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Judgment
COMPLAINT was filed, inter alia, alleging that the complainant had established 160 -bed hospital and for meeting construction expenses and for equipping the hospital it had taken loan from Industrial Development Bank of India, Industrial Finance Corporation of India and Industrial Credit and Investment Corporation of India at high risk interest rates. To liquidate the liability of the accumulated interest and loan amount, the complainant decided to raise money from other resources. Opposite party offered his services representing that he had links with overseas banks and financiers who could finance the money to the complainant. A Memorandum of Understanding was executed between the parties on 5.12.1997. Under this MoU upfront fee @ 2% on the loan to be secured of US 5 million dollars was to be paid by the complainant in advance to the opposite party. Complainant paid amounts of Rs. 39,00,000 by means of demand draft bearing No. 924893 dated 5.12.1997 and Rs. 11,70,000 by means of demand draft No. 924894 dated 5.12.1997 to the opposite party. Another sum of Rs. 81,396 was paid by a cheque bearing No. 909228 dated 25.11.1997 towards registration and processing fee. It was further alleged that the complainant company was advised by the opposite party to float a company called M/s. Gold Earth Fund Limited and register it under the laws of British Virgin Islands. All these years the opposite party was unable to arrange the assured loan of US 5 million dollars to the complainant. He was thus deficient in service. Ultimately, on 12.11.1999, the complainant sent a notice calling upon the opposite party to refund the amount of Rs. 51,51,396. Though this notice was served on the opposite party but he failed to comply with the demand made therein. Complainant is a consumer. It was prayed that opposite party be directed to pay amount of Rs. 51,51,396 together with amount of Rs. 76,24,066 towards interest @ 24% p.a. as also future interest and compensation of Rs. 5,00,000 to the complainant.
OPPOSITE party contested the complaint by filing written version. It was alleged that the opposite party renders the services as detailed in para No. 3 of the complaint. Complainant after satisfying that the opposite party was fully capable of rendering such services entered into MoU with the opposite party for arranging loan of US 5 million dollars at preferential/lower rate of interest than that prevailing at that time. Complainant wished to borrow the loan through M/s. Horizon International Group S.A. based in the Republic of Seychelles, sole Director whereof was Yeluri Venkat Sai Vinod, auditor of the complainant. While the matter was under process, the complainant proposed to form a foreign company in Singapore at its own and increased the loan amount to US 8 million dollars of which US 3 million dollars was proposed to be retained abroad. It was stated that the incorporation of foreign company by the name of M/s. Gold Earth Fund Ltd. took considerable time. Opposite party made offer on 14.3.1998 of the increased loan amount of US 8 million dollars and the complainant accepted that offer after a long period on 18.5.1998. It was denied that the opposite party gave any advice to the complainant regarding incorporation of the said company to avail the loan amount. It was pleaded that the complainant made an application to avail of the said financial assistance through the above foreign company and on 30.7.1998 RBI asked the complainant to provide a Dun and Bradsheet Credit report on the credentials of M/s. Gold Earth Fund Ltd. but the complainant was unable to do so. On 1.8.1998 M/s. Gold Earth Fund Ltd. confirmed to the opposite party''s principal abroad that it had received acceptance from the complainant and offer made on 14.3.1998 was accepted. Complainant was still not able to get the required clearance from RBI. Opposite party could not proceed further in the matter without RBI clearance as it would have attracted the violation of FERA which was in force at the time. Complainant could not arrange the bank guarantee to enable the opposite party to get the loan amount released by his principal abroad. It was stated that out of the paid amount of Rs. 50,70,000, amount of Rs. 26,00,000 was spent towards cost and expenses incurred by the opposite party. Balance amount had been adjusted towards the fee for the services rendered. Under Clause 6 of the MoU if the complainant fails to comply with its obligations the opposite party is entitled to forfeit the amount paid. It was denied that the complainant is a consumer'' as the services availed of by it, of the opposite party was for commercial purpose.
COMPLAINAN T filed rejoinder to the written version filed by the opposite party. Affidavits of Dr. K.S. Shekhar, Y.V.S. Vinod, M.V. Shivaraman Murthy and Dr. S.H. Shetty were filed by way of evidence by the complainant. Opposite party filed his affidavit is evidence.
WE have heard Mrs. Kiran Suri for the complainant and Mr. V.K. Srivastava for the opposite party and have been taken through the record.
RECEIPT of a total amount of Rs. 51,51,396 for refund whereof along with interest attributing deficiency in service is claimed, is admitted by the opposite party. Since the case is primarily based on documentary evidence, reference of the relevant documents needs to be made first. Clauses 1, 2 and 5 and the schedule of the MoU dated 5.12.1997 admittedly executed between the parties are reproduced below: "1. The first party (opposite party) shall liaison between the Lending Institutions/Banks and the 2nd party (complainant) to complete all the formalities of the Forex Loan, required by the 2nd party.
The 2nd party shall provide all the required documents to the 1st party to organize the Forex Loan the documents being property collaterals, securities, bonds, bank guarantees, and any other document required by the banks, financial institution or the first party from time -to -time.
Whereas the 1st party has agreed to clear all formalities of arranging the loan within a maximum period of 90 days and in case of failure of the 1st party, to complete the above transaction, the 2nd party is entitled for the refund of the service charges received by the 1st party along with interest at the rate of 24% p.a. from the date of payment till date of realization (i.e. within 30 days from the date of non -performance).
SCHEDULE 1. Arrangement of Forex Loan of US $ 5,00,000. (US $ five million) 2. Advice on RBI/ECB clearance. 3. Advice on Procurement of Bank Guarantee."
SEA Ranger Holdings Ltd., Bahamas was the principal of the opposite party. M/s. Gold Earth Fund Ltd., a company registered under the laws of British Virgin Islands having office at Singapore was purchased for arranging the Forex Loan by the complainant. Letter dated 14.3.1998 sent by Sea Ranger Holding Ltd. to M/s. Gold Earth Fund Ltd. omitting immaterial portion, reads thus: JUDGEMENT_42_LAWS(NCD)3_2009.htm These financing conditions are based on the assumed key data of the financing transaction and on today''s market conditions. It is well understood that the afore -mentioned financing would be subject to all authorization and registrations required and to be obtained in Singapore and Bahamas respectively. Kindly send us your acce ptance letter and Bank Guarantee. Looking forward to receiving a written acceptance mounting this transaction and to working with you in a bigger way in the future. "
BY the letter dated 18.5.1998 written with reference to the letter dated 14.3.1998, M/s. Gold Earth Fund Ltd. informed the Sea Ranger Holdings Ltd. that the terms and conditions of offer are accepted subject to necessary governmental regulations binding on the transaction. This letter is signed by Dr. S.H. Shetty who was nominated by the complainant as Director in M/s. Gold Earth Fund Ltd. Letter dated 1.8.1998 sent by M/s. Gold Earth Fund Ltd. under the signature of said Dr. Shetty to Sea Rangers Holdings Ltd. notices that it had received letter of acceptance from the complainant who have approached the Ministry of Finance for the necessary statutory approval. Acceptance of the terms and conditions contained in the letter dated 14.3.1998 was reiterated. The complainant approached the Joint Secretary (ECB), Department of Economic Affairs, Ministry of Finance, New Delhi to approve the proposal for availment of External Commercial Borrowing of US $ 5 million to enable it to take permission from RBI for withdrawal of the amount vide letter dated 8.7.1998. Ministry of Finance in the Department of Economic Affairs by the letter dated 30.7.1998, 3.8.1998 intimated the complainant to approach an overseas Branch of SBI for a Dun and Bradstreet report on the credentials of M/s. Gold Earth Fund Ltd. to enable it to process the case. Desired information was to be submitted within a month of the issue of this letter. Sea Rangers Holding Ltd. wrote a letter dated 3.11.1998 to W/s. Gold Earth Fund Ltd. informing that the loan of US $ 8 million has been sanctioned and through its alliance partner in Europe it has arranged a standby letter of credit for US $ 9,60,000 and it should now provide bank guarantee for US $ 9,60,000 or its equivalent. Vide letter dated 14.12.1998, it was clarified by Sea Rangers Holding Ltd. that the bank guarantee required to be produced will be for equivalent of US $ 1,92,000 and the standby letter of credit arranged will also be for this amount. In the rejoinder, it is alleged that as M/s. Gold Earth Fund Ltd. had no activity at all, the credential report to the said letter dated 30.7.1998 -3.8.1998 could not be sent to the Ministry through SBI. By the letter dated 4.8.1999 the Department of Economic Affairs informed the complainant that as it had failed to furnish the required documents/information within the stipulated time period its proposal for availing the loan had been cancelled.
THRUST of arguments advanced by Mrs. Suri, Advocate was that the loan for arranging whereof the service of the opposite party was availed of, was not arranged within 90 days period as stipulated in the MoU dated 5.12.1997, by the opposite party. M/s. Gold Earth Fund Ltd. was purchased on the advice of opposite party. The opposite party ought to have verified the credentials of M/s. Gold Earth Fund Ltd. before recommending purchase thereof. As this company had no activity at all, its credentials could not be forwarded as desired by the Ministry of Finance, Department of Economic Affairs vide letter dated 30.7.1998 -3.8.1998 and the proposal was accordingly closed. It was submitted that the loan amount was not received by the complainant. It may be mentioned that under the said MoU the amount of Forex loan to be arranged was US $ 5 million. It is not in dispute that subsequently this amount was enhanced to US $ 8 million. Term of the MoU was thus varied. Period of 90 days had expired on 4.3.1998. Terms and conditions of the enhanced loan accepted by aforesaid letters dated 18.5.1998 and 1.8.1998, were conveyed by the principal of the opposite party by the letter dated 14.3.1998 much after 4.3.1998. So, having varied the terms of the MoU and having unconditionally accepted the offer contained in the letter dated 14.3.1998, the complainant cannot be heard to say that the opposite party was deficient in service by not arranging the loan within 90 days period. This time period was not the essence of the contract.
ADVERTING to the later limb of argument referred to above, in para No. 5 of the complaint, it is pleaded that on the advice of opposite party, M/s. Gold Earth Fund Ltd. was purchased which fact is categorically denied in the corresponding para of the written version by the opposite party. It is alleged that the purchase of the said company was done entirely at the instance of the complainant. In the affidavits filed by way of evidence both the parties have adhered to the stand taken to the said effect in the pleadings. Complainant has not produced any documentary evidence whatsoever to show that M/s. Gold Earth Fund Ltd. was purchased on the advice of opposite party as alleged. Y.V.S. Vinod was the auditor while Dr. H.S. Shetty was consultant, Orthopedician in the complaint. In their affidavits they have averred that in March, 1998 they visited Singapore and M/s. Gold Earth Fund Ltd. was purchased/formed. Before purchase they must have enquired about the credentials of this company. In this backdrop, the case of the opposite party in regard to his not having advised the complainant to purchase M/s. Gold Earth Fund Ltd. seems to be more probable.
AFOREMENTI ONED letter dated 3.11.1998 read with letter dated 4.12.1998 support the contention of Mr. Srivastava, Advocate that Forex Loan of US $ 8 million was procured by the opposite party through Sea Rangers Holding Ltd. principal who had also arranged standby letter of credit of US $ 1,92,000 but the loan amount could not be released to M/s. Gold Earth Fund Ltd. for failure to furnish the bank guarantee and obtain necessary governmental approvals by the complainant. To be only noted that the loan amount was to be routed to the complainant through M/s. Gold Earth Fund Ltd. Complainant has failed to make out case of deficiency in service on the part of the opposite party and the complaint, therefore, deserves to be dismissed being without any merit. Dismissed as such. No order as to cost.