National Consumer Disputes Redressal
M.O.H. Leathers vs Indian Bank on 2 September, 2013
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI ORIGINAL PETITION No. 12 OF 1999 M.O.H. Leathers Ltd. 12, Langs Garden Road Chennai 600 002 Complainant Versus Indian Bank Nandanam Branch Represented by its Chief Manager Nandanam Chennai 600 035 Opposite Party BEFORE: HONBLE MR.JUSTICE J. M. MALIK, PRESIDING MEMBER HONBLE DR.S.M. KANTIKAR, MEMBER For the Complainant : Mr. R.Venkatramani, Sr.Advocate With Mr.V. G. Pragasam, Mr. S. Prabu Ramasubramanian, & Ms. Neelam Singh, Advocates For the Opposite Party : Mr. M.C. Kochhar, Advocate PRONOUNCED ON _2ND SEPTEMBER, 2013 O R D E R JUSTICE J.M. MALIK 1. The whole controversy pivots around the question, Whether the consumer fora can poach into the jurisdiction of Delhi Debt Recovery Tribunal?. M.O.H. Leathers Ltd., a partnership concern, approved as SSI Unit and 100% Export Oriented Unit, was formed in the year 1986. UCO Bank was the Banker of the said firm. In the year 1990, Indian Bank became the Banker of the Partnership firm. The aforesaid Partnership firm was converted into a Private Limited Company, i.e., the complainant and the Indian Bank, OP, in this case, was retained as its Banker. 2. In the year 1991-92, the turnover of the complainant was Rs.11,05,46,874.00. The Bank took into consideration the above said turnover and performance and enhanced the credit limits, w.e.f. 21.05.1992. The said limit was further enhanced on the basis of turnover of Rs.16,11,02,131/- and performance by the Bank on 16.08.1993. During the year 1994-95, there was decline in Leather Industry because of (1) Global Recession (2) Central Water (Prevention and Control of Pollution) Act, 1974, Air Prevention and Control of Pollution) Act, 1981, and Environment (Protection) Act, 1986. 3. During the year 1994-97, the complainant, with its own resources, was able to achieve turnover of Rs.9.00 crores, approximately, every year. At the top of the above said Enactments, the Honble Supreme Court of India, issued Directives which added more burden resulting in many of the tanneries being closed down and the turnover of tanned leather diminished. The export trade was hard hit. 4. In the meantime, the Indian Bank, OP, wrote a letter dated 03.02.1997, under the Caption Your Overdue Packing Credit, Overdue Export Bills and Advance Bills Liabilities. The Indian Bank requested the complainant to regularize the facilities, detailed in the said letter, immediately and submit compliance report on doing the same. It was further requested to arrange to submit necessary papers immediately to enable the Bank to put up renewal proposal to their higher authorities as operations cannot be allowed, without a proper renewal sanction. The complainant approached the OP. It was informed that under the Guidelines of RBI, the OP would help the Unit under the Rehabilitation Programme and asked the representatives of the complainant to give proposal for rehabilitation on the lines as contained in the complainants proposal dated 21.04.1997. 5. OP agreed to rehabilitate the complainant in principle and asked the complainant for additional security, vide letter dated 17.05.1997. In June, 1997, the complainant furnished additional security. Vide letters dated 11.08.1997 and 20.08.1997, the Export Credit Guarantee Corporation of India Ltd (hereinafter referred to as ECGC, in short), allowed the sanction relating to post-shipment and pre-shipment credit facility with certain conditions. As desired by ECGC, the complainant submitted the Schedule of Shipment, on 20.08.1997. 6. The complainant submitted a Bill for DM 1,41,440 (equivalent to Rs.28,60,724/-) as part shipment against order of Rs.2.5 crores from M/s. Arma Leather (Holland) to the OP for discounting the same but the same was not discounted and was sent on collection basis, on 13.08.1997. The complainant paid Rs.5,00,000/- as compensation as it was the case of part-shipment and the complainant was unable to confirm that the remaining order will be supplied in full as per the Schedule. The payment received in respect of the Bill was adjusted against the old packing credit and in turn new packing credit was not released. The complainant submitted Bill and LC at site from Space 2000 Italy, being part shipment of USD 22,787 against the whole LC amount of USD 83,681, valid till 31.08.1997 for shipment. The said Bill was not discounted as agreed by OP. Even after the receipt of the payment, the same was not released in contravention to the terms of the Rehabilitation Programme. The Bank accepted the Bill, but did not discount the same and sent the said Bill to the Foreign Buyer on collection basis. Even after receiving the money on collection basis, which normally takes about 30-40 days for the money to come to the account, the Bank adjusted the said amount in the old account, but even at this stage of the matter, did not release the packing credit to the said extent. 7. It is alleged that the said act of the OP, amounted to chocking out of the entire function of the organization. In the meantime, M/s. Arma Leathers Placed order supply of goods worth Rs.2.5 crores with the complainant. Goods worth Rs.68.00 lakhs were dispatched but other goods could not be prepared because the amount could not be released by the OP Bank. The Complainant had to pay Rs.5.00 lakhs as compensation to the Buyer. The complainant had to loose the offer of Rs.2.5 crores. The amount was not released despite the fact that another LC from Space 2000 of the value of USD 83,681.50 and another LC from Court International, London, the total being Rs.43 lakhs, approximately. The complainant dispatched merchandise to the extent of USD 22,787 as a partial shipment against order of Space 2000. The said Bill was lodged by the complainant with the OP in August, 1997. The OP did not discount the said Bill, also in violation of the terms and conditions of the rehabilitation programme. The said Bill was accepted under the LC and sent the same on collection basis and on receipt of the amount, adjusted in the old account and even at that stage of the matter, the OP did not release the packing credit for further consideration. The balance amount in LC was expiring in August, 1997 and because of the default of the OP, further goods could not be manufactured and shipped. The complainant suffered huge loss due to expiry of the LC. Both the Buyers cancelled the shipment for the balance goods. Space 2000, was a client of the complainant for the past more than 10 years. The complainant was earning a lot of money. 8. The grouse of the complainant is that the Bank after approving the rehabilitation programme, sanctioned the recommendation of the same to the ECGC and after getting the positive directions from ECGC, failed to release the funds for further production for the export purposes. The complainant had to suffer huge losses. In order to cover up its default, OP, on or about 04.11.1997 and 10.11.1997, came out with a plea that the complainant should get its viability study conducted by IndBank Merchant Banking Services Ltd, which is a Sister Concern of the OP and intimated that it will cost a sum of Rs.98,000/- and thereby a person, who is in a position to dominate the Will of the company, the OP undertook to rehabilitate the complainant company which was showing signs of sickness and dictated its arbitrary terms to the complainant, which had no choice but to obey and accept. It is alleged that the Bank did not fulfill its own self-serving agreement in time and played for illegal gains at the cost of the complainant company and to its detriment. The complainant had to suffer loss of Rs.148 lakhs, detailed in the complaint. 9. Again, the OP has charged penal interest over overdue PC. The amount of Rs.1.15 crores was charged excess, as being own claim. In between, there was a compromise between the parties. Vide Notice dated 18.12.1997, calling back the loan amounts, the OP should have applied to ECGC for claiming amount due from the complainant and should not have charged any interest. Consequently, the complainant is not liable to pay the sum of Rs.1,16,67,434/-. The beneficiary under the ECGC policy is OP itself. They are supposed to pay premium for the said policy out of their own pocket. The OP had charged the complainant every month, premium paid to ECGC on their account but debited to the complainants account, unlawfully. The amount charged was Rs.28,26,414/-. Due to fluctuation in exchange rate for USD and D.MARKS against rupees, the OP charged extra amount in the sum of Rs.1.48 crores. 10. Ultimately, the complainant company had to close the shutters and send away 450 employees from the job who were directly employed by it. Vide Registered AD Notice, dated 02.12.1998, the complainant claimed an amount of Rs.7,15,93,848/- but it did not evoke any response from the OP. Ultimately, this complaint, dated 05.01.1998 was filed with the following prayers:- a) Direct the Opposite Party to pay a sum of Rs.7,15,93,848/- as detailed in para 35 hereinabove; b) Direct the Opposite Party to pay a sum of Rs.1 crore to the Complainant on account of mental pain and agony suffered by the complainant; c) Direct the Opposite Party to pay interest @ 18% per annum from the date of filing of the complaint till the date of payment of the amount awarded; d) Direct the Opposite Party to pay cost of this litigation; e) Pass such other or further orders as this Honble Commission may deem fit and proper under the circumstances of the case. 11. DEFENCE:- The Indian Bank, OP, has enumerated the following defences in its reply. It is contended that the complainant is not a consumer. No rehabilitation programme was ever granted or even agreed to by the OP. As a matter of fact, the OP asked certain clarifications/details and additional security from the complainant, but the complainant could not pass on the same and hence rehabilitation package was never agreed or granted by the OP to the complainant. The complainant did not fulfill the requirements for considering the rehabilitation programme by the OP. The complainant has filed the present complaint due to frustration and as a counter blast in view of the application filed by the OP before the Debts Recovery Tribunal, Chennai, for recovery of loan dues against the complainant, its Directors, Guarantors, etc., which was pending at the time of filing of the Written Statement. The complainant could agitate the points before the Debts Recovery Tribunal, Chennai, and as such, the present complaint is not maintainable. 12. It is explained that during the year 1993-94, the Bank had released packing credit advances and it had enabled the complainant to achieve approximate turnover of Rs.9.00 crores. It is explained that the complainant did not submit its proposal for rehabilitation programme vide their letter dated 21.04.1997. It is explained that by that time, the accounts of the complainant Company had already become irregular and the OP had been requesting the complainant to regularize the accounts. The Final statements, stock statements, sealed projections and details of security offered by the complainant to take up for the rehabilitation programme to the concerned authority, the complainant could not give the additional securities in the form of mortgage by deposit of title deeds. The title deeds submitted by the complainant were not clear for the acceptance of mortgage. The Bank never assured or promised to grant or sanction loan, by way of rehabilitation programme or otherwise. The overdues of the complainant were alarming. The affairs of the complainant were not handled in a professional way and were mismanaged and mishandled by the management of the complainant company. As per proposal for re-phasement/renewal of credit facilities, the Bank was asked to produce documents vide order dated 25.09.1997, but the needful was not done. Vide letter dated 25.09.1997, the complainant was asked to produce the following documents :- a) Conducting an audit by outside agency preferably by Indian Bank Merchant Banking Service Limited. b) Conducting of turn around viability by IBMBS c) Creation of equitable mortgage of properties offered as security d) Company to bring their own funds for adjustments of advance bills liabilities. 13. It is explained that the proposal of the complainant for rehabilitation recommending the same to Export Credit Guarantee Corporation of India Ltd, was never accepted. The bank never gave any understanding that the amount of the bills mentioned would be purchased and adjusted against the previous old packing credit and to that extent, new packing credit would be released in order to make further production. The rehabilitation programme was never approved nor sanctioned by the Bank. It is explained that the OP was entitled to charge penal interest as per RBI Guidelines since the accounts of the complainant company became irregular. Whatever amount received from ECGC by the Bank under the guarantee taken by OP and that payment has to be repaid to ECGC on recovery from Borrowers and Banks. The conversion from foreign currency to Indian rupees is to be assessed as per RBI Rules. All other allegations have been denied. 14. Both the parties have adduced evidence, by way of affidavits. 15. We have heard the learned counsel for the parties and perused their written synopses. It was argued by the counsel for the complainant that OP, in principle, agreed to rehabilitate the complainant as is apparent from their letter dated 17.05.1997 wherein the complainant was requested to furnish certain documents and the OP also asked the complainant to give details of additional security. The complainant offered the security of a City flat of 4-Bed rooms, in a posh locality valued around Rs.60.00 lakhs and in addition thereto, collateral security of 50 acres of land valued around Rs.90.00 lakhs had already been furnished. It was mentioned that the complainant was trying to arrange security of one more flat. OP accepted the proposal of rehabilitation programme and recommended to ECGC of India Ltd. ECGC also considered the said proposal. Vide letter dated 11.08.1997, ECGC allowed the sanction relating to post-shipment and vide letter dated 20.08.1997, allowed the pre-shipment. When the OP assured the complainant that its proposal for rehabilitation programme has been approved by it as well as by ECGC, the Complainant Company submitted a Bill under its packing credit limit for DM 1,41,440 vide Bill No.2, dated 08.08.1998 equivalent to Indian Rupees 28,60,724/- and gave the assurance that the money released against the said Bill would be utilised for further production for the export purposes for which the limit had been granted and for which the rehabilitation programme had been approved. 16. The learned counsel for the complainant submitted that the complainant was taken for a ride. The Bank has been, long in promises but short in performances. Due to Banks inaction, the complainant had to lose 2-3 big Buyers. It was explained that if the Bank did not want to help the complainant it should have informed it from the very start that they are not going to do the needful, in that event, the complainant would have made an attempt to deal with another Bank. Although, in the written arguments, it is submitted that the rehabilitation programme was approved and sanctioned by the Bank as well as the ECGC in order to rehabilitate the Unit, but at the stage when the Company needed funds urgently, the Bank failed to provide the much needed credit. However, at the time of the final arguments, counsel for the complainant admitted that there was no sanction order either from the Bank or from any other authority. 17. The plea raised by the learned counsel for the complainant is mere palliative and does not delve deep to the roots of malady. To top it all, the complainant has kept the main facts under the hat. We fully agree with the arguments advanced by the learned counsel for OP that the present complaint has been filed due to frustration and as a counter blast, in view of the application filed by the OP, before the DRT, Chennai, for recovery of loan dues against the complainant, its Directors, Guarantors, etc., and the same has already been decided in favour of the OP in a hotly contested case. The DRT, Chennai, has directed the complainant to pay a sum of Rs.104,90,82,386.83. The said complaint was filed in the year 1998. First of all, the counsel for the complainant submitted that the said complaint was filed in the year 2002 but when his attention was invited to the fact that the said application pertains to the year 1998 by the counsel for the OP, he did not pick up a conflict with this point. These facts found no mention in the complaint. The complaint is conspicuously silent about it. 18. Secondly, the matter was pending before the DRT, Chennai, for recovery of debt. Consequently, the consumer fora do not have jurisdiction to try this case. While we were dealing with a case of SARFAESI Act in Shri Yashwant G. Ghaisas & Ors. Vs. Bank of Maharashtra, on 06.12.2012, in Consumer Complaint No.302 of 2012, this Commission, dismissed the case in limine, on the ground that consumer fora have no jurisdiction to try this case. Against this order Special Leave to Appeal (Civil) No.1359 of 2013 was preferred by the complainant, before the Honble Apex Court. The Honble Apex Court, vide order dated 01.03.2013, was pleased to approve our following observations:- 19.The National Commission is not empowered to arrogate to itself the powers which come within the jurisdiction of Debt Recovery Tribunals. This matter is purely covered within the jurisdiction of DRT or DRAT. If there is any grievance against the notice under Section 13(2) of the SARFAESI Act, that should be brought to the notice of the concerned authority. It is well settled that main Creditor and the Guarantors are equally responsible. There lies no rub for the Bank to take action against the Guarantor directly. It cannot be alleged that he is adopting the policy of pick and choose. From the allegations stated above, there appears to be no deficiency on the part of the opposite party. In case the Bankers are working within the ambit of SARFAESI Act, it cannot be said to be deficiency on the part of the Bank. It must be established that there is deficiency on the part of the Bank. In that case, this Commission can take action. For the reasons stated above, the complaint is dismissed at the stage of its admission. Nothing will preclude the complainants from approaching appropriate Forum as per law. 19. In a case decided by four Members Bench of this Commission, comprising of Honble Mr.Justice D.P.Wadhwa, Honble President, Mr.Justice J.K.Mehra, Mrs.Rajyalakshmi Rao & Mr.B.K.Taimni, Honble Members, titled as Traxpo Trading Ltd., Vs. The Federal Bank Ltd., (Original Petition No.116 of 2001, decided on 15.10.2001) I (2002) CPJ 31 (NC), it was held :- Under Section 18 of the Act, jurisdiction of this Commission is barred where the Bank has filed suit. Defendant in that suit can claim set-off or even counter claim against the Bank under Section 19 of the Act. Complainant would have ample opportunity to raise all the issues presented in the present complaint. That apart, when we examined the complaint, it raises complex questions both of facts and law which is not possible to decide in our summary jurisdiction. Then we also feel that this complaint has been filed more as a counter blast to the proposed action of the Bank. No doubt this complaint has been filed four months earlier of filing of the suit by the Bank before the Debt Recovery Tribunal. But from that we cannot lose sight of the fact that the Bank would have threatened the complainant for filing a suit and when such suit was imminent, complainant chose to file this complaint. We, therefore, decline to entertain this complaint and return the same to the complainant to seek remedy, if any, elsewhere. This complaint is disposed of accordingly. Opposite Party Bank shall be entitled to costs of these proceedings which we quantify at Rs.5,000/-. 20. Thirdly, the complainant should have ventilated all his grievances before the learned DRT, Chennai. He could have claimed set-off against the Bank. There lies no rub. It appears that the present complaint was filed in order to harass the Bank authorities and to take revenge against them. The order passed by the DRT, Chennai in favour of OP dated 22.07.2010 and the Appeal, if any, have attained finality. It cannot be challenged in a consumer fora. 21. The complainant has made a vain attempt to make bricks, without straw. Vide notice dated 03.02.1997, the complainant was called upon to clear the outstanding dues. The rehabilitation package was never mooted. The complainant was asked to complete the formalities, but it did not. The complainant had only submitted its proposal for rehabilitation which could not proceed further due to the fact that the complainant could never give the additional securities and the assurance to provide all additional securities in the form of mortgage by deposit of title deeds which was never fulfilled because it transpired that the additional securities were not clear to accept the mortgage. Legal opinion dated 31.03.1998 goes to confirm this fact. All the alleged promises were made orally. There was nothing in black and white. Such like excuses can be made at any time. The proposal sent by the complainant was never accepted. The Bank was already aware of the fact that the complainant is bordering to be the sick company. Under these circumstances, to accept that the Bank will come to its rescue is unacceptable. The story created by the complainant does not just stake up. On 02.12.1997, the talks of negotiations for compromise took place. As a matter of fact, all these points should have been put up before the DRT, Chennai, if the same were not put, in that case, the complainant had missed the bus. It will be deemed to have been given up under Order II, Rule 2 of CPC. Last, but not the least, counsel for the complainant candidly admitted that there was no sanction order in favour of the complainant. Is it this Commissions duty to write definitions on invisible blackboard with non-existent chalk?. The complainants tilt at windmills, does not ring the bell. The complaint is, therefore, dismissed. No costs. ...
(J. M. MALIK, J) PRESIDING MEMBER ...
(DR.S.M. KANTIKAR) MEMBER dd/