State Consumer Disputes Redressal Commission
The Branch Manager, Corporation Bank ... vs P.Surender S/O.Ramachandraiah ... on 24 September, 2012
BEFORE THE A BEFORE THE A.P.STATE CONSUMER DISPUTES REDRESSAL COMMISSION: AT HYDERABAD. FA.No.731/2011 against C.C.No.61/2010 District Forum, Medak at Sangareddy . Between The Branch Manager, Corporation Bank Plot No.1070, Pothireddypalli X road, Sangareddy, District Medak. ..Appellant/ opposite party And P.Surender S/o.Ramachandraiah Aged 31 years, Occupation:Nil, R/o.Fasalwadi Village, Sangareddy Mandal, District Medak. ..Respondent/ Complainant Counsel for the Appellant : Mr.G.Anand Kumar Counsel for the Respondent : M/s.Gopi Rajesh & Associates QUORUM: THE HONBLE SRI JUSTICE D.APPA RAO, PRESIDENT, AND SRI S.BHUJANGA RAO, HONBLE MEMBER.
MONDAY, THE TWENTY FOURTH DAY OF SEPTEMBER, TWO THOUSAND TWELVE Oral Order (Per Honble Sri Justice D.Appa Rao, President) *** This is an appeal preferred by the opposite party bank against the order of the District Forum directing it to release the loan amount or alternatively pay Rs.50,000/- towards compensation and to reimburse Rs.6,000/- fee of project report and legal opinion, with interest at 9% p.a. from the date of complaint i.e. 03-12-2010 together with costs of Rs.3,000/- The case of the complainant in brief is that he is an educated unemployed, belonging to backward class . He intended to establish a tent house and applied under PMEGP scheme which agreed to give margin money provided he obtained loan from the bank for the remaining amount. Accordingly, he approached the appellant bank for a loan of Rs.6,00,000/- and opposite party bank by letter dated 19-9-2009 informed that the credit proposal for setting up the tent house under PMEGP scheme was declined. Thereby the complainant apporached the PMEGP Board which made discussion with the opposite party bank and its Regional Manager and requested to sanction loan and also addressed a letter to this effect.
Thereupon the complainant on the advise of the opposite party has furnished a fresh project report on 28-10-2009 along with opinion of the legal advisor and report of Civil Engineer regarding the valuation of the property which he intended to offer as security.
He constructed a shop by spending Rs.1,00,000/-. However, the bank by its letter dated 16-4-2010 informed him that the loan could not be sanctioned as the proposed business activity was not viable and cash flows were not satisfactory in respect of such activities. He alleged that without proper reason and that too after completion of formalities, the opposite party bank deprived him his livelihood which amounts to deficiency in service. Hence the complaint to release the loan amount or alternatively reimburse an amount of Rs.1,06,000/- and to pay Rs.1,00,000/- towards damages and Rs.50,000/- towards mental agony and costs.
The appellant bank resisted the case. It alleged that originally the complainant had approached Andrha Bank Sangareddy for loan under the said scheme. Since his application was not considered for the reasons not known, he approached it during the last week of July, 2009 for setting up a tent house and sought a loan of Rs.6,00,000/- with a total cost of Rs.10,00,000/-. On that, the said application was forwarded to the higher authorities who sought certain clarifications and letters were addressed to the complainant but he did not furnish satisfactory replies and therefore it found that the project was not viable. Though in-principle KVIB had agreed to sanction a term loan of Rs.5,75,000/- inclusive of subsidy following the terms and conditions of the bank and the same should not be construed as sanction of loan at any stage as per bank norms.
Later when the complainant has furnished legal opinion, project report and valuation of the property, the authorities reconsidered and opined that the proposed activity was not feasible and cash flows were not satisfactory and lodged the proposals at their end and this was communicated to the complainant. The complaint is not maintainable under Consumer Protection Act, 1986 and prayed for dismisal of the complaint with costs.
The complainant in proof of his case filed his affidavit evidence and got Exs.A1 to A7 marked while opposite party filed the affidavit of its Senior Manager and got Exs.B1 to B16 marked.
While the learned President of the District Forum opined that the grant of loan could not be insisted as it is a matter of discretion, following the decision of the National Commission in PARAMANANDA TRIPATHY v. CANARA BANK reported in 1993 (II) CPR 645 and dismissed the complaint, however, the other two members, after considering the material on record, opined that KVIB had agreed to contribute margin money of Rs.2,10,000/-, the bank could not have stated that the proposed activity was not viable and cash flows were not satisfactory. Had the said fact been intimated earlier, the complainant would not have bothered to get legal opinion and furnish security of his fathers property and this amounts to deficiency in service and directed the bank to release the loan amount or alternatively pay Rs.50,000/- towards compensation and reimburse Rs.6,000/- spent towards legal fee, project report etc together with costs of Rs.3,000/-.
Aggrieved by the majority order of the District Forum, the bank preferred this appeal contending that the Members did not consider either facts or law in correct perspective. Granting of loan is purely discretion of the bank and after scrutinizing the entire project, it was found that it was not feasible and that cash flows were not sufficient. It is settled law that no direction could be given to the bank to sanction loan and therefore prayed that the complaint be dismissed.
The point that arises for consideration is whether the order of the District Forum is vitiated by any mis-appreciation of fact or law in that regard?
It is undisputed fact that the complainant sought for a loan amount of Rs.6,00,000/- for establishing a tent house, he being an educated unemployed. No doubt he applied under PMEGP scheme whereunder the subsidy of Rs.2,10,000/- would be granted while the remaining amount had to be obtained by way of loan from a bank. The complainant had submitted the project report and legal opinion etc. as directed by the bank. However the authorities of the bank for whatever reason observed that the proposed activity of the complainant was not feasible and cash flows were not satisfactory in respect of the said activity. The said fact was informed under Ex.A4 letter dated 16-4-2010. At no point of time, the complainant was informed that the loan was sanctioned or the amount would be released. It is settled law that no directions could be isused to sanction loan as it is purely in the realm of discretion. The National Commission considered this aspect of the matter in PARAMANANDA TRIPATHY v. CANARA BANK repoted in 1993(II) CPR 645 and held that when the complainant is not eligibel for the credit facility, no direction can be given to the Bank to sanction loan. The National Commission in another decision in M/s GOVIND ELECTRODES PVT. LTD. v. GENERAL MANAGER, UNITED COMMERCIAL BANK AND ANOTHER observed that Banks have the discretion to decide in good faith in the interests of safeguarding public funds whether a party should be given or continued to be given credit facilities or not. No doubt it has to have due regard to the guidelines of the Reserve Bank of India but they are merely guidelines and the final decision rests with the Bank. The Banks will have to decide ultimately in its best judgment whether credit facilities should be given to a party or whether a party should continue to enjoy them keeping in view its performance, and above all, whether or not the party concerned is justifiably eligible for additional credit facilities. In view of this, the complaint before this Commission is not maintainable and is dismissed on that ground. The petitioner is free to seek redressal in a civil court, if so chooses and if so advised.
In the teeth of the above decisions, the District Forum could not have directed the bank to release the loan amount in favour of the complainant. It cannot be said that the bank did not exercise discretion in good faith in order to safeguard the interest of public fund, it could either exercise discretion or not. The complainant could not show any guidelines issued by RBI or any terms under the scheme stating that the bank was bound to issue credit facility to him. When the bank has informed its opinion about non feasibility of the project, we cannot direct the bank to release the amount.
The majority opinion of the District Forum cannot be upheld. We agree with the dissenting view of the President of the District Forum in this regard.
In the result this appeal is allowed and the majority order of the Members of the District Forum is set aside. Consequently the complaint is dismissed. In the circumstances, there shall be no order as to costs.
Sd/-PRESIDENT.
Sd/-MEMBER.
.
JM Dt.24-9-2012