement which covers all the dates on which follow-up action has been taken by the bank. There is a solid proof that the bank, made all out efforts to make good the deficit. The complainant reiterated the Clause 1 of the agreement-cum-pledge which mentioned the bank should give seven days notice to the borrower to repay the amount due, which is quoted below : The overdraft limit shall not exceed the said amount. However, the actual overdraft facility would depend upon the value of the securities at the time of grant of the said facility. The valuation of securities, margin money and actual overdraft facility would be exclusive decisions of the bank and will be binding on the parties. The facility is repayable unconditionally on demand at the bank''s absolute discretion. The bank would give seven days written notice to the borrower to repay the amount due.

But the bank has not asked her to repay the loan amount due but had only asked her to make good the shortfall in security which is covered by Clause 7 which is reproduced below: If at any time the value of the said securities falls so as to create a deficiency in the margin requirement specified by the bank from time to time or if there is an excess over the overdraft facility limit, the borrower shall within three days of notice from the bank, deposit with the bank additional security in the form of cash or such other securities which may be acceptable to bank, failing which the bank may at its discretion sell, dispose off or realize any or all of the said securities without being liable for any loss or damage or diminution in value sustained thereby .

IT is true that the complainant had not given irrevocable power of attorney to the bank to sell the shares. Though an undertaking had been given by the complainant while obtaining loan stating that : The borrower as well as the guarantor also undertake to give irrevocable power of attorney in favour of the bank to authorise the bank to sell or transfer the said pledged securities for the purpose. This power of attorney was not given at the time of sale of shares. But the borrower had given this power of attorney to the bank on 26.7.2001 which ratifies the action taken by the bank in selling the shares to make good the deficit in security.

WHILE the Bank Manager Shri Mahendra Patel who sanctioned the loan and also the Loan Account Manager Mr. Ashvin Panchal have filed their affidavits mentioning the bank''s stand and the details of action taken by them, the complainant has not filed any affidavit in support of her case. This is despite the fact that opportunities were given to both the sides by this Commission on 1.8.2002 to file the respective affidavits by way of evidence within four weeks from the date of the order. Till today the complainant has not filed any affidavit. Hence, the affidavit statement made by the Bank''s officers go unrebutted. The learned Counsel for the bank also pointed out that after disposing of the shares and the loan account, the balance amount was deposited by the bank in the complainant''s account which has been withdrawn by the complainant without a murmur. The above analysis indicates that there has been no deficiency of service on the part of the respondent bank in this case. Therefore, the complaint is dismissed. There shall be no order as to costs. Complaint dismissed.