T.P. VIJAYAN vs BRANCH MANAGER, BRITISH BANK OF THE MIDDLE EAST

THIS complaint is filed under Section 12 of the Consumer Protection Act seeking a direction to the opposite party to pay Rs. 6,00,000/- to the complainant as compensation and cost attributing deficiency in service on the part of the oppo- site party.

THE material allegations in the complaint are as follows : THE complainant is a non-resident Indian doing business in Abu Dhabi, U.A.E. THE opposite party was canvassing deposits from nonresident Indians and in that connection contacted the complainant and requested him to invest in a Foreign Currency Non-Resident Deposit Scheme wherein the depositors were offered interest at the rate of 7.25% on the deposit amount and also an incentive at the rate of 2.1% over and above the deposit amount. Attracted by the representation of the opposite party, the complainant deposited Sterling Pounds 50,230.14 for a period of 3 years on 22.11.1993. THE complainant wanted to withdraw the amount as he intended to purchase a property. Accordingly the complainant approached Abu Dhabi Branch of opposite party on 6.9.1995 for liquidating the fixed deposit prematurely as the branch had a lien on that account. After consul ting the officers of the opposite party the complainant decided to prematurely uplift the afore said deposit amount. Accordingly instructions were given to the opposite party for uplifting the above deposit in the British Bank of Middle East, Trivand rum, repaying the same to the complainant in Trivandrum in Indian Rupees. The opposite party paid Rs. 26,35,189.91 to the complainant on 11.9.1995 in Trivandrum and transferred to the N.R.E. Account with Indian Overseas Bank at Kannur. The complainant was shocked to see that the payment by the opposite party did not include the interest of about Rs. 4,00,000/- which the complainant is entitled to get for the proportionate period after deduction of premature withdrawal charges which is normally 1% less than the agreed rate of interest. When demand was made, to make the payment, the complainant was told that no interest was payable since deposit was encashed prematurely and for being eligible for the interest, deposit must be kept with the opposite party for atleast 24 months. Several letters were sent by the complainant to the opposite party requesting to pay interest but no positive reply was given to his letters. The opposite party informed the complainant that the deposit was placed under ''A'' scheme according to which interest is payable only after completion of two years. This fact was not made known to the complainant at the time of placing the deposit. It is further stated that the contention of the opposite party is their letter dated 25.9.1995 that it had advised the complainant that no interest was payable in case of premature withdrawal of the deposit is not true. What was mentioned to him was that he would lose interest by way of penal charges which was supposed to be 1% of the deposit amount. In a subsequent letter dated 31st October, 1995, the opposite party claimed as having advised the complainant to take an overdraft facility instead of encashing the fixed deposit but that is not true. If there was any rule not to pay interest for the amount uplifted prematurely which is now being claimed by the opposite party, the opposite party was bound to disclose the same to the complainant before releasing money, in which case the complainant would have definitely waited for two more months and given instructions to withdraw the amount thereafter. The opposite party never intimated the complainant about the minimum deposit period and that was the reason why the complainant opted for the premature withdrawal of the deposit. The opposite party who was expected to give maximum service to its customers had failed to render any service and due to deficiency on the part of the opposite party, the complainant lost the interest amounting to about Rs. 4,00,000/-. Non-payment of interest would also amount to unfair trade practice and is against the principles of natural justice. The written demand made by the complainant was unheeded. In the circumstances, the complainant is entitled to get a compensation of Rs. 6,00,000/- and cost.

A written version was filed by the oppo site party denying allegation that there is deficiency of service on the part of the opposite party. It is further averred that the FCNR deposit made by the complainant is controlled and governed by the Circulars of the RBI relating to Foreign Currency (Non-Resident) account scheme and the interest rates and rules relating thereto promulgated by the RBI in exercise of the powers conferred by Sections 21 and 35 A of the Banking Regulation Act, 1949 directed that no Commercial Bank which is an authorised dealer in foreign exchange, shall pay interest on deposits of money accepted by it under the Foreign Currency account scheme except as prescribed therein.

BY Circular DBOD No. BC. 181/121.0/93 dated 11.10.1993 all Scheduled Commercial Banks were directed in the matter of Foreign Currency Non-resident Account Scheme (FCNR A Scheme), that FCNR A account which carries exchange guarantee to Banks, will have only two maturity periods, namely : (1) Two years and above but less than 3 years, (2) 3 years. On the same date FCNR A account with maturity period of one year and above but less than two years was withdrawn with effect from 12.10.1993 and authorised dealers were accordingly permitted to mobilise FCNR A deposits only for the said two maturity periods. Thus on and from 12.10.1993 as per the circulars and directions of the RBI, FCNR A deposits can be accepted by Scheduled Commercial Banks only for two periods as mentioned above. It is also stated these instructions have got force of law. In the circumstances the complainant is not entitled to get any relief. On behalf of the complainant PW 1 was examined and Exts. PI to P3 were marked. On behalf of the opposite party RW 1 was examined and Exts. Rl to R8 were marked.

THE following points arise for consideration : 1. Whether there is any deficiency on the part of the opposite party ? 2. If so, what is the relief to which the complainant is entitled ? 3. What is the order as to cost ? Point No. 1-The question to be considered is whether any deficiency is committed by the opposite party in not allowing interest on the deposit of 50,230.14 Sterling Pounds made by the complainant at Abu Dhabi Branch of the British Bank of the Middle East on 22.11.1993. PW 1 the complainant gave evidence in terms of the averments made in the complaint. He also filed an affidavit in lieu of Chief Examination. He stated that the opposite party was canvassing deposits from Non-Resident Indians and in that connection contacted the complainant and requested him to invest in a Foreign Currency Non-Resident Deposits Scheme where the depositors were offered 7.25% interest on the deposit amount and also an incentive of 2.1 % over the deposit amount. After 22 months from the date of deposit he had to buy a property for which he required funds and he approached the opposite party for liquidating the deposit prematurely and instructions were given to the opposite party for uplifting the above deposit and repaying the amount to the complainant in Trivandrum in Indian Rupees. Ext. R6 is the letter sent by him in this regard to the Manager, British Bank of Middle East, Trivandrum. The complainant requested to arrange the principal amount with interest to his NRE Account No. 765 with the Indian Overseas Bank, Cannanore, at existing exchange rate with immediate effect. Pursuant to his request the Abu Dhabi Branch of British Bank of Middle East sent a communication to their Thiruvananthapuram Branch to uplift the deposit. The said letter reads as follows : "We enclose letter from Mr. T.P. Vijayan which is self explanatory. The lien has now been released on the above deposit".

It may be noticed that there was lein and that was lifted are seen from Ext. R5. It may also be noted that the complainant specifically asked for not only uplifting the deposits but also to give interest at the existing rate. However, Ext. R5 does not mention that the complainant was not entitled to any interest. However, in Ext. P2 communication sent by Thiruvananthapuram Branch to Abu Dhabi Branch which is dated 31.10.1995 it is stated that their Abu Dhabi Branch had received the letter of the complainant requesting them to contact the complainant and inform him that no interest will be payable on premature withdrawal and that the gift amount would also be refunded and this advice was given to him on 11th September, 1995 by Mr. N.K. Narayanan. It is also stated there that no interest will be payable if the deposit was uplifted prematurely at that point of time. Gift amount on a prorata basis will need to be refunded by the complainant and that a temporary over draft be taken instead of breaking the deposit prematurely. Before this letter, the opposite party uplifted the deposit and paid Rs. 26,35,189.91 to the complainant on 11.9.1995 in Trivandrum. PW 1 further deposed that he was shocked to see that the payment of interest was not made. According to him he was entitled to get interest as per the agreement at the agreed rate. The case of the opposite party, in its version and also in the affidavit filed by it is that as per the instructions given by the Reserve Bank of India no interest will be payable in respect of premature withdrawal of FCNRA deposit. They contended that by Circular DBOB. No. BC. 181 / 13.1.1993 dated 11.10.1993 all scheduled Banks are directed in the matter of Foreign Currency (Non-resident) Account Scheme (FCNR A Scheme) that FCNR A account which carries exchange guarantee to Banks will have only two maturity periods viz; (1) 2 years and above but less than 3 years, (2) 3 years. On the same date FCNRA account with maturity period of one year and above but less than 2 years was withdrawn with effect from 12.10.1993. The complainant made the deposit with the opposite party Bank as per FCNR A Scheme on 22.11.1993 for a period of 3 years and the complainant requested for premature withdrawl of deposit on 28.9.1995 before completion of two years and therefore the complainant is not entitled to any interest. They also contended that this position is confirmed by the Foreign Exchange Dealers As sociation of India (vide their Circular 1823/ FCNR/SPL-841/94 dated 2.9.1994) which opined that in case of a FCNR deposit accepted for 21/2 years on or after 12.10.1993, when the maturity slab of one year and above but less than two years was withdrawn and the maturity slabs : (1) 2 years to less than 3 years, (2) 3 years. were only available, interest would be payable if the deposit is prematurely withdrawn only after the completion of a minimum period of 2 years but no interest will be payable if the deposit is withdrawn before completion of 2 years and member Banks are advised to be guided accordingly. In the evidence of RW 1 and in his affidavit he has reiterated this position. However, the case of the complainant is that at the time of deposit was placed under the scheme the fact that interest is payable only after completion of 2 years, was not made known to the complainant. That is evidenced from the deposit advice as well as letter sent requesting for premature withdrawal of the deposit. The scheme was bifurcated as FCNR A and FCNR B scheme and since the deposit was made by the complainant after bifurcation in 11 /93, the opposite party has got an obligation to intimate the complainant regarding the bifurcation and also the conditions of the deposits and the difference in the conditions in the two types of schemes. Though the opposite party has got a case that it was the deposit in FCNR A, Ext. P3 deposit advice does not specifically say whether it is FCNR A or FCNR B. At the top there is a column to describe the type but that is left blank and the account is described at bottom as FCNR T (transfer) account. The complainant was also not informed of the difference between FCNR A & FCNR B or the bifurcation. No documents have been placed before us to show that really the deposit was accepted under FCNR A. If it is FCNR B Scheme the complainant would have been entitled to withdraw prematurely and earn the interest also with some penal deduction at the rate of 1%. RW 1 was questioned about it and he admitted that he had not stated in Ext. P3 whether it was under ''A'' or ''B'' Scheme. He has also not produced any document showing that the complainant''s deposits were made and accepted under FCNR A Scheme. He stated that the rules governing FCNR A and FCNR B scheme are different. Under FCNR B scheme even if a pre-mature encashment is made after 6 months it will fetch interest. He further stated that they have not incorporated any condition in the deposit receipt. The conditions that the opposite party relies on are those issued by the R.B.I. R.B.I. Circulars are sent only to the Banks. He also admitted that in the circulars produced here there is no mention regarding the minimum period of deposit so as to earn interest for premature withdrawals. He further admitted that under FCNR ''B'' scheme also a customer can deposit amount for two years and above but less than 3 years and premature withdrawal beyond six months will earn interest. The opposite party was asked a definite question whether non-mentioning of FCNR A or FCNR B in the deposit receipt is not a deficiency in service on their part, he answered in the negative, and he added that they expected the customers to know while placing the deposit or otherwise dealing with the Bank in financial matters about the position and they are also expected to be competent enough to take their own decision regarding all the benefits as well as the loss. A suggestion was also put to RW 1 that they never informed the customer that there were two schemes that is FCNR A and FCNR B to which he replied they need not. He also stated that he does not know personally what transpired between the complainant and the Abu Dhabi Branch at the time of deposit. To a suggestion, whether at the time of deposit what was stated by his Abu Dhabi Branch is that there is no minimum period prescribed for premature withdrawal and it will earn interest, he replied, he does not know and he added that they are not bound to inform personally the customers regarding the Circulars of RBI which are detrimental to the interest of the customers, and they were not supposed to advise the customers regarding the same. He also stated that he informed the complainant over phone regarding the loss of interest in the case of premature withdrawal. To a further question whether they have produced any document to show that they have informed the complainant that the premature withdrawal will not fetch interest, he answered in the negative but added that he informed over phone. However we do not find any acceptable materials to show whether the complainant was informed that in the case of pre-mature withdrawal, he will loose interest. It is the definite case of the complainant that had he been informed the position, he would have waited for 2 months more to earn the agreed interest. It may also be noticed that the application for withdrawal was on 6.9.1995 and the amount was credited to the complainant''s account only on 2.10.1995 and if he had waited one month the complainant would have earned interest even according to the opposite party. In our view the failure on the part of the opposite party to inform the complainant regarding two types of deposits i.e., FCNR A & FCNR B and explain the differences between the two and relative advantages and disadvantages will amount to deficiency. A customer cannot be expected to know the Circulars issued by the Reserve Bank of India from time-to-time and certainly got a right to information of the above details from the Bank. Withholding of necessary information from a customer in such circumstances will also amount to unfair trade practice. In this context it may point out that even in the receipt issued by the opposite party has not stated whether the deposit is FCNR A or FCNR B. So long as this has not been specifically mentioned, it will be only just and reasonable to assume that deposit was accepted as FCNR B. In this context we refer to circular Ext. R3 dated 11.9.1986 which directs : "that no commercial Bank which an authorised dealer in foreign exchange shall pay interest on deposits of money accepted by it or renewed by it under the Foreign Currency (Non-Resident) Accounts Schemes except in accordance with the rates specified in annexure hereto and on the terms and conditions specified" therein. Paragraph 4 of the Circular under heading Premature withdrawal of deposits reads as follows : "If payment of a deposit is made before the completion of the period of the deposit agreed upon at the time of making of the deposit, the rate of interest payable in respect of such deposit shall be the one applicable to the period for which the de- posit remained with the Bank less one percent being penalty for the premature withdrawal".

According to this Circular, the only consequence of premature withdrawal is penalty of 1%. The next Circular relied on by the opposite party is Circular dated 11.10.1993. In this Circular also what is stated therein is "that the authorised dealers would be permitted to mobilise FCNR A deposits only for the following two maturity periods, i.e., 2 years and above but less than 3 years and 3 years only. The existing FCNR A deposits under the maturity slab of 1 year and above but less than 2 years will be allowed to continue till maturity. Authorised dealers are however permitted to continue to accept deposits under foreign currency (Non-resident) Accounts (Banks) scheme under all the four maturity slab as indicated in our aforesaid circular dated 29th April, 1993". Another document relied on is a communication sent by Foreign Currency Dealers Association of India where it is stated that they had been advised by the Reserve Bank of India that if FCNR A deposits are withdrawn prematurely without running for the minimum period of maturity stipulated by Reserve Bank of India as prevailing at the time of acceptance of the relative deposit, no interest can be paid as per the directive of the RBI. This had been conveyed by the Reserve Bank of India to a few member Banks who had sought clarification. It is further stated for example, in the case of FCNR deposit accepted for 2 years or after 12.10.1993 when the maturity slab of one year and above but less than two years was withdrawn and the maturity slabs of : (i) two years to less than three years and (ii) three years only, were available, interest would be payable if the deposit is prematurely withdrawn only after completion of minimum period of two years but no interest will be payable if the deposit is withdrawn before completion of two years. We are unable to see this as a circular issued by the RBI so as to deny benefits of depositors mentioned therein. In this context, we may also refer to the evidence of RW 1 that under FCNR B Scheme a customer can deposit amount for two years and above but less than 3 years and premature withdrawal beyond six months will earn interest. Lastly the opposite party has relied on Exts. R5 and R6. Ext. R5 is a communication sent by the opposite party dated 19.1.1996 to the General Manager, Exchange Control Department, Reserve Bank of India, Ernakulam Branch, seeking approval to pay interest to the deposit at 1 year FCNR ''B'' GBP rate prevailing on 22nd November, 1993 less penal rate of 1% and include the same in interest claim from Reserve Bank of India. In reply, Ext. P6 dated 28.2.1996 it is stated that they are unable to accede to the request for paying interest under FCNR (Banks) Scheme in respect of deposits accepted under FCNR (RBI) Scheme. We are unable to find anything in Ext. R6 to indicate that the Reserve Bank of India has considered all the aspects and rejected the request made by the opposite party to pay interest. We also feel that the very fact that the opposite party thought of requesting the RBI to permit the opposite party to pay interest itself is indicative of the fact mat they are satisfied with the genuineness of the claim made by the complainant and that they were aware of the deficiency committed by them in not passing necessary information regarding details of schemes, especially when under FCNR B Scheme interest is payable even in the case of premature withdrawal. A suggestion was put to RW 1 that they sought permission to pay interest because they were not sure whether they should pay interest on premature withdrawal and he answered that they as a prudent Banker wished to help a customer. From the conduct of the opposite party in sending Ext. R5 we are also inclined to think that the opposite party was not very sure whether the complainant is eligible for interest or not. Whatever that be, the documents relied on by the opposite party are not helpful for the opposite party to deny interest for the reasons we have already stated. The documents produced did not show that the Reserve Bank has given any instruction under Section 21 of the Banking Regulation Act specifically mentioning that in the case of such premature withdrawal no interest is payable. In this context we may also say that the principles of natural justice demand that it may not be proper to deny interest in such cases.

IN this context we refer to a ruling of a Division Bench of Karnataka High Court in Syndicate Bank v. Verranna, I (1995) BC 147. It is held, though under the maxim ignorance of law cannot be an excuse, knowledge of increase in me rate of interest by the RBI may be attributed to the debtors, but what was the proportion rise in the rate of interest and from what date it has come into force are material facts and the debtors cannot be presumed to know these material facts unless and until the debtors are made known about the rise in the rate of interest and die date from which it has been made operative and in the absence of such information they cannot be fastened with the liability on the basis of the maxim that ignorance of law is no excuse. If there are conditions attached to the deposit receipts and if such conditions contain a stipulation that the rate of interest fixed by the Reserve Bank of INdia from time-to-time can be applicable to the customer, then it can possibly be argued that it will preclude such customer from raising contentions on the ground that the information was not passed to him. IN another decision of a Division Bench of Madras High Court in, II (1990) BC 364 (DB), Syndicate Bank v. Muthian and Another, the Madras High Court took the view that circular issued by RBI does not mean higher rate of interest can be claimed unilaterally without a concurrence of customer. IN Catholic Syrian Bank Ltd. v. Thomas, 1996 (3) CPR 306, we have mentioned about the obligation of the Bank to inform the customer about the rise in interest. The Uttar Pradesh State Commission has also taken similar view in M/s. Bharat Appliances Corporation v. Syndicate Bank and Others, III (1994) CPJ 389, where it was observed by the State Commission that the Bank did not indicate to the complainant why the interest is being debited and that the manner of dealing by a National Bank with its customers is highly objectionable. However, as we have already pointed Out that if there was a binding agreement allowing the Bank to apply the rate of interest fixed by the RBI from time-to-time by issue of instructions under Section 21 of Banking Regulation Act, different consideration may follow. IN this case not only there was no such condition in the deposit receipt but the opposite party did not inform the complainant at all that he will not be eligible to get interest in the case of premature withdrawal before uplifting the deposit though complainant wanted premature withdrawal alongwith interest. For all these reasons we have no hesitation to hold that the opposite party has committed deficiency.

IN the result, we hold that the complainant is entitled to interest at the rate applicable to one year in respect of his FCNR B deposit less 1% penal interest for premature withdrawal. We do not find ground to allow any further compensation. However, the complainant also will be entitled to his cost which we fix at Rs. 1,000/-. These amounts will be paid by the opposite party to the complainant within a period of one month from today. Complaint allowed.