State Consumer Disputes Redressal Commission
V. Manickam Engineers Pvt. Ltd, Rep By ... vs State Bank Of India, The Chairman & 4 Ors on 5 December, 2017
Daily Order BEFORE THE STATE CONSUMER DISPUTES REDRESSAL COMMISSION, CHENNAI BEFORE : Hon'ble Dr Justice S. TAMILVANAN PRESIDENT Thiru K. BASKARAN JUDICIAL MEMBERCC.NO.70/2014
DATED THIS THE 5th DAY OF DECEMBER 2017 M/s. V. Manickam Engineers Pvt. Ltd., Rep. by its Managing Director Mr.V. Macnickam, Chairman No.364, Pillayar Koil Street Panneer Nagar, Mugappair West Chennai - 600 037 .......Complainant Vs.
1. The Chairman State Bank of India Central Office, Chairman's Secretariat P.B.No.12, Nariman Point Mumbai - 400 021
2. The Chief General Manager State Bank of India SAM Group, Central Office Fort, Mumbai - 400 001
3. The Deputy General Manager State Bank of India Stresses Assets Management Branch No.32, Montieth Road, Egmore Chennai - 600 008
4. The Deputy General Manager Credit Division Industrial Finance Branch State Bank of India, Anna Salai Chennai - 600 002
5. The Asst. General Manager And Regional Manager - III Credit Division, Industrial Finance Branch State Bank of India, Anna Salai Chennai- 600 002 ...... Opposite parties This complaint is filed by the complainant alleging deficiency in service on the part of the opposite parties and seeking an order for return of the amount payable under TDR deposit amount of RS.55,91,300/- together with interest @18% p.a., from 28.2.2011 till payment, alongwith compensation of Rs.40 lakhs and cost.
This complaint coming before us for hearing finally 20.11.2017, upon hearing the arguments of the counsel on bothsides, perusing the documents placed on record, this commission made the following order:
Counsel for the complainant : Mr.R.Krishnamoorthy, Senior Advocate for M/s. V. Srinivasa Babu Counsel for the opposite parties : M/s. M.L.Ganesh Dr. JUSTICE S. TAMILVANAN, PRESIDENT
1. This consumer complaint has been filed under Sec.17 of Consumer Protection Act 1986, by the complainant seeking a direction to the opposite parties to return the amount payable under TDR deposit amount of RS.55,91,300/- together with accrued interest @18% p.a., from 28.2.2011 till payment, with compensation of RS.40 lakhs for mental agony and cost.
2. The averments of the complainant are that he had been a customer of the State Bank of India, Chennai, and availed credit facilities from the 4th opposite party, to the tune of RS.10.20 crores. The complainant was repaying the loan amount as per the sanction order, and also using sanctioned Bank Guarantee limits for issuing performance guarantees, retention guarantees, EMD's etc., for various Government projects. The complainant availed bank guarantees for the work orders, relating to the Divisional Engineers (H), Project -1 Division, Madurai and Chennai, for which EMD was given for the value of (1) Rs.4,60,000/-, and the last date was extended till 30.9.2007 (2) Security Deposit for the value of RS.13,54,000/- in favour of Divisional Engineer (H) Madurai Divison (3) Security Deposit for the value of RS.37,77,300/- for which last date was extended till 30.9.2007, in favour of Divisional Engineer (H) Chennai.
All the aforesaid three bank guarantees were given by State Bank of India, Chennai-2. It is further stated that clause B of the above mentioned bank guarantees stipulates as follows:
"That the Guarantee herein contained shall remain in full force and effect during the period from the date of submission of the bid by the bidder to the Government till the Government decision on the said bid."
The aforesaid Bank guarantees would remain in force until the respective dates of 24.8.2006 and 3.2.2006. The claims under the guarantees were not made or communicated to the bank in writing, before the respective dates stated above. The right of the Government under the guarantee arrangement shall stand forfeited or closed, thereupon the complainant shall be relieved and discharged from all its liabilities thereunder and accordingly the complainant would be entitled to operate its accounts without any obstruction of bank guarantees being given.
3. It is admitted by the opposite parties that the aforesaid bank guarantees given by the complainant in favour of Divisional Engineer (H) Project-I, Divisions of Chennai and Madurai, respectively and accordingly three sets of Bank guarantees got expired as there was no claim whatsoever from the Government after the guarantee period. Hence the liability of the State Bank of India got relieved/ discharged and there is no obligation whatsoever for the bank towards the guarantees. Hence the liability of the State Bank of India got relieved and there is no obligation whatsoever for the bank to honour the expired bank guarantees given in favour of the Government. It is not in dispute that all the said three bank guarantees got expired on 30.9.2007. The complainant thereafter by letter dt.5.10.2007 informed the 5th opposite party to cancel the bank guarantee and reverse the margin money to the CC account of the complainant. The letter was acknowledged. The 5th opposite party by letter dt.12.2.2008 informed the Divisional Engineer (H) Project-1 Division, Chennai in response to letter dt.10.1.2008 which reads as follows:
"We are unable to accede to your request for the extension of the same and we hereby inform you that the liability on the above guarantee has since cancelled and request you to submit the original bank guarantee at the earliest."
4. It is further stated that the complainant's company had become a sick industry and was unable to repay the instalments as per the sanctioned order, which ultimately entered into one time settlement with the opposite party bank. At that time, the opposite parties bank insisted for deposit of 10% cash margin for the expired three bank guarantees, as pre-condition. Infact, the complainant was forced to give collateral security, and in order to safeguard the property of the complainant from public auction, the same was accepted by the complainant. By letter dt.31.12.2010, the 3rd opposite party gave approval under one time settlement scheme (OTS) to settle the amount due and payable to the bank. In the said letter offer amount was stated as Rs.5 crores apart from legal fees and other charges of the bank and also insisted for 10% cash margin with the bank relating to the bank guarantees. Though the complainant expressed his willingness to settle the OTS for an amount of Rs.5 crores to the State Bank of India.
5. It was argued by the learned senior counsel that the complainant was forced to deposit a sum of Rs.55,91,300/- with reference of 100% cash margin for the three expired bank guarantees that had been executed by the complainant in favour of Government of Tamilnadu, represented by Divisional Manager (H) Project-1, Chennai and Madurai and accordingly the complainant was forced to make additional payment of Rs.55,91,300/- as Fixed Deposit. In order to safeguard the company from any action by way of SARFAESI proceedings, residential property owned by the company was also given as collateral security. After making payment the 3rd opposite party, by letter dt.28.2.2011, certified that the term loan and cash credit balance were closed and that the complainant has no liability with the state bank there under. Accordingly the complainant company has no liability whatsoever towards the opposite parties. However the amount of RS.55,91,300/- paid by the complainant is retained as Fixed Deposit and kept by the opposite parties without any justification, though the same represents 100% cash margin relating to the expired bank guarantees. Hence the complainant issued legal notice on 11.12.2012 to the 3rd opposite party calling upon the 3rd opposite party bank to return the amount paid under term deposit receipt, together with accrued interest. Subsequently on 26.12.2012, another letter was sent to the 2nd opposite party to release the Fixed Deposit amount of RS.55,91,300/- with interest, however without any justification the amount is retained by the opposite parties. However the opposite party bank informed that only on receipt of the expired original three bank guarantees the TDR deposit amount of RS.55,91,300/- would be released to the complainant. The expired three bank guarantee deeds dt.19.6.2003 and 4.2.2004 does not contemplate for return of original bank guarantees to the bank, as per the original deed. The complainant sent a legal notice dt.2.4.2014 to the opposite parties, demanding return of the amount payable under TDR amount of RS.55,91,300/- together with accrued interest @ 18% p.a. to the complainant. The complainant has further stated that the unreasonable retention of the money of RS.55,91,300/- by the opposite parties cannot be justified and it is only a deficiency of service and also unfair trade practice of the Bank against the complainant, who is a customer of the bank.
6. In the written version filed by the opposite parties, the factum of the deposit of Rs.55,91,300/- made by the complainant towards the three bank guarantees, which were expired on 30.9.2007 itself has not been disputed. It is admitted by the opposite parties, that the aforesaid bank guarantees were given by the complainant for work contract being carried out by the complainant with Divisional Engineer, Highways Department, Project - I Division, Madurai and Chennai. It is stated by the opposite parties that the complainant had committed default in repaying the loan amount. Therefore original application had been filed in OA.No.93/2010 before DRT-I Chennai. During the course of th proceedings, the complainant entered into compromise on 2.2.2011 with the Bank. The compromise was entered into writing on 2.2.2011, wherein specific terms and conditions have been stipulated, and accordingly the complainant should return the three original bank guarantee deeds. Learned counsel for the opposite parties submitted that it is a commercial transaction, hence the complainant is not entitled to seek relief under the Consumer Protection Act, and further submitted that without impleading the State Highways Department, the complainant cannot seek an order to return the deposit made by the complainant in favour of State Bank of India.
7. Based on the pleadings of bothsides the following points for determination are framed:
1. Whether the consumer complaint filed by the complainant is legally sustainable?
2. Whether the complainant is entitled to the relief sought for in the complaint?
8. POINT NO.1: Learned Senior counsel Mr.R.Krishnamurthy, appearing for Mr.V.Srinivasa Babu, counsel for complainant, submitted that the claim made in the complaint by the customer against the Bank for deficiency of service and unfair trade practice adopted by the opposite parties, the Bank is legally sustainable since the amount Rs.55,91,300/- is unreasonably kept by the Bank under deposit, without any justifiable reason, which shall be construed only as deficiency in service by the Bank and also its unfair trade practice to its customer. It was further submitted by the learned senior counsel that the complainant being a consumer as per Sec.2(1)(d)(ii) of Consumer Protection Act, is entitled to file the complaint before the State consumer commission having jurisdiction and the defense raised by the opposite parties are totally unsustainable.
9. Learned counsel, Mr.M.L.Ganesh, appearing for the opposite parties has not disputed the factum that the complainant is a customer to the State Bank of India, the opposite parties herein, and that there is no amount due and payable by the complainant to the State Bank of India. Hence it is an admitted fact that there is no amount due and payable by the complainant to the State Bank of India, since the same was settled by way of (OTS) as per the compromise arrived at between the complainant and the opposite parties. It is also not in dispute that the amount of RS.55,91,300/- was deposited by the complainant, as claimed by the State Bank, towards the expired three Bank guarantees, as the one time settlement (OTS) was made between the complainant and the opposite party bank, "No objection" certificate was also issued by the bank in favour of the complainant. It is well settled that as customer of the bank one can make out a claim under the Consumer Protection Act, against the bank, if there is any deficiency of service on the ground of unfair trade practice. In this case, the complainant, who is admittedly a customer of the opposite parties bank, has alleged deficiency in service against the opposite parties for not returning the amount deposited by the complainant without any justifiable reason. On the said facts and circumstances we are of the view that the complainant is a consumer, as per Sec.2(1)(d)(ii) of Consumer Protection Act 1986 and also entitled to maintain the complaint before this commission on the ground of deficiency of service and unfair trade practice. Point No.1 is answered accordingly.
10. POINT NO.2: It is admitted by both the parties that there is no amount due and payable by the complainant to the opposite parties bank. A sum of Rs.55,91,300/- was deposited by the complainant before the 3rd opposite party, only for the three expired bank guarantees given in favour of the Divisional Engineer, Highways Project -I Division, Chennai and Madurai. Since the bank guarantees had expired on 30.9.2007, based on the same the Divisional Engineer (H) Project-1 Division was not entitled to claim any amount from the state bank. It is well settled that after the expiry of the guarantee period, the State Bank of India is not liable to answer for any claim if made by the Highways Department for the amount due and payable by the complainant towards the expired bank guarantees. It is also an undisputed fact that there has been no attachment made against the amount by any competent court, and no charge has been created on the said amount deposited by the complainant. On the aforesaid facts and circumstances there could be no valid defence on the side of the opposite parties to retain the amount paid by the complainant after the expiry of bank guarantee, since the amount had been deposited admittedly by the complainant, though there was no need for the complainant to do so. The facts reveals that the amount was deposited by the complainant under a compelling circumstances to the Bank after the expiry of the bank guarantee, only to avail the one time settlement (OTS) with the bank, and refund of the amount was demanded by the complainant by way of legal notice, but the same was not refunded with interest. It is crystal clear that while settling the dues by way of one time settlement (OTS) with the Bank, the amount was deposited by the complainant though there was no need for making the said deposit by the complainant.
11. In support of the claim of the complainant, there were 22 documents filed on the side of the complainant which are marked as Ex.A1 to A22, and no document was filed on the side of the opposite parties.
12. It is seen that the complainant has marked copy of the three bank guarantees dt.24.8.2004, 3.2.2006 and 3.2.2006 as Ex.A1 to A3. Ex.A4 and A5 are the letters sent by 5th opposite party and A6 relates to OTS proposal dt.31.12.2010 given by the 3rd opposite party, whereby one of the condition stipulated by the Bank for the OTS is to deposit Rs.55,91,300/- representing 100% cash margin for the expired bank guarantees, hence, we are of the considered view that the said condition imposed for the OTS is unreasonable and against law, as the amount was deposited only after the expiry of the bank guarantees as required by the Bank, without any attachment being made in any suit or anyother claim made by Highways Department after the expiry of the guarantees. The amount of RS.55,91,300/- was asked to be deposited and the complainant was also directed to produce the expired original guarantee for getting the amount refunded though no amount was due and payable to the bank. Therefore, as argued by the learned senior counsel appraising for the complainant, it is seen that the amount was deposited by the complainant only on the demand of the opposite parties as a pre-condition for the OTS (Settlement) apart from by making a payment of RS.5 crores under the OTS. Even on the date of said deposit made by the complainant no bank guarantee deed was in existence. It is further submitted by the learned Senior Counsel that the original deed was not returned by the Highways Department, without justifiable reason, due to someother dispute between the complainant and the Highways Department, however that is a different issue, between the complainant and the Highways Department, which is nothing to do for return of the deposit amount payable to the complainant by the Bank. The representations made by the complainant on 11.12.2012 and 26.12.2012 to the opposite parties 2 and 3 have been marked as Ex.A8 and A9 and Ex.A10 is the letter sent by the 3rd opposite party, seeking details about the pending cases against the complainant and the Highways Department. Ex.A11 is the reply sent by the complainant. Subsequently representation was made by the complainant under Ex.A12 to the first opposite party on 15.5.2013 for the refund of the amount. The 3rd opposite party replied for the same on 24.1.2014, which is marked as Ex.A13. Subsequently legal notice was sent by the complainant to the opposite parties under EX.A14, for which the acknowledgements received were marked under Ex.A15.
The copy of agreements between the complainant and the Highways department were marked as Ex.A16 & A17, and the contract was terminated under document EX.A18 & A19 dt.6.10.2007 and 12.10.2007. It is stated by the complainant that no suit was filed by the Highways Department against the complainant within the limitation period, and only a time barred claim was made by the Highways, which is nothing to do with the opposite parties. Ex.A20 is the certified copy of the affidavit seeking an order to vacate the stay already granted in W.M.P.NO.2/2008 in WP.No.7826 of 2008. A letter dt.5.2.2014 sent to the complainant under RTI Act, seeking information about the pending suit is marked as Ex.A21. Reply sent by the opposite party under RTI Act shows that the beneficiary has not initiated any legal action, till 22.2.2004 against the complaint which has been marked as Ex.A22.
13. A perusal of the aforesaid documents would clearly show that there is no justifiable reason for the opposite parties to keep the amount of RS.55,91,300/- without disbursing the same in favour of the complainant, since the same was deposited only on the demand of the opposite parties at the time of making the settlement under OTS scheme, after the expiry of the bank guarantee. After the expiry of the guarantee period, as there was no attachment or charge created over the amount, it is the bounden duty of the banker to honour the request of the customer to refund the amount to the complainant herein being the customer of the Bank.
14. Learned senior counsel for the complaint also drew the attention of the commission to the citation reported in 2008 (15) SCC 102 dt.24.4.2008 held in City Bank NA VS. Geekay Agropack Private Limited and another. Wherein it has been held by the Hon'ble Supreme Court that for deficiency in banking and another financial services, relief could be granted under Consumer Protection Act as there was failure to realise sale proceeds and also to return the documents with due diligence authorities and held that there was deficiency of service, and hence the banks were held liable for the relief sought for.
15. In another case in Punjab University Vs. Unit Trust of India reported in (2015) 2 Supreme Court Cases 669, the Hon'ble Supreme Court has distinguished that consumer claim and claim based on commercial transaction and clearly interpreted the term commercial purpose as the same should be decided considering the facts and circumstances of each case, which includes interalia any undertaking (business/project etc) with an object to make profit out of said undertaking.
16. As per the admitted facts of the case on hand the works contract between the complainant and the Highways department was commercial in nature, for which bank guarantee was given as required by the Highways Department. Accordingly, the complainant herein gave bank guarantee as stated in the complaint, that was obtained from the opposite parties bank. Subsequently, in the year 2007 all the bank guarantee got expired, and therefore the opposite parties are no way responsible to pay any amount towards the bank guarantees given in favour of the Highways Department. The amount of RS.55,91,300/- was deposited by the complainant to the Bank only after the expiry of bank guarantees in order to have one time settlement (OTS) between the complainant and the opposite parties. On the aforesaid circumstances, the said deposit made by the complainant is no way commercial in nature as the same is only between the bank and its customer. Since there was no attachment or charge created over the said amount, there is no justification for the opposite parties in retaining the amount deposited by the complainant. The unreasonable claim of the opposite parties to produce the original of the expired Bank guarantee for the purpose of returning the deposit amount made by the complainant and incorporating such a clause in the OTS would show that it is an unfair trade practice followed by the opposite parties as there was no need for the complainant to deposit the said amount towards the expired Bank guarantee.
17. On the said circumstances, we are of the considered view that the claim of the complainant has been proved under the Consumer Protection Act, and the complainant is entitled to appropriate relief. Point No.2 is answered accordingly, hence we are of the considered view to meet the ends of justice that the opposite parties shall be directed to return the amount of Rs.55,91,300/-deposited by the complainant alongwith interest @18% p.a., from 28.2.2011 till the date of payment, apart from compensation of Rs.5 lakhs, for mental agony suffered by the complainant and cost of Rs.10000/-.
18. In the result, the complaint is allowed in part, directing the opposite parties to return Rs.55,91,300/- alongwith interest @ 18% p.a., from 28.2.2011 till date of realisation, alongwith compensation of Rs.5,00,000/- towards mental agony and cost of Rs.10000/-. Time for payment one month, from the date of receipt of copy of this order, failing which the amount shall carry interest @12% p.a., from the date of default, till realisation.
K. BASKARAN S. TAMILVANAN JUDICIAL MEMBER PRESIDENT List of Exhibits on the side of complainant A1 24.08.2004 Deed of Bank Guarantee No.0993003BG0000091 A2 03.02.2006 -do- No.0993003BG0000092 A3 " -do- No.0993003BG0000289 A4 15.10.2007 Letter from complainant A5 12.02.2008 Letter from 5th opposite party A6 31.12.2010 OTS proposal given by the OP3 A7 28.02.2011 No Due Certificate given by the 5th OP A8 11.12.2012 Letter sent to OP3 A9 26.12.2012 Letter sent to OP2 A10 10.01.2013 3rd Opposite party reply letter A11 19.01.2013 Letter sent by the complainant A12 15.05.2013 Letter sent OP1 A13 24.01.2014 OP3 reply to the complainant A14 02.04.2014 Legal notice to the Opposite parties A15 Acknowledgements A16 26.02.2003 Agreement between complainant and Suptd. Engineer (Highways) Madurai A17 04.02.2004 Agreement between complainant and Divl. Engineer Highways Department A18 06.10.2007 Termination notice of Divl. Engineer Madurai A19 12.10.2007 Termination notice by Supdt.Engr. Chennai circle A20 09.04.2008 Certified copy of affidavit and vacate stay petition A21 05.02.2014 Letter by the complainant under RTI Act A22 22.02.2014 Reply sent by OP under RTI Act Documents filed on the side of opposite parties:....Nil..... K. BASKARAN S. TAMILVANAN JUDICIAL MEMBER PRESIDENT INDEX : YES / NO