State Consumer Disputes Redressal Commission
Magma Fincorp Ltd.& Other vs Manjit Singh on 17 May, 2022
STATE CONSUMER DISPUTES REDRESSAL COMMISSION,
PUNJAB, CHANDIGARH.
First Appeal No.337 of 2021
Date of institution : 30.09.2021
Reserved On : 05.05.2022
Date of decision : 17.05.2022
1. Magma Fincorp Limited (now known as Poonawalla Fincorp
Ltd.), Registered Office 24, Park Street, Kolkatta, through its
Authorized Signatory PIN No.700016.
2. Magma Fincorp Limited (now known as Poonawalla Fincorp
Ltd.), Moga Tyre House, near Akalsar Chowk, G.T. Road, Moga,
through its Authorized Signatory PIN No.142001.
3. Magma Fincorp Limited (now known as Poonawalla Fincorp
Ltd.), Room No.213-214, 2nd Floor, Savitri Complex, Dhole Wala
Chowk, G.T. Road, Ludhiana, through its Authorized Signatory
PIN No.141001.
....Appellants/Opposite Parties
Versus
Manjit Singh, aged 58 years, son of Avtar Singh, resident of Village
Rukna Beggu, Tehsil and District Ferozepur, Mobile No.9781080940.
....Respondent/Complainant
First Appeal under Section 41 of the
Consumer Protection Act, 2019 against the
order dated 03.08.2021 passed by the
District Consumer Disputes Redressal
Commission, Ferozepur.
Quorum:-
Hon'ble Mrs. Justice Daya Chaudhary, President
Mrs. Urvashi Agnihotri, Member.
First Appeal No.337 of 2021 2
1) Whether Reporters of the Newspapers
may be allowed to see the Judgment? Yes/No
2) To be referred to the Reporters or not? Yes/No
3) Whether judgment should be reported
in the Digest? Yes/No
Present:-
For the appellants : Sh. Sethi Kumar, Advocate for
Sh. Sandeep Suri, Advocate
For the respondent : Sh. P.S. Chahal, Advocate.
JUSTICE DAYA CHAUDHARY, PRESIDENT
Appellants/opposite parties have approached this
Commission by way of filing the present appeal under Section 41 of the Consumer Protection Act, 2019 to challenge the impugned order dated 03.08.2021 passed by the District Consumer Disputes Redressal Commission, Ferozepur (in short, "the District Commission"), whereby the complaint filed by respondent No.1/complainant-Manjit Singh was allowed and a direction was issued to the appellants/opposite parties to issue 'No Objection Certificate' of the vehicle in dispute to the respondent/complainant. Said order was to be complied with within a period of 30 days from the date of receipt of copy of the order.
2. It would be apposite to mention here that hereinafter the parties will be referred, as have been arrayed before the District Commission.
3. Briefly, the facts of the case as made out in the complaint are that the respondent/complainant-Manjit Singh being the owner of First Appeal No.337 of 2021 3 truck Make Tata Motors bearing Registration No.PB-05W-9491 got the same financed from the appellants/opposite parties and was paying monthly instalments of loan. At the time of sanctioning of the loan, the appellants/opposite parties gave assurance that on paying the entire amount of loan instalments, the 'No Objection Certificate' (NOC) of the vehicle in dispute was to be issued. It was further mentioned in the complaint that the total loan amount was paid to the appellants/opposite parties but still NOC was not issued. In-spite of making requests, the matter was put off on one excuse or the other. The complainant also served a legal notice upon the opposite parties on 07.10.2020 but still nothing was done. Certain allegations of 'deficiency in service' and 'unfair trade practice' were levelled in the complaint. The prayer in the complaint was to direct the opposite parties to issue 'No Objection Certificate' of the vehicle and to pay an amount of ₹1 lac as compensation for causing mental agony, pain and harassment and also to pay an amount of ₹11,000/- as litigation expenses.
4. The complaint filed by the complainant was contested by the opposite parties and they filed joint reply to the complaint, wherein certain preliminary objections were also raised. It was also mentioned in the reply that the loan amount was disbursed to the complainant by opposite party No.2. The payment of loan amount was directly given to the dealer of the vehicle and thereafter, the vehicle was delivered to First Appeal No.337 of 2021 4 the complainant by the dealer. It was also mentioned in the reply that the complainant was also guarantor in one more loan case, wherein huge amount was due. By considering this fact, the NOC was rightly not issued to the complainant.
5. After considering the arguments raised by learned counsel appearing for both the parties as well as on appreciation of evidence produced by both the sides, the complaint was allowed by the District Commission vide impugned order dated 03.08.2021 by issuing certain directions. A detailed order was passed, wherein detailed findings were recorded.
6. Being aggrieved by the said order, the appellants/opposite parties have filed the present appeal by raising a number of arguments.
7. Mr. Sethi Kumar, proxy counsel for Mr. Sandeep Suri, learned counsel for the appellants submits that the impugned order has been passed by the District Commission without proper appreciation of evidence available on record. Learned counsel further submits that the respondent/complainant has entered into one more loan account being the guarantor of loanee Laxman Singh, wherein huge amount was due. The respondent/complainant being the guarantor was equally responsible for non-payment of the loan amount taken by the said person. The NOC was withheld on account of this reason. At the end, learned counsel submits that all these aspects First Appeal No.337 of 2021 5 have not been taken into consideration by the District Commission and the impugned order is liable to be set aside.
8. Mr. P.S. Chahal, learned counsel for the respondent/ complainant has opposed the submissions made by learned counsel for the appellants and submits that the impugned order passed by the District Commission is well reasoned and the same has been passed after proper appreciation of evidence produced by the parties. Learned counsel further submits that the responsibility of the guarantor can be fixed only in case there is default in repayment of loan amount by the loanee. There was no justification to withhold the NOC against the loan account of the complainant.
9. Heard arguments of learned counsel for the parties. We have also carefully perused the impugned order passed by the District Commission and all other documents available on the file.
10. Facts relating to obtaining of loan, payment/deposit of all the loan instalments with the appellants/opposite parties and thereafter the request made by the respondent/complainant for issuance of NOC are not disputed. The NOC was not issued to the complainant simply on the ground that he was guarantor in some other loan case, wherein huge amount was involved but it was not disputed that the entire loan amount taken by the complainant was deposited/cleared. The responsibility of the guarantor was limited to the extent that only in a situation where the loanee did not pay/return the loan amount, the First Appeal No.337 of 2021 6 guarantor was liable to pay. Meaning thereby, the guarantor was to step into the shoes of the loanee in case there was any default in returning the loan amount. The liability to repay the loan amount is firstly of the loanee and thereafter in case of default on the part of the loanee, it is to be shifted to the guarantor. However, it is a separate situation in the present case. In case any default was there on the part of the loanee of other account, the respondent/complainant could not be held responsible at the stage of issuance of NOC. Both the proceedings are different. Even no evidence has been produced by the appellants/opposite parties to prove that the principal borrower Lachman Dass had actually defaulted in repaying the said loan amount or that any show-cause notice was issued to him. Even no notice has been served on the complainant as the guarantor to pay the dues of the principal borrower of other account i.e. Lachman Dass.
11. As far as the plea of the appellants that they have a general right of lien over the loan account of the complainant, as provided under Section 171 of the Contract Act, is concerned, the Hon'ble Orissa High Court in the case of Alekha Sahoo v. Puri Urban Co-operative Bank Ltd. and others reported in AIR 2004 Ori. Page 142/2004 CLT 769 has dealt with this point in Paras No.7 to 12, which are reproduced as under:
"7 .....In the aforesaid portions of the documents signed by the petitioner at the time of taking the gold loans, the petitioner has stated that the byelaws and the rule of the Bank have been explained to him and he has accepted the same as binding on First Appeal No.337 of 2021 7 him and has further stated that he will not question the said bye-laws and rule. But the particular bye-law and rule of the Bank to the effect that the Bank can retain the gold ornaments of the petitioner for the loan account of the principal debtor for whom he is a guarantor has not been placed by the Bank before the Court. In the absence of any bye-law or rule of the Bank to the effect that the gold ornaments of the petitioner pledged for the gold loans could be retained by the Bank as additional security for loan granted to M/s. Bimala Bhandar for whom the petitioner was a guarantor, the Bank could not retain the gold ornaments of the petitioner after repayment of the gold loans by the petitioner under the bye-laws of the Bank.
8. The next question to be decided in this writ petition is whether the Bank could in exercise of its right of general lien under Section 171 of the Indian Contract Act retain the gold ornaments of the petitioner as additional security for the loans granted to Manmohan Sahoo, Proprietor M/s. Bimala Bhandar for whom the petitioner was a guarantor. Section 171 of the Indian Contract Act is quoted herein below :
"771. General lien of bankers, factors, wharfingers, attorneys and policy-brokers:
Bankers, factors, wharfingers, attorneys of a High Court and policy-brokers may, in the absence of a contract to the contrary, retain as a security for a general balance of account, any goods bailed to them; but no other persons have a right to retain, as a security for such balance, goods bailed to them, unless there is an express contract to that effect."
The aforesaid Section states that bankers may, in the absence of a contract to the contrary, retain as a security for a general balance of account, any goods bailed to them. The said Section 171 does not extensively deal with the cases in which a banker can retain as security for a general balance of account any goods bailed to it. Section 171 of the Contract Act, however, is a recognition of the right of general lien of bankers under English Mercantile Law and therefore the decision of Court in England as to in which cases such lien can be exercised by bankers and in which cases such lien cannot be exercised by bankers will, equally apply to exercise of lien under Section 171 of the Contract Act.
9. In Wolstenholm v. Sheffield Union Banking Co. Ltd. (1886) 54 L.T. 746, the question that arose for decision was as to whether the Bank can retain a property belonging to a partner to satisfy the general account of his firm and Lord Esher, M. R. held that First Appeal No.337 of 2021 8 the Bank cannot exercise such lien over the private property of a partner for satisfying the general balance of account of his firm. To quote Lord Esher, M. R. :
"The bank said, 'we shall not account to Wing's trustees for the surplus, although the lease was his private property, because we have a right to keep it to satisfy the general account of his firm'. That was tantamount to saying, 'we are now claiming your surplus to pay the debt of somebody else.' The claim in effect was that, in virtue of the bank's general lien, they were entitled to retain the property of one man to pay the debt of another. That claim was based, not upon agreement, but on a supposed custom that bankers should in such a case have a general lien. There never was or could be a custom, however, by which you could take the property of one man to pay the debt of another. No such proposition was put forward in the cases cited, and no such proposition has ever been laid down in any of the cases respecting a banker's lien."
In Cuthbert v. Roberts, Lubbock & Co, (1909) 2 Ch. 226, C.A., the bankers applied to claim the plaintiffs' shares or the proceeds thereof to the liquidation of the debit balance of Chancellor's Current Account and Joyce J. held that the bankers were not entitled to do so. Joyce J. in particular held :
"... It is true that the bankers have a general lien on the securities of any customer deposited by him with them otherwise than for a particular purpose, to secure any sum in which the customer may be indebted to the bankers. This, however, is a lien upon the securities of the customer and not upon those of other persons, and the general lien of a banker does not attach even upon money or securities of the customer known to the bankers to be affected by a trust. ..."
This view taken by Joyce J. that the lien of the Bank is upon the security of the customers and not upon those of other persons was upheld by Buckley L.J. and Kennedy L.J. and the appeal against the decision of Joyce J. was dismissed. It is thus clear from the aforesaid decision of the Courts of England that under the English Mercantile Law relating to Banker's General Lien the Bank can retain as security for general balance of an account of a customer, goods bailed to them by that customer and not goods bailed to them by some other customer.
10. The contention of Mr. Kanungo is that the petitioner is a guarantor for the loan account of M/s. Bimala Bhandar and is First Appeal No.337 of 2021 9 therefore liable for the outstanding balance of M/s. Bimala Bhandar by virtue of the provisions of Section 128 of the Contract Act which provides that the liability of the surety is co- extensive with that of the principal debtor unless it is otherwise provided by the contract. But there is no provision in the Contract Act to the effect that the properties of the surety can be retained by the creditor as security for the debts due from the principal debtor to the creditor. On the other hand, Courts have taken a view that Bank in exercise of its general lien cannot retain the private property of a partner to satisfy the outstanding balance in the general account of his firm notwithstanding the settled position of law that the partners are jointly and severally liable for the debts of a firm of which they are the partners. The aforesaid decision in Wolstenholm v. Sheffield Union Banking Co. Ltd. (supra) has been followed by a Division Bench of the Punjab High Court in Punjab National Bank Ltd. v. Arura Mal Durga Das and Anr., AIR 1960 Punjab 632, for coming to the conclusion that :
"a bank has no lien on a partner's private account for an overdraft on partnership account or vice versa for want of reciprocity."
Similarly, in Gurbax Rai and Ors. v. Punjab National Bank (supra) cited by Mr. Patnaik, learned counsel for the petitioner, the Supreme Court has held that goods which are offered by the firm as security for the cash credit facility could not be utilized for adjusting the liability of the partners to the Bank. The relevant portion of the said judgment of the Supreme Court in Gurbax Rai and Ors. v. Punjab National Bank (supra) is quoted herein below :
"The question is: Is it open to the Bank which held pledged goods against the cash credit facility to adjust the amount recovered from the pledged goods for wiping out separate dues of the individual partners? The goods were of the firm. They were not the goods of the partners. The goods were not offered as security for the individual debt of the partners. The goods were pledged against cash credit facility of the firm. Therefore, when the amount on account of the destruction of the pledged goods of the firm was recovered from the insurer, it must be given credit only in the cash credit account and to that extent the liability in the cash credit account would be reduced. ....."
11. In Syndicate Bank v. Vijay Kumar and Ors. (supra) cited by Mr. Kanungo, the judgment-debtor who owned two Fixed Deposits executed two letters on 17.9.1980 creating a lien in favour of the Bank over the two Fixed Deposit Receipts and on these facts the Supreme Court held that the two letters executed by First Appeal No.337 of 2021 10 the judgment-debtor on 17.9.1980 created a lien in favour of the Bank over the two Fixed Deposit Receipts, this is thus a case where the owner of the Fixed Deposit Receipts had expressly agreed that the Bank would have lien over the Fixed Deposit Receipts. In this case, the Supreme Court has not laid down any law that the Bank can exercise its general lien under Section 171 of the Contract Act over the properties of the surety for the liabilities of the principal debtor to the Bank, In S. Vasupataiah v. The Vysya Bank, Kudagenahalli Branch (supra) and in City Union Bank Ltd. v. C. Thangarajan (supra) cited by Mr. Kanungo, the learned single Judges of the Karnataka High Court and the Madras High Court respectively have referred to the aforesaid decision of the Supreme Court in Syndicate Bank v. Vijay Kumar and Ors. (supra) and have held that the Bank can exercise lien over the properties of a guarantor or a co- promisor for recovery of the outstanding dues of the principal debtor or the promisor to the Bank. But as we have discussed above, Courts in England and in India have held that the Bank can exercise general lien over the properties of a customer for the general balance in such customer's account and not for the general balance of some other customer's account. Unless therefore a customer has expressly agreed that his properties can be retained as security for the outstanding balance in the account of some other customer, a Bank cannot exercise lien over the properties of such customer under Section 171 of the Contract Act. In the guarantee agreement executed by the petitioner for the cash credit account of M/s. Bimala Bhandar, a copy of which has been annexed to the counter-affidavit as Annexure-R/2, there is no such provision that the Bank can retain the properties of the petitioner as security for the outstanding balance in the loan account of M/s. Bimala Bhandar. In fact, the Bank has also not relied on any such provision in the guarantee agreement and instead has relied on the bye-laws of the Bank and the general lien of the Bank as provided in Section 171 of the Contract Act. As we have seen, the Bank has no such right under the bye-laws or Section 171 of the Contract Act to retain the gold ornaments of the petitioner as security for the outstanding balance in the loan account of M/s. Bimala Bhandar.
12. Since we have found that the Bank has no right whatsoever either under its bye-laws or under Section 171 of the Contract Act to retain the gold ornaments of the petitioner after the petitioner had cleared the outstanding balance in the two gold loan accounts for which the gold ornaments were pledged as security, the retention of the gold ornaments of the petitioner by the Bank was without any authority of law and is arbitrary and the impugned notice dated 30.7.2003 is liable to be quashed. First Appeal No.337 of 2021 11
12. In the present case also, the appellants/opposite parties have not produced on record any particular bylaw or Rules or Regulations allowing them to withhold the NOC in respect of the loan account of the complainant, which has been duly cleared by way of repayment of entire loan amount. After clearance of loan amount, appellants cannot exercise general lien under Section 171 of the Contract Act over NOC to be issued to the complainant, in the absence of any specific bylaws or rules to that effect. The ratio of aforesaid authority is fully applicable to the facts and circumstances of the present case. Therefore the appellants have acted arbitrarily by exercising its right of lien over the NOC of the complainant. The respondent/complainant has returned/repaid the entire loan amount to the appellants and he is entitled for 'No Objection Certificate'.
13. The appellants have also taken the plea that they have already initiated Arbitration proceedings against the complainant, wherein the complainant preferred not to appear and the Award has also been passed. However, the fact remains that no evidence with regard to initiation of Arbitration proceedings or copy of Award passed by the Ld. Arbitrator has been produced by the appellants either before the District Commission or in the appeal before us. In the absence any evidence in this regard, the aforesaid plea of the appellant cannot be accepted.
First Appeal No.337 of 2021 12
14. By considering these aspects, the District Commission has rightly allowed the complaint by recording a finding that the opposite parties cannot retain the NOC of the vehicle, as the complainant had already repaid the entire loan amount. There is no illegality or infirmity in the findings recorded by the District Commission.
15. Accordingly, finding no merit in the contentions raised by learned counsel for the appellants, the appeal being devoid of any merit is hereby dismissed.
16. The appeal could not be decided within the statutory period due to heavy pendency of court cases and pandemic of COVID-19.
(JUSTICE DAYA CHAUDHARY) PRESIDENT (URVASHI AGNIHOTRI) MEMBER May 17, 2022.
(Gurmeet S)