Standard Chartered Bank vs RENU SOOD

THE opposite party in O. P. No. 425/2000 on the file of the District Forum, Chennai (North) is the appellant.

THE case of the complainant was as follows : During February, 2000 the opposite party canvassed with the complainant and lured her into taking loan against shares. She pledged shares of VSNL, MRF, Corporation Bank, Grasim, I. T. C. , Reliance Industries, S. B. I. , TISCO and Integrated Enterprises Limited. An overdraft limit of Rs. 10,00,000 with a drawing limit of Rs. 2,80,000 was given to her on 12. 2. 2000. The drawing limit was revised from time-to-time. On 4. 12. 2000 the drawing limit was enhanced to Rs. 6,79,000 and on 24. 2. 2000 it was enhanced to Rs. 8,79,000. A sum of Rs. 7,900 was debited to her account by way of documentation charges and front end fee. All revisions of drawing limit were communicated in writing to the complainant. On 13. 3. 2000 the opposite party issued a notice to the effect that the complainant''s drawing limit was Rs. 8,08,500, that she had exceeded the drawing limit by 69,400 and, therefore, the limit was cancelled and she should remit the entire dues within 7 days with accrued interest and in default, shares would be sold. The complainant had always taken proper care to operate her account within the drawing power fixed by the opposite party. She had never drawn any money in excess. She never received any intimation regarding the reduction of the drawing limit from Rs. 8,79,000 to Rs. 8,08,500. The complaint of irregularity and cancellation of limit was untenable. The threat of sale of shares was even more galling. By a Fax letter dated 15. 3. 2000 the complainant informed the opposite party that she had not received any intimation about the reduction of the drawing limit, that she had not committed any irregularity, that her limit had been cancelled within four weeks without assigning any reasons; that she would clear the loan upon receiving the statement and that the bank should not reimburse the front end fee and charges and should not charge any interest. After she had despatched that, she had received an excess drawing letter dated 11. 3. 2005 on 18. 3. 2000. The letter was sent in a cover of Cameo Corporate Services Limited and bore the postal mark on 18. 3. 2000. On 20. 3. 2000 the complainant sold her machinery and equipment for a sum of Rs. 6 lakh. By letter dated 21. 3. 2000 she informed the opposite party that her cheques for Rs. 8,70,000 were ready and would be handed over upon receiving confirmation that she would pay service charges and interest. The opposite party by letter dated 21. 3. 2000 admitted that the letter dated 11. 3. 2000 had not been received by the complainant and that Ex. A4 was the first letter received by the complainant. On 25. 4. 2000 the complainant paid a sum of Rs. 6,70,000 and asked for no-due certificate and requested for cancellation of the pledge. The pledge was cancelled only on 19. 6. 2000. She gave a lawyer''s notice claiming damages in a sum of Rs. 5 lakh occasioned by loss in sale of machines, distress, mental agony and hardship. The opposite party filed a version admitting the grant of overdraft facility against the pledge of shares, denying luring the complainant and further stating that they had kept the complainant informed about the drawing power by way of letters and admitting that the opposite party had in fact sent a letter dated 13. 3. 2000 cancelling the limit and calling upon her for liquidation of the limit; pleading that the letter dated 11. 3. 2000 was a routine letter; that they had not committed any deficiency in service, sale of machines was the complainant''s own making that the complainant had not suffered a loss and in any event, the opposite party was not liable for the loss.

On the side of the complainant Ex. A1 to Ex. A21 were marked while on the side of the opposite party Ex. B1 to Ex. B10 were marked.

THE District Forum found; the limit had been cancelled and notice of sale issued even before the expiry of one month; even according to the admission of the opposite party, customers should be informed about the change in operating limits and that it was a statutory requirement; though the opposite party, contended that they had issued notice about excess drawals under Ex. A6 and Ex. B8, there was no evidence that the letter had been received by the complainant; Ex. A5 postal receipt had been received on 18. 3. 2000 only; the opposite party had not come out with any valid or justifying reason to hurry the issue of notice of sale; Ex. A4 showed that under Ex. A3 the complainant had not been intimated about the revised limit; the opposite party had not responded after several notices; the complainant had clearly stated that one Mr. Natarajan of the opposite party had met the complainant in her office and had offered overdraft facility; Ex. A21, legal notice, also confirmed the allegations and that there was no response to the legal notice. The District Forum futher concluded that even after clearing the entire sum, the opposite party had issued a no due certificate nor cleared the pledge. Omission to give notice, threatening sale without a reasonable cause and indifference in responding to communications, according to the District Forum, amounted to negligence and deficiency in service. The District Forum ultimately found that the circumstances showed that there was a distress sale for the purpose of liquidating the dues and that though there was no evidence to show the value of machinery and actual sale price or loss on sale, there was evidence of mental agony and financial strain. So holding the District Forum directed the opposite party to pay a sum of Rs. 25,000 to the complainant. It is as against that the present appeal has been filed.

MR. M. Muthuperiasamy, learned Counsel for the opposite party/appellant, submitted as follows : The District Forum was wrong in holding that the complainant''s contention as a grievance that the reduction in operating limit from Rs. 8,79,000 to Rs. 8,08,500 as unilateral and arbitrary. It was an agreed term as per Ex. B4 that the opposite party might determine the operating limit from time-to-time without prior intimation on the basis of banks margin requirement and the market value of the pledged security. The District Forum failed to note that having agreed to the terms of the loan facility, it would not lie in the month of the complainant to allege that the operating limit was unilaterally and arbitrarily reduced. It was also wrong on the part of the District Forum to hold that a notice of sale under Ex. A3 was sent within a period of less than a month stating that the complainant had exceeded the limit by Rs. 69,400 without looking into the relevant facts and circumstances proved by the opposite party. The complainant was put on notice vide Ex. B8 which was the bank''a letter dated 11. 3. 2000 informing the complainant of the overdrawal by Rs. 69,400. She was called upon to pay the same. The District Forum was in error in holding that this letter was received by the complainant only on 18. 3. 2000 without verifying the veracity of the evidence produced by the complainant namely Ex. A5 despite bringing it specifically to the notice of the District Forum. Ex. A5 was the envelope produced by the complainant in evidence of having received the letter dated 11. 3. 2000 only on 18. 3. 2000. This envelope did not bear the ''to address''. The postal stamp for Rs. 3 affixed on the envelope was not defaced. The envelope bore the purported postal seal on the back of the envelope. How the postal authorities delivered this envelope without ''to address'' to the complainant and why the postal authorities chose to affix its seal on the stamp. It would show that Ex. A5 was a concocted document to project a picture as if the letter dated 11. 3. 2000 was received by the complainant only on 18. 3. 2000. The District Forum failed to note the admission of complainant vide Ex. A9 that all the communications of the opposite party were received by the complainant on the very next day itself by courier. The District Forum was in error in ordering the complaint. Per contra the learned Counsel for the complainant submitted as follows : The conclusions arrived at by the District Forum were based upon the materials on record, probabilities of the case and were fully justified and warranted. The evidence of the complainant in the proof affidavit had not been rebutted. Ex. A21, legal notice, stated that the opposite party lured the complainant into taking a loan against shares. The said notice had not been replied to. While Ex. B4, standard form contract, provided for reduction of operating limits without any notice to the customer, it had come out in the written version that it was statutory requirement to intimate the customer about the reduction in drawing limit. The same was also found in Ex. A8 which was a clear admission that Ex. A5 had not been received before the receipt of Ex. A8. Further cancellation of the limit without requesting the borrower to bring the over-drawings to order and giving reasonable time, therefore, was certainly a deficiency in service. Further, threatening the sale of securities within one month of giving the facility in these circumstances was certainly negligence. The District Forum had seen that the opposite party had taken their own sweet time to respond and the pledge of shares had been cancelled very much later on 19. 6. 2000. If the opposite party was convinced about the legality of the sale, they should have proceeded further with the sale immediately after the issue of Ex. A3 or within 7 days thereof, appropriated the sale proceeds with interest and released the balance to the complainant. However, the opposite party neither sold the shares, nor accepted the cheque tendered by the complainant. The opposite party also did not release the pledge till very date. There was thus clearly deficiency in service. The District Forum had rightly allowed the complaint. No exception could be taken to the same. We have gone through the materials on record. We are satisfied that the District Forum has rightly allowed the complaint and granted relief to the complainant. The facts not in dispute are as under : The opposite party provided an overdraft limit to the complainant in a sum of Rs. 10 lakh with a drawing limit of Rs. 2,80,000. This was being increased or reduced periodically depending on the fluctuations in the price of the shares deposited by the complainant with the opposite party. The first OD facility was availed by the complainant on 17. 2. 2000. But within a period of less than one month i. e. , on 13. 3. 2000 the opposite party had sent a notice of sale under Ex. A3 stating that the complainant had been provided with drawing limit of Rs. 8,08,500 and she had exceeded the limit by drawing a sum of Rs. 69,400 in excess of the limit provided and, therefore, she had committed an irregularity and consequently enhancement had been cancelled and she was called upon to settle the dues within 7 days. This notice further stated that if she failed to settle the amount, the shares pledged by her would be disposed of towards the money payable by her. According to the complainant, she was not informed about the reduction of the drawing limit from Rs. 8,79,000 to Rs. 8,08,500. Her further grievance was that this had been done in a unilateral and arbitrary manner by the opposite party without information.

THE short question for consideration is as to whether the opposite party had informed the complainant about reduction in limit earlier to the notice of sale. There is nothing on record to show as to how many times the opposite party had intimated the change in operating limit on the basis of the valuation of the shares. Even before expiry of one month, the opposite party had issued a notice of sale. Why was this done in such a great hurry when the opposite party accepted that, there should be intimation to the constituents of the change of operating limit and that it was statutory requirement? There was nothing to show that the statutory requirement had been complied with by the opposite party. The stand of the opposite party was that prior to notice of sale on 13. 3. 2000, there was intimation to the complainant under Ex. A6 and Ex. B8. Nothing had been produced by the opposite party to show that this letter had been received by the complainant or had been acknowledged by her. The District Forum on the basis of Ex. A5, postal receipt produced by the complainant and in the balance of any proof by the opposite party, accepted the case of the complainant that it was received on 18. 3. 2000. After receipt of sale notice the complainant had sent a FAX, Ex. A4, dated 14. 3. 2000; that she had never been informed about the revised limit nor about excess drawing. The letter for sale had provoked her and she chose to close the account and asked for statement of account and also settled the accounts. The most important letter dated 11. 3. 2000 regarding excess drawing according to the complainant was received by her only on 18. 3. 2000. The District Forum is perhaps justified in observing that the opposite party had created a letter to show that a notice had indeed been given before notice of sale. Let us for the sake of argument assume that the letter Ex. A5 dated 11. 3. 2000 had indeed been received by the complainant before she received Ex. A3 dated 13. 3. 2000 canceling the facility and calling upon her to pay the excess amount of Rs. 69,000 with interest thereon within 7 days from the date of the letter. Ex. A5 calls upon the complainant to regularise the account either by pledging further securities as per the opposite party FAST list or by depositing adequate funds to cover excess amount within a week from the date of the letter. But then within 2 days Ex. A3 came to be issued. There is absolutely no explanation on the side of the opposite party as to why this was done though some attempt was made at damage controlling by withdrawing the subsequent notice. But then naturally the complainant felt offended and proceeded to close the account. There were several reminders and letters and even legal notices issued on behalf of the complainant. The complainant writes under Ex. A4 dated 15. 3. 2000. This was received on 15. 3. 2000. She clearly mentioned that she had never been informed about the revised limit nor about the so-called excess drawing nor any request from the bank to regularize the account. Earlier she wrote to them saying that she awaited the statement of account confirming the balance to be paid to close the account. But so far as the opposite party was concerned the statutory requirement as dictated by the product guidelines the letter dated 11. 3. 2000 had been sent. It is significant to note that the letter Ex. A8 dated 21. 3. 2000 does not mention the letter dated 11. 3. 2000. Apparently Ex. A5 has been created to support Ex. A3. But it turned out to be a clumsy concoction. Whatever it is, so far as the complainant was concerned, she had not been treated fairly. There was clear deficiency in service on the part of the opposite party. It has been so found by the District Forum and in our view, rightly. In these circumstances, we confirm the order of the District Forum.

IN the result, the appeal fails and the same is dismissed. There will be no order as to cost. Appeal dismissed.