National Consumer Disputes Redressal
Branch Manager, Icici Bank Ltd. vs M/S. Limenaph Chemicals Private ... on 7 September, 2017
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI FIRST APPEAL NO. 235 OF 2016 (Against the Order dated 17/12/2015 in Complaint No. 11/2014 of the State Commission Tamil Nadu) 1. BRANCH MANAGER, ICICI BANK LTD. TENKASI ROAD, RAJAPALYAM, TAMIL NADU ...........Appellant(s) Versus 1. M/S. LIMENAPH CHEMICALS PRIVATE LIMITED REPRESENTATIVE BY ITS DIRECTOR, SH. P.B. CHINNAVENKATA RAJA, NO. 803/2, SANKARAN KOVIL ROAD, RAJAPALYAM, TAMIL NADU ...........Respondent(s)
BEFORE: HON'BLE MR. PREM NARAIN,PRESIDING MEMBER
For the Appellant : Mr. R.S. Suri, Sr. Advocate with
Ms. Suruchi Suri and Mr. Varun Khanna,
Advocates For the Respondent : Mr. Subramonium Prasad, Sr. Advocate with
Mr. Jitendra Kumar, Jha, Mr. Sarasiji Narayan
and Mr. Manurajvanshi, Advocates
Dated : 07 Sep 2017 ORDER
The present appeal has been filed by the appellant herein, ICICI Bank Ltd. seeking to assail the order dated 17.12.2015 passed by the Tamil Nadu State Consumer Disputes Redressal Commission, Madurai Bench in Consumer Complaint No. 11/2014, whereby the complaint has been partly allowed.
2. The facts of the case are that the complainant/respondent had availed cash credit facility from the appellant bank vide cash credit A/C No. 611551000125 by mortgaging its properties. As per the Credit arrangement letter vide No.34/SMECMB/64419 dated 31.12.2013, the opposite party/appellant bank had renewed the working capital facilities to the complainant by reducing the existing cash credit from Rs.8 crores to 7 crores, with certain terms and conditions. It is the case of the complainant that they have fulfilled all requirements contemplated in the letter dated 31.12.2013 and also submitted the stock statements regularly based on which the opposite party arrived at drawing power every month. Since the complainant was in need of additional financial assistance, the complainant approached State Bank of Travancore, Rajapalayam (hereinafter referred to as "S.B.T."), which agreed to sanction credit facility with a higher working capital limit of Rs.14.25 crores, subjected to certain terms and conditions. The complainant submitted that vide letter dated 21.02.2014 the opposite party was informed of the proposed sanction of higher cash credit facility by the S.B.T. and requested the opposite party to provide the credit opinion on the complainant company and its three directors, however, the opposite party failed to do so. Thereafter, on 11.03.2014, the complainant requested the S.B.T. to release payment through RTGS towards Cash Credit A/c No. 61155100125 maintained with the opposite party, for discharge of the existing loan; the same was done on 18.03.2014. Vide letter dated 17.03.2014, the opposite party was informed of the arrangement and was requested to close the account of the complainant upon receipt of dues pending against his cash credit account and issue No Dues Certificate and deliver the title deeds of the properties mortgaged with the opposite party so that the same may be mortgaged with the S.B.T. The opposite party failed to respond despite additional reminders dated 21.03.2014 and 26.03.2014 sent to the opposite party. Finally, the complainant received a reply dated 02.04.2014 from the opposite party whereby the complainant was informed that on account of breach of the conditions stipulated in the credit arrangement letter dated 7.11.2012, the complainant was liable to remit penal charges of Rs. 28 lakhs as a prerequisite for issuance of No Dues Certificate. According to the complainant, the credit arrangement letter No.34/SMECMB/64419 dated 31.12.2013 was applicable and not the credit arrangement letter dated 07.11.2012.Aggrieved by the acts of the opposite party, the complainant filed a consumer complaint bearing no.CC No.11 of 2014 before the State Commission.
3. The opposite party contested the claim of the complainant on the ground that the complaint is not maintainable before this State Commission. It was stated that the State Bank of Travancore has not been impleaded as a party and hence the complaint is bad for non-joinder of parties. It is also stated that the issue in the complaint is a civil dispute and does not fall within the ambit of deficiency in service as envisaged under the Consumer Protection Act, 1986. It was submitted that the complainant without prior written consent of the opposite party approached other bank and hence violated the terms and conditions of the agreement. In this regard, it was further submitted that the complainant has not paid penal charges to the tune of Rs. 28 lakhs for violating the terms and conditions and hence the opposite party rightly refused to issue the NOC and to return the documents.
4. During the pendency of the main complaint, the State Commission, vide order dated 24.06.2014, passed an ex-parte interim order directing the opposite party to release the title deeds deposited as security within one week and also issue a No Dues Certificate subject to the complainant furnishing bank guarantee to the tune of Rs. 28 Lakhs in favour of Assistant Registrar, State Consumer Disputes Redressal Commission, Circuit Bench, Madurai on or before 14.07.2014. Thereafter, the opposite party moved a counter affidavit before the State Commission contending that the State Commission erred in overlooking the fact that the complainant failed to qualify as a consumer as envisaged under the Consumer Protection Act, 1986, and also moved an application for setting aside the ex-parte order. Vide order dated 17.07.2014, the said application was dismissed. Later, the opposite party filed a Civil Revision Petition before the Hon'ble Madras High Court, CRP (MD) No. 1691 of 2014 challenging the orders dated 24.06.2014 and 17.07.2014 passed by the State Commission, however, vide order dated 21.11.2014, the same was dismissed as withdrawn. Thereafter, the opposite party filed a revision petition before this Commission challenging the interim order passed by the State Commission. This Commission vide order dated 19.01.2015 partly allowed the said revision petition and set aside the order of the State Commission in respect of the issuance of the No Dues Certificate. Thereafter, the State Commission vide final order dated 17.12.2015 held as follows:-
"20. In the result, the complaint is partly allowed and the opposite party is directed to issue No Due Certificate to the complainant in respect of Cash Credit Account No. 611551000125. The opposite party is directed to pay a sum of Rs. 5,00,000/- (Rupees five lakhs only) as compensation for loss sustained by the complainant due to non-return of original title deeds and NOC and to pay Rs. 25,000/- as cost of this proceedings. The Registry is directed to cancel and return the bank guarantee to the complainant.
Time for compliance two months from the date of receipt of copy of this order. In case of default to comply with the order, the amount shall carry interest at the rate of 9% per annum from the date of default till compliance".
5. Aggrieved by the aforesaid order, the opposite party has approached this Commission by way of the present appeal.
6. Heard the parties and perused the records.
7. The learned counsel for the appellant stated that the respondent/complainant had availed the services of the State Bank of Travancore for availing enhanced cash credit limit without the No Objection Certificate from the appellant Bank which is in violation of the terms and conditions of the credit sanction letter dated 7.11.2012. As soon as the appellant Bank was informed about the intention of the complainant to avail credit facility from the other Bank, the appellant sent a letter dated 2.4.2014 whereby the complainant was informed that due to breach of the conditions of the loan agreement, complainant is required to remit the penal charges of Rs.28 lakhs for these lapses as well as for non compliance of the terms and conditions of the credit sanction letter dated 7.11.2012. The pledged documents have already been returned to the complainant by the interim order of the State Commission. However, the State Commission has ordered to issue No Dues Certificate to the complainant and a compensation of Rs.5 lakhs has also been awarded alongwith 9% p.a. interest to be paid to the complainant by the appellant Bank. The complainant has breached the terms and conditions of the credit sanction letter and therefore No Dues Certificate can only be issued if all the dues as indicated by letter dated 2.4.2014 of the appellant Bank are liquidated by the complainant. A sum of Rs.28 lakhs is to be recovered by the appellant Bank from the complainant but instead of appreciating this fact, the State Commission has ordered a compensation of Rs.5 lakhs to be paid by the appellant Bank. The Bank guarantee that was submitted by the complainant before the Registry of the State Commission has also now lapsed after the final order has been passed by the State Commission. Therefore, at present there is no security for the amount to be paid by the complainant to the appellant bank. The learned counsel further mentioned that the amount of Rs.28 lakhs is based on the default charges mentioned in the credit sanction agreement dated 7.11.2012. Based on these reasons, the learned counsel for the appellant emphasized that the appeal may be allowed and the order of the State Commission be set aside. The learned counsel for the appellant argued that complainant is not a 'consumer' as the cash credit limit was availed for commercial purpose of running the industry. The State Commission has not considered this aspect at all, which is a grave error.
8. On the other hand, learned counsel for the respondent /complainant stated that when the complainant wrote letters to the appellant bank for doing the needful in the matter, there was no response from the bank and ultimately the new bank i.e. State Bank of Travancore had to remit the outstanding loan amount at that time to the bank. The appellant bank had reduced the cash credit limit from Rs.8 crores to Rs.7 crores through new credit sanction letter dated 31.12.2013. As the complainant was in the need of high cash credit limit, the complainant had approached the State Bank of Travancore for this purpose and they had agreed for a cash credit limit of Rs.14.25 crores. Accordingly, letters were sent to the appellant bank. The bank did not reply in time. A letter dated 2.4.2014 was finally received from the appellant bank to remit Rs.28 lakhs on account of violation of terms and conditions of the agreement dated 7.11.2012. By that time the cash credit letter dated 31.12.2013 was already signed. The appellant bank was not competent to raise any demand on the basis of the credit sanction letter dated 7.11.2012. The learned counsel for the respondent further submitted that the complainant is very well a consumer as the Sector of Banking is covered under Section 2(o) of the Consumer Protection Act, 1986. The cash credit limit is not directly producing any profit to the complainant and this is only a facility that has been availed from the appellant bank. In support of his arguments, the learned counsel cited the following judgments:
(1) Canara Bank Vs. M/s. Jain Motor Trading Company & Anr., F.A. No. 432 of 2008, decided on 29.07.2013; wherein this Commission has held as follows:
"10. We also do not accept the contention of Counsel for Appellant/Bank that Respondent being a commercial firm is not a 'consumer' as per the provisions of the Consumer Protection Act, 1986. Commercial concerns per se are not excluded from filing a complaint under the Consumer Protection Act, 1986 if it does not involve direct generation of profits or resale. Also as stated in the instant case, the OCC facility was sought from Appellant/Bank to help resolve the financial difficulties being faced by Respondent which was not per se a commercial activity generating profits. As pointed out by Counsel for Respondent, these aspects are well settled in a number of judgments, including of this Commission as also of the Hon'ble Supreme Court e.g. Harsolia Motors Vs. National Insurance Co. Ltd. [I (2005) CPJ 27 (NC)] and Madan Kumar Singh Vs. Distt. Magistrate, Sultanpur [(2009) 9 SCC 79]."
(2). In M/s. Harsolia Motors Vs. M/s. National Insurance Company Ltd., this Commission held as follows:-
"16. Further, what is commercial purpose is discussed by the Apex Court in various decisions.
We would refer to few relevant judgments:
In Regional Provident Fund Commissioner Vs. Shiv Kumar Joshi, (2000) 1 SCC 98, the Court elaborately considered the provisions of Sections 2(1)(d) and 2(1)(o) as well as earlier decisions and held that The combined reading of the definitions of consumer and service under the Act and looking at the aims and object for which the Act was enacted, it is imperative that the words consumer and service as defined under the Act should be construed to comprehend consumer and services of commercial and trade-oriented nature only. Thus any person who is found to have hired services for consideration shall be deemed to be a consumer notwithstanding that the services were in connection with any goods or their user. Such services may be for any connected commercial activity and may also relate to the services as indicated in Section 2(1)(o) of the Act.
17. The aforesaid ratio makes it abundantly clear that services may be for any connected commercial activity, yet it would be within the purview of the Act.
23. Further, from the aforesaid discussion, it is apparent that even taking wide meaning of the words for any commercial purpose it would mean that goods purchased or services hired should be used in any activity directly intended to generate profit. Profit is the main aim of commercial purpose. But, in a case where goods purchased or services hired in an activity which is not directly intended to generate profit, it would not be commercial purpose."
9. I have carefully examined the material on record and have given a thoughtful consideration to the arguments advanced by both the parties. First of all, coming to the question of consumer, it is seen that the banking services are covered under the Consumer Protection Act, 1986 and placing reliance on the judgments submitted by learned counsel for the respondent, I do not find any justification to interfere with the conclusion reached by the State Commission in this regard.
10. Now coming to the merits of the case, it is seen that both the credit sanction letters dated 7.11.2012 and 31.12.2013 have more or less similar provisions. The appellant bank through its letter dated 2.4.2014 has indicated to the complainant that it has violated certain terms and conditions of the agreement which relate to following:
1. The unsecured loans from related parties have been withdrawn during the currency of the facility with ICICI Bank.
2. Borrowings from other banks/financial institutions without the permission of ICICI Bank.
3. Non-submission of client wise outstanding for top 80% debtors as part of the stock statement.
11. A perusal of the agreement dated 31.12.2013 reveals that there are default charges for different types of violations. For delayed submission, the maximum default interest rate is 2% p.a.. Similarly for non-compliance of sanction terms, the maximum default interest rate is 1% per annum. As the new agreement was signed on 31.12.2013, it is implied that upto this date all the previous dues including default charges etc. were reconciled and settled between the parties. The maximum period for which such default can continue will be for the first quarter of the year 2014. As the complainant informed to the OP bank vide its letter dated 21.2.2014 about the proposed sanction of larger cash credit limit by the SBT and the dues of the loan was cleared by SBT on 18.3.2014, so only the month of February, 2014 and March, 2014 constitute the period when violation of terms and conditions happened.
12. It is seen that the appellant bank has not filed any proof that the statements were not submitted in time. In fact, it is claimed by the respondent that no letter was written before 2.4.2014 in this regard. Such default charges are generally debited to the loan account immediately on happening of default or at least at the end of the month, so if such default was made, the default charges would have been reflected in the dues in the loan account which was repaid on 18.3.2014 by SBT. If it was not reflected in the loan account, the authenticity of such default becomes shrouded in doubt. Hence, I do not find any justification for levying the default charges for non submission of statements. However, it is true that there has been violation of terms and conditions of the credit sanction letter dated 31.12.2013 as fresh cash credit limit was got sanctioned from SBT without obtaining 'No Objection" from the appellant bank. As cash credit limit as per letter dated 31.12.2013 is Rs.7.00 crores, the default charges @ 1% p.a. for two months would be Rs.1,16,700/- which the appellant bank is entitled to get from the respondent.
13. From the above analysis, it seems that the State Commission has not correctly appreciated the terms of the loan agreement. Thus, the compensation of Rs.5.00 lakhs and cost of Rs.25,000/- was not justified.
14. Based on the above discussion, the appeal is partly allowed and the order of the State Commission in respect of the award of compensation of Rs.5 lakhs and cost of Rs.25,000/- is set aside and the order of the State Commission regarding issuance of "No Dues Certificate" to the complainant by the appellant/OP is sustained subject to the complainant paying Rs.1,16,700/- (Rupees one lakh sixteen thousand seven hundred only) to the appellant bank within a period of four weeks from the date of this order, failing which complainant would be liable to pay interest on this amount @ 8% per annum from the date of this order till actual payment. The appellant bank is directed to issue "No Dues Certificate" within 15 days after receiving the amount from the complainant.
...................... PREM NARAIN PRESIDING MEMBER