URMILA BHARGAVA vs PUNJAB AND SIND BANK

THE complainant has alleged deficiency in service on the part of the opposite party-Bank, for not providing adequate and timely working capital and subsequently in not providing rehabilitation finance when the complainants unit became uneconomic land sick because of the antecedent failure to provide adequate working capital. The complainant has, therefore, alleged to have suffered heavy losses due to opposite party''s negligence, malafide and illegal actions and claimed Rs. 56.76 lakhs as compensation for the losses suffered by the complainant and Rs. 10 lakhs as compensation for the mental harassment and agony and have also prayed that the opposite party be directed to waive off interest on the sanctioned loans and that the opposite party should pay interest on the loan from U.P. Finance Corpora-

THE complainant had set up a unit for refining of used lubricating oil in March, 1977. She took a term loan of Rs. 2.99 lakhs from the U.F. State Finance Corporation and received Rs. 1 lakh as working capital from the opposite party Bank (though the complainant states that her working capital requirement was assessed at Rs. 2.5 lakhs in 1977 on the advice of the bank, she had accepted Rs. 1 lakh only). The application dated 9th November, 1977 for working capital loan is for Rs. 1 lakh only. (Pages 60 to 63 of the paper book). It appears to have been sanctioned on 9th November, 1977. According to the complainant, no substantial amount was released for the purchase of stocks and for meeting the wage bill, overheads like electricity, transport, etc. from January, 1977 to November, 1977. At the time of the opening of the cash credit account in December, 1977, with the sanctioned cash credit limit of Rs. 1 lakh, there was an overdraft of Rs. 87,315 which was transferred to the cash credit account. In the result a small sum of Rs. 12,700 only was made available by way of cash credit to the complainant. Because of inadequacy of the working capital from the very beginning, the complainant could not excute the orders.

IT is further alleged that the respondent bank, without the knowledge and consent of the complainant, blocked Rs. 50,000 for working capital in the form of fixed deposit receipts. In the result even this money was not available to the complainant for purchasing stocks, etc. In November, 1981, the opposite party bank agreed to release Rs. 65,000 against which the bank deducted Rs. 35,000 due to it from the complainant and imposed a 10 per cent cut on the cash credit limit.

THE complainant has, therefore, alleged that the U.P. State Finance Corporation declared the complainant a sick unit. According to her, this was all due to non-cooperation, malafide action of the bank and its branches, respondent Nos. 1 to 3 as they did not release the working capital to its full extent in time. In March, 1982, the opposite party, bank, refused to give the bank guarantee of Rs. 12,000 in favour of the Indian Oil Corporation for a job work received by the complainant. As such, she had to obtain a guarantee from the private party at an exhorbitant cost of Rs. 80,000. When she withdrew this amount, the unit was closed down in 1983.

IN August, 1983, it was decided that U.P.F.C and the respondent banks would jointly rehabilitate the unit. But there was delay in sanctioning rehabilitation finance. RespondentNo.4,U.P.F.C. released a sum of Rs. 1.21 lakhs as margin money (loan) in September, 1985. But the first opposite party, bank, did not release the same till March, 1986. As a result, the unit remained closed. Further on release of Rs. 1.21 lakhs provided by the State Finance Corporation, the opposite party bank adjusted Rs. 44,000 on the amount due to it in violation of the Reserve Bank of India Rules. The Cash Credit Account was not opened by the opposite party, bank for 6 months. A working capital loan of Rs. 3 lakhs was sanctioned, but eventually its drawing power was reduced to Rs. 75,000, thus crippling the complainant financially. In 1986, the opposite party denied the complainant the margin money resulting in stoppage of production for nine and half months of the year. There are further complaints about the inadequate release of funds by way of working capital, arbitrary stoppage of withdrawals of funds against the account, dishonouring of the cheques issued by the complainant even when there was sufficient drawing power, etc. All this resulted in stoppage of production for months and years together and non-execution of orders and non-acceptance of fresh orders by the complainant for supply. There are a number of other complaints against the working of the bank, but it may not be necessary to take note of them for reasons we have to say hereafter.

THE opposite party, bank, has observed that the complaint requires extensive evidence including examination of numerous documents. This appears to be correct. It is further pointed out that the opposite party, bank, agreed to provide working capital of Rs. 1 lakh in November, 1977 after making an assessment of complainant''s requirements.

PRIOR to the opening of the working capital loan account, the bank had already advanced a sum of Rs. 87,315 on the security of the fixed deposit receipts of Rs. 50,000. Consequently on the sanctioning of the working capital and the opening of an overdraft account, it was necessary for the bank to adjust the debit balance of Rs. 87,315 to regularise it. It was in these circumstances that the balance amount of Rs. 12,700 was only available by way of working capital.

FURTHER on the regularisation of the account after release of working capital, the fixed deposit receipts were given by the bank as margin money, which was a condition precedent to grant of a loan of Rs. 1 lakh. In 1981, the working capital limits were enhanced to Rs. 2.40 lakhs as against the original sanction of Rs. 1 lakh in 1977, but due to the credit squeeze policy of the Reserve Bank of India the Bank''s Head Office ordered on 9th July, 1981, a general cut of 10 per cent of the credit sanctioned/outstanding and was imposed by the bank on all the borrowers.

THE opposite party has pointed out that it had given a working capital loans in accordance with the Reserve Bank of India guidelines. The limit of the complainant was enhanced from Rs. 1 lakh to Rs. 1.50 lakhs in March, 1981, and then to Rs. 2.40 lakhs. "Bills purchase limit of Rs. 75,000 and cheque limit of Rs. 15,000 and also on the value of the goods in transit were allowed to the complainant" by the bank. However, the unit became sick because of the delay in establishing it on the death of the complainant''s husband in 1976, a long period of five years as gestation period, delay in taking power connection, non-availability of raw material the same being available only in public auction, etc. A consultant was appointed to examine the cause of sickness of the unit. He reported in 1986. The Consultant''s Report says that "from the very beginning the unit faced problems on account of cost overruns as well as working capital requirements". It traced the cost overruns to delay in implementation due to the untimely death of Mr. Bhargava in 1976. It also observed that the acceptance of C.C. limit of Rs. 1 lakh by the promoter proved to be a wrong decision. Further the unit suffered because of lack of technical competence, managerial skill and lack of inventory management.

IT would be evident from the above that the complainant has made wrong and misleading allegations against the opposite party bank. If the working capital loan was applied for and sanctioned in November, 1977 only, the complainant cannot maintain that from January, 1977 to November, 1977, no substantial amount was released for the purchase of stocks by the opposite party, bank, and for meeting the wages and overheads. Again even before the opening of the working capital loan account, she had been advanced a sum of Rs. 88,715 and the bank was justified in demanding security of fixed deposit receipts of Rs. 50,000 in giving this overdraft. It cannot be, therefore, maintained that the margin money of Rs. 50,000 for working capital was blocked in the form of fixed deposit receipts taken by the banks as security.

THE bank was within its rights in adjusting the overdraft against the working capital loan account, when it was opened in November, 1977. Likewise, it was also within its rights to adjust in 1981 interest short charged.

FROM the facts, available it cannot be maintained that the respondent bank No. 3, the Punjab and Sind Bank Branch was responsible for the unit becoming sick and being declared as sick by U.P.F.C. The respondent has also produced a circular from its head office dated July, 1981 imposing a cut of 10 per cent on all cash credit overdraft/bills accounts as on the first day of June, 1991. The head office further directed that interest due from a party should be recovered immediately, generally the instalments due should be recovered up to date and that all temporary facilities granted to borrowers should m be withdrawn. In the light of this, the local branch cannot be accused of having acted malafidely and illegally against the complainant.

PRIMA facie, the branch had been just and fair inasmuch as the credit facilities have been enhanced from Rs. 1 lakh to Rs. 2.40 lakhs in l981. It also granted bill purchase limits, cheque limits, etc. The bank has also denied that it ever refused to furnish the bank guarantee of Rs. 12,000 in favour of the Indian Oil Corporation for the job work received by the complainant.

REGARDING the operation of the working capital loan account, the respondent bank has pointed that the "drawing power in this account was regulated on the basis of the stocks hypothecated by the complainant to the bank". Again, the cheques drawn by the party on the cash credit account were honoured the bank on the basis of the drawing power available and if any cheque was dishonoured, this was due to non-availability of the drawing power calculated on the basis of the stocks hypothecated to the bank by the complainant. We do not think it necessary to go into other allegations made in the complaint. Whatever we have examined upto now is sufficient to establish that the complainant has failed to establish that the bank acted malafide and illegally or there was otherwise any deficiency in service towards the complainant. We have also taken note of the factors which led to the unit becoming sick. It is nowhere established that this was due to the bank having starved the unit of funds.

THE Commission was conscious of the fact that this is a highly belated complaint which deserves to be rejected as time barred. Nonetheless, the Commission went into the matter in some detail to see whether the bank had really acted unfairly towards the complainant as the Commission felt impressed by the complainants presentation at the hearing.

THE complaint is therefore dismissed. The complainant shall pay Rs. 2,000 to the opposite party as costs.