SOMA CHEMICALS vs Syndicate Bank

A married lady having failed to get financial assistance from bankers and receiving notice for exercise of statutory power from the financier has filed this complaint claiming compensation of Rs. 8,96,932.60 paise from the opposite parties.

OPPOSITE party Nos. 1 and 4 are banking organisations and opposite party Nos. 2 and 3 are the financing body. Case of complainant in short is that she applied for financial assistance to establish a Small Scale Industry at Rourkela from opposite party No. 3 through its Branch at Rourkela (opposite party No. 2). Loan of Rs. 4,11,000/- was sanctioned on 3.8.1984 subject to satisfaction of some terms and conditions one of which was to arrange loan for working capital. Thereafter, complainant approached the Syndicate Bank (opposite party No. 1) for loan in respect of working capital and on 11.3.1985 Branch Manager of opposite party No. 1 intimated that the bank would consider her proposal for sanction of working capital finance. All other terms having been satisfied, Orissa State Financial Corporation (opposite party No. 3) disbursed loan to the tune of Rs. 3,70,660/- after her unit was registered with District Industries Centre on 17.10.1985. Factory was ready for production in November, 1985. Since Syndicate Bank insisted on trial production prior to sanction of loan for working capital deputed its technical officer who on physical inspection was satisfied regarding trial production. However, on 17.1.1986 Syndicate Bank intimated complainant that it would not be possible to sanction any working capital facility as the bank was going through a period of credit restriction. Bank advised to contact any other bank and forwarded a copy to Branch of State Bank of India in Industrial Estate, Rourkela. However, inspite of approaches several times, State Bank of India did not sanction the loan and rejected the same on 4.4.1986 raising some points about her integrity. Complainant approached various authorities to render her assistance to get the loan. On 24.1.1987 Manager (credit) of District Industries Centre addressed a letter to Syndicate Bank to consider the loan application of complainant for working capital since there was no longer any credit squeeze. Complainant approached higher authorities of the Syndicate Bank. While complainant was making her attempts corporation first demanded interest and thereafter issued notice to seize the factory under Section 29 of the State Finance Corporation Act.

Opposite Party No.1 has stated its case asserting that it never assured complainant to grant the facility of loan. It only stated that it shall consider the application for loan. On 13.6.1985, it informed the corporation that sanction of working capital loan applied for by complainant is under active consideration which shall be subject to approval by Divisional Office at Bhubaneswar. Corporation ought not to have disbursed the loan without sanction since Clause 17 of the terms provided for sanction of loan. Insistance for trial production was denied but it was stated that technical officer visited the factory on 8th and 9th January, 1986 who submitted the report on 11.1.1986 stating that complainant has no experience and she may not be able to took after the unit properly. Divisional Officer did not approve the loan on two grounds. They are (i) expertise knowledge is necessary for chemical manufacturing which complainant does not possess, and (ii) bank was experiencing tight resources constraint and was compelled to curtail credit. Complainant was intimated about the same in a registered letter dated 5.2.1986.

OPPOSITE party Nos. 2 and 3 filed a separate statement. Their case is that it has no deficiency in service. As per terms it issued notices when no payment was made. State Bank of India in its separate statement claimed that failure to provide financial facility to an industry or business does not come within purview of the Act since it does not constitute deficiency in service. It was stated that proposal of complainant was duly considered by it since complainant did not possess healthy banking record which was gathered from Syndicate Bank and also Bank of India. In Bank of India complainant had a cash credit limit in name of M/s. Chandra which was overdrawn and payment was irregular.

FROM the aforesaid assertions, it is clear that complainant took loan from the Orissa State Financial Corporation for establishment of a Chemical factory. Although one of the conditions for disbursement of loan was that a commercial bank is to sanction loan for working capital loan was disbursed before such sanction. All attempts of complainant to get loan either from Syndicate Bank or from State Bank of India failed. Orissa State Financial Corporation has issued notice to exercise power under Section 29 of the State Finance Corporation Act on account of failure to repay the loan. Although it is urged by State Bank that grant of loan is not a service, we are of the clear view that such function of State Bank or any other Bank is a service as defined in Section 2(1)(o) of the Act. Where there is any fault, imperfection or short comingin the manner of performance which is required to be maintained in relation to a service it amounts to deficiency as defined in Section 2(1)(g). Rejection of application for loan for reasons which are not brought to notice of the complainant for getting an opportunity to explain by State Bank of India which is created by Statute and is an other authority under Article 12 of the Constitution is a short-coming in manner of performance of its duty to advance loan to complainant. We have no hesitation to come to conclusion that State Bank of India is liable for deficiency in service since complainant suffered on account of rejection of her application for sanction of loan towards working capital. Ground of rejection of application by Syndicate Bank are squeezing of credit facility in the year 1986 and absence of experience of the complainant. These grounds were also intimated to complainant. Therefore, there is no deficiency in service since it has not been brought to our notice that the reasons for rejection are extraneous consideration.

DISBURSEMENT of loan by Orissa State Financial Corporation appears to be a favour shown to complainant. When a statutory body has indicated the term that the loan would be disbursed after sanction of loan for working capital by a commercial bank, there was no justification for the corporation to disburse the same. Circumstances under which compliance of the term was waived has not been brought to our notice. While we depricate the same and hope that the delinquency of the officers responsible for the same shall be effectively dealt with by the corporation after due enquiry, show of favour is not a deficiency is service and accordingly, opposite party Nos. 2 and 3 are not liable.

STATE Bank of India refused loan in the year 1986 against which complainant made a grievance to Reserve Bank of India. Representations do not keep a claim alive. Accordingly, approach to this forum five years after i.e. on 1.6.1991 results in the complaint of the complainant being barred by limitation. In result, in spite of our finding that there was deficiency in service of STATE Bank of India which resulted in suffering of complainant we are not able to give any direction as the complaint is barred by limitation. Accordingly, complaint is dismissed. Complaint dismissed.