TELETRONICS vs INDIA

THESE two appeals arise out of a common order passed in C.D.F. Case No. 726 of 95 by the Calcutta District Forum, Unit-II, Calcutta. The complainant in the aforesaid case made an allegation of deficiency in service against the opposite party State Bank of India, Bhavanipore Branch, for refusal of the Bank to give assistance as per the sanctioned loan. The complainant carries on manufacturing business and selling of high technology telecommunication materials and electronic components and for this purpose it is registered with the Directorate of Cottage and Small-Scale Industries, Government of West Bengal and National Small Industries Corporation Ltd., Government of India. The complainant entered into an agreement with the Bank on 5.12.1980 for financial assistance under four categories, viz. Medium-Term loan of Rs. 80,000/ -, a Term Loan under the quality schemes of the Bank of Rs. 40,000/-, a cash credit limit of Rs. 80,000/- and a cash credit limit of Rs. 40,000/- as also other related banking facilities. The complainant repaid the Medium-Term Loan of Rs. 80,000/- to the Bank with payable interest. At present, the complainant is utilising cash credit limit of Rs. 80,000/- and cash credit limit of Rs. 40,000/-. He, however, never availed of Term-Loan of Rs. 40,000/-.

THE complainant received a purchase order in the middle of 1993 from the Department of Telecommunication, Government of India, amounting to Rs. 3,04,920/-. As the complainant was dependent on the Government of India and as he had entered into an agreement with the opposite party-Bank creating an embargo on the borrowing credit facilities of any description from any other Bank or any credit agency or institution, he approached the opposite party Bank for a paltry amount of Rs. 15,000/-. Although the complainant had urged upon the Bank to make the sanction of the loan as early as possible, the Bank remained silent over the pro- posal and opened the dialogue in this regard only on 10.11.1993, vide their letter No. SIB : AK : 39 : 1604 dated 10.11.1993. In the meantime, the limiting date of supply of the materials by the Telecommunication Department, Government of India, expired on 10.9.1993. THE complainant lost the order on account of this deliberate and negligent delay on the part of the Bank to take appropriate action. THE Department of Telecommunication being the principal buyer of the products of the complainant, the prospects of selling its products to the said Department were doomed for ever and its name was inserted in the list of non-performance of contract. What is more, the Bank demanded back the outstanding loan amount on the allegation that it had neglected to deal with the Bank according to the contract.. It also made an allegation of exceeding the credit facilities on one occasion which has been explained by the complainant as being caused by the temporary stoppage of clearing cheques by Vizag Steel Plant. It has been further stated by the complainant that this transaction was regularised as soon as the budgetary constraint of the Vizag Steel Plant was lifted. THE complainant has alleged that due to the irresponsible stoppage of banking facilities as agreed to between the Bank and the complainant, it had to suffer a huge loss including loss of goodwill and other business loss. Accordingly, it has claimed a total compensation of Rs. 1,30,000/-. The District Forum after hearing the parties has held that the stoppage of banking facilities by the Bank and not providing assistance as per sanctioned loan was deficiency in service and caused injury to the complainant. It had, accordingly, allowed a compensation of Rs. 15,000/- only to the complainant. The present appeal has been filed against the said order and demanding enhancement of compensation.

The Bank also filed a cross-appeal stating that the order of the Forum was not a proper one as it had failed to appreciate that the complainant was not a consumer and that the granting of loan by a Bank was discretionary and refusal of the same did not amount to deficiency in service.

THE point for determination is if the order of the District Forum has been a proper one and if not, what should have been the proper order ? DECISION From the papers filed it is evident that there was arrangement with the opposite party Bank for the grant of financial assistance in the form of Medium-Term Loan and Cash Credit Loan of different amounts. It is also proved that the said agreement was acted upon and the complainant took assistance from the Bank for carrying on his business. The complainant''s allegation is that when he was in dearth of business loan to avail of a contractual commitment, his prayer for loan of a very paltry amount was not considered. As a matter of fact, the prayer for loan was made on 24.6.1993 but no prompt action was taken on it. This was followed by reminders from the complainant but no positive reply came from the Bank till 10.11.1993. It appears that the direction of the Department of Telecommunication was that the supply of the consignments of per contract should be completed by 10.9.1993. It is really a mockery to send the reply long after the expiry of the said date and inviting the party for a discussion about the special loan. This happened in the face of the fact that an assurance for loan was already in favour of the complainant by virtue of the agreement referred to here in before. It is argued on behalf of the Bank that the Bank was not obliged to grant a prayer for loan made by a customer and it had the right to consider the feasibility and other pros and cons of the proposal. In our opinion, however, matter stands clearly on a different footing. Here there was no new proposal for loan so that the advisibility of granting such a loan should seriously be considered by the Bank. It was actually a running account and the loan was to be provided as per mutual terms of agreement. While we agreed with the argument that the privilege of granting a loan rests with the grantor and it has the right to consider aspects of the same before granting the loan. The action of the Bank in this case is, in our opinion, not in exercise of that right.

THIS aspect of the question has been considered by the National Commission in a case reported in 1991 (2) CPR 148; In the aforesaid case, the National Commission held that although a Bank had the right to decide the question of granting a loan to a particular customer, where the Bank consented to give advance but did not give the same, the matter stood on a different footing According to the National Commission, no relief could be granted by a Consumer Court under Section 14 of the Consumer Protection Act in such a case by giving direction to the Bank to advance the loan, but relief could be given for damage caused due to refusal to give advance loan. In our opinion, the same principle applies here also. The purport of the financial arrangement with the Bank is to obtain financial assistance to carry on business and it was an implicit assurance that such loan should normally be given whenever required. In the instant case, we see no prima facie ground for non-consideration of the prayer for loan, atleast no such ground was advanced by the Bank with a prompt reply. The Bank did not actually realise that this negligent apathy on their part could cause serious loss to the other party. Hence, we agree with the finding of the Lower Court that there was a good cause for awarding compensation to the complainant. As regards the amount of compensation, the Lower Court has apparently not considered any objective standard for assessing the loss. Where it was alleged that the complainant had forfeited the contract which could reasonably yield a fair income in his favour, the Lower Court should have considered the probable loss that might have been caused to the complainant. Virtually, the Lower Court has granted a lump sum amount as compensation. The Bank, however, sent a notice to the complainant for realisation of outstanding loan against them. This demand was made sometimes in 1994. It is submitted on behalf of the complainant that the amount demanded was much below the permissible limit of the sanctioned loan and the demand notice had plausibly nothing to do with the prayer made by the complainant for disbursement of Rs. 15,000/-. We are at a loss as to what prompted the Bank from taking such an unusual action. It should also be noted in this connection that there was a clear embargo on the complainant from obtaining credit facilities of any description from any other Bank or any credit society or institution. So, the complainant was evidently put to a dead end and was drawn to a said plight for no fault of its own.

WE have seen the papers produced by the complainant in support of its claim for loss. WE have considered the recurring expenditure which it has to incur for the carrying on of its business and we have also taken into consideration the ultimate total discontinuance of the business of the complainant on account of refusal on the part of the Bank to grant an assured loan. Considering all these aspects we think that the complainant should be entitled to a compensation of atleast Rs. 50,000/- (fifty thousand).

IN their cross-appeal, the Bank has raised the point that the complainant is not a consumer. This point was also raised before the Lower Court and the Lower Court decided the point in favour of the complainant. We agree with the reasoning of the Lower Court and hold that in relation to the Bank, the complainant is a consumer. The case was, therefore, maintainable before the District Forum. The next point raised is that granting of loan is a descretion on the part of the Bank and that the Bank was within its right not to allow the loan. We have dealt with this point in details in the foregoing paragraphs. We have held that this was not a question of granting loan simplicitor but a question of disbursing sanction of such a loan on the basis of an agreed financial arrangement. So, this point is also decided against the Bank. In the result, S.C. Case No. 398/A/96 is partly allowed with the modification that the amount of compensation payable to the complainant should be Rs. 50.000/- (fifty thousand). There will also be an order for payment of cost of Rs. 2.000/- in favour of the complainant. The aforesaid amounts must be paid within a period of 30 days failing which they will carry interest @ 18% until payment. The Case No. 405/A/96 is dismissed on contest without any cost. S.C. Case No. 398/A/96 partly allowed & S.C. Case No. 405/A/96 dismissed.