PRECISION INDUSTRIES vs BANK OF BARODA

THIS is an appeal against the order dated 1st October, 1992 of the State Consumer Disputes Redressal Commission, Uttar Pradesh at Lucknow. By the impugned order the State Commission has allowed the complaint filed by the present Appellant-Precision Industries (hereinafter referred to as Complainant) against the present Respondent-Bank of Baroda (hereinafter referred to as Opposite Party). However, no relief was granted to the Complainant and the State Commission merely directed the Bank to intimate to the Complainant the precise reasons for refusing to extend the cash credit facility. Feeling aggrieved the Complainant has filed this appeal on the ground that the direction issued by the State Commission gives no relief to him.

ACCORDING to the averments in the complainant, the Complainant-proprietor, Shri Krishan Maheshwari was selected by the Opposite Party and U.P. Electronics Corporation (for short the Corporation) jointly in the year 1977 under the Government sponsored scheme for technical entrepreneurs to set up small scale industrial unit at the proposed Uptron Industrial Estate, Panki, Kanpur. The detailed project report of the Complainant for manufacturing of Water meters was examined for technical and financial feasibility respectively by Sponsoring Authorities. The Corporation was to provide infrastructure for the project such as factory shed, water, power, technical and marketing assistance while the Opposite Party was to provide the needed finances towards the purchase of machinery and working capital for the project on soft terms of margin money, subsidised interest rate and easy instalments for repayment of loan. After approval of the project report, the Complainant got factory shed at the said Industrial Estate where he set up his project in the year 1977-78, and the Bank of Baroda sanctioned demand loan of Rs. 2.00 lakks towards purchase of machinery besides working capital facilities of Rs. 85,000/- in the form of cash credit against stock of goods and book debts. As per the terms of sanctioned letter the Complainant fulfilled his obligation of depositing margin money amounting to Rs. 37,500/- from his own resources being 10% of the total cost of the project so as to avail the facilities/services of the Opposite Party and also completed all paper formalities for the Bank to release the funds. Part of machinery ordered by the Complainant was received for which the Opposite Party released total amount of Rs. 93,460/- on various dates upto 17th September, 1978. However, all of a sudden the State Government imposed total ban to new power connections to the Industry in the year 1977 and due to indefinite position of electrical power availability, procurement of the remaining machinery was postponed. On getting electricity connection in January, 1978, after a period often months, the Complainant took action to instal balance machinery. When two of the ordered consignments arrived, the Complainant submitted its demand note to the Opposite Party on 28th August, 1979 to release the payment for the same. The Complainant further averred that the facilities provided by the Bank have been highly deficient which hindered the progress of the work for the following reasons : (a) The Opposite Party refused on 28th August, 1979 to release payment against sanctioned amount of Rs. 2.00 lakhs without assigning any reason and returned the documents of the suppliers. Consequently, the Complainant had to cancel orders. (b) That the balance amount of margin money of the Complainant in the current depositaccount with the Bank was also frozen which he was not allowed to utilise. Even the request for small drafts of Rs. 1,000/- towards earnest money to be submitted with tenders was turned down by the Bank.

The Complainant was faced with complete stagnation as he could neither commence commercial production for want of machinery nor participate in tenders for supply of water meters to Govt., Semi Govt. Departments where these were consumed. The part-payment of Rs. 93,460/- in machinery and all preoperative expenditure became dead investment. The Opposite Party unscrupulously exploited the complainant by charging interest, penal interest, compound interest and credit guarantee fees etc. and debited the Complainant''s accounts with the Bank without caring for the implementation of the project. The Complainant submitted his representation dated 4th December, 1979 to the higher authorities i.e., Regional Manager of the Opposite Party through Branch Manager, Panki and also informed the Sponsoring Authority i.e. the Corporation about the state of affairs. The Opposite Party did not pay any heed to the representation of the Complainant nor paid any attention to the recommendations of the Corporation which had certified vide their letter dated 18th August, 1980 addressed to the Opposite party to the effect that the machinery listed were essential for carrying out production. The Complainant however, continued to press his demand for machinery through letters on various dates addressed to Regional Manager and Branch Manager of the Opposite Party which were followed with personal visits so as to impress upon the Opposite Party for necessity of early action. For revival of facilities the Opposite Party granted second term loan for machinery vide their letter dated 20th July, 1982 and disbursed in January, 1983 totalling Rs. 47,200/- which was totally inadequate to commercially run the sick unit and did not even meet the original cost of machinery envisaged in 1977 notwithstanding the cost of escalation during the period. The Opposite Party did not follow the norms stipulated by Reserve Bank of India for rehabilitation of sick units. The Complainant submitted revival proposal to the sick unit committee of the State Government on 16th March, 1985 and the copy of the same was sent to the Opposite Party by the District Industries Centre, Kanpur for necessary action vide their letter dated 13th June, 1987 which was not acted upon by the Opposite Party. The Complainant submitted a fresh revival proposal dated 1st April, 1987 to the Bank of Baroda and inter alia demanded refund of excess interest debited by the Bank to his accounts and supplementary financial facilities as were necessary to make the unit commercially viable. To his dismay the Complainant received from the Opposite Party a letter dated 12th May, 1990 stating that higher authorities are not in favour to refund excess amount charged and denied concessions for things that had taken place in the past. The Complainant again represented for reconsideration on which higher authorities of the Opposite Party agreed to waive of Rs. 1.64 lakhs amount of penal interest, if any further concessions were not pursued. Thus the authorities of the Opposite Party continued to thwart rehabilitation of the small sick unit and whatever little ground was covered by it after second part loan was also lost due to economic inflation during the past few years. All efforts of the Complainant to run the unit profitably became futile. The Bank is not entitled to charge any interest for its deficient services. The Complainant had already repaid to the Bank an amount of Rs. l,94,409.60whichisin excess of principal amount of term loan disbursed amounting to Rs. 1,53,840/- in all including DL(I), DL(II) and DL (pre-operative). An amount of Rs. 38,306.40 had been debited by theBank as Credit Guarantee fees to the accounts of the Complainant upto the period 31st March, 1991 on various dates which is not payable by him. According to the Complainant the Opposite Party failed to perform its contractual obligations by not releasing term loan for machinery on account of which the Complainant has suffered irreparable loss. The Complainant claimed the following relief: (a) To write off all interest charges debited by the Opposite Party in term loan accounts of the Complainant amount to Rs. 5.00 lakhs. (b) To refund credit guarantee fees as debited to the accounts of the Complainant by the Opposite Party amounting to Rs. 38,305/- upto 31st March, 1991 which are not payable by him. (c) To refund Rs. 40,570/- being the amount of repayment made in excess of the principal amount of loan. (d) To compensate for the loss of valuable career of the Complainant, who now at the age of 57 years cannot get any new job, assignment and is totally exhausted to carry on business. The minimum sum of Rs. 3.00 lakhs be considered on this account.

THE complaint was contested by Bank of Baroda. However, the copy of the counter is not on the record nor the pleas taken by the Opposite Parties in the counter find mention in the order of the State Commission.

VIDE order dated%14th March, 1995 this Commission ordered the Respondent i.e. Opposite Party to file a detailed affidavit setting out the reasons as to why Respondent-Bank did not release to the Appellant the full amount of cash credit facility that had been sanctioned to him. The Opposite Party had filed a detailed affidavit stating that by letter dated 25th February, 1988 the Appellant had requested the Bank to waive of penal / excess interest charged of this complainant could not utilise the loan facility and delayed implementation of the project resulting in the instalments becoming overdue in the account. In mid 1979 the Bank did not allow further disbursement as the Complainant could not install the machinery as per their project. Penal interest of 2% was charged by the Bank on account of non-payment of instalment. The Bank also granted term loan limit of Rs. 70,000/- for the purchase of machinery which was to carry interest at the rate of 13.5% per annum. The first disbursement of Rs. 20,000/- was made on 1st October, 1982 and the second one of Rs. 15,200/- on 8th October, 1982 and further disbursement of Rs. 12,012/-on 17th January, 1983. The above demand loan was to be repaid in 58 instalments. On account of non-installation of the machinery and non-payment of instalment with interest further disbursement under this account was also stopped. The Bank further granted a demand loan of Rs. 25,000/- carrying interest at the rate of 11% per annum. Under the said limit a total sum of Rs. 13,180/-wasreleased and was to be repaid in 36 instalments. This account was closed on 27th January, 1990 on the amount being repaid. The Bank also granted a Cash Credit (Bood Debt) Limit of Rs. 35,000/-but the appellant herein did not utilise the said amount. The Bank also granted cash credit hypothecation limit of Rs. 65,000/- which limit was to carry interest at the rate of 15% per annum with quarterly rests. The aforesaid limit was availed in full by the Complainant with effect from 22nd March, 1978. The position with regard to the Demand Loan Limit of Rs. 2.00 in his account and to grant an additional financial limits. The higher authorities did not agree to the same and the Branch of the Opposite Party communicated to the Complainant vide letter dated 12th January, 1990 that the Bank was not agreeable to refund penal/additional interest charges as per agreement to the account. It was pointed out that the Complainant''s unit was making cash profit and the Bank could consider any need based credit facilities without entailing any concession as claimed. It has been further stated that the Complainant''s factory was established in 1978 for the manufacture of water meters and production commenced in 1978. At the request of the Complainant the Bank granted him a demand loan of Rs. 2.00 lakhs for the purchase of machinery out of which Rs. 93,460 / - were disbursed. This disbursement was made on 22nd August, 1977 and disbursement was continued upto 17th September, 1988. It was provided that the amount would be repaid in 21 equal monthly instalments and interest at the rate of 11 % would be charged and the margin of 20% was to be made. On account of default in payment of instalment, at the request of the Complainant the total amount then outstanding in the sum of Rs. 1,60,000/- was rescheduled for payment on 12th May, 1982 and the Complainant was required to make repayment in 53 monthly instalments commencing from 1st January, 1983. The first six instalments of Rs. 1,000/- each next twelve instalments of Rs. 2,500/- each, next twelve instalments of Rs. 3,000/- each and next 22 instalments of Rs. 4,000/- each. Although the unit was established in 1976 and the credit facilities were sanctioned in 1977 the Complainant could not commence production till August, 1978 and it is possible that one lakhs, the Demand Loan Limit of Rs. 70,000/-and Cash Credit hypothecation Limit of Rs. 65,000/- as of November, 1991 was as under:� Outstanding (a) Demand Loan Limit '' of Rs. 2,00,000/- Rs. 5,40,346.80 (b) Demand Loan Limit of Rs. 70,000/- Rs. 94,315.00 (c) Cash Credit Hypothecation Limit Rs. 88,045.88 Rs. 7,22,607.68

THE Complainant had failed and neglected to repay the instalments in the Demand Loan Account as also the rescheduled instalments with the result the penal interest accrued on overdue instalment. The Complainant had requested the Bank to waive the penal interest and/or interest accrued in the account, as a measure of relief to the unit. As the Complainant was making cash profit, the higher authorities did not agree to the said request. The Bank is required to work within the frame work of its guidelines and since the cash credit account was not properly operated by the Complainant nor any deposits made there was no reason to give the relief as requested by the complainant. The Complainant had acknowledged indebtedness to the Bank from time to time and lastly on 31st December, 1988 but thereafter declined to sign further acknowledgements of debt or documents of renewal of limits with the result that the Bank was forced to file a civil suit against the complainant on 13th December, 1991. It was further stated in the affidavit that on 6th August, 1984 and 15th February, 1986 the Bank had issued registered letter to the Complainant to submit financial papers, stock statement failing which the Bank would stop operation of the account. The complainant did not submit papers resulting in the stoppage of the account. In the Cash Credit Hypothecation account the Complainant was required to bring all transactions into his account with the Bank but wilfully failed and neglected to do so.

THE Complainant filed rejoinder to this affidavit and pleaded that it was not making any profit and it has continuously sustained losses and the cumulative assessed losses over the period amount to over Rs. 4.00 lakhs. Unless the project was implemented and commercial operation started repayment could not have been made nor the dates of instalments could have been fixed. The main grievance of the Complainant is about the charging of interest, penal interest, credit carried guarantee fees and compound interest. We have carefully gone through the affidavit filed on behalf of the Opposite Party as well as the rejoinder filed by the Complainant. We are of the opinion that in the present case the Bank cannot be said to be deficient in the rendering of service. The Bank has given all possible financial help to the Complainant but he failed to pay the instalments of repayment of loan. The Complainant''s Unit must have commenced production and that is why it intended to submit tenders for the supply of water meters to Government, Semi Government Departments. Other thing to be noted is that most of the happenings took place from 1977 to 1983 but surprising enough the Complainant did not complain in a Court of Law about the breach of any contract that might have been entered into between the parties.

TO help the Unit the Bank even agreed to waive of Rs. 1.64 lakhs towards penal interest if further request for further concessions was not made. As noticed above Rs. 7,22,607.68 are due from the Complainant to the Bank for which the Bank has filed a suit. When the Complainant could not keep the financial discipline the Bank was justified not to grant further facilities. The Bank has to safeguard its interest also. In the light of the above discussion we hold that the Opposite Party Bank is not guilty of any deficiency in banking service. Accordingly we dismiss the present appeal, but make no order as to costs.