National Consumer Disputes Redressal
The Bombay Dyeing & Manufacturing Co. ... vs Union Bank Of India on 30 August, 2000
ORDER
Suhas C. Sen, J., President
1. This is a dispute between two big commercial organisations, Bombay dyeing and Manufacturing Co. Ltd. and Union Bank of India about the legitimacy of certain bank charges. Highly disputed questions of facts are involved in this Original Petition. It appears that Union Bank of India and some other Banks formed a Consortium to grant credit facilities to the Complainants. The Union Bank of India as the lead Bank of the Consortium had to render some special services. The case of the Complainant is that the role of the Union Bank of India as the led Bank of the Consortium, is separate and distinct from its role as the lender Bank to the Complainant and the Union Bank of India is obliged to follow instructions given by the Complainant and debit their accounts specifically according to the instructions. The Bank however, cannot debit the accounts of the Complainants either unilaterally or contrary to the instructions of the Complainant. The lead Bank under the guidelines and circulars issued by the Reserve Bank of India levy a service charge as lead Bank for services rendered but the fee must no exceed 0.25%. The fee has to be settled after negotiating with the customer (the complainant). The Bank, however, in total disregard to the Reserve Bank of India's guidelines and Banking practice and without any negotiations with the Complainant has debited the Company's account to the tune of Rs. 93.00 lakhs. The Complainant has prayed for a direction directing the Bank to pay the Complainant a sum of Rs. 185.50 lakhs along with interest at the rate of 24% per annum and also loss and damage to the tune of Rs. 50.00 lakhs.
2. It appears from letter dated 9th June, 1997 that the Bank was about to debit the Complainant's account with Rs. 93.00 lakhs as required by "Statutory Auditors". There is a letter on record from the Bank dated 26th February, 1998 where it has been stated:
"During the internal audit of our branch as of August 1996, our Auditors have found out leakage of income of Rs. 93,00,000/- as Lead Bank Service Charges. As you are one of our valued clients, the issue was taken up with our higher authorities for waiver of the focussed charges. However, our higher authorities have not considered favourably the complete waiver of the same.
Our Central Office/Auditors have been continuously following up on the issue and instructed as to recover the Lead Bank Charges immediately. Under the circumstance we shall debit your account shortly with Rs. 93,00,000/- towards Lead Bank Service Charges and relative advice will be sent to you to that effect".
3. The Complainant's case is that lead bank charges cannot be levied unilaterally. Under the guidelines of Reserve Bank of India it can only be fixed by negotiation. In other words, the contention of the Complainant boils down to this that unless a rate is mutually agreed the lead Bank will not be entitled to levy any charge on account of services rendered as lead Bank. In other words the lead Bank is helpless. It cannot levy any charge without the consent of the Complainant.
4. The second contention is that the Opposite party as lead bank of the consortium had not rendered any service whatsoever as such lead bank charges cannot at all be levied in the facts of this case. The Complainants contend that the Opposite Party, not having rendered any service whatever as a lead bank, is not entitled to recover any lead Bank charge by debiting the Complainant's account or in any other manner on account of purported service charges. There is also a point raised about a circular issued by Reserve Bank of India on 28.10.93 which has allegedly been withdrawn on 29.10.96. According to the Complainant the lead bank was placing reliance on this circular even after its withdrawal to levy service charges.
5. Lastly, that in any event the charges had been made retrospectively for the period 1995-96 and 1997-98 which is clearly contrary to the banking norms and practices.
6. A further point of discrimination has been raised. The Bank has itself levied service charges at much lower rate on another borrower (E. Merck, drug manufacturer).
7. A close scrutiny of the facts, Reserve Bank of India's circulars and oral evidence will be required before the arguments made on behalf of the Complainant can be upheld as right. There is a letter dated 16th March, 1998 whereby Union Bank of India had renewed the limits of the loan had advances taken by the Complainant. It has specifically been mentioned in that letter inter alia "the bank will charge Lead Bank charges/processing charges as per RBI guidelines". The Complainant was asked to accept the terms of the said letter and duly acknowledge such acceptance by an authorised person. In the reply, the Complainant Company stated in its letter dated May 4, 1998 that the clause relating to lead bank charges was not acceptable to the Company. It was also not agreeable to interest charges mentioned in that letter.
8. The Union Bank of India in its reply to that letter inter alia that the request for waiver/reduction of lead bank charges was not acceptable to the Bank and they had debited the Complainant's account by a sum of Rs. 62.50 lakhs being the lead bank charges for the year 1997-98 at the rate of 0.25% of the assessed limit of Rs. 250 Crores. The Bank's stand was reflected in a letter dated 19th August, 1998 by which the Company was informed "We may clarify that Lead Bank charges have been levied as per the norms of the Bank. We, therefore, regret we are unable to consider your request.
9. Thereafter, several letters were exchanged between the parties. Ultimately the Union Bank of India stated in a letter dated 16th March, 1999:
"As you are aware, in terms of Reserve Bank of India guidelines, Banks can levy Lead Bank charges based on the Fund Based Working Capital limits sanctioned from 1993 onwards. We observe that a sum of Rs. 1.555 crores only has been recovered in your account as detailed hereunder, as against a sum of Rs. 3.890 crores that the bank should have recovered at rates applicable to all our other customers where we are the Lead Bank.
Rs. 0.93 crores for the year 1996-97.
Rs. 0.625 crores for the year 1997-98.
We request you to appreciate that the Bank has already foregone an income of Rs. 2.34 crores in the case of your company. Please also note that our records reveal that due notice has been served on your company for recovery of Lead Bank charges for both the abovementioned two years.
We feel that comparison of charges levied by one Bank with another by taking into account the Lead Bank charges alone as done by you in your letter is not fair as the same does not take into account the quantum of limits sanctioned, the extent to which they are availed, the quantum of business given in the form of Non fund based limits etc. However, looking to our long-standing relations and your representation, the Bank has, as a special case, decided to reduce the Lead Bank charges for your company to Rs. 15.00 lakhs for the current financial year 1998-99".
10. There is a further letter dated August 5, 1999 of Union Bank of India by which the allegation of levy of lead bank charges without prior notice made by the Company was denied and it was stated by the Chairman and Managing Director of the Bank that:
"I am not sure whether you have been given a correct picture by our company officials with particular regard to schedule of charges as the Lead Bank for the period in question, which amounts to Rs. 3.89 Cr. As such, the Bank has already extended a concession of Rs. 2.34 Cr. despite a paltry amount earned from your Company. You have mentioned that the debits made by the Bank towards Lead Bank charges are unauthorised. May I set the records straight with particular reference to the Bank's action in this regard? Due notice was given by the Bank to the Company for debit of Lead Bank charges Your Company did, of course, send representations for substantial reduction which was discussed at various levels. In fact, in the hope of making your officials' see the logic and rational of the charges proposed, the Bank even withheld debiting these amounts for some time. However, when the Bank realised in March 1999 that there was no meeting ground, the charges were debited to the account for the entire period starting from 1996-97 having waited for 3 long years.
May I also bring to your kind attention another disquieting aberration in your operations brought to light by the Reserve Bank of India that your Company had issued CPs without even informing the Bank in contravention of RBI guidelines. These suggest scant regard for credit discipline besides placing the bank in an embarrassing position in having to explain the contravention of the RBI.
......
I wish to submit that the Lead Bank charges at concessional rate debited to your account were legitimate and applied after due consideration of all relevant factors despite loss of income to us by earmarking huge funds for availment which have scarcely been used at all and for which we levy no commitment charges. And I hope you will accept this ground reality."
11. This ultimately lead to the filing of this Original Petition before this Commission.
12. There are several reasons why we should not entertain this Original Petition. The questions raised are complicated questions of fact and law and will take elaborate argument on both facts and law and possibly evidence. The allegations made by the Complainant raised questions like whether a lead bank charge has to be paid or not? If so, at what rate? Can it be imposed unilaterally or only with the consent of the Complaint? Whether there was any circular of Reserve Bank of India in force at the relevant time or for the period for which lead bank charges were payable? Whether the Bank was entitled to impose the charge retrospectively? What is the role of the Statutory Auditors who have insisted on the levy of the disputed charge? These questions can only be answered on elaborate arguments and evidence.
13. Moreover, the Complainant has claimed a sum of Rs. 50,00,000/- with 24% interest from the date of filing of this complaint as loss and damage. Loss or damage, if any, will have to be proved on evidence. There is also a prayer for interim injunction restraining the Bank from debiting the Complainant's account on account of lead Bank charge. This Commission is not empowered to pass any interim order on an Original Petition.
14. We are of the view that this is not a proper case to be heard and decided by this Commission. The Consumer Protection Act was passed to provide quick justice without any court fee to the consumers. It was an additional remedy to all other remedies provided by various other Acts. The Company may come within the meaning of consumer under the Consumer Protection Act {Section 2(d)}. Service may also include banking {(Section 2(o)}. But that does not mean all commercial disputes between a Bank and a large Company must be decided by the Consumer Courts. No court fee is payable in a Consumer Court so that people of modest means can seek expeditious justice in the Consumer Court. The entire purpose behind setting up of the Consumer Court was to provide quick, easy and affordable justice to common people who could not otherwise enforce their rights before a Court of Law. A large number of complaints have been filed in Consumer Courts at all levels all over India and the arrears of the cases pending disposal are mounting every day. One of the reasons of such mounting arrears' is that large commercial organisations like the Complainant is invoking the jurisdiction of the Consumer Courts to settle their commercial disputes. There is no reason why the big Companies should abandon the remedy provided by the Civil Court and seek justice from the Consumer Court by-passing the Civil Courts altogether. This will have the effect of clogging the wheels of justice in the Consumer Courts and common people are subjected to unreasonable delay in getting their cases heard.
15. There is yet another ground on which this petition should not be moved in this Commission. The Complainant has sought for an interim order restraining the Bank from debiting their amount for levy of lead bank charge. This Commission has not been empowered by Consumer Protection Act to pass any interim order on Original Complaints filed before this Commission. To that extent, the complaint is misconceived.
16. The Original Petition is dismissed. We make it clear that we have not gone into the merits of the case. All the questions are left open to be decided by a Court of proper jurisdiction.