Punjab and Sind Bank vs TEJIDER SINGH

THIS is an appeal filed against the order of District Consumer Disputes Redressal Forum-I, U.T., Chandigarh [hereinafter referred to as District Forum-I, for short], dated 12.7.2004 in Complaint Case No. 620 of 2003: Sh. Tejinder Singh v. Chief Manager, Punjab and Sind Bank and Another.

BRIEFLY the complaint is that the complainant stood as a guarantor for one Sh. Amrik singh, who had secured a car loan. The said loan was secured by way of the hypothecation of the car purchased i.e., Zen Car bearing Registration No. CH-01-W-8774. The said Sh. Amrik Singh failed to pay the loan instalments regularly and the loan was declared as N.P.A. account. It is averred that the complainant, as per Reserve Bank of India instructions, offered a proposal to the Bank on behalf of Sh. Amrik Singh in which it was agreed to make the payment of the loan amount of Rs. 2,50,000/- as full and final settlement of the entire loan amount under the N.P.A. scheme. The O.P. Bank asked the complainant to deposit Rs. one lac as fixed deposit with the Bank to indicate that the complainant was really serious in his offer to settle the car loan account. Accordingly the complainant deposited Rs. one lac on 29.10.2001 in the said Bank in the shape of an FDR and asked the O.Ps. to adjust the instalments already paid out of loan amount of Rs. 2,50,000/- and also informed the Bank that the balance amount will be paid by the loanee. The Bank however showed Rs. 2,95,486/- as the amount outstanding against the loan account as on 30.4.2003. Since the Bank did not agree to settle the loan account under the N.P.A. scheme as proposed by the complainant, he asked the Bank to refund the amount of Rs. one lac that was got deposited by him, conditionally on refundable basis in case the proposal was not acceptable. It is alleged that the Bank is neither refunding the amount nor it is settling the loan account under N.P.A. scheme and they illegally want to adjust this amount of Rs. one lac against some other loan received by one Smt. Gurpreet Kaur wife of Sh. Bhupinder Singh, which has got nothing to do with the car loan under reference. This complaint has been instituted by the complainant alleging that O.Ps. have not rendered proper service to the complainant and that they were deficient in all respects resulting in mental and physical harassment of the complainant and the complainant prays for refund of Rs. one lac deposited as F.D.R. with interest upto date and payment of Rs. 50,000/- for unnecessary harassment and humiliation besides costs of litigation as well as any other relief deemed fit. In response the O.Ps. version is that a sum of Rs. 2,48,000/- was taken on loan by Sh. Amrik Singh on 23.12.1997. He was to pay interest @ 17.5% per annum and the payment was to be made in monthly instalments of Rs. 4,800/- each. The complainant as well as loanee''s wife Smt. Baljit Kaur stood surety for the said loan. The loanee defaulted in payment and on 29.9.2001 visited the Bank with a request that his case for lumpsum payment be viewed sympathetically and he be granted rebate in payment of the loan amount. However, it is denied by the Bank that the loan account at that time was N.P.A. and that Rs. one lac in the shape of F.D.R. was given to fulfil any condition of the Bank. It is further stated that as on 29.10.2002 debit balance of the loan account was Rs. 3,11,593/- and the complainant deposited the said F.D.R. As per his own instructions, the bank marked its lien on the F.D.R. The complainant did request for rebate on the loan amount but he was told that the rebate is granted strictly as per the policy and guidelines of the Reserve Bank of India. It is denied that the Bank ever agreed to accept Rs. 2,50,000/- as offered by the complainant for adjustment of the total loan amount of Rs. 3,11,593/-. The Bank however forwarded the rebate proposal of the complainant to their Zonal Office but the same rejected on 5.3.2002 by that office on the ground that the case did into fall into N.P.A. category as on 31.3.2002. It is further stated that the loanee was asked to make the payment of the outstanding amount and upon his failure to do so the Bank after serving demand notice dated 20.6.2002 on the complainant, exercised its right to set off and adjust the proceeds of the aforesaid F.D. towards adjustment of the loan account. It is averred that as the principal borrower and the complainant have defaulted towards repayment of the Bank loan and they had failed to respond to the deand as well as legal notices and, therefore, there is no deficiency in service on the part of the O.P. Bank.

Learned District Forum-I in their analysis of the case was guided by the order of Hon''ble National Commission in the case cited as Union Bank of India v. Devinder Kaur, 2003 (2) CPC 65, and it held that since in the instant case the loan was sanctioned on 23.12.1997 and the F.D.R. in question was deposited on 29.10.2001 for 45 days the Bank cannot withhold the amount of F.D.R. as the loan was created in 1997 and the F.D.R. was deposited in 2001. Consequently, the Bank was directed to refund the F.D.R. amount to the tune of Rs. one lac with interest applicable till date of payment by treating F.D.R. as renewed from time-to-time. The learned District Forum also awarded Rs. 1,100/- as cost of litigation to be paid to the complainant.

AGGRIEVED by this order of the learned District Forum the O.P. Bank has filed this appeal. The appeal having been taken on board, record of the complaint case was summoned from District Forum-I and notice was sent to the respondent/complainant. Mrs. Adarshpal Kaur, Advocate appeared on behalf of the appellants/O.Ps. whereas Mr. Tejinder Singh, respondent/complainant appeared in person. Mrs. Adarshpal Kaur, Advocate, first submitted that the complainant is not a consumer as he has not availed/hired services of the Bank and hence the complaint is not maintainable under the Consumer Protection Act, 1986. She further submitted that the rebate is granted strictly as per Reserve Bank of India guidelines and instructions and the loanee was not entitled to the rebate sought. Moreover, she submitted that the aforesaid car loan did not fall in the N.P.A. category where the rebate can be granted, hence no deficiency in service is there on the part of the Bank in this regard. Further regarding adjustment of the amount of Rs. one lac of the F.D.R. against the outstanding loan, she submitted that the Bank is legally entitled to appropriate the debt dues from the amounts which are in its possession either belonging to the principal borrower or the surety as it is settled law that the liability of the surety is co-extensive with that of the principal debtor and the mere fact that the F.D.R was created subsequent to the loan transaction would not make any difference and to support her plea she cited case titled S. Vasupalaiah v. Vyasya Bank, I (2002) BC 405=2002 (1) ISJ (Banking) 157. She emphatically reiterated the Bank''s right to adjust the F.D.R. against the outstanding loan amount and pleaded that there was no deficiency in service even on this count. She, therefore, prayed that the appeal be allowed.

MR.. Tejinder Singh in response submitted that his letter dated 29.10.2001 was written by him at the behest and advice of the O.P. Bank and that the F.D.R. was made as part of the proposal for rebate. In case the proposal is unacceptable to the Bank it cannot withhold the amount of F.D.R. He justified the order of the learned District Forum-I as fair, just and legal and prayed for dismissal of the appeal. We have gone through the record and the impugned order in detail and have also heard the submissions of both the parties. The main issues in the case are two i.e., Is the complainant a consumer qua the O.P. Bank? and Is the Bank entitled to adjust the amount of the aforesaid F.D.R. against the outstanding loan amount? Addressing the first issue of the complainant being a consumer qua the O.P. Bank, though the O.Ps. did not raise this issue as a preliminary objection in their written statement yet they participated in further proceeding of the case and thus by their conduct made this objection null and void. Moreover, the complainant had written his letter dated 29.10.2001 on behalf of the principal borrower and thus being a beneficiary he steps into the shoes of the principal borrower and, therefore, becomes a consumer qua the O.P. Bank as defined in Section 2(d)(ii) of the Consumer Protection Act, 1986. This objection of the O.P. Bank, therefore, does not survive.

COMING to the main issue i.e., adjustment of the proceeds of the F.D.R. against the unpaid loan amount, it is settled law that in cases of non-payment of loans, it is the original debtor who is to be first tackled for realisation of the amount and only if unable, the lender may proceed against the guarantor whereas in this case the principal borrower had shown his willingness to pay the loan amount and also there is nothing on record by way of evidence that the Bank made any efforts to recover the amount from the principal borrower. In these circumstances, the Bank''s action of adjustment of the proceeds of the F.D.R. against the outstanding loan amount cannot be legally justified. Moreover, it is on record that the F.D.R of Rs. one lac has been made under the proposal for rebate, forwarded by the complainant vide his letter dated 29.10.2001. It was for the O.P. Bank to accept or reject the proposal in toto. The Bank does not have the liberty to accept the proposal in parts i.e., not grant the rebate but create a lien on the F.D.R. Furthermore, F.D.R. in question has been made four years later than the sanctioned loan and it is not hypothecated to the Bank against the loan amount, thus in our considered view the Bank has no legal authority/right to withhold the proceeds of this F.D.R. and deny the same to the complainant.

IN view of the foregoing analysis, we find that the impugned order is just, fair and legal and it does not require any interference, therefore, the impugned order is upheld and the appeal is dismissed as it lacks merit. The parties are left to bear their own costs of litigation. Copies of this order be sent to the parties free of charges. Appeal dismissed.