VIKRAM AND VIKRAMS ENTERPRISES vs STATE BANK OF INDIA

THIS is an appeal against the Order dated 7th July, 1993 passed by the State Consumer Disputes Redressal Commission, Uttar Pradesh at Lucknow in Case No. 81/SC/91 by which it dismissed the complaint filed by the present appellant. In the complaint the opposite parties Nos. 1 to 3 were Manager, State Bank of India, Shakti Farm, District Nainital, Regional Manager, State Bank of India, Regional Office, Region III, Bareilly and S.L. Agarwal, the then Regional Manager, State Bank of India, Region No. Ill, Bareilly, respectively. The complainant is the appellant herein. The parties will be referred to by the above nomenclature.

THE facts as gathered from the record are that the complainant-appellant was sanctioned cash credit loan of Rs. 1.00 lakh in the year 1982-83. Subsequently in 1983-84 cash credit loan of Rs. 2.00 lakhs under lock and key and cash credit of Rs. 1.50 lakhs plus Rs. 1.50 lakhs under the Mandi Type account was sanctioned. In the year 1986-87 the cash credit loan under lock and key remained Rs. 2 lakhs, under the Mandi Type Account it was raised from Rs. 1.50 lakhs to Rs. 3.00 lakhs. Those limits were renewed in the year 1987-88. To secure due repayments of all the amounts which may be found due and payable from the complainant to the opposite party-Bank the complainant executed and delivered to the Bank various loan/security documents and Ashok Sekhon, Jaipal Singh and Rajendra Sahay executed respective Guarantee Agreements to secure the due repayment of the loan amount which may be found due. Rajendra Sahay also mortgaged his property situated at Lucknow to further secure the loan. These credit facilities were subject to renewal. In April, 1988 Rajendra Sahay desired to have his security released. In lieu of the security of Shri Rajendra Sahay the complainant offered the personal guarantee of one Smt. Nirmala Devi and also mortgage of her property situated at Lucknow. The Bank examined the credit worthiness of Smt. Nirmala Devi and the value of the property to be mortgaged and accepted the substitution of the guarantor in May, 1988. According to the complainant the property of Nirmala Devi could not be mortgaged due to her prolonged illness. The complainant approached the Ashok Nagar branch of the Bank at Lucknow for acceptance of the property in mortgaged belonging to one Smt. Savitri Devi. On 10th August, 1988, the complainant deposited Rs. 72,600/- and Rs. 2,10,000/- on 19th August, 1988 with the opposite party-Bank hoping that during working period from October, 1988 to April, 1989 the complainant would get cash credit of Rs. 5 lakhs from the Bank for the normal working of their rice mill. However on 12th October, 1988 the Nainital Branch with whom the complainant had the account wrote the complainant withdrawing the credit facilities and to liquidate the dues. The complainant subsequently cleared out standings of the Bank. The complainant''s case further is that though Ashok Nagar Branch of the Bank had strongly recommended the acceptance of the mortgage security offered by Smt. Savitri Devi but opposite party No. 3, S.L. Agarwal who was the then Regional Manager of the Bareilly Branch did not accept the substitution for mala fide reasons. Inspite of the fact that the entire out standings were liquidated the Bank did not renew credit facilities resulting thereby that the entire activity of the complainant''s rice mill came to an end and thus they have incurred loss. It may be mentioned here that the mortgage security of Rajendra Sahay was released by the Bank on 24th February, 1989. The grievances of the complainant are as follows: 1. Permission was not granted for mortgaging the property of Savitri Devi for availing cash credit limit during the period 1988-89. 2. Cash credit facility was denied during the above period without any reason and with mala fide intention. S.L. Agarwal opposite party No. 3 did not accept the proposal of the complainant that the property of Smt. Savitri Devi be hypothecated. The Bank had approached the U.P. Financial Corporation vide their letter dated 14th April, 1988 for allowing creation of 2nd charge in favour of the opposite party-Bank and the said Corporation vide their letter dated 6th August, 1988 had consented to allow the second charge in favour of the Bank. But inspite of that the Bank did not do anything to permit second charge to be created in favour of the Bank and allow cash credit loan to the complainant during they year 1988-89. 3. Cash credit facility was not allowed though the loan by the Bank was fully secured by stock of finished and unfinished goods. The Bank never informed the complainant that it was free to further draw the account by Rs. 8,000/- according to R.B.I. guidelines. Thus according to the complainant they have suffered a loss of Rs. 5.00 lakhs due to the close of the rice mill and the Bank is liable to pay that amount.

THE complaint was contested by the opposite party. Their case was that in the year 1988 Rajendra Sahay withdrew his guarantee and asked the Bank to return all the documents pertaining to his property. Further in his letter dated 5th October, 1988 (which is at page 39 of the paper book) Rajendra Sahay also requested the Bank not to allow any credit facility to the appellant on his guarantee and the mortgage created by him. The complainant offered the guarantee of Smt. Nirmala Devi and also the mortgage of her property and after examining the credit-worthiness of Smt. Nirmala Devi the Bank accepted the substitution of guarantor but due to the reasons best known to the complainant the said substitution never took place and no property of Smt. Nirmala Devi was mortgaged nor she executed any loan certificate document as substituted guarantor for the credit facilities granted to the complainant. The said mortgage and deposit of title deeds were to be created by Smt. Nirmala Devi at the Ashok Nagar Branch at Lucknow of the opposite party Bank. Afterwards the complainant requested Ashok Nagar branch for acceptance of the property in mortgage belonging to Smt. Savitri Devi. Ashok Nagar branch had nothing to do in the matter as the credit facilities were granted by the Nainital branch of the Bank. Ashok Nagar branch was brought in the picture only to satisfy the credit-worthiness of the guarantor and to accept the security. As the complainant failed to substitute the mortgage as well as the guarantor and Shri Rajendra Sahay, on whose credit-worthiness and mortgaged property the credit facilities were granted to the complainant withdrew his guarantee, the Bank was left with no option but to withdraw the credit facilities granted to the complainant. As the credit facilities granted to the complainant was cash credit facilities and against the primary security of raw material, semi-finished and finished goods the complainant subsequently cleared the outstanding of the Bank and the Bank discharged the guarantor and the mortgaged property. As the complainant had cleared all the out standings and the securities had been discharged no cause of action was subsisting for the complainant to file any complaint. As the credit facilities were granted on the basis of credit-worthiness of the complainant and the guarantors the complainant cannot ask the Bank to continue the credit facilities in case of withdrawal of the guarantee/security and the Bank was within its right to withdraw the credit facilities. In fact the complainant wants to cheat the Bank. The complainant opened another account and started realising the sale proceeds of the hypothecated goods through that account and thus even the primary security of the complainant was eroded. The complainant cannot compel the Bank to change the terms and conditions of the credit facilities granted on the personal guarantee and mortgage of Shri Rajendra Sahay. That the slackness was on the part of the complainant when Shri Rajendra Sahay withdrew his guarantee and security the complainant failed to furnish the requisite guarantee within the required time. Even the alternative security of Smt. Nirmala Devi offered by the complainant did not materialise. The complainant cannot blame the opposite party. When the credit facility was withdrawn it did not entitle the complainant not to deposit the sale proceeds of the hypothecated goods.

AS noticed above the State Commission after consideration of the facts of the case did not find any negligence on the part of the Bank in not granting cash credit facilities to the complainant during the year 1988-89. We have gone through the records of the case and have heard the Counsel for the appellant. We are of the opinion that no negligence on the part of the Bank has been proved. The contentions of both the parties have been narrated in detail above. From the records of the case it is clear that when Rajendra Sahay withdrew his guarantee and security the Bank was left with no alternative but to withdraw facilities granted to the complainant and to call upon them to liquidate the dues. As noticed above the substituted guarantee and mortgage of Smt. Nirmala Devi did not materialise for one reason or the other.

AS far as the question of second charge in favour of the Bank on the property on which the U.P. Financial Corporation had the first charge is concerned, it also did not materialise though the Bank was agreeable to it.

THE complainant has also made some reference to RBI guidelines but we are very doubtful if the Bank was bound to follow those guidelines in the facts and circumstances of the present case wherein the guarantee and the security had been withdrawn. Even the hypothecated goods were sold away by the complainant and the sale proceeds were not deposited in the account with the branch of the opposite party-Bank. On the other hand the sale proceeds were deposited in another account. After giving our careful consideration to the facts of the case we have no hesitation in confirming the finding of the State Commission and accordingly we dismiss this appeal. However, in the circumstances of the case we do not make any order as to costs.